In today’s briefing:
- Japan Post Bank (7182 JP): The Current Playbook
- Naigai Trans Line (9384 JP): IA Partners’ JPY4,065 Tender Offer
- Pharmarise HDS (2796 JP) – Navigating Industry Restructuring…
- Japan Business Systems (5036 JP) – Cloud Integration Profitability Recovering in FY25/9
- Transition to Regional Stock Exchange Means Continued Unhappy History for Shareholders
Japan Post Bank (7182 JP): The Current Playbook
- Since the offer announcement, Japan Post Bank (7182 JP)/JPB’s shares have declined by 2.5%. On 3 March, JPB completed the ToSTNeT-3 buyback by acquiring 13.3 million shares for JPY20 billion.
- To understand JPB’s trading pattern, it is instructive to examine its 2023 offering, Japan Post Insurance (7181 JP)/JPI’s 2019 offering, and Japan Post Holdings (6178 JP)/ JPH’s 2021 offering.
- JPB’s shares follow the trading pattern playbook of its 2023 and JPH’s 2021 offerings, in which investors buying the offer were rewarded with positive returns at the payment date.
Naigai Trans Line (9384 JP): IA Partners’ JPY4,065 Tender Offer
- Naigai Trans Line (9384 JP) has recommended a tender offer from IA Partners at JPY4,065 per share, a 62.3% premium to the last close.
- Despite being below the midpoint of the target IFA’s DCF valuation range, the offer is attractive compared to historical trading ranges and represents an all-time high.
- Given that the offer is reasonable, the required minority acceptance rate is attainable. The offer is from 10 March to 21 April, with payment on 28 April.
Pharmarise HDS (2796 JP) – Navigating Industry Restructuring…
- Japan’s elderly population is projected to continue to grow through 2040, and Pharmarise HDS will benefit from the corresponding increase in the number of prescriptions.
- However, there are expected to be revisions to national health insurance (NHI) drug prices , one measure to restrain medical spending, and revisions to dispensing fees, which are made once every two years.
- Among the industry, the company is keen on preparing to counter downward pressure on prices by focusing on capturing technical fees, including community support system premiums and family pharmacist guidance fees.
Japan Business Systems (5036 JP) – Cloud Integration Profitability Recovering in FY25/9
- For FY25/9, JBS is forecasting OP to increase +24.1% YoY (OPM 3.3% → 3.8%), in large part driven by a recovery in profitability for Cloud Integration including NEXTSCAPE, addressing rectification of unit prices and NEXTSCAPE project delays which depressed GPM, and also recouping leading investment in personnel, new HQ, etc.
- Q1 FY25/9 consolidated net sales increased +7.9% YoY, operating profit +61.7%, and profit attributable to owners of parent +96.9%.
- Profitability improved sharply, where Q1 GPM rose 1.8pp from 13.4% → 15.2%, the ratio of SG&A expenses declined 0.4pp from 8.8% → 8.4%, and OPM increased 2.3pp from 4.5% → 6.8%, in large part due to the recovery in profitability of Cloud Integration business, which accounted for nearly two-thirds of the total increase in consolidated OP, a solid result kicking off the new fiscal year.
Transition to Regional Stock Exchange Means Continued Unhappy History for Shareholders
- Many companies that cannot meet listing criteria have challenges with their tradable stock market capitalization in Prime markets, both in Standard markets, and tradable share ratios in Growth markets.
- As a result of the market restructuring, the role of regional securities exchanges became a “receptacle” for ensuring trading of shares of companies that cannot meet the TSE listing criteria.
- For a company that considers the purpose of a stock listing to be to improve the company’s credibility and name recognition, going private or an MBO isn’t on their mind.
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