In today’s briefing:
- Japan Tobacco High Conviction Call: No Price Hikes This Year, But Profits Poised to Soar
- SoftBank Group (9984 JP); Arm IPO, Priced for Disappointment
- JMDC (4483 JP): Omron’s Partial Tender Offer
- Peptidream (4587 JP): Solid Revenue Growth Continued in 1H23; 2023 Guidance Remains Unchanged
Japan Tobacco High Conviction Call: No Price Hikes This Year, But Profits Poised to Soar
- Combustible tobacco is declining globally, but Japan Tobacco (2914 JP) is defying the odds by outperforming the industry significantly through capturing market share from competitors.
- Also in Heated Tobacco, Japan Tobacco is slowly but steadily capturing market share from IQOS and other heated tobacco makers.
- There will be no price hikes this year, but we think that there’s enough spillover from the price hikes in the past 3-4 years to maintain JT’s OP growth momentum.
SoftBank Group (9984 JP); Arm IPO, Priced for Disappointment
- SoftBank’s internal transaction acquiring the 25% Arm stake held by SVF1 valued Arm at USD64bn; the IPO valuation range is from USD48bn to USD52bn
- This valuation range implies an Nvidia-like price to prospective 2024E sales multiple range of 22x-25x; the prospectus reveals risks with Arm China, and confirms its lacklustre revenue and earnings growth
- Given SoftBank’s largely negative track record on the after-market performance of its investee companies IPOs and SPOs; we expect further downside to SoftBank’s share price
JMDC (4483 JP): Omron’s Partial Tender Offer
- JMDC (4483 JP) announced a partial tender offer for Omron Corp (6645 JP), the largest shareholder. Omron aims to make JMDC a consolidated subsidiary.
- The offer is for a minimum of 12.0m shares (18.52% ownership ratio) and a maximum of 15.0m shares (23.08%) at JPY5,700 per share, a 22.4% premium to the undisturbed price.
- Irrevocables (Noritsu Koki (7744 JP)) represent a 13.63% ownership ratio. While the offer is light, it will likely succeed as the minimum acceptance condition requires a 7.1% minority acceptance rate.
Peptidream (4587 JP): Solid Revenue Growth Continued in 1H23; 2023 Guidance Remains Unchanged
- Peptidream Inc (4587 JP) has reported strong result for H1 2023. Revenue jumped 88% YoY, and both the operating and net losses have narrowed compared with the year-ago period.
- 2023 guidance remains unchanged, with revenue of ¥30B (+12% YoY), core operating profit of ¥6.7B (-31% YoY), and net profit of ¥2.7B (-64% YoY).
- In the mid-term (over the next 3–4 years), Peptidream aims for revenue of ~¥50B. The company has set a goal to reach revenue of ~¥100B by 2030.
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