In today’s briefing:
- Macromill (3978 JP) – Five Major Investors Have 50+%; CVC Extends and Will Need to Bump Or Walk
- Hamamatsu Photonics (6965 JP): Rebound Ahead
- Will the Timing of the BOJ ETF Exit Be Revealed in December?
- Ono Pharmaceutical (4528 JP): Struggle Continues with Opdivo; Competition and Price Cuts Loom Large
- Kurotani Corp (3168 JP): Coverage Initiation
- Q2 Follow-Up – TSUBAKIMOTO KOGYO (8052 JP)
- PCI Holdings (3918 JP) – What Restar Corporation’s Tender Offer Will Bring
- Q2 Follow Up – COPRO-HOLDINGS (7059 JP)
Macromill (3978 JP) – Five Major Investors Have 50+%; CVC Extends and Will Need to Bump Or Walk
- Three pre-existing Large Shareholders have not sold down. Two new 5+% shareholders have appeared since Tender Launch. Together, their reports give them 51.7% of shares out.
- That provides them with a significantly strong implied negotiating hand. Given the midpoint of the Target Company’s Advisor’s DCF Range, I expect a bump.
- Today the Bidder extended for 10 more days. They didn’t have the shares to close. I expect they won’t unless they bump a lot.
Hamamatsu Photonics (6965 JP): Rebound Ahead
- Profits and share price stabilizing after steep declines, although margins still under pressure from rising R&D and depreciation, and costs associated with recent acquisitions.
- Sales of medical equipment to recover from post-COVID decline. Semiconductor equipment driven by advanced logic and high-bandwidth memory. Lasers to become fourth major product division.
- Buy for the long-term. Risks include Trump tariffs, weak European economies, emergence of Chinese competition.
Will the Timing of the BOJ ETF Exit Be Revealed in December?
- The actual ratio of tradable shares, excluding ETFs held by BoJ, is low, as a result, the number of Japanese equities available for investment by large institutional investors is limited.
- ETFs owned by BoJ may be treated as being in favor of company-proposed proposals and against shareholder-proposed proposals, thus BOJ-owned ETFs are hindering the improvement of corporate governance.
- It is good that BoJ has begun to consider an exit from ETFs, but with several variables and unknowns, it is not easy for investors to predict the timing.
Ono Pharmaceutical (4528 JP): Struggle Continues with Opdivo; Competition and Price Cuts Loom Large
- Ono Pharmaceutical (4528 JP) is reporting decelerating revenue from its flagship drug, Opdivo. During H1FY25, domestic revenue from Opdivo decreased 17% YoY to ¥62.6B.
- Opdivo will start to lose patent protection starting from 2028. Prolific commercialization of these new drugs will remain crucial for Ono riding the patent cliff successfully.
- Ono shares plunged 36% over the last one year to trade at attractive valuation. In absence of any near-term growth catalyst, the shares are not expected to see much upside.
Kurotani Corp (3168 JP): Coverage Initiation
- In FY08/24, revenue was JPY82.1bn (-3.0% YoY), operating profit was JPY1.5bn (+172.2% YoY), recurring profit was JPY1.0bn (+355.9% YoY), and net income attributable to owners of the parent was JPY533mn (+212.8% YoY). The initial company forecast at the beginning of the fiscal year was revenue of JPY72.9bn, operating profit of JPY634mn, recurring profit of JPY454mn, and net income attributable to owners of the parent of JPY320mn. The initial assumptions were an exchange rate of JPY135/USD and an LME copper price of USD8,500/ton.
- The USD remained above JPY150 until end-Q3 and LME copper prices exceeded USD9,000/ton since April 2024. The company thus revised its performance forecast upward at its Q3 results briefing to revenue of JPY82.1bn, operating profit of JPY2.3bn, recurring profit of JPY1.9bn, and net income attributable to owners of the parent of JPY1.1bn.
- However, due to a decline in LME copper prices in Q4, the actual results for FY08/24 fell below the revised forecast.
Q2 Follow-Up – TSUBAKIMOTO KOGYO (8052 JP)
- Tsubakimoto Kogyo Co., Ltd., (hereafter, the Company) announced its H1 FY2025/3 results on October 31, 2024. Net sales rose but profit fell during H1 FY2025/3.
- Net sales were firm due to the substantial order backlog.
- However, profits at the operating profit level and below fell year on year as SG&A costs rose for various reasons, including stronger sales activities following the end of the COVID-19 pandemic and revisions to personnel expenses. Orders remained firm and hit a record high.
PCI Holdings (3918 JP) – What Restar Corporation’s Tender Offer Will Bring
- PCI Holdings, Inc. (hereafter, the Company) reported generally grim results for FY2024/9.
- Net sales fell 12.0% YoY to JPY 25,084 mn, while dropping 3.3% YoY when excluding the sale of subsidiary leafnet.
- Operating profit fell 38.3% YoY to JPY 1,054 mn, while effectively dropping 17.4% excluding the sale of leafnet.
Q2 Follow Up – COPRO-HOLDINGS (7059 JP)
- COPRO-HOLDINGS (hereafter the Company) key consolidated figures increased sharply, including net sales of JPY 14,227 mn (+27.7% YoY), operating profit of JPY 1,237 mn (+67.9% YoY), Non-GAAP operating profit of JPY 1,439 mn (+67.0% YoY), ordinary profit of JPY 1,257 mn (+55.1% YoY), and profit attributable to owners of parent (hereafter, net profit) of JPY 797 mn (+56.4% YoY).
- Higher sales at COPRO Construction, the Company’s core construction technician dispatching business, led to higher gross profit and a lower fixed cost ratio.
- As a result, operating profit at COPRO Construction rose by 42.5% YoY, contributing significantly to the Company’s earnings growth.
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