In today’s briefing:
- Osaka Steel (5449) Large Buyback At a Discount Ruins Fun For Activists
- Unloved Japan Round-Up: Some Massive Results Surprises
- Chuoh Pack Industry (3952 JP): NIKKON (9072 JP) Offer’s 273% Premium Results from an Auction
- Weekly Deals Digest (02 Feb) – NTT UD REIT, Sanyo, Ascot, Giga Prize, Lifestyle China, Dada, LG CNS
- SCREEN: Moderate ~teens Growth Outlook but the Stock Is Cheap
- Easier to Raise Listing Criteria, but More Difficult to Encourage Growth of Companies Already Listed
- Seria Co Ltd (2782 JP): Q3 FY03/25 flash update
- Yellow Hat Ltd (9882 JP): Q3 FY03/25 flash update
Osaka Steel (5449) Large Buyback At a Discount Ruins Fun For Activists
- Osaka Steel (5449 JP) is 65% owned by Nippon Steel Corporation (5401 JP). They make a relatively simple set of steel products used by shipbuilders, construction companies, and warehouse builders.
- Activist Effissimo Capital went over 5% in October 2016 and is still a top holder. Activist Strategic Capital went over 5% in December 2023 and now owns 10+% of votes.
- The “hope” had been that Nippon Steel buy out minorities and Osaka Steel would be rescued from mediocre capital returns. That was not to be. Activists are disappointed.
Unloved Japan Round-Up: Some Massive Results Surprises
- Lixil increased operating profit by 15.7% YoY, to ¥20.6bn, compared to consensus estimates for an 18% decline. The stock trades at 80% of book value.
- TEPCO earned ¥112bn compared to a consensus forecast of a ¥3bn loss. It trades at 35% of book value.
- Lasertec increased EBIT by 122% to ¥47.7bn compared to consensus estimates for ¥27bn, and the stock trading at the lowest multiples relative to Topix in seven years.
Chuoh Pack Industry (3952 JP): NIKKON (9072 JP) Offer’s 273% Premium Results from an Auction
- Chuoh Pack Industry (3952 JP) has recommended Nikkon Holdings (9072 JP)’s tender offer at JPY5,034, a 273.2% premium to the last close.
- The extraordinary premium resulted from a competitive auction, enabling Toyota Motor (7203 JP), the largest shareholder, to sell most of its stake.
- The offer is well above the target IFA’s DCF valuation range and more than double the all-time high. Stating the obvious, this is a done deal.
Weekly Deals Digest (02 Feb) – NTT UD REIT, Sanyo, Ascot, Giga Prize, Lifestyle China, Dada, LG CNS
- A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
- ECM developments: LG CNS (LGCNSZ KS) seeks to raise up to US$837 million, and Guming Holdings (GUM HK) seeks to raise US$300 million.
- Event-Driven developments: NTT UD REIT Investment Corporation (8956 JP), Ascot Corp (3264 JP), Giga Prize (3830 JP), Sanyo Special Steel (5481 JP), Lifestyle China (2136 HK), Dada Nexus (DADA US).
SCREEN: Moderate ~teens Growth Outlook but the Stock Is Cheap
- Big Dec-24 due to China. Mar-25 will be weaker. FY26 growth will come only from TSMC and HBM. After a strong FY25 (~30% growth), FY26 should see growth at 10-15%.
- Accounting concerns should be over after the publication of the audit report on Jan 14 2025. The stock has started appreciating since early Jan 2025.
- Valuations are low. The stock is trading at ~11x FY26 EPS. A muted Mar-25 could limit the upside short-term, let’s wait.
Easier to Raise Listing Criteria, but More Difficult to Encourage Growth of Companies Already Listed
- There is a need to change the mindset of company managers who consider IPO as a goal and not a way to grow after the listing.
- The listing criteria for TSE Growth Market will be raised as early as April 2026. It’s clear that the current listing criteria are far from liquid enough to invest in.
- For companies that are already listed, some rule should be established to either de-list them because they cannot bear the listing cost or to increase their market capitalization through M&As.
Seria Co Ltd (2782 JP): Q3 FY03/25 flash update
- Sales reached JPY178.0bn, a 7.0% YoY increase, with directly managed stores contributing 98.9% of total sales.
- Operating profit rose 16.9% YoY to JPY13.2bn, while net income increased 18.3% YoY to JPY8.9bn.
- The company opened 84 directly managed stores and closed 49, totaling 2,056 stores by end-Q3 FY03/25.
Yellow Hat Ltd (9882 JP): Q3 FY03/25 flash update
- Yellow Hat’s cumulative Q3 FY03/25 sales increased 4.9% YoY to JPY119.1bn, with operating profit up 9.6% YoY.
- The medium-term plan targets FY03/28 revenue of JPY180.0bn, operating profit of JPY16.8bn, and net income of JPY11.8bn.
- Planned investment of JPY33.0bn from FY03/26 to FY03/28 includes JPY28.0bn in capex and JPY5.0bn for M&A.
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