In today’s briefing:
- Proto Corp (4298) – Large Active Holders Going Activish-Y
- Proto Corp (4298 JP): Kaname Capital Throws a Spanner in the Works
- Sotetsu Holdings (9003) – Crossholders Sell Down – Big ADV Multiple, Low Earnings Multiple, Boring
- Tsumura (4540 JP) Equity Offering – Easy To Swallow, and Not Expensive
- Softbank (9984) Is Trading Cheap, And That Could Be An Opportunity
- Sotetsu Placement: Low Valuation and Share Buyback Should Aid Deal Performance
- M&As Due to Restructuring of Business Portfolios Have Finally Begun to Increase
- 4576 JP – Notice of Approval of Ophthalmic Surgical Aid “DW-1002” in China
- Asaka Industrial (TYO 5962): A 350-Year-Old Profitable Nanocap Net-Net Trading at 0.4x P/B, 7x P…
Proto Corp (4298) – Large Active Holders Going Activish-Y
- When the deal was announced, I wrote that the MBO for Proto Corp (4298 JP) was opportunistic and was possibly “vulnerable” to activist attentions (original insight here).
- On the 17th, one large active holder Ancient Arts LP filed an amendment to their Large Shareholder Filing showing a change in Reason for Investment.
- On the 18th of Feb, top independent shareholder Kaname Capital reported an increase in stake and sent Open Letters which appear only now to be circulating. It’s worth a look.
Proto Corp (4298 JP): Kaname Capital Throws a Spanner in the Works
- Kaname Capital, the second-largest shareholder of Proto Corp (4298 JP), has issued an open letter stating that the JPY2,100 MBO tender offer is a bad conclusion at the wrong price.
- Some assertions are valid, while others do not stand up to scrutiny. Kaname claims that Proto is worth JPY3,778, which will make it hard to reach a compromise.
- Maintaining terms is increasingly not viable. The Chairman is likely to respond by lowering the minimum acceptance condition and/or bumping to secure the support of minorities (excluding Kaname).
Sotetsu Holdings (9003) – Crossholders Sell Down – Big ADV Multiple, Low Earnings Multiple, Boring
- Sotetsu Holdings (9003 JP) today announced a large-ish secondary equity offering – 10% of shares out and 20% of Max Real World Float.
- This is crossholders selling down roughly 30% of what they own. Sotetsu announced a buyback for a quarter of the offering over the next six months.
- The shareholder structure and distribution within Max Real World Float tells you all you need to know.
Tsumura (4540 JP) Equity Offering – Easy To Swallow, and Not Expensive
- Tsumura & Co (4540 JP) shocked everyone a year ago when they announced an immediate large price hike across the board for its kampo medicines. The stock was +35% immediately.
- It did not fall back. Now the stock is up 60% from a year ago and earnings are too. It’s still <10x PER. Now we get a ¥10bn secondary offering.
- It’s 12 days of ADV but not super heavy, and there is a buyback on the back end.
Softbank (9984) Is Trading Cheap, And That Could Be An Opportunity
- Softbank’s investment in Arm, valued at around USD 148 billion, is its new NAV driver, after its 300% rally post its IPO.
- Despite an ongoing share buyback and an LTV near 12.9%, Softbank is still trading around a 59% discount to its net asset value.
- Softbank looks like a good proxy for investing in Arm and being long Softbank and Short Arm looks like reasonable risk/reward at current levels.
Sotetsu Placement: Low Valuation and Share Buyback Should Aid Deal Performance
- A group of shareholders are looking to raise US$135m from selling their respective stakes in Sotetsu Holdings (9003 JP) .
- While the deal shouldn’t come as a surprise, given the ongoing cross-shareholding unwind narrative in Japan, the timing of such a selldown isn’t always certain.
- In this note, we will talk about the placement and run the deal through our ECM framework.
M&As Due to Restructuring of Business Portfolios Have Finally Begun to Increase
- Listed subsidiaries and affiliates are now required by the TSE to disclose their basic thoughts on their business portfolio strategy and the rationale for being listed.
- M&A is expected because Japanese companies have not taken effective steps to expand their corporate value as cash on hand is building up and ROE is sluggish.
- M&A is likely to be mostly conducted by domestic companies or investment funds as a result of industry restructuring and business portfolio restructuring in Japan.
4576 JP – Notice of Approval of Ophthalmic Surgical Aid “DW-1002” in China
- DWTI announced that ophthalmic surgical aid product “DW-1002” has been approved by the National Medical Products Administration (NMPA) in China for the indication of staining of the internal limiting membrane (ILM) during vitreous surgery, as reported by the Company’s sublicensee Dutch Ophthalmic Research Center International B.V. (DORC).
- This drug is already being sold in 76 countries and regions around the world, including Europe and the United States, and sales are progressing favorably.
- The graph below shows the annual trend of DW-1002 royalty income to DWTI from DORC. In China, it is scheduled to be launched under the product name ILM-BlueⓇ
Asaka Industrial (TYO 5962): A 350-Year-Old Profitable Nanocap Net-Net Trading at 0.4x P/B, 7x P…
- Asaka Industrial Products. Check out their web store here .
- Asaka Industrial is a dirt-cheap manufacturer of shovels, gardening tools, and logistics equipment.
- According to its annual report, the company was “the first in Japan to produce and commercialize shovels and scoops” back in 1893.
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