Daily Brief Japan: Rakuten Bank , Rakuten, Ferrotec Corp, Tokyo Electron, Aeon Co Ltd and more

In today’s briefing:

Rakuten Bank – Big TOPIX Inclusion Next Week

Rakuten Bank priced its IPO low and then immediately bounced. Earnings came in as forecast, and the forecast next year did too. Highish PBR, high ROE, not-so-high-PER on low ROA.
The stock fell on 16 May after Rakuten Bank announced its capital raising. That was probably a knee-jerk reaction, and had no reason.
Next week sees the TOPIX inclusion. And the Real World Float has gotten smaller since the offering. And some of those people aren’t going to sell near-term.

Since the announcement of the placement, Rakuten (4755 JP)’s shares are down -15.7% from the undisturbed price of JPY707 per share (12 May prior to press reports of the placement).
To understand how the shares will trade as the offer is launched, we think it is instructive to look at recent large Japanese placements. Pricing date is likely 24 May.
So far, Rakuten’s shares have mostly followed the pattern of previous large placements. Investors participating in previous large Japanese placements tend to secure positive returns.

Guidance for 1H of FY Mar-24 should be easy to beat. The sharp rebound that management is forecasting for 2H is open to question.
TSMC and Micron plan long-term expansion in Japan and Rapidus will be a new customer. But exports to China – the company’s largest market – will be restricted.
The share price has spiked, but uncertainty is high, visibility is low and valuations are not compelling.Management’s MAGIC medium-term targets look like … magic.

Aeon just announced record revenues of more than ¥9 trillion for FY2022.
Its supermarkets, mall developments and drugstores continue to strengthen and even the GMS business had a good year even if it still a way to go to generate consistent profit.
Meanwhile, Aeon plans to pour ¥150 billion a year into group-wide digital technologies, after launching the most advanced food online operation Japan has seen yet this month.

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