Daily Brief Japan: SBI Shinsei Bank, Mandom Corp, Pacific Industrial, Honda Motor, Toho Co Ltd, TSE Tokyo Price Index TOPIX, Fukushima Galilei, ROHM Co Ltd, Monex Group Inc and more

• SBI Shinsei Bank (8303 JP)‘s listing has been approved by the JPX and the stock is expected to start trading on the Prime Market from 17 December.
• At the indicated IPO price of ¥1,440/share, the IPO will raise up to ¥367.6bn (US$2.38bn) and value SBI Shinsei Bank (8303 JP) up to ¥1,290bn (US$8.34bn).
• The stock should be added to the TOPIX INDEX at the close on 29 January while inclusion in global indices should take place in May and June.

• I summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads: Mayne Pharma (MYX AU), Smart Share Global (EM US), AUB Group Limited (AUB AU), Dongfeng Motor (489 HK), ENN Energy (2688 HK), Digital Holdings Inc (2389 JP).
• Lowest spreads: Bright Smart Securities (1428 HK), Mandom Corp (4917 JP), Seven West Media (SWM AU), Pacific Industrial (7250 JP), Toyota Industries (6201 JP), Jinke Smart Services (9666 HK). 

• 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: CNGR Advanced Material (2579 HK) prices at the low end of the range, Klook (KLK US) seeks to raise US$400 million.
• Event-Driven developments: Pacific Industrial (7250 JP), Forum Engineering Inc (7088 JP), Fujitec Co Ltd (6406 JP), Itochu Shokuhin (2692 JP), Maruwn Corp (9067 JP), Star Micronics (7718 JP). 

• Context: This Insight follows up on previously highlighted relative value opportunities, using a statistical methodology based on mean-reversion to identify opportunities in paired securities.
• Highlights: Currently ten pair trade opportunities across four markets and four sectors persist.
• Why read: Statistical analysis offers a unique perspective on relative value. Gain insights into actionable statistical pair trade opportunities and monitor performance of previously highlighted pairs.

• Leading Market Position in a Resilient Sector: Toho is a dominant player in Japan’s food service distribution industry, a sector characterized by stable, albeit low-margin, demand. Its comprehensive business model, encompassing distribution, cash & carry, and food solutions, provides a significant competitive advantage.
• Strategic Growth Initiatives Driving Profitability: The company’s mid-term management plan, ‘SHIFT-UP 2027,’ focuses on key growth areas including expansion in the Greater Tokyo Area, increasing the share of higher-margin private brand (PB) products, and pursuing strategic M&A, which are expected to enhance profitability.
• Attractive Shareholder Returns and Valuation: Toho demonstrates a strong commitment to shareholder returns, targeting a 40% dividend payout ratio. The stock trades at a compelling valuation relative to its peers, supported by robust growth in earnings and dividends over the past three years.

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• Dominant integrated entertainment enterprise in Japan, underpinned by a powerful intellectual property (IP) portfolio, most notably the globally recognized ‘Godzilla’ franchise.
• Clearly defined growth strategy, “TOHO VISION 2032,”focuses on strengthening its four core pillars (Film, Theatre, Real Estate, and Anime), with a significant emphasis on international expansion and digital innovation.
• Stable financial performance is augmented by the lucrative and less volatile Real Estate division, providing a solid foundation for investments in the inherently cyclical content creation business.

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• Since TSE’s request, many companies have introduced share buybacks as a measure, and as a result of investors demanding accountability for how these shares are used, share cancellations have increased.
• Companies that frequently cancel treasury stock demonstrate superior capital profitability. Companies with high capital profitability also exhibit strong scores in growth strategy, cash holdings, dividend policy, and treasury stock cancellation.
• More companies are expected to consider cash allocation within overall goal of enhancing corporate value, encompassing growth strategy, cash holding policy, and dividend policy, in order to improve capital profitability.

• Industry Leader with Diversified Operations: Fukushima Galilei is a leading Japanese manufacturer of commercial and industrial refrigeration systems, with a strong market presence in the food service, retail, and medical sectors. The company is diversifying its business by expanding into non-food areas like pharmaceuticals and semiconductors, leveraging its core temperature control technology.
• Solid Financial Performance and Growth: The company has demonstrated a consistent track record of revenue and net income growth, supported by strong demand in its core markets. Recent financial results show continued positive momentum, with double-digit growth in sales and operating profit, leading to a positive revision of the fiscal year forecast.
• Commitment to Sustainability and Innovation: Fukushima Galilei is proactively investing in environmentally friendly technologies, such as CO2-based refrigeration systems and energy-efficient products. The company’s focus on R&D and innovation, highlighted by its ‘MILAB’ open innovation base, positions it to capitalize on future industry trends toward sustainability and automation.

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• ROHM is demonstrating a significant turnaround, returning to profitability in Q1FY25 after a challenging FY2024, driven by structural reforms, improved demand, and cost controls.
• The company is a key player in the high-growth Silicon Carbide (SiC) power semiconductor market, which is critical for electric vehicles (EVs) and energy-efficient applications, representing a major growth catalyst.
• Despite the positive outlook, the stock trades at an attractive valuation of approximately 0.8x Price-to-Book, though it faces significant risks from macroeconomic headwinds, weak demand in China, and geopolitical tensions.

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• Monex Group is strategically positioned at the intersection of traditional online brokerage and the high-growth crypto-asset market through its key subsidiary, Coincheck. This dual focus offers a diversified revenue stream but also exposes the company to significant market volatility.
• The company’s financial performance is highly sensitive to cryptocurrency market fluctuations, as evidenced by volatile earnings and a recent net loss attributed to one-time costs for Coincheck’s Nasdaq listing. However, core operations in Japan and the U.S. remain profitable, supported by strategic partnerships and growing assets under management.
• Facing intense competition and a zero-commission trend in the Japanese online brokerage industry, Monex is focused on expanding its crypto-asset business globally and growing its asset management segment to drive future growth and enhance shareholder value, underscored by a strong dividend payout.

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