In today’s briefing:
- SBI Sumishin Net Bank IPO: An IPO Price Range in the Wake of the Bank Share Sell-Off
- TBS (9401) Selling Cross-Holdings But Don’t Hold Your Breath
- Nikkei and Nifty Shorts Hitting Bear Targets
- Trial Holdings IPO: The Bull Case
- Sumitomo Pharma (4506 JP): Latuda To Drag Near-Term Performance; New Long-Term Growth Driver Added
- Lasertec (6920 JP): Negative Potential of Sculpta Not in the Price
- Trial Holdings Pre-IPO – The Negatives – Wafer-Thin Margins
SBI Sumishin Net Bank IPO: An IPO Price Range in the Wake of the Bank Share Sell-Off
- SBI Sumishin Net Bank (7163 JP) has introduced a price range of JPY1,200-1,260 per share in the wake of a sell-off in bank shares. Offer shares and timelines are unchanged.
- We previously discussed the IPO in SBI Sumishin Net Bank IPO: The Investment Case and SBI Sumishin Net Bank IPO: Valuation Insights. The shares will be listed on 29 March.
- Our analysis suggests that SBI Sumishin Net Bank is fairly valued at the new IPO price range. We would participate in the IPO.
TBS (9401) Selling Cross-Holdings But Don’t Hold Your Breath
- Three years ago I wrote a piece about the history of activism at Tokyo Broadcasting System (9401 JP), suggesting it was not expensive but activist gains might be hard won.
- Yesterday, TBS announced it would sell strategic cross-holdings to raise cash for investment, as per its Medium-Term Management Plan 2023, and its full-year forecast Net Profit would rise 75%.
- That tells you what you need to know, and it guides you to the value within.
Nikkei and Nifty Shorts Hitting Bear Targets
- Japan became a top laggard short bet above 28,000 given our call for a domino roll. Nikkei 26,900 was our initial downside target with a primary target of 26,000.
- India’s short from 18,000 is meeting the overshoot target at 17,100 with 16,800 a level to cover if not look for a tradable bounce. 17,700-800 is fresh sell resistance.
- SPX weakness was the call from March 6-20 so we may be seeing up for some recovery actvity in Asia after the 20th but will face headwinds come June.
Trial Holdings IPO: The Bull Case
- Trial Holdings (5882 JP), a discount store operator in Japan, is seeking to raise US$380 million at the IPO reference price of JPY2,000. Pricing on 26 March.
- Trial aims to act as a one-stop shopping store where a consumer can buy whatever they want at a great price. Trial’s basic pricing strategy is Every Day Low Price.
- The key elements of the bull case rest on top quartile revenue growth, encouraging same-store sales growth, solid margin profile and cash generation.
Sumitomo Pharma (4506 JP): Latuda To Drag Near-Term Performance; New Long-Term Growth Driver Added
- Sumitomo Pharma (4506 JP) completed the acquisition of Myovant Sciences. Myovant’s marketed drugs Orgovyx and Myfembree are on strong growth trajectory and have the potential to become blockbuster drugs.
- Sumitomo’s flagship drug Latuda lost patent protection in Feb’23 and has already started seeing revenue erosion. For FY23, Sumitomo has guided for Latuda revenue of $1,565 million, down 14% YoY.
- Post Latuda, newly added drugs will not be able to fully offset the effect of Latuda revenue loss. the company is not expected to launch in-house new drug before FY25.
Lasertec (6920 JP): Negative Potential of Sculpta Not in the Price
- Applied Materials’ new Sculpta pattern-shaping tool could greatly reduce demand for EUV mask inspection on a medium- to long-term view. High-NA EUV is likely to do the same.
- Lasertec’s high valuations are predicated on a multi-year high growth trajectory. That trajectory is now being called into question.
- We have cut our FY Jun-25 profit forecast by 32%, but the projected P/E ratio is still 40x. More downside ahead.
Trial Holdings Pre-IPO – The Negatives – Wafer-Thin Margins
- Trial Holdings (5882 JP) is looking to raise around US$375m in its Japan IPO.
- TH operates a network of retail stores that offer one-stop shopping under its everyday low price model, across a variety of daily necessities, food items and other products.
- In this note, we will talk about the not-so-positive aspects of the deal.
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