Daily Brief Japan: SBI Sumishin Net Bank, Tokyo Broadcasting System, Nikkei 225, Trial Holdings, Sumitomo Pharma, Lasertec Corp and more

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.

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.

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 (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) 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.

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 (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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