In today’s briefing:
- 7&I (3382) – In Limbo, Dipping, But Stories Coming Together
- Japan: Last Look at Potential Passive Selling in February
- SBI Sumishin NetBank (7163) – Oops! NTT Docomo May Not Be There As a Buyer
- EQD | Toyota (7203 JP // TM US) – Option Opportunities Amid Tariff Tension
- Merger Arb Mondays (10 Feb) – Shibaura, Makino, Fuji Soft, Tecnos, Tohto Suisan, Proto, Pentamaster
- Appier (4180) | Q4 Preview; Valuation Re-Rating Likely
- EQD | Nikkei Index Options Weekly (January 27 – 31): Implied Vol Very Reactive to Spot
- Kyodo Printing (7914 JP): Q3 FY03/25 flash update
- Axell Corp (6730 JP): Q3 FY03/25 flash update
- Forum Engineering Inc (7088 JP): Q3 FY03/25 flash update
7&I (3382) – In Limbo, Dipping, But Stories Coming Together
- In the past month we have seen Seven & I Holdings (3382 JP) earnings, confirmation of the York Holdings timeline, stories about Apollo, KKR, and CP Group providing MBO financing.
- We’ve also seen Itochu confirm the financing request from the Ito family, and two American banks tapped to provide LBO financing.
- York Holdings itself gets created this month, and a buyer decided “in spring” with a Group Buyer/Outcome possibly decided by the May AGM. Looks skewed to me.
Japan: Last Look at Potential Passive Selling in February
- There are 14 Japanese stocks at risk of being deleted from global passive portfolios in February. The number will be smaller depending on the day of the review period chosen.
- Selling from passive trackers will range from US$176m-354m and the impact ranges from 3.1-18.4 days of ADV. Short interest has increased in nearly all stocks over the last 4 weeks.
- The forecast deletes have underperformed the TSE Tokyo Price Index TOPIX on average over the last 1-3 months, while there has been marginal outperformance over the last week or two.
SBI Sumishin NetBank (7163) – Oops! NTT Docomo May Not Be There As a Buyer
- On Friday, SBI Sumishin Net Bank (7163 JP) fell 12.5% in the last 90 minutes of trading. This was not due to their Q3 earnings release (out 30 January).
- It seemed due to investor disappointment in the content of the NTT earnings call. As discussed in the forked insight, there had been speculation NTT would buy SBI Sumishin.
- Investors had thought NTT would pay more than 28x earnings and a ¥600bn premium to book to buy the business. At 23.7x Mar25e EPS and 4.1x book, it’s still expensive.
EQD | Toyota (7203 JP // TM US) – Option Opportunities Amid Tariff Tension
- Japanese Prime Minister Shigeru Ishiba’s meeting with US President Trump shines the spotlight on potential US tariffs on Japanese cars. Toyota Motor’s (7203 JP) high implied volatility expresses elevated risk.
- Risk analysis suggests a range of option strategies. Implementation is challenging due to low liquidity in the Japanese market.
- Option liquidity is higher in the US traded Toyota Motor Corp Spon ADR (TM US) which is the preferred route of implementation.
Merger Arb Mondays (10 Feb) – Shibaura, Makino, Fuji Soft, Tecnos, Tohto Suisan, Proto, Pentamaster
- We 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: Lifestyle China (2136 HK), Seven & I Holdings (3382 JP), Dada Nexus (DADA US), Smart Share Global (EM US), ESR Group (1821 HK), Get Nice Financial.
- Lowest spreads: Makino Milling Machine Co (6135 JP), Shibaura Electronics (6957 JP), Avjennings Ltd (AVJ AU), Fuji Soft Inc (9749 JP), Macromill, Inc (3978 JP), Proto Corp (4298 JP).
Appier (4180) | Q4 Preview; Valuation Re-Rating Likely
- We forecast Q4 consolidated revenue of ¥9.7bn (+27% YoY); Operating profit (OP) is expected to grow +129% YoY to ¥1.0bn in Q4
- For FY25, we expect the company to guide for +25% revenue growth and OP +160% to ¥5.7bn, significantly ahead of the street estimate of ¥4.8bn.
- Appier’s AI-powered solutions operate on top of generative AI models, utilizing proprietary data and analytics to enhance corporate online advertising efficiency.
EQD | Nikkei Index Options Weekly (January 27 – 31): Implied Vol Very Reactive to Spot
- Nikkei down 2.66% on Monday with Implied vol very reactive to the move jumping almost 3 points.
- USD/JPY dropped 2.35% for the week, Nikkei fared better only losing 1.96%.
- Open interest in the Nikkei dominated by Puts with 2 outstanding for every 1 Call.
Kyodo Printing (7914 JP): Q3 FY03/25 flash update
- Revenue increased by 4.4% YoY to JPY75.1bn; net income rose 86.3% YoY due to investment gains.
- Publishing printing revenue declined YoY; operating loss narrowed by JPY138mn YoY, but price pass-through was slower than expected.
- Revenue from business forms rose 8.8% YoY; operating profit exceeded expectations due to cost reductions despite weak BPO performance.
Axell Corp (6730 JP): Q3 FY03/25 flash update
- Sales decreased by 13.6% YoY to JPY11.9bn, with operating profit and recurring profit declining by 38.7% and 37.5% respectively.
- Pachinko and pachislot machine market showed deceleration; company focused on AI business expansion and graphics LSI sales.
- New Businesses segment reported an operating loss of JPY377mn, with sales declining by 8.1% YoY to JPY340mn.
Forum Engineering Inc (7088 JP): Q3 FY03/25 flash update
- Revenue increased by 10.9% YoY to JPY26.1bn, driven by higher demand for temporary engineers and staffing rates.
- Cumulative Q3 pre-tax profit rose 43.3% YoY to JPY3.5bn, with significant contributions from Cognavi Staffing and staffing rate increases.
- Cognavi India recorded JPY15mn revenue and JPY279mn operating loss in cumulative Q3 FY03/25 due to upfront investments.
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