In today’s briefing:
- 7&I (3382) Possibility of YUUUUUGE Buyback?
- 7&I (3382) – A Starting Point for the Standalone Plan – The Good, The Bad, The Ugly
- Seven & I Holdings (3382 JP): Board’s Plan to Unlock Value Is a Stop-Gap Measure
- Japan Post Bank US$4bn Deal Updates – Needs to Correct More. Discount Vs Deal Performance Analysis
- Nikkei 225 Sep25 Rebal: One ADD, One DELETE Probable – Less Interesting Than Before
- JX Advance Metals IPO: Priced Reasonably but The Timing Isn’t Great
- Makino Milling Machine (6135 JP): State of Play
- Trial a Top 10 Retailer After Seiyu Purchase from KKR (With Big Synergies)
- PAL Group (2726JP): 3Coins Still Growing Very Fast
- MEC Co., Ltd (4971 JP): Research Update
7&I (3382) Possibility of YUUUUUGE Buyback?
- Last Thurs the MBO died. Tuesday an article said the ACT deal had died. Then 7&i denied that. Yesterday an article said Bain’s York Holdings deal would be approved today.
- That meant a Board meeting which would approve receipt of ~¥700bn of cash. What to do with it?
- Just now, Bloomberg says Seven & I Holdings (3382 JP)‘s board will consider a massive buyback. THAT is the capital allocation news my last piece suggested necessary. It’s HUGE.
7&I (3382) – A Starting Point for the Standalone Plan – The Good, The Bad, The Ugly
- Today, partway through the day, we got a Bloomberg article suggesting a large-scale buyback was to come. Post-close, we got the full details.
- “Seven & i Holdings Announces Plan to Unlock Shareholder Value Through Leadership Changes and Transformational Capital and Business Initiatives”.
- Sale of York. Management change. Update on Special Committee work with ACT. Commitment to return ¥2trln to shareholders via buybacks by FY2030. Higher divs. IPO of 7-Eleven Inc (US).
Seven & I Holdings (3382 JP): Board’s Plan to Unlock Value Is a Stop-Gap Measure
- The Seven & I Holdings (3382 JP) Board announced a plan to unlock and distribute significant value to shareholders.
- The initial excitement focused on the positives of leadership changes, US Assets IPO, a higher-than-expected valuation for the Superstore Business and a considerable buyback.
- The negatives of a long-dated buyback, inevitable rejection of the Couche-Tard offer, an uncertain US Assets IPO and ongoing HoldCo discount suggest the initial excitement will fizzle out.
Japan Post Bank US$4bn Deal Updates – Needs to Correct More. Discount Vs Deal Performance Analysis
- Japan Post Holdings (6178 JP) (JPH) aims to sell around US$4bn worth of Japan Post Bank (7182 JP) (JPB), trimming its stake to below 50%.
- JPH had last sold around US$9bn worth of JPB shares in Mar 2023. That deal had a similar structure and it didn’t end up performing well.
- We have looked at the deal dynamics in our previous notes. In this note, we talk about updates and look at discounts vs performance for past secondary deals.
Nikkei 225 Sep25 Rebal: One ADD, One DELETE Probable – Less Interesting Than Before
- The March 2025 Nikkei 225 review came out with a sparse set of changes. That gives us hints for the September 2025 review.
- I see one ADD and one DELETE. Fast Retailing capping is right on the border. BayCurrent will see an upweight.
- The lack of effort to address sector imbalances within the rules suggests the rules are not as hard as people thought. Intra-review changes could be more interesting in years ahead.
JX Advance Metals IPO: Priced Reasonably but The Timing Isn’t Great
- JX Advance has announced the terms for its IPO and set the pricing at ¥810-820 per share, at a much lower pricing range than previously expected ¥862 per share.
- ENEOS is planning to offer 465.2m shares at the IPO raising around ¥377-381bn (US$2.5bn) at a market capitalisation and EV of ¥760bn and ¥857bn respectively.
- Our SOTP valuation suggests that JX Advanced Metals (5016 JP)’s shares are priced reasonably, however, given the negative sentiment over AI and tech stocks, we remain cautious.
Makino Milling Machine (6135 JP): State of Play
- On 27 December, Nidec Corp (6594 JP) announced a hostile preconditional tender offer for Makino Milling Machine Co (6135 JP) at JPY11,000 per share.
- The Board has raised several issues with the Nidec proposal through two questionnaires. Some assertions are valid, while others do not stand up to scrutiny.
- The Board has launched an ambitious MTM plan to thwart the offer and hinted at potential competing offers. Nidec’s offer increasingly needs a bump.
Trial a Top 10 Retailer After Seiyu Purchase from KKR (With Big Synergies)
- Trial was already one of Japan’s leading discount retailers with a strong network of stores down south in Japan although rather low margins.
- Buying Seiyu transforms this local retailer into a national champion and one of the top 10, with a highly complementary set of stores, product expertise, warehouses and tech.
- Together, the two will now be able to take on Aeon, Seven & I, PPI and other major retailers in building the first true national grocery chains in Japan.
PAL Group (2726JP): 3Coins Still Growing Very Fast
- 3Coins is the non-apparel part of PAL Group, and its fastest growing sub-brand.
- With pressure from import costs due to the weak Yen, the company spent FY2024 looking to boost product-level profitability through price increases for higher end items and new ranges.
- Results look positive and operating profit for the group is due to rise 23%.
MEC Co., Ltd (4971 JP): Research Update
- MEC’s (4971 JP) reported FY24 (Dec year-end) results, producing OP of ¥4,562mil (+83.0% YoY) on sales of ¥18,234mil (+30.1% YoY).
- FY24 Chemical segment sales rose +27.0% YoY to ¥17,478mil, thanks to 1) a steady increase in demand for chemicals used in high-end packages, and 2) a gradual recovery in demand associated with PCs, smartphones, and general servers.
- MEC is guiding for FY25 1H OP of ¥2,250mil (-4.8% YoY) on sales of ¥9,600mil (+8.1% YoY), and full-year OP of ¥5,000mil (+9.6% YoY) on sales of ¥20,000mil (+9.7% YoY).
💡 Before it’s here, it’s on Smartkarma
Sign Up for Free
The Smartkarma Preview Pass is your entry to the Independent Investment Research Network
- ✓ Unlimited Research Summaries
- ✓ Personalised Alerts
- ✓ Custom Watchlists
- ✓ Company Data and News
- ✓ Events & Webinars
