In today’s briefing:
- [Japan M&A] – KKR Launches Still-Too-Light Topcon (7732) Deal
- Global Markets Tactical Outlook: Week of July 28 – August 1
- Shionogi & Co (4507 JP): High on HIV Royalty; FY Guidance Reaffirmed; New Launches to Drive Growth
- Japan Pure Chemical (4973 JP): Q1 FY03/26 flash update
- Shin-Etsu Chemical: Full Year Guidance Disappoints
- Ono Sokki (6858 JP): 1H FY12/25 flash update
- Setting the Trading Unit to One Share Is the Quickest Way to Increase Virtual AGMs
[Japan M&A] – KKR Launches Still-Too-Light Topcon (7732) Deal
- In December-2024, this deal was mooted and it came out as expected. But the implied growth in management forecasts was higher than expected so the price came in quite light.
- In March when the deal was announced, it seemed like a tough call, but three weeks later Value Act decided they would tender, but would reinvest in the back end.
- The deal is now approved, and launches tomorrow. It gets done, I expect, but it is not a model deal other than being one showing the loopholes available to buyers.
Global Markets Tactical Outlook: Week of July 28 – August 1
- A quick synoptic look at the tactical models for the key indices, stocks, commodities and bonds we cover, for the week July 28 – August 1.
- OVERSOLD: China Mobile (941 HK) , Commonwealth Bank of Australia (CBA AU) are just mildly oversold, NIFTY Index (NIFTY INDEX) is oversold.
- OVERBOUGHT: Amazon (AMZN US) , Alphabet (GOOG US) , NVIDIA (NVDA US) , Toyota Motor (7203 JP) , Softbank Group (9984 JP) , Hang Seng Index , Nikkei 225 INDEX
Shionogi & Co (4507 JP): High on HIV Royalty; FY Guidance Reaffirmed; New Launches to Drive Growth
- Shionogi & Co (4507 JP) achieved YoY improvement in all key parameters. Moreover, Q1FY26 result shows a significant improvement compared to Q1FY25, when all key parameters recorded double-digit YoY decline.
- During Q1FY26, revenue increased 2% YoY to ¥100B, driven by HIV franchise. Q1FY26 revenue records 19% progress, while operating and net profit advanced more than 20% of full-year target.
- Shionogi has maintained H1FY26 and FY26 guidance. This indicates Q2FY26 revenue expectation of ¥133B, up 14% YoY. Acquisition of JT Group’s pharmaceutical business and Torii Pharmaceutical is progressing.
Japan Pure Chemical (4973 JP): Q1 FY03/26 flash update
- Revenue increased by 10.7% YoY to JPY3.4bn, while operating profit decreased by 37.8% YoY to JPY93mn.
- Sales for AI servers and data centers remained strong, but consumer product demand stalled due to US-China tensions.
- Revenue from semiconductor packages grew 24.1% YoY, while automotive-related sales declined slightly due to inventory adjustments.
Shin-Etsu Chemical: Full Year Guidance Disappoints
- Shin-Etsu Chemical’s fiscal Q1/26 results were inline with expectations, with EBIT down -12.6% yoy as margins declined yoy for all of its divisions
- However, FY26E guidance disappointed markets, with a -14.4% decline in operating income, well below consensus’ already weak 0.6% forecast, and the stock fell -9.5%
- Shin-Etsu has trades at a P/B premium to the Japan chemical sector even with a lower ROE, providing limited valuation support especially given a weak operating outlook
Ono Sokki (6858 JP): 1H FY12/25 flash update
- Orders increased by 4.4% YoY to JPY7.4bn, with Measuring Equipment orders at JPY2.2bn and Custom Order Test Equipment at JPY5.2bn.
- Sales rose 24.8% YoY to JPY6.3bn, despite project postponements, with a gross profit margin decline of 1.1pp to 43.0%.
- Operating loss narrowed by JPY398mn YoY, while net loss expanded by JPY1.0bn due to absence of extraordinary gains.
Setting the Trading Unit to One Share Is the Quickest Way to Increase Virtual AGMs
- It is obvious to everyone that digitization reduces costs. However, if few companies adopt digitization, trust banks that undertake shareholder management tasks will not make temporary investments for digitization.
- With many companies wanting to distance themselves from shareholders, digitization and online services will unlikely accelerate even if legislation is enacted, at least until manual work reaches its limits.
- The solution is to create an environment (setting the trading unit to one share) where it is burdensome to send AGM documents manually and count voting rights manually.
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