Daily Brief Japan: Toshiba Corp, Anycolor, Japan Post Bank, Samco Inc, Trial Holdings, MonotaRO Co Ltd, Rakuten, Tokyo Stock Exchange Tokyo Price Index Topix and more

In today’s briefing:

Toshiba (6502) – Funding Possibly Re-Secured, Deal Possibly In Play,
Anycolor (5032 JP) Shows Its Colours – Great Quarter Guys! and TOPIX-Bound
Japan Post Bank (7182) – The Flow Calendar
Samco (6387) | Specialist in Silicon Carbide Equipment for Power Chips
Trial Holdings IPO: The Bear Case
MonotaRo: Hasn’t Been This Cheap For Quite a Long Time
Japan’s E-Commerce Wars: Rakuten Fighting Hard as Amazon Japan Becomes No. 2 Retailer
The Effect of the TSE Requesting an Improvement Plan from a Company with a P/B Below 1x Is….

Toshiba (6502) – Funding Possibly Re-Secured, Deal Possibly In Play,

Bloomberg has an article today after the close saying Toshiba Corp (6502 JP)‘s board will meet tomorrow to discuss the JIP bid, and the Special Committee will give its recommendations.
The article suggests the Board may proceed with a vote. If they do, an announced bid could come as early as the afternoon.
The world is quite volatile now, and funding is probably more precious today than yesterday. But a bid is too. All in all, I see no reason for a position.

Anycolor (5032 JP) reported Q3 results today. 9mo Revenue is now above the lower end of original forecasts for the full-year. 9mo OP is 25% higher than the original mid-range.
The net profit forecast is now up 51% from the original mid-range, and up 128% on the year. The stock has cratered. Badly.
It is now 19x April 2023 earnings for 90% revenue growth and 150% Net Profit growth and 40% OPM in the last quarter. Go figure.

The near-term Supply/Demand Balance is helped or hurt – depending on how well the deal has been placed to retail, by overseas bank turmoil.
Quality of placement to retail is tough to know from outside. We have near-term offsets with both index demand and dividend looming.
The biggest near-term differentiator in possible supply/demand outcomes is, of course, in the hands of the TSE Index team. And we just don’t know.

Samco is a beneficiary of rising power semiconductor investment for electric vehicles
The company is focused on SPE equipment for the growing silicon carbide power chip market
New investment from the likes of Mitsubishi Electric should drive structural growth for SiC equipment

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.
In Trial Holdings IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
The key elements of the bear case rest on bottom quartile gross and operating margin, mid-tier FCF generation and unusual cash collection cycle.

After surging past 20.0x consensus FY+2 EV/OP multiple in 2012-2013, MonotaRO Co Ltd (3064 JP)’s consensus FY+2 EV/OP has fallen below 20.0x on one very rare occasion.
We see no major change in the fundamentals of MonotaRo aside from a temporary hike in Opex through concurrently running old and new distribution centres for the past 3 quarters.
Currently trading at 22.5x consensus FY+2 OP, we think this is a good opportunity to benefit from the company’s depressed valuation.

The big online malls continue to grow at higher rates than many branded e-commerce stores, meaning consecutive annual gains in market share.
Amazon’s lead now seems to be widening while Rakuten is also pulling ahead of Z Holdings, which continues to struggle with poor integration of assets, and we see little upside.
Amazon is now Japan’s 2nd biggest retailer but, despite its problems in Mobile, Rakuten is proving a relentless competitor in e-commerce and we remain bullish on its e-commerce prospects.

TSE will require companies with P/Bs below 1x to disclose improvement plans, urging them to shift to management that reflects an awareness of their cost of capital and stock price.
The good thing about this TSE request is that “cost of capital” will be widely recognized by companies. Companies can no longer easily reject shareholder proposals regarding cost of capital.
It should also be an opportunity for management to evaluate its own corporate value and compare it to market value and consider whether it should remain listed or go private.

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