In today’s briefing:
- Fuji Soft (9749 JP): Nearing the Endgame as KKR Bumps to JPY9,850
- LG CNS: First Day Trading Strategy Post IPO
- Tecnos Japan (3666 JP): Ant Capital’s JPY1,155 Tender Offer
- Korea: 11 Potential Index Deletions in February
- Tecnos Japan (3666 JP) – Small Cap IT Consultant Goes Private – Activist Pitches In
- Fuji Soft (9749) – KKR Bumps Bigly In Bain Boyg; Buyers Bully a Bagarre
- Nintendo (7974)| Nintendo: Switch 2 Can’t Come Soon Enough
- SailPoint, Inc. (SAIL) — First Software IPO of the Year: Thoma Bravo Seeking $11.5b IPO Valuation
- SailPoint IPO Valuation Update: Modest Upside, Only ~$690M Will Be Used To Repay a Portion Of Debt
- Hennge KK (4475 JP): Q1 FY09/25 flash update
Fuji Soft (9749 JP): Nearing the Endgame as KKR Bumps to JPY9,850
- KKR & Co (KKR US) has increased its Fuji Soft Inc (9749 JP) offer to JPY9,850, a 4.2% premium to the previous JPY9,451 offer and a 2.6% premium to Bain’s JPY9,600 offer.
- A bump from KKR was expected and necessary, as the shares have consistently traded above its previous offer. Bain is scheduled to launch its competing offer this week.
- Expect a final round of bids, as KKR’s offer is not final. The shares closed above KKR’s offer, which remains below the high end of the IFA DCF valuation range.
LG CNS: First Day Trading Strategy Post IPO
- In this insight, we discuss the first day trading strategy of LG CNS which starts trading on 5 February.
- On the first day of trading, we believe LG CNS’s shares could trade at higher levels, overshooting its intrinsic valuations.
- We recommend investors to take some profits off the table if the share price shoots higher by 30% to 50%+ from the IPO price on the first day.
Tecnos Japan (3666 JP): Ant Capital’s JPY1,155 Tender Offer
- Tecnos Japan (3666 JP) has recommended a tender offer from Ant Capital at JPY1,155, a 38.7% premium to the last close.
- The offer is reasonable as it is above the midpoint of the target IFA’s DCF valuation range and represents a seven-year high.
- Ant has secured irrevocables from the top three shareholders. However, the largest shareholder’s irrevocable has a counteroffer and share price clause, which could result in a competing bid.
Korea: 11 Potential Index Deletions in February
- There are 11 stocks (maybe 12) in Korea that could be deleted from a global index in February and that will result in large selling from passive trackers.
- With announcement in a week and implementation in just over 3 weeks, there is positioning in a lot of the names.
- With short selling still banned, positioning will not be as high as the passive selling and the stocks could still drop over the next few weeks.
Tecnos Japan (3666 JP) – Small Cap IT Consultant Goes Private – Activist Pitches In
- Tecnos Japan (3666 JP) decided it wanted to go private. It has a bunch of large shareholders and a lot of retail, and was getting kicked out of TOPIX.
- An activist bought 6% last spring, Tecnos conducted a bidding process last fall. Ant Capital won. The activist has 10+% now. They and two others with 25% agreed to tender.
- This should get done easily. It is not expensive, but an auction is good process and should be a model for deals done in future.
Fuji Soft (9749) – KKR Bumps Bigly In Bain Boyg; Buyers Bully a Bagarre
- In Dec 2024, Bain announced it would overbid KKR’s bid without requiring Fuji Soft’s approval, backed by the founding family. In early Jan 2025, we got an anticipated start date.
- That anticipated start date is upon us. KKR’s deal to close 7 Feb is now bumped to ¥9,800 and extended 7 days, suggesting Bain’s bid beacons.
- I think they’ll have to go to ¥10,000 and from here there may not be much upside. I’d rather stay away.
Nintendo (7974)| Nintendo: Switch 2 Can’t Come Soon Enough
- Switch slowdown: Nintendo’s Q3 revenue and profit fell sharply as the ageing console nears the end of its cycle, missing hardware sales expectations.
- Guidance cut: Full-year revenue and profit forecasts were lowered, but investors remain focused on the upcoming Switch 2 launch.
- Muted upside: Switch 2 is an incremental upgrade, unlikely to expand the market significantly or boost Nintendo’s valuation beyond its current fair value of ¥9,000 per share.
SailPoint, Inc. (SAIL) — First Software IPO of the Year: Thoma Bravo Seeking $11.5b IPO Valuation
- SailPoint is sponsor-backed by Thoma Bravo and is seeking a valuation north of $11b after taking the company private in August 2022 for $6.9bn
- The sponsor will be only selling 2.5mm shares in this offering.
- As of October 31, 2024, their annual recurring revenue was $813.2 million, reflecting an increase of 30% compared to October 31, 2023.
SailPoint IPO Valuation Update: Modest Upside, Only ~$690M Will Be Used To Repay a Portion Of Debt
- Austin-Based SailPoint, a Thoma Bravo-backed identity management software company, has announced the initial price range for its US IPO.
- The offering is expected to be between $19.00 and $21.00, implying a market cap of ~$11B at the midpoint, up ~61% vs. take-private transaction valuation of ~$6.9B in 2022.
- I see modest post-listing upside for SailPoint stock, and the company plans to use only ~$690M to repay a portion of its $1.5B+ debt.
Hennge KK (4475 JP): Q1 FY09/25 flash update
- Revenue increased 31.1% YoY to JPY2.5bn, with HENNGE One revenue at JPY2.3bn and Professional Service at JPY175mn.
- Operating profit rose 37.3% YoY to JPY529mn, with a margin of 21.1% and SG&A expenses at JPY1.6bn.
- Gross profit reached JPY2.1bn, gross margin at 85.5%, and advertising expenses increased 68.8% YoY to JPY157mn.
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