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2006 Japan IPO data digested (Part 2 of 2) January 23, 2007

Posted by fukumimi in Economy & Business, IPO, Japan.
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So, here are some other statistics regarding the IPO situation last year:

Average gain on IPO price (offer price vs initial trading price) was 77%, down from 133% in 2005. Looking at the main 3 venture markets (Jasdaq, Mothers, Hercules) the average was 97.5% gain (J-60%, M-104%, H-148%).

On average, numbers seem to be becoming a little bit more sensible, compared to the year before.

Maximum gain was 773% (JTEC) and worst performer was KFE Japan which hir 41.6% below the offer price (it listed on Nagoya Centrex, a regional market).

JTEC had sales of JPY2.8B and net earnings of JPY0.18B (about $2M) and at the initial trading price was valued at JPY17.4B, or about $200M.

Other top performers include eBASE, a database software company which went up 543%. Revenues of JPY0.67B, earnings of JPY0.18B, valuation: JPY16.1B

Third was Hikaku.com, the Kakaku.com rip-off that I’ve written about before, up 500%. Revenues JPY0.57B, Earnings JPY0.25B, valuation: JPY84.7B……….

The big IPOs were dominated by old economy stock, led by Nomura Real Estate raising JPY126B and Idemitsu raising JPY109B. Perhaps worthy of note was #7 on that particular list, Accordia Golf, the Goldman Sachs golf course roll-up vehicle, which raised JPY9.8B

Valuation spread (based on initial trading price):

<JPY1B    2

<JPY2B   3

<JPY5B    29

<JPY10B    41

<JPY20B    56

<JPY50B    33

<JPY100B    11

>JPY100B    13

Substantial increase in total <JPY5B valuation companies, from 11 in 2005 to 34 in 2006. Is it an indication that underwriters are keen to push IPOs out early, sensing a possible downturn…?

PER (initial trading price)

<10    2.7%   (2005 – 1.9%)

<20   25.5%   (2005 – 20.1%)

<30    21.8%   (2005 – 14.5%)

<50    19.1%   (2005 – 21.4%)

<100    18.1%   (2005 – 20.1%)

>100    12.8%   (2005 – 22%)

Again, a little bit more sensible numbers, at least compared to the crazy 35 companies hitting PERs >100 in 2005.

However, internet related sectors were still hot, with 15 out of the 24 stocks hitting PER >100 being in this sector. Standouts include Mixi (PER 210, valuation JPY208B), Hikaku.com (PER 567, JPY84.7B), Drecom (PER 572, JPY68.6B), Raccoon (PER 238, JPY29.5B, OKWave (PER 235, JPY13.4B).

For the vast majority of these “hot stocks”, the initial price is was the highest price they posted through the year. Let’s look at their current valuations (and change from the initial trading price).

Mixi –  JPY166B (Down 20% in 4 months)

Hikaku.com – JPY9.4B (Down 89% in 10 months)

Drecom – JPY36.9B (Down 46% in 11 months, down  more than 2/3 from its first week peak price)

Raccoon – JPY3.8B (Down 87% in 9 months)

OKWave –  JPY8.67B (Down 35% in 7 months)

Notable Trends

ICT/internet/mobile sector –  Continued where they left off in 2005 (which saw 77 IPOs) , and had another strong year (a total of 88 out of 188 IPOs belonged to this category – 47% of all IPOs)

Financial Service – We saw IPOs of the first M&A advisory firms (GCA and Japan M&A Center) and equity research firms (Fisco, Japaninvest Group, T&C Holdings)

System Integrators & Software houses – 24 IPOs of SI/software companies in ’06, up from 16 in ’05. Industry specialisation, consulting and new business models are notable trends. Examples are companies claiming expertise in Private Information Protection Law compliance, J-SOX (which is not a single act but an unsightly mishmash of new and updated laws and directives) compliance, nursing care industry specific solutions, amongst others.

In other news,

For people who like faux-British pubs, the company behind the “Hub” chain of British themed pubs also IPO’d last year (April 3rd, on Hercules).  Current valuation is JPY3B, down from more than JPY12B at its peak. (At its peak, it would have had a PER of about 170, which is, well, silly…)

Comments»

1. Mark C - May 6, 2008

I see that you mentioned both T&C Holdings and FISCO in this post. I am doing some research on both of these companies. I was wondering if you have any experience as a customer of either of these companies.

Do you have an opinion on the quality of their data and service in general?

Thanks!

2. fukumimi - May 7, 2008

I have no opinion on their data or services as I’ve never used either that much. (Laziness makes me turn to Google and Yahoo (usually not looking for much beyond stock charts and basic financials), the other source for information relating to IPOs that I use is TokyoIPO)

Looking back at both these companies, it is worth noting that the are both trading well below the IPO price, Fisco down nearly 90% from the post-IPO pop, and T&C also down 80-odd %.

Would be unfair to single these guys out, the vast majority of recent IPO stock has fared similarly badly.


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