June 2023: A Close Look at the Most Promising IPOs in Japan
Exploring the red-hot IPO scene in Japan of June 2023 featuring emerging stars in AI, Healthcare and Beyond
In the bustling financial hub of Japan, the stock market is burning hot, and the startup scene is taking off. Indeed, June 2023 promises to be an exhilarating month, with the next Sony or Rakuten potentially lurking amongst the debutants.
In this dynamic landscape, two sectors are turning heads – Artificial Intelligence (AI) and Healthcare. These industries, on the precipice of their own IPOs, are driving Japan's technological transformation.
And so, I present to you the most anticipated and the hottest IPOs hitting the Japanese stock market this June (ranked based on my excitement for them):
June 2023 IPOs: From AI solutions to healthcare and beyond
1. Globee (TYO 5575 - Information & Communications)
IPO Date: The Initial Public Offering (IPO) of Globee, an AI English teaching platform, is scheduled for June 6, 2023, as approved by the Tokyo Stock Exchange on May 11, 2023.
Business Overview: Globee was founded on June 6, 2014, to maximize individual potential by creating and operating AI learning platforms. Their main product, "abceed," is a web-based and smartphone app AI English teaching platform, aimed at maximizing learning volume and efficiency.
Financial Performance (in million yen): Globee has shown consistent growth in net sales over the years with 223 million yen in 2020, 411 million yen in 2021, and 709 million yen in 2022. The forecast for 2023 is 943 million yen. Despite a setback in 2021, the company returned to profitability in 2022 with a profit of 54 million yen and forecasts a profit of 170 million yen in 2023.
IPO Details: Globee plans to issue 4,996,800 shares during the IPO with a provisional price ranging between 1080 to 1150 yen. The public offering includes 11,800 shares and an additional 71,7500 shares through over-allotment. The scale of the public offering is expected to be around 10.3 billion yen.
Offering Assessment: Comparing the expected Price Earnings Ratio (PER) of the preliminary terms with the average PER of similar companies, it appears that the IPO price of Globee is slightly higher than that of its counterparts, predicted to land at around 31-34x, while its closest competitors (Rare Job ‘TYO 6096) BizMates (TYO 9345) & Progrit (TYO 9560)) are around 16-29x.
Strategic Outlook: Globee's success depends on the continuous development of their AI-powered English learning platform, "abceed," and their ability to acquire paying members. Their strategy includes improving service, expanding sales, enhancing usability, and developing more diverse content. With an emphasis on English learning, the company has a competitive edge in the educational market. Considering the positive trends in the market, Globee's IPO can expect a solid initial price formation.
2. ABEJA (TYO 5574- Information & Communications)
IPO Date: ABEJA is scheduled to IPO on June 6, 2023. The application period runs from May 5 to June 29, 2023.
Business Overview: ABEJA was established in September 2012 and aims to promote the digital transformation of companies through its ABEJA Platform. The company is a regular member of the Japan Deep Learning Association and is working to expand "Deep Learning for Digital Transformation".
Financial Performance (in million yen): ABEJA's net sales have been increasing year on year, reaching 1,978 million yen in 2022, with a growth rate of 57.1%. However, the company has recorded losses in the past years. For the fiscal year ending August 2023, the company expects net sales to increase to 2,767 million yen and aims to return to profitability with an ordinary profit of 366 million yen.
IPO Details: ABEJA's IPO is expected to raise about 20 billion yen. The expected public offering price is 1550 yen per share, with a forecast trading range of 1000-4000JPY. The IPO will be managed by Nomura Securities.
Offering Assessment: The expected price-earnings ratio (PER) of ABEJA's provisional terms is cheaper than the average PER of four similar companies. However, that does not mean it is cheap! At an expected number of 40x, it is expensive, but the average of its four closest competitors is a whopping 121x(!) Additionally, the scale of the public offering is expected to be around 20 billion yen, indicating low concerns on the supply and demand side.
Strategic Outlook: ABEJA operates a "digital platform business" that transforms the business processes of client companies. With the growing trend of digital transformation and companies' strong willingness to invest in IT, ABEJA is expected to continue and expand its business stably. The company's business model is similar to EMS (Electronics Manufacturing Service), and it provides a fully managed service for the processes necessary for digital transformation.
3. AIDEMY (TYO 5577 - Information & Communications)
IPO Date: The Initial Public Offering (IPO) date for AIDEMY is set for June 6, 2023.
Business Overview: AIDEMY is primarily engaged in providing AI/DX products and solutions. The company offers "Aidemy Business", an online DX learning program, and "Aidemy Practice", a digital human resource development training. It also provides "Modeloy" services for enterprise companies and "Aidemy Premium", a digital human resource development support program in the personal domain.
Financial Performance: The company expects net sales to increase by 5.42% year on year to JPY 7.16 billion in the fiscal year ending May 2023. The company also anticipates ordinary profit of JPY 5 million, marking a return to profitability.
IPO Details: The estimated IPO price is JPY 710, with an expected trading range of 1200 to 6000JPY. The number of shares issued is planned to be 396,7600. The public offering is expected to be small, less than 5 million yen, which is predicted to lead to a strong initial price formation due to supply and demand.
Offering Assessment: Comparing the expected PER of AIDEMY at 16x with the average PER of similar companies, around 52x, suggests that the IPO price of AIDEMY is cheaper. However, around 90% of the shares will be held by venture capital, leading to possible risk and requiring some caution.
Strategic Outlook: AIDEMY is developing its business with the aim of quickly installing AI and other new software technologies on the front lines of business, accelerating the creation of next-generation industries. The company's small-scale public offering and strong themes related to DX and AI could lead to a high initial price. However, the high percentage of venture capital holdings might necessitate cautious investment.
4. OB Systems (TYO 5576 - Information & Communications)
IPO Date: OB System (OBS) is set to have its Initial Public Offering (IPO) on June 6, 2023.
Business Overview: OB Systems, established in August 1972, operates in the information service industry. It provides system integration services and is expanding into new technology fields such as digital transformation and cloud computing. Its business strategy is segmented into four service lines - Financial Business, Industrial Distribution Business, Social Public Works, and IT Innovation Business.
Financial Performance (in million yen): In the fiscal year ending March 2024, OBS expects its net sales to increase by 3.5% to 5.65 billion yen and ordinary profit to increase by 0.12% to 0 million yen. The operating results for the three quarters (April 1, 2022 - December 31, 2022) were net sales of 4,541.01 million yen, operating income of 362,352,000 yen, ordinary income of 376,926,000 yen, and net income of 256,242,000 yen.
IPO Details: The company plans to issue 2,277,000 shares at the assumed issue price of JPY 1710. The number of publicly traded shares includes 20,40 shares and 9 additional shares to be sold. The public offering is expected to raise about 12.5 billion yen.
Offering Assessment: Although the company's stock price valuation is very cheap with a PER of around 9x, its popularity in the IPO market may be limited considering that it is a long-established company with over 50 years in business and is listed on the standard market (it will now IPO on the Tokyo Prime market).
Strategic Outlook: The company plans to promote a medium-term management plan with DX-related businesses as the pillars of growth. It is also focusing on securing a shortage of human resources and expanding its business domain to improve customer satisfaction. The scale of the public offering is relatively small, and all shareholders except Hitachi Solutions Co., Ltd. are subject to a 180-day lockup period post-IPO, limiting concerns about supply and demand.