Sushi chain IPO will test investor appetite for risk
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
To some investors, Abenomics has gone horribly stale. Others — hungry for a decent return on their investments — are convinced that it is still appetisingly fresh. The answer, along with some vital hints at wider investor sentiment, may come this week with the IPO of the country’s biggest chain of sushi shops.
Like the finest of raw fish, Thursday’s market debut of Sushiro Global looks simple enough. The low-cost, conveyor-belt sushi chain was bought and delisted by one private equity group in 2009, sold to another — Permira — in 2012 and will return to the market bigger and buzzier than eight years ago. Revenues are up about 80 per cent over that period, branch numbers have increased almost a third and operating profits have nearly tripled.
Underneath that, however, Permira is offering investors a more complex dish: a balance sheet freighted since its 2009 delisting with some Y84bn in intangible assets and Y96bn of liabilities. That profile will root out whether four years of pro-market chatter has moved the needle on attitudes towards investment risk, and generated any more than a flicker of public optimism on the economy.
The good news for Sushiro is that there are signs of pent-up retail appetite for new issues — Japanese IPO numbers are up about 15 per cent since the start of 2017 compared with the same period last year, and analysts see that growth continuing. There is also evidence that investors are prepared to back a company peddling traditional Japanese food to an ageing country with anaemic wage growth. Last week, Chikaranomoto, which runs a chain of ramen noodle shops, listed its shares and saw their value surge by more than five times when they started trading.
A greater test, though, will be whether Sushiro can specifically generate faith in both the debt-heavy shape that private equity ministrations has left it, and in a management that seems to actively thrive on that leverage.
Foreign investors grumble about a Japanese equity market where companies jealously hoard idle mounds of cash, and 38 per cent of companies have a market capitalisation below their tangible book value. Sushiro’s passage through the private equity machine highlights an alternative cuisine; its IPO will test the Abe-era appetite for adventure.
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