Leading International Investment Research, Edison Investment Research

Edison Investment Research

Leading International Investment Research

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisors and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting.

Equity Bottom-Up

Dentsu Group’s better-than-expected Q325 profit performance, which was driven by Japan, and the phasing of restructuring costs and investment have enabled management to upgrade underlying profit guidance for the year. The regional revenue trends remain consistent with prior quarters, with Japan leading the charge and outperforming management’s expectations, while international markets remain weak with trends quite mixed. Relative to its peers, Dentsu’s organic growth position is broadly in the middle of the pack. Although the upgrade is encouraging, there is uncertainty due to management’s ongoing search for strategic partnerships for its international business and regarding the FY25 dividend.

Dentsu Group’s better-than-expected Q325 profit performance, which was driven by Japan, and the phasing of restructuring costs and investment have enabled management to upgrade underlying profit guidance for the year. The regional revenue trends remain consistent with prior quarters, with Japan leading the charge and outperforming management’s expectations, while international markets remain weak with trends quite mixed. Relative to its peers, Dentsu’s organic growth position is broadly in the middle of the pack. Although the upgrade is encouraging, there is uncertainty due to management’s ongoing search for strategic partnerships for its international business and regarding the FY25 dividend.

Dentsu Group — Strength in Japan feeds FY25 profit upgrade

Dentsu’s Q225 performance was a little below management expectations, with conditions remaining challenging outside Japan. Group operating margins were controlled for H125 at 12.0%. With a further goodwill write-down of ¥86.0bn, Dentsu reported a statutory loss for H125 and is not now paying an interim dividend. A decision on the full year will be made later, and our model assumes dividends resume for FY26. Our FY25 forecasts have been realigned to match revised guidance, with a slightly more cautious stance on growth for FY26. Management’s target for operating margins of 16–17% by FY27 remains in place, predicated on the targeted cost reductions in the mid-term management plan.

Dentsu’s Q225 performance was a little below management expectations, with conditions remaining challenging outside Japan. Group operating margins were controlled for H125 at 12.0%. With a further goodwill write-down of ¥86.0bn, Dentsu reported a statutory loss for H125 and is not now paying an interim dividend. A decision on the full year will be made later, and our model assumes dividends resume for FY26. Our FY25 forecasts have been realigned to match revised guidance, with a slightly more cautious stance on growth for FY26. Management’s target for operating margins of 16–17% by FY27 remains in place, predicated on the targeted cost reductions in the mid-term management plan.

Dentsu Group — Japan performs well, international tougher

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Index Rebalance

<ul>
<li>The drop in <a href="https://www.smartkarma.com/entities/dentsu-inc" target="_blank" data-smartkarma-citation="entities:12434:1" rel="noopener">Dentsu Inc (4324 JP)</a>'s stock price over the last few months could lead to the deletion of the stock from a global index in August.</li>
<li>
<a href="https://www.smartkarma.com/entities/dentsu-inc" target="_blank" data-smartkarma-citation="entities:12434:1" rel="noopener">Dentsu Inc (4324 JP)</a> has underperformed its peers over the last year and trades cheaper than the average of its Advertising peers.</li>
<li>There is positioning in <a href="https://www.smartkarma.com/entities/dentsu-inc" target="_blank" data-smartkarma-citation="entities:12434:1" rel="noopener">Dentsu Inc (4324 JP)</a>, though it is likely to be smaller than the estimated passive selling. A relative selloff could be used to enter the stock.</li>
</ul>


The drop in Dentsu Inc (4324 JP)'s stock price over the last few months could lead to the deletion of the stock from a global index in August.

Dentsu Inc (4324 JP) has underperformed its peers over the last year and trades cheaper than the average of its Advertising peers.
There is positioning in Dentsu Inc (4324 JP), though it is likely to be smaller than the estimated passive selling. A relative selloff could be used to enter the stock.


Dentsu Group (4324 JP): Global Index Deletion Likely

Dentsu Group’s Q125 figures show 0.2% organic net revenue growth and an improvement in operating margin. Japan performed well, with international operations more challenged. Dentsu’s new management plan aims to drive profitability and competitiveness, particularly ex-Japan. It targets up to ¥50bn of operating cost reductions, returning the group to consistent profit growth from FY27. The ¥50bn cost of reshaping the group weighs on FY25 profits but should result in a simpler organisation. A further ¥45bn will be invested over three years with the aim of no markets being loss-making by FY26. The group will focus on the key Japanese and US markets, with the international business centred on adding value to Dentsu’s existing strengths in media. The goal is to achieve a mid-teens return on equity by the plan’s completion.

Dentsu Group’s Q125 figures show 0.2% organic net revenue growth and an improvement in operating margin. Japan performed well, with international operations more challenged. Dentsu’s new management plan aims to drive profitability and competitiveness, particularly ex-Japan. It targets up to ¥50bn of operating cost reductions, returning the group to consistent profit growth from FY27. The ¥50bn cost of reshaping the group weighs on FY25 profits but should result in a simpler organisation. A further ¥45bn will be invested over three years with the aim of no markets being loss-making by FY26. The group will focus on the key Japanese and US markets, with the international business centred on adding value to Dentsu’s existing strengths in media. The goal is to achieve a mid-teens return on equity by the plan’s completion.

Dentsu Group — New medium-term plan actioned

Dentsu has published its FY24 results, which show a strong Q424 in its Japanese business, ensuring that the group effectively met November’s net revenue guidance despite continuing weakness in international trading. As a result of higher discount rates and shifts in the international risk profile, Dentsu has taken a ¥210.1bn impairment charge, split ¥153.0bn in EMEA and ¥57.1bn in the Americas. The group has also now launched its new mid-term management plan (MTMP), targeting organic revenue growth of 4% in FY27, with operating margins of 16–17% by the plan’s completion. This involves a re-evaluation of the underperforming businesses within the group and laying solid foundations on which to build.

Dentsu has published its FY24 results, which show a strong Q424 in its Japanese business, ensuring that the group effectively met November’s net revenue guidance despite continuing weakness in international trading. As a result of higher discount rates and shifts in the international risk profile, Dentsu has taken a ¥210.1bn impairment charge, split ¥153.0bn in EMEA and ¥57.1bn in the Americas. The group has also now launched its new mid-term management plan (MTMP), targeting organic revenue growth of 4% in FY27, with operating margins of 16–17% by the plan’s completion. This involves a re-evaluation of the underperforming businesses within the group and laying solid foundations on which to build.

Dentsu Group — Mid-term management plan in place

Japan

DENTSU INC. mainly provides comprehensive advertising services.  The Company also provides marketing and event planning & promotion services.  Dentsu has associated companies in the US, Europe, and Asia.

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Dentsu Inc (4324 JP)

Dentsu Group — Strength in Japan feeds FY25 profit upgrade

Dentsu Group’s better-than-expected Q325 profit performance, which was driven by Japan, and the phasing of restructuring costs and investment have...

Edison Investment Research

Dentsu Group — Japan performs well, international tougher

Dentsu’s Q225 performance was a little below management expectations, with conditions remaining challenging outside Japan. Group operating margins...

Edison Investment Research

Dentsu Group (4324 JP): Global Index Deletion Likely

Dentsu has underperformed its peers this year and the stock could be deleted from a global index in August. Positioning appears to be smaller than...

Brian Freitas

Dentsu Group — New medium-term plan actioned

Dentsu Group’s Q125 figures show 0.2% organic net revenue growth and an improvement in operating margin. Japan performed well, with international...

Edison Investment Research

Dentsu Group — Mid-term management plan in place

Dentsu has published its FY24 results, which show a strong Q424 in its Japanese business, ensuring that the group effectively met November’s net...

Edison Investment Research

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Market Cap (USDm)

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