Equity Long-Short

Mo Aziz

Equity Bottom-Up

<ul>
<li>We identified <a href="https://www.smartkarma.com/entities/kato-sangyo-co-ltd" target="_blank" data-smartkarma-citation="entities:4882:1" rel="noopener">Kato Sangyo (9869 JP)</a> (Kato) as the most attractive Japanese laggard opportunity due to its net cash balance sheet, undemanding PER, and attractive PEG and P/FCF ratios  </li>
<li>Management guides for 25% EPS growth in FY24 with only 15% net profit growth, implying a massive share buyback of ~JPY9 billion (5.4% shares in issue) with subsequent cancellation       </li>
<li>The combination of impending share buybacks, cancellation of existing treasury shares, and dividends equates to 10% shareholder returns in FY24   </li>
</ul>


We identified Kato Sangyo (9869 JP) (Kato) as the most attractive Japanese laggard opportunity due to its net cash balance sheet, undemanding PER, and attractive PEG and P/FCF ratios  
Management guides for 25% EPS growth in FY24 with only 15% net profit growth, implying a massive share buyback of ~JPY9 billion (5.4% shares in issue) with subsequent cancellation       
The combination of impending share buybacks, cancellation of existing treasury shares, and dividends equates to 10% shareholder returns in FY24   


Japanese Laggard Opportunity #1: Kato Sangyo (9869 JP)

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

Event-Driven

NTT (Nippon Telegraph & Telephone) / Event-Driven

NTT (Nippon Telegraph & Telephone) (9432 JP)

<ul>
<li>On 7 April, the JPX announced the changes to the Free Float Weights (FFW) for the TOPIX Index. There are some big changes due to the updated FFW methodology.</li>
<li>From April to June, we see a one-way turnover of 2.87% and a one-way trade of ¥2,285bn. Some stocks have opposite way flows in different months.</li>
<li>Stocks with inflows outperformed stocks with outflows from Oct-Dec 2021 before giving up all the gains. These stocks have started to outperform and could continue outperforming over the next quarter.</li>
</ul>


On 7 April, the JPX announced the changes to the Free Float Weights (FFW) for the TOPIX Index. There are some big changes due to the updated FFW methodology.
From April to June, we see a one-way turnover of 2.87% and a one-way trade of ¥2,285bn. Some stocks have opposite way flows in different months.
Stocks with inflows outperformed stocks with outflows from Oct-Dec 2021 before giving up all the gains. These stocks have started to outperform and could continue outperforming over the next quarter.


TOPIX FFW Transition - Big Flows from April to June

Japan

KATO SANGYO CO., LTD. is a wholesaler which handles processed foods including seasoning, dried foodstuffs, soft drinks, and frozen and canned foods.  The Company has a distribution network through supermarkets and co-op stores.

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Kato Sangyo (9869 JP)

Japanese Laggard Opportunity #1: Kato Sangyo (9869 JP)

Kato Sangyo is an attractive laggard opportunity with net cash and strong growth. We forecast it shareholder returns of ~10% in 2024 via combo of...

Mo Aziz

TOPIX FFW Transition - Big Flows from April to June

Changes to the Topix FFW methodology will result in a turnover of 2.87% & trade of ¥2,285bn from April to June. There is a lot to trade on some...

Brian Freitas

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Japanese Laggard Opportunity #1: Kato Sangyo (9869 JP)

​Kato Sangyo is an attractive laggard opportunity with net cash and strong growth. We forecast it shareholder returns of ~10% in 2024 via combo of...

Mo Aziz

TOPIX FFW Transition - Big Flows from April to June

Changes to the Topix FFW methodology will result in a turnover of 2.87% & trade of ¥2,285bn from April to June. There is a lot to trade on some...

Brian Freitas

Kato Sangyo is an attractive laggard opportunity with net cash and strong growth. We forecast it shareholder returns of ~10% in 2024 via combo of...