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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Index Rebalance

<p>The results of the JPX Nikkei 400 review have been announced. There are 32 inclusions and 27 deletions to bring the number of constituents back to 400 and the changes will be effective after the close of trading on 27 November.</p><p>The index review is normally effective after the close of trading on  the second last trading day in August, but was postponed by 3 months this year because of the extension given to companies to file their annual reports and quarterly reports to 30 September owing to COVID-19.</p><p>These are the stocks that have been included and excluded from the index.</p><table class="table table-striped">
<colgroup>
<col>
<col>
<col>
<col>
</colgroup>
<tbody>
<tr>
<td colspan="2" style="text-align: center; width: 181pt;"><h3>Inclusions</h3></td>
<td colspan="2" style="text-align: center; width: 197pt;"><h3>Exclusions</h3></td>
</tr>
<tr>
<td><strong>Name</strong></td>
<td><strong>Code</strong></td>
<td><strong>Name</strong></td>
<td><strong>Code</strong></td>
</tr>
<tr>
<td>1766.T</td>
<td>Token Corp</td>
<td>2124.T</td>
<td>Jac Recruitment Co Ltd</td>
</tr>
<tr>
<td>2222.T</td>
<td>Kotobuki Spirits Co Ltd</td>
<td>2206.T</td>
<td>Ezaki Glico Co Ltd</td>
</tr>
<tr>
<td>2264.T</td>
<td>Morinaga Milk Industry Co Ltd</td>
<td>2432.T</td>
<td>DeNA Co Ltd</td>
</tr>
<tr>
<td>2317.T</td>
<td>Systena Corp</td>
<td>3254.T</td>
<td>Pressance Corp</td>
</tr>
<tr>
<td>2593.T</td>
<td>Ito En Ltd</td>
<td>3668.T</td>
<td>Colopl Inc</td>
</tr>
<tr>
<td>2811.T</td>
<td>Kagome Co Ltd</td>
<td>4246.T</td>
<td>DaikyoNishikawa Corp</td>
</tr>
<tr>
<td>3563.T</td>
<td>Sushiro Global Holdings Ltd</td>
<td>4587.T</td>
<td>PeptiDream Inc</td>
</tr>
<tr>
<td>3635.T</td>
<td>Koei Tecmo Holdings Co Ltd</td>
<td>4681.T</td>
<td>Resorttrust Inc</td>
</tr>
<tr>
<td>4189.T</td>
<td>KH Neochem Co Ltd</td>
<td>4751.T</td>
<td>CyberAgent Inc</td>
</tr>
<tr>
<td>4348.T</td>
<td>Infocom Corp</td>
<td>4902.T</td>
<td>Konica Minolta Inc</td>
</tr>
<tr>
<td>4527.T</td>
<td>Rohto Pharmaceutical Co Ltd</td>
<td>5486.T</td>
<td>Hitachi Metals Ltd</td>
</tr>
<tr>
<td>4686.T</td>
<td>Justsystems Corp</td>
<td>5703.T</td>
<td>Nippon Light Metal Holdings Co Ltd</td>
</tr>
<tr>
<td>4816.T</td>
<td>Toei Animation Co Ltd</td>
<td>5714.T</td>
<td>DOWA Holdings Co Ltd</td>
</tr>
<tr>
<td>4921.T</td>
<td>Fancl Corp</td>
<td>5975.T</td>
<td>Topre Corp</td>
</tr>
<tr>
<td>5105.T</td>
<td>Toyo Tire Corp</td>
<td>6269.T</td>
<td>Modec Inc</td>
</tr>
<tr>
<td>5631.T</td>
<td>Japan Steel Works Ltd</td>
<td>6324.T</td>
<td>Harmonic Drive Systems Inc</td>
</tr>
<tr>
<td>5857.T</td>
<td>Asahi Holdings Inc</td>
<td>6463.T</td>
<td>TPR Co Ltd</td>
</tr>
<tr>
<td>6005.T</td>
<td>Miura Co Ltd</td>
<td>6473.T</td>
<td>Jtekt Corp</td>
</tr>
<tr>
<td>6035.T</td>
<td>IR Japan Holdings Ltd</td>
<td>6641.T</td>
<td>Nissin Electric Co Ltd</td>
</tr>
<tr>
<td>6134.T</td>
<td>Fuji Corp (Aichi)</td>
<td>6755.T</td>
<td>Fujitsu General Ltd</td>
</tr>
<tr>
<td>6465.T</td>
<td>Hoshizaki Corp</td>
<td>6806.T</td>
<td>Hirose Electric Co Ltd</td>
</tr>
<tr>
<td>6532.T</td>
<td>BayCurrent Consulting Inc</td>
<td>7012.T</td>
<td>Kawasaki Heavy Industries Ltd</td>
</tr>
<tr>
<td>6670.T</td>
<td>MCJ Co Ltd</td>
<td>7606.T</td>
<td>United Arrows Ltd</td>
</tr>
<tr>
<td>6753.T</td>
<td>Sharp Corp</td>
<td>7867.T</td>
<td>Tomy Co Ltd</td>
</tr>
<tr>
<td>6754.T</td>
<td>Anritsu Corp</td>
<td>8227.T</td>
<td>Shimamura Co Ltd</td>
</tr>
<tr>
<td>8354.T</td>
<td>Fukuoka Financial Group Inc</td>
<td>8628.T</td>
<td>Matsui Securities Co Ltd</td>
</tr>
<tr>
<td>8572.T</td>
<td>Acom Co Ltd</td>
<td>9404.T</td>
<td>Nippon Television Holdings Inc</td>
</tr>
<tr>
<td>9044.T</td>
<td>Nankai Electric Railway Co Ltd</td>
<td></td>
<td></td>
</tr>
<tr>
<td>9142.T</td>
<td>Kyushu Railway Co</td>
<td></td>
<td></td>
</tr>
<tr>
<td>9504.T</td>
<td>Chugoku Electric Power Co Inc</td>
<td></td>
<td></td>
</tr>
<tr>
<td>9509.T</td>
<td>Hokkaido Electric Power Co Inc</td>
<td></td>
<td></td>
</tr>
<tr>
<td>9603.T</td>
<td>H.I.S. Co Ltd</td>
<td></td>
<td></td>
</tr>
</tbody>
</table>

The results of the JPX Nikkei 400 review have been announced. There are 32 inclusions and 27 deletions to bring the number of constituents back to 400 and the changes will be effective after the close of trading on 27 November.The index review is normally effective after the close of trading on  the second last trading day in August, but was postponed by 3 months this year because of the extension given to companies to file their annual reports and quarterly reports to 30 September owing to COVID-19.These are the stocks that have been included and excluded from the index.








Inclusions
Exclusions


Name
Code
Name
Code


1766.T
Token Corp
2124.T
Jac Recruitment Co Ltd


2222.T
Kotobuki Spirits Co Ltd
2206.T
Ezaki Glico Co Ltd


2264.T
Morinaga Milk Industry Co Ltd
2432.T
DeNA Co Ltd


2317.T
Systena Corp
3254.T
Pressance Corp


2593.T
Ito En Ltd
3668.T
Colopl Inc


2811.T
Kagome Co Ltd
4246.T
DaikyoNishikawa Corp


3563.T
Sushiro Global Holdings Ltd
4587.T
PeptiDream Inc


3635.T
Koei Tecmo Holdings Co Ltd
4681.T
Resorttrust Inc


4189.T
KH Neochem Co Ltd
4751.T
CyberAgent Inc


4348.T
Infocom Corp
4902.T
Konica Minolta Inc


4527.T
Rohto Pharmaceutical Co Ltd
5486.T
Hitachi Metals Ltd


4686.T
Justsystems Corp
5703.T
Nippon Light Metal Holdings Co Ltd


4816.T
Toei Animation Co Ltd
5714.T
DOWA Holdings Co Ltd


4921.T
Fancl Corp
5975.T
Topre Corp


5105.T
Toyo Tire Corp
6269.T
Modec Inc


5631.T
Japan Steel Works Ltd
6324.T
Harmonic Drive Systems Inc


5857.T
Asahi Holdings Inc
6463.T
TPR Co Ltd


6005.T
Miura Co Ltd
6473.T
Jtekt Corp


6035.T
IR Japan Holdings Ltd
6641.T
Nissin Electric Co Ltd


6134.T
Fuji Corp (Aichi)
6755.T
Fujitsu General Ltd


6465.T
Hoshizaki Corp
6806.T
Hirose Electric Co Ltd


6532.T
BayCurrent Consulting Inc
7012.T
Kawasaki Heavy Industries Ltd


6670.T
MCJ Co Ltd
7606.T
United Arrows Ltd


6753.T
Sharp Corp
7867.T
Tomy Co Ltd


6754.T
Anritsu Corp
8227.T
Shimamura Co Ltd


8354.T
Fukuoka Financial Group Inc
8628.T
Matsui Securities Co Ltd


8572.T
Acom Co Ltd
9404.T
Nippon Television Holdings Inc


9044.T
Nankai Electric Railway Co Ltd




9142.T
Kyushu Railway Co




9504.T
Chugoku Electric Power Co Inc




9509.T
Hokkaido Electric Power Co Inc




9603.T
H.I.S. Co Ltd






JPX Nikkei 400 Index Rebalance: Better Late Than Never (32 Adds; 27 Deletes)

Equity Analyst, LightStream Research

Oshadhi Kumarasiri

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Bottom-Up

<p><a href="https://www.smartkarma.com/entities/meiji-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:15996:1" rel="noopener">Meiji Holdings (2269 JP)</a> generates over 83% of revenues from the Food segment while the rest comes from the Pharmaceuticals segment. Irrespective of the economic situation, the company’s revenue has grown at low single digits YoY throughout its trading history, apart from two instances where it declined marginally compared to the prior year. Furthermore, the OCF grew at a CAGR of 12% over the last five years while OP and DPS grew at 22% and 28% CAGRs respectively. Therefore, on the surface, Meiji looks like a perfect defensive stock.</p>

Meiji Holdings (2269 JP) generates over 83% of revenues from the Food segment while the rest comes from the Pharmaceuticals segment. Irrespective of the economic situation, the company’s revenue has grown at low single digits YoY throughout its trading history, apart from two instances where it declined marginally compared to the prior year. Furthermore, the OCF grew at a CAGR of 12% over the last five years while OP and DPS grew at 22% and 28% CAGRs respectively. Therefore, on the surface, Meiji looks like a perfect defensive stock.

Quantamental Analysis Shows Meiji’s Perception as a Defensive Stock Could Be a Delusion

Global Automotive Stocks/EV Focus/Event Driven, SC Capital

SC Capital

Global Automotive Stocks/EV Focus/Event Driven

Over 22 years covering Japanese equities on both the sell side and the buy side. 

Bottom-up Japan Equities Research

<ul><li>Meiji Holdings will get slammed by government price cuts on pharmaceuticals in Japan from this April and then begin to see a massive decline in profitability of its anti-psychosis drug once its patent expires in December.</li><li>Combined, this should be at least a 10% drag on FY3/19 OP, raising the risks that the company guides for substantially lower numbers than consensus. Our estimates are for FY3/19 OP of Y94bn (-4% YoY), while consensus is at Y102bn (+4% YoY).</li><li>While this gap is not large and we expect management to guide for roughly flat profits YoY in FY3/19 (but miss in the end), the difference between OP growth and OP decline should be a big psychological swing factor for the share price. Meiji's share price has gone up by 3.9x over the past five years, as earnings have grown by a CAGR of +34% over that time.</li><li>Meiji's core earnings come from probiotic yogurt drinks and chocolates, which are performing well, but slowing as OP in this division has already doubled over the past 3 years. Nearly 90% of the +5% YoY OP growth seen in the Food division's 1H of FY3/18 came from cost-cutting efforts, which management says has largely run its course. Underlying sales were actually down a bit from last year's 1H.</li><li>The company announced last month that it aims to acquire a 49% stake in a blood plasma products/vaccine producer Kaketsuken, which it plans to consolidate onto its books from the 2H of FY3/19. While this could boost pharma sales by roughly 8% (based on 6 months of Kaketsuken's FY3/17 sales), the OP contribution may not be that significant as Kaketsuken had a recall of problematic plasma products in 2016. On its Japanese website (but not in the English version), Kaketsuken has a huge banner saying "Aiming to Restore Trust". </li><li>Furthermore, in recent talks with the company, they stressed that they've picked all the low-hanging fruit in terms of cost cuts and would now have to begin a multi-year phase of "investments for higher efficiencies". This sounded like a caveat that capex burdens could weigh on earnings over the next several years. Consensus estimates call for Meiji's capex falling by -4% to Y62bn in FY3/19.   </li><li>Valuations--based on our estimates, which are 7% lower than the Street but imply negative growth in FY3/19--are not demanding for a food company, with an FY3/19 PER of 22x and an EV/EBITDA of 9.8x.  But with a declining RoE (from 13.7% this fiscal year to 12.5% in FY3/19), the prospective PBR of 2.5x doesn't provide much support for the share price.</li><li>Our analysis of what Meiji could be worth if it were to sell its pharmaceutical division implies a value of at least Y12,000 per share, or 30% upside from current levels. It makes one wonder why activists haven't targeted Meiji yet but does explain why value investors like Capital have recently begun building positions.</li></ul>

Meiji Holdings will get slammed by government price cuts on pharmaceuticals in Japan from this April and then begin to see a massive decline in profitability of its anti-psychosis drug once its patent expires in December.Combined, this should be at least a 10% drag on FY3/19 OP, raising the risks that the company guides for substantially lower numbers than consensus. Our estimates are for FY3/19 OP of Y94bn (-4% YoY), while consensus is at Y102bn (+4% YoY).While this gap is not large and we expect management to guide for roughly flat profits YoY in FY3/19 (but miss in the end), the difference between OP growth and OP decline should be a big psychological swing factor for the share price. Meiji's share price has gone up by 3.9x over the past five years, as earnings have grown by a CAGR of +34% over that time.Meiji's core earnings come from probiotic yogurt drinks and chocolates, which are performing well, but slowing as OP in this division has already doubled over the past 3 years. Nearly 90% of the +5% YoY OP growth seen in the Food division's 1H of FY3/18 came from cost-cutting efforts, which management says has largely run its course. Underlying sales were actually down a bit from last year's 1H.The company announced last month that it aims to acquire a 49% stake in a blood plasma products/vaccine producer Kaketsuken, which it plans to consolidate onto its books from the 2H of FY3/19. While this could boost pharma sales by roughly 8% (based on 6 months of Kaketsuken's FY3/17 sales), the OP contribution may not be that significant as Kaketsuken had a recall of problematic plasma products in 2016. On its Japanese website (but not in the English version), Kaketsuken has a huge banner saying "Aiming to Restore Trust". Furthermore, in recent talks with the company, they stressed that they've picked all the low-hanging fruit in terms of cost cuts and would now have to begin a multi-year phase of "investments for higher efficiencies". This sounded like a caveat that capex burdens could weigh on earnings over the next several years. Consensus estimates call for Meiji's capex falling by -4% to Y62bn in FY3/19.   Valuations--based on our estimates, which are 7% lower than the Street but imply negative growth in FY3/19--are not demanding for a food company, with an FY3/19 PER of 22x and an EV/EBITDA of 9.8x.  But with a declining RoE (from 13.7% this fiscal year to 12.5% in FY3/19), the prospective PBR of 2.5x doesn't provide much support for the share price.Our analysis of what Meiji could be worth if it were to sell its pharmaceutical division implies a value of at least Y12,000 per share, or 30% upside from current levels. It makes one wonder why activists haven't targeted Meiji yet but does explain why value investors like Capital have recently begun building positions.

Meiji Holdings--Healthy Food Ops Have Heavy Drug Problems

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<p>A bit over a month ago on 24 February, the Nikkei carried an <a href="http://asia.nikkei.com/Business/Deals/Morinaga-snack-dairy-makers-to-combine-in-2018" target="_blank">article</a> which described the plans <a href="https://www.smartkarma.com/entities/1835" target="_blank" data-smartkarma-citation="entities:1835:1">Morinaga &amp; Co Ltd (2201 JP)</a> and <a href="https://www.smartkarma.com/entities/20907" target="_blank" data-smartkarma-citation="entities:20907:1">Morinaga Milk Industry Co (2264 JP)</a> had to combine, including an apparent decision regarding the two top C-suite spots <em>("Morinaga Milk President Michio Miyahara is eyed as chairman of the holding company, while Toru Arai, his counterpart at Morinaga &amp; Co., is likely to become president").</em></p><p>The market responded Yesterday, Morinaga Milk and Morinaga &amp; Co <a href="http://www.morinagamilk.co.jp/english/about/pdf/20170330_en.pdf" target="_blank">announced</a> they have…</p>

A bit over a month ago on 24 February, the Nikkei carried an article which described the plans Morinaga &amp; Co Ltd (2201 JP) and Morinaga Milk Industry Co (2264 JP) had to combine, including an apparent decision regarding the two top C-suite spots ("Morinaga Milk President Michio Miyahara is eyed as chairman of the holding company, while Toru Arai, his counterpart at Morinaga &amp; Co., is likely to become president").The market responded Yesterday, Morinaga Milk and Morinaga &amp; Co announced they have…

Special Situations, Content Strategist, Smartkarma

Crispin Francis

Special Situations, Content Strategist

Smartkarma

Smartkarma unites the fragmented investment industry, connecting institutional investors, independent research providers, and corporates within a single network.

Research Reinvented

<p><em>We at Smartkarma Special Situations put out a weekly update on trade ideas we like, key events from the week gone by and what to look out for in the week ahead.</em></p><p>Risk arbitrage trades we have our eyes on are:</p><ul><li><a href="https://www.smartkarma.com/entities/13301" target="_blank" data-smartkarma-citation="entities:13301:1">ARA Asset Management (ARA SP)</a> / Consortium</li><li><a href="https://www.smartkarma.com/entities/15217" target="_blank" data-smartkarma-citation="entities:15217:1">Yingde Gases Group Co Ltd (2168 HK)</a> / PAG Asia</li><li><a href="https://www.smartkarma.com/entities/19290" target="_blank" data-smartkarma-citation="entities:19290:1">USEN Corp (4842 JP)</a> / <a href="https://www.smartkarma.com/entities/9637" target="_blank" data-smartkarma-citation="entities:9637:1">U-Next Co Ltd (9418 JP)</a></li><li><a href="https://www.smartkarma.com/entities/1249" target="_blank" data-smartkarma-citation="entities:1249:1">Intime Retail Group Co Ltd (1833 HK)</a> / <a href="https://www.smartkarma.com/entities/787" target="_blank" data-smartkarma-citation="entities:787:1">Alibaba Group Holding Ltd (BABA US)</a></li><li><a href="https://www.smartkarma.com/entities/20907" target="_blank" data-smartkarma-citation="entities:20907:1">Morinaga Milk Industry Co (2264 JP)</a> / <a href="https://www.smartkarma.com/entities/1835" target="_blank" data-smartkarma-citation="entities:1835:1">Morinaga &amp; Co Ltd (2201 JP)</a></li></ul><p>Have a great weekend!</p>

We at Smartkarma Special Situations put out a weekly update on trade ideas we like, key events from the week gone by and what to look out for in the week ahead.Risk arbitrage trades we have our eyes on are:ARA Asset Management (ARA SP) / ConsortiumYingde Gases Group Co Ltd (2168 HK) / PAG AsiaUSEN Corp (4842 JP) / U-Next Co Ltd (9418 JP)Intime Retail Group Co Ltd (1833 HK) / Alibaba Group Holding Ltd (BABA US)Morinaga Milk Industry Co (2264 JP) / Morinaga &amp; Co Ltd (2201 JP)Have a great weekend!

Smartkarma: Special Situations Weekly Update (6 March 2017)

Japan

Morinaga Milk Industry Co., Ltd. produces and sells milk and related dairy products such as ice cream and yogurt.  The Company also develops biochemical product and pharmaceutical.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Morinaga Milk Industry Co (2264 JP)

JPX Nikkei 400 Index Rebalance: Better Late Than Never (32 Adds; 27 Deletes)

There are 32 inclusions and 27 exclusions from the JPX Nikkei 400. The changes will be effective after the close of trading on 27 November and the...

Brian Freitas

Quantamental Analysis Shows Meiji’s Perception as a Defensive Stock Could Be a Delusion

Meiji Holdings (2269 JP) generates over 83% of revenues from the Food segment while the rest comes from the Pharmaceuticals segment. Irrespective...

Oshadhi Kumarasiri

Meiji Holdings--Healthy Food Ops Have Heavy Drug Problems

Meiji Holdings will get slammed by government price cuts on pharmaceuticals in Japan from this April and then begin to see a massive decline in...

SC Capital

Morinaga Merger Plans On Ice For Now

A bit over a month ago on 24 February, the Nikkei carried an article which described the plans Morinaga & Co Ltd (2201 JP) and Morinaga Milk...

Travis Lundy

Smartkarma: Special Situations Weekly Update (6 March 2017)

We at Smartkarma Special Situations put out a weekly update on trade ideas we like, key events from the week gone by and what to look out for in...

Crispin Francis

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)