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Smartkarma Daily Briefs

Apr 19
0

Daily Brief Event-Driven: HKBN (1310 HK): China Mobile Is the Latest to Show Interest and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • HKBN (1310 HK): China Mobile Is the Latest to Show Interest
  • Targeting the Widening of KT Corp ADR Premium Amid MSCI Inclusion
  • YFO Goes Hard for Board Spill – Independents AND Executives
  • Yamada Denki (9831) Buyback Almost Done and Odd Dividend “Cut”, and a Lightbulb Dilemma
  • Softbank (9984 JP) – Focus on the SVFs, Are the Private Companies Appropriately Marked?
  • Quiddity Leaderboard ASX Jun 23: DHG Could Underperform Peers
  • ZJLD Group (6979 HK): Index Inclusion Possibility & Timelines
  • Oishi Group: IFA Backs ThaiBev’s Offer
  • Sega Sammy Holdings/Rovio Entertainment: Agreed Offer

HKBN (1310 HK): China Mobile Is the Latest to Show Interest

By Arun George

  • Reuters reported that China Mobile (600941 CH) is exploring a potential buyout of HKBN Ltd (1310 HK). The shares surged 12.3% to HK$6.57, above I Squared’s rumoured HK$6.00 offer. 
  • To get an idea of the appropriate offer price, we examine shareholding dealings from substantial shareholders. Our analysis suggests that a scheme offer of around HK$8.50 would likely be required.
  • PAG is also a rumoured bidder. The flurry of interest around HKBN suggests a good probability that one of the bidders will come through with a formal offer.

Targeting the Widening of KT Corp ADR Premium Amid MSCI Inclusion

By Sanghyun Park

  • We should expect significant changes in KT’s ADR premium approaching the implementation date as foreign institutions leading the passive flow for MSCI Korea constituents have typically preferred ADRs.
  • Looking at the previous two occasions, the ADR disparity widened from the midpoint of the review period. And this trend continued for a while after the implementation.
  • Although KT’s ADR disparity has not yet significantly expanded, we may witness a similar pattern this time as well, given that it has been continuously moving in the premium recently.

YFO Goes Hard for Board Spill – Independents AND Executives

By Travis Lundy

  • At end-March, Toyo Construction (1890 JP) started playing hardball against YFO. They rejected the EGM call; they sent a letter to METI crying “FEFTA Breach!”, and raised the div BIGLY.
  • The new div at ¥63/share was meant to get the share price over ¥1,000/share so the YFO bid at that price would not be meaningful. So far, no luck. 
  • But YFO, which had threatened to propose a new slate, came out today with a list of nine, including two who would be executive directors. 👀👀

Yamada Denki (9831) Buyback Almost Done and Odd Dividend “Cut”, and a Lightbulb Dilemma

By Travis Lundy

  • In May 2022, Yamada Denki (9831 JP) announced a very large buyback. GINORMOUS – in fact – at 23.9% of shares out ex-Treasury if maximum shares were bought.
  • So far, YDH is 83.5% through, and at the recent pace, they will end it 8 May having bought 183-184mm shares (21.9% of TSO) spending 86.6% of funds allocated.
  • That’s why the announcement lowering the March 2023 div to ¥12/share vs ¥18/share last year was just weird. And bodes badly. We need a lightbulb moment for a lightbulb dilemma.

Softbank (9984 JP) – Focus on the SVFs, Are the Private Companies Appropriately Marked?

By Victor Galliano

  • Softbank Vision Funds 1 and 2 were the biggest combined holdings at December 2022, accounting for 30% of group equity value; SVF private companies accounted for 73% of equity value
  • To December-end 2022, public companies in SVF2 were marked down by 52% versus investment cost, whereas SVF2 private companies were marked down by a more modest 33% versus investment cost
  • We believe that SVF2 private company valuations are at risk of further markdowns in 4QFY22 results, with many of these investments made close to the period of peak pandemic valuations

Quiddity Leaderboard ASX Jun 23: DHG Could Underperform Peers

By Janaghan Jeyakumar, CFA

  • In this insight, we take a look at the potential index changes for ASX 200, 100, 50, and 20 in the run up to the June 2023 Rebalance.
  • Based on the latest data, I do not expect any changes for ASX 20, ASX 50, and ASX 100.
  • I expect Neuren Pharmaceuticals (NEU AU) to be added to ASX 200 and Domain Holdings Australia (DHG AU) to be deleted from ASX 200.

ZJLD Group (6979 HK): Index Inclusion Possibility & Timelines

By Brian Freitas

  • ZJLD Group (ZJLD HK) is looking to raise between US$775m-US$933m (including the oversubscription option) in its IPO by selling 564.3m shares at a price range of HK$10.78-HK$12.98/share.
  • ZJLD Group (ZJLD HK) will not get Fast Entry to any indices but should be added to the HSCI and Stock Connect in September.
  • Peer performance has not been great this year and that could weigh on the ZJLD Group (ZJLD HK) listing.

Oishi Group: IFA Backs ThaiBev’s Offer

By David Blennerhassett

  • On the 10th March, Thai Beverage (THBEV SP) proposed taking 79.66%-held Oishi Group PCL (OISHI TB) private, at an Offer price of THB 59/share, a 26.9% premium to last close. 
  • This Delisting Offer requires a shareholder vote which will take place on the 3<May. Payment may occur mid-to-late August. 
  • In its report yesterday, the IFA reckons “that the shareholders should approve of the voluntary delisting“.

Sega Sammy Holdings/Rovio Entertainment: Agreed Offer

By Jesus Rodriguez Aguilar

  • Sega with better reputation and deeper pockets than Playtika, announces a €9.25/share recommended cash offer; 63% premium to Playtika’s announcement; it represents 2.1x EV/Fwd Revenue, 12.3x EV/Fwd EBITDA, 21.6x Fwd P/E.
  • Acceptance condition is over 90%, and irrevocables are 49.1%, so 80.4% of the float is needed, which is high. I value Rovio using DCF (9% WACC, 1.5% perpetuity growth rate).
  • My fair value base case estimate is €8.80/share (€9.45/bull case). I thus update my TP to €9.25. Spread is 0.59%/1.22% (gross/annualised), which is not massive. 

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Apr 19
0

Daily Brief Equity Bottom-Up: Alibaba (9988 HK): “Department One” in Reorganization and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • Alibaba (9988 HK): “Department One” in Reorganization
  • TSMC:  Crowded Trade?
  • Whitehaven Coal: Production Guide Down, Solid Support From Buybacks, 80% Annualized OCF Yield in Q3!
  • Korean Holdcos Vs Opcos Gap Trading Opportunities in 2Q 2023
  • [PDD Holdings Inc. (PDD US, BUY, TP US$95) Earnings Preview]: BUY on Expected Margin Beat
  • Anta Sports (2020 HK): Our View After Placement
  • British American Tobacco: New Category Growth
  • 10 in 10 with H2G Green – The Pivot to Green Hydrogen
  • First Solar Inc: A Strong Start To 2023 – Key Drivers
  • Rio Tinto: Expansion Plans

Alibaba (9988 HK): “Department One” in Reorganization

By Ming Lu

  • Alibaba broke down Taobao Tmall Center, the most important department, into three departments.
  • Industry Development Department One is actually “other businesses” after the reorganization.
  • Following Department One will help investors to understand Alibaba’s financials.

TSMC:  Crowded Trade?

By Steven Holden

  • Taiwan Semiconductor (TSMC) is by far the most dominant stock holding among active EM investors.
  • TSMC is owned by 87.5% of EM funds with an average weight of 6.1%, it is also the largest portfolio holding for 64.5% of managers.  
  • Despite high levels of positioning, there are no obvious signs that managers are scaling back positions. The risk of not holding TSMC may be greater than playing the contrarian.

Whitehaven Coal: Production Guide Down, Solid Support From Buybacks, 80% Annualized OCF Yield in Q3!

By Sameer Taneja

  • Whitehaven Coal (WHC AU) guided down production in an update released yesterday by 5-10% from a range of 19-20 mnt to 18-19 mnt for FY23.
  • Net cash increased 300 mn AUD QoQ from 2.5 bn to 2.7 bn AUD representing 44% of market capitalization with 1.2 bn AUD of operating cash flow alone in Q3!
  • We agree an OCF yield of 80% (1.2 bn*4 qtrs on a six bn mkt cap) is unsustainable; the capital allocation possible on this name is mind-boggling. 

Korean Holdcos Vs Opcos Gap Trading Opportunities in 2Q 2023

By Douglas Kim

  • In this insight, we highlight the pricing gap divergences of the major Korean holdcos and opcos in 2Q 2023.
  • Of the 38 pair trades, 21 of them involved holdcos outperforming opcos YTD and 17 of them involved opcos outperforming holdcos in the same period.
  • We highlight 38 pair trades that involve Korean holdcos and opcos.

[PDD Holdings Inc. (PDD US, BUY, TP US$95) Earnings Preview]: BUY on Expected Margin Beat

By Shawn Yang

  • We expect PDD to report 1Q23’s revenue and non-GAAP net income 6.1% and 23.8% ahead of consensus, respectively. 
  • PDD entered an adjustment period, reflected in lower S&M expenditure both overseas and domestically, which has led to declining PDD DAU and moderating growth of Temu’s GMV and losses.
  • We raise our PDD’s 2023’s EPS estimate by 14%~ to reflect better-than-expected cost control.  We maintain PDD’s BUY rating and US$ 95 TP, implying 21x 2023 P/E.

Anta Sports (2020 HK): Our View After Placement

By Osbert Tang, CFA

  • The new share placement of Anta Sports Products (2020 HK) has caught the market by surprise, but we think long-term story for the company should not be affected.
  • With proceeds to be used for repayment of outstanding debts, expansion in China and pursuing SE Asia markets, we should not overlook the benefits to be generated. 
  • An IPO of Amer Sports is clearly brewing and this represents an important catalyst. Anta’s 26.4x and 20.9x FY23 and FY24 PERs do not look stretched relative to earnings growth. 

British American Tobacco: New Category Growth

By Baptista Research

  • British American Tobacco delivered decent financial results and successfully navigated a progressively challenging macro environment.
  • In New Categories, the company delivered strong revenue growth driven by Geo expansion, innovation, and share growth.
  • British American Tobacco launched the first connected Vapour device of the Group, Vuse ePod2 plus, that drives increased pod consumption.

10 in 10 with H2G Green – The Pivot to Green Hydrogen

By Geoff Howie

10 in 10 with H2G Green – The Pivot to Green Hydrogen

First Solar Inc: A Strong Start To 2023 – Key Drivers

By Baptista Research

  • First Solar entered 2023 with an improved financial, operational, and commercial position with increased R&D, new international and domestic capacity coming online as well as a new Series 7 product.
  • The company commenced initial production at its next-generation Series 7 factory in Ohio will continue to ramp this year.
  • Furthering its manufacturing program, First Solar recently announced an innovative 3.5-gigawatt Series 7 factory in Alabama and also a 0.9-gigawatt rise to nameplate capacity at its Ohio factories.

Rio Tinto: Expansion Plans

By Baptista Research

  • Rio Tinto’s business remained resilient in the last quarter and the company successfully entered the year with quite a good operational momentum, particularly in Pilbara iron ore.
  • However, accelerating cost inflation and lower prices throughout the year led to margin compression.
  • At Simandou, Rio Tinto incorporated the infrastructure joint venture with its various partners and the government of Guinea.

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Apr 19
0

Daily Brief Macro: Is Singapore Setting Itself Up for a Fall? and more

By | Daily Briefs, Macro

In today’s briefing:

  • Is Singapore Setting Itself Up for a Fall?
  • Asian Urbanization Warrants Plugging Infrastructure Gaps
  • The Great Game – a New Migrant Wave into Europe?
  • UK: Wages Reflate Hawkish Pressure
  • CX Daily: China Emerges As Powerbroker On Global Diplomatic Stage

Is Singapore Setting Itself Up for a Fall?

By Manu Bhaskaran

  • The city-state has had a good few years due to sound pandemic management, adept investment promotion, and setbacks experienced by rival hubs such as Hong Kong. 
  • However, concerns over the costs of doing business, particularly in labour and rental costs, are early warning signs that firms may look elsewhere if these issues are not fixed. 
  • Structural shifts in policy are required, including enhancing regional integration with neighbours, rethinking the education system, and pro-competition policy reforms.  

Asian Urbanization Warrants Plugging Infrastructure Gaps

By Manu Bhaskaran

  • Emerging Asia is on the cusp of a rapid expansion in its urban population. This brings with it exciting opportunities for employment and business activity. 
  • However, investments into infrastructure need to be made now to ensure that the needs of the expanded urban population can be met to avoid downsides such as congestion. 
  • The medium-term financing needs for infrastructure are significant, with the transport, energy, and telecommunications segments facing their own set of challenges.

The Great Game – a New Migrant Wave into Europe?

By Mikkel Rosenvold

  • A new migrant wave threatens Europe as Italy declares emergency and Mediterranean deaths reach new heights
  • Refugees will be used as a tool of war in Putin’s hybrid war against Europe and the West
  • And Refugees will potentially shape a series of key elections in 2024

UK: Wages Reflate Hawkish Pressure

By Phil Rush

  • The UK unemployment rate increased back to 3.8% in Feb-23 as an unusually actively unemployed cohort joined the sample. The underlying trend remains broadly flat.
  • Vacancies are high, encouraging firms to pay up to hire and retain staff. Revisions into rapid Feb-23 wage growth remove signs of a slowdown.
  • Settlements are anchoring around 5%, with a skew up, fuelling problematic second-round effects. We maintain our call for the BoE to hike by another 25bp in May.

CX Daily: China Emerges As Powerbroker On Global Diplomatic Stage

By Caixin Global

  • Diplomacy /Cover Story: China emerges as powerbroker on global diplomatic stage
  • France /: France and U.S. are allies with different voices, French ambassador to China says
  • Yi Gang /: China calls for ‘fair burden sharing’ to address poor countries’ sovereign debt issues

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Apr 18
0

Daily Brief Indonesia: Merdeka Battery Materials, Health And Happiness (H&H) and more

By | Daily Briefs, Indonesia

In today’s briefing:

  • Merdeka Battery Materials IPO Trading – Earnings Might Be Long Drawn Out but Should Perform Fine
  • Morning Views Asia: Guangzhou R&F Properties

Merdeka Battery Materials IPO Trading – Earnings Might Be Long Drawn Out but Should Perform Fine

By Ethan Aw

  • Merdeka Battery Materials (2012725D IJ) raised around US$591m in its Indonesian IPO.
  • It has the largest resource globally in terms of contained nickel at the Konawe Nickel Mine (the SCM Mine), according to Wood Mackenzie. 
  • In this note, we will talk about the trading dynamics and valuation.

Morning Views Asia: Guangzhou R&F Properties

By Charles Macgregor

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

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Apr 18
0

Daily Brief China: Anta Sports Products, ZJLD Group, Hang Seng China Enterprises Index, ADICON Holdings Limited, Health And Happiness (H&H) and more

By | China, Daily Briefs

In today’s briefing:

  • Anta Sports Placement – A Large Deal to Digest with Unknown Use of Proceeds but Track Record Is Good
  • ZJLD Group IPO – Sentiment Could See a Positive Shift, Mid-Bottom End Digestible
  • ZJLD Group IPO: Valuation Insights
  • Hang Seng CEI (HSCEI) – Pending Confirmation of Bullish Breakout and Textbook 7770/80 Q2 2023 Target
  • ADICON Holdings IPO: The Bull Case
  • Morning Views Asia: Guangzhou R&F Properties

Anta Sports Placement – A Large Deal to Digest with Unknown Use of Proceeds but Track Record Is Good

By Sumeet Singh

  • Anta Sports Products (2020 HK)  aims to raise around US$1.5bn in its top-up placement. 
  • Anta hasn’t specified what it aims to do with the money that it’s looking to raise, furthermore, it’s already net cash.
  • In this note, we will talk about the placement and run the deal through our ECM framework.

ZJLD Group IPO – Sentiment Could See a Positive Shift, Mid-Bottom End Digestible

By Clarence Chu

  • ZJLD Group (ZJLD HK) is looking to raise around US$811m in its Hong Kong IPO.
  • ZJLD Group (ZJLD) is a Chinese liquor company primarily producing baijiu.
  • In this note, we will look at deal dynamics and share our thoughts on valuation.

ZJLD Group IPO: Valuation Insights

By Arun George

Hang Seng CEI (HSCEI) – Pending Confirmation of Bullish Breakout and Textbook 7770/80 Q2 2023 Target

By David Coloretti, CMT

  • At TMA we deliver high probability outcomes by focusing on our 3 pillars of technical analysis. 1) Response to key levels. 2) Price action. 3) Momentum confirmation.
  • A prominent bottom below 5000 in Q4 2022 set up an impulsive multi-month uptrend and LT uptrend bias. Our 2023 target at 9450/70 reflects this major bottom.
  • 2023 has delivered a tangible downward correction. Since mid-February a Head and Shoulders Bottom has formed. A break above the neckline at 7085 targets 7770/80 in Q2 2023.

ADICON Holdings IPO: The Bull Case

By Arun George

  • ADICON Holdings Limited (ADI HK) is pre-marketing an HKEx IPO to raise up to US$400 million, according to press reports.
  • Adicon is the third largest independent clinical laboratories (ICL) service provider in China, with an 8.6% market share of the non-COVID-19 testing market in 2021, according to Frost & Sullivan.
  • The key elements of the bull case rest on the growing non-COVID-19 testing addressable market, improving market sentiment, strong non-COVID-19 testing growth, stable EBITDA margin and cash generation. 

Morning Views Asia: Guangzhou R&F Properties

By Charles Macgregor

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

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Apr 18
0

Daily Brief South Korea: Ecopro Co Ltd and more

By | Daily Briefs, South Korea

In today’s briefing:

  • MSCI May 2023 QCIR: Potential Changes & Things to Watch as Review Period Commences

MSCI May 2023 QCIR: Potential Changes & Things to Watch as Review Period Commences

By Brian Freitas

  • The review period for the price cutoff for the MSCI May Quarterly Comprehensive Index Review (QCIR) starts today. MSCI should choose a day from this week to compute market cap.
  • The most changes (especially adds) are expected in mainland China following an expansion of the universe for inclusion of stocks in Northbound Stock Connect.
  • There are stocks in India where there will be FIF changes triggering large flows and there are things to watch on some stocks in Korea and China.

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Apr 18
0

Daily Brief India: Max Healthcare Institute, SJVN and more

By | Daily Briefs, India

In today’s briefing:

  • Max Healthcare (MAXHEALTH IN): Improving Operating Parameters; Well-Positioned for Long-Term Growth
  • SJVN Limited (SJVN IN): Renewable Energy Play; Installed Capacity To Double in 12-18 Months.

Max Healthcare (MAXHEALTH IN): Improving Operating Parameters; Well-Positioned for Long-Term Growth

By Tina Banerjee

  • Max Healthcare Institute (MAXHEALT IN) reported improved occupancies, revenues, EBITDA and other operating and financial parameters in Q3FY23 versus year-ago period.   
  • The company recorded highest-ever EBITDA – both in terms of absolute value and margins, EBITDA per bed, ARPOB, and ROCE for the third consecutive quarter in FY23.
  • During the last three-year, Max had revenue and EBITDA CAGR of 12% and 59%, respectively. Consensus expects the company to report double-digit revenue and EPS growth through FY25.

SJVN Limited (SJVN IN): Renewable Energy Play; Installed Capacity To Double in 12-18 Months.

By Mohit Surana

  • Fundamentally strong company with track record of high profitability and efficient operations. 
  • Installed power generation capacity will more than double to ~5,500 MW by FY24 and another 4-5x by FY30. 
  • Potential for DPS to improve from a trailing 1.70 INR to INR 2.50 by FY24, implying an attractive dividend yield of 7.5%. 

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Apr 18
0

Daily Brief Thailand: Oishi Group PCL and more

By | Daily Briefs, Thailand

In today’s briefing:

  • Oishi Group (OISHI TB): IFA Recommends the THB59.00 Delisting Offer

Oishi Group (OISHI TB): IFA Recommends the THB59.00 Delisting Offer

By Arun George

  • The Oishi Group PCL (OISHI TB) IFA opines that shareholders approve Thai Beverage (THBEV SP)’s delisting tender offer of THB59.00 per share at the EGM on 3 May.
  • The offer is conditional on Oishi shareholder approval which requires 75% approval by total outstanding shares and <10% rejection by total outstanding shares.
  • The offer is attractive to the IFA’s fair value of THB53.48-56.42 per share. At last close and the end-July completion, the gross and annualised spread is 2.2% and 8.1%, respectively.

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Apr 18
0

Daily Brief Australia: Genesis Minerals, Qantm Intellectual Property, Vection Technologies Ltd and more

By | Australia, Daily Briefs

In today’s briefing:

  • Genesis To Acquire St Barbara’s Flagship As Merger Cancelled
  • QANTM Intellectual Property (ASX:QIP) – Registering Potential Operating Leverage
  • QANTM Intellectual Property Ltd – Registering Potential Operating Leverage
  • Vection Technologies – Rapid H2 growth de-risks ambitious FY23 target

Genesis To Acquire St Barbara’s Flagship As Merger Cancelled

By David Blennerhassett

  • Gold miner St Barbara Ltd (SBM AU)’s reverse merger with Genesis Minerals (GMD AU) always had a whiff of biting off more than they could chew. That’s now validated.
  • St Barbara has confirmed it will sell its flagship Leonora gold project to Genesis for $600mn (in cash and GMD scrip). The reverse merger has been cancelled.
  • Post transaction, St Barbara will hold up to ~19.5%,  and be left with no debt and ~$197m in cash. Genesis will emerge with no debt, and ~$175mn cash (pre-transaction costs). 

QANTM Intellectual Property (ASX:QIP) – Registering Potential Operating Leverage

By Research as a Service (RaaS)

  • Initiation of Coverage with a DCF valuation of $1.57/share. QIP is trading at a 60% discount to its nearest peer, IPH (ASX:IPH)
  • Key areas of focus  are completing its business transformation programme and expanding geographically.
  • Success will lead to EBITDA margin expansion, greater exposure to Asia, and a growing exposure to automated and IP technology.

QANTM Intellectual Property Ltd – Registering Potential Operating Leverage

By Research as a Service (RaaS)

  • QANTM Intellectual Property Ltd (ASX:QIP) owns a group of intellectual property (IP) services businesses operating under the independent brands of Davies Collison Cave (DCC), FPA Patent Attorneys and Sortify.tm.
  • It is a major player in the mature and regulated Australian patent, trade marks and IP legal services market with 16.5% market share (H1 FY23) in its key patents segment (68% of revenue) and a diversified mix of local and foreign clients (~45%/55% split; ~50% US$ revenue).
  • QIP produces ~$97m service revenue (3.7% five-year CAGR) primarily via various workstreams underlying the patent and trade marks lifecycles, and has a history of profitability and cash flow generation which facilitates high dividend pay-outs. 

Vection Technologies – Rapid H2 growth de-risks ambitious FY23 target

By Edison Investment Research

Vection Technologies reported a 60% uplift in its total contract value (TCV) to A$16m from the TCV metric announced at the half year, driven by new contract wins, upsells from existing clients and recognising delayed contracts from Q223. Delivering rapid contract growth in H223 instils further confidence in management’s FY23 revenue guidance of A$24–26m for its IntegratedXR technology stack, reflected in the 9% rise in share price following the announcement. As illustrated by our previous note, promising pilot projects, including a potential A$30m tender in the defence sector, should bolster the company’s growth trajectory. A proven track record of converting c 100% of TCV into revenue by year-end further de-risks the group’s FY23 growth target and our forecasts, which are unchanged.

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Apr 18
0

Daily Brief Japan: Nitori Holdings, Rakuten Bank, Money Forward, Tokyo Stock Exchange Tokyo Price Index Topix, Seven & I Holdings and more

By | Daily Briefs, Japan

In today’s briefing:

  • Nikkei 225 Sep 2023 Rebalance Gets Interestinger – Possible Fast Retailing Cap and Zozo Stretch
  • Rakuten Bank IPO: First Day Trading
  • Money Forward: Lower S&M Spending in 1Q Drives Losses Down
  • Maintaining Labor Productivity by Cutting Working Hours Was Effective but Risks Should Be Considered
  • Seven & I: The Biggest Barrier to Change Has Gone

Nikkei 225 Sep 2023 Rebalance Gets Interestinger – Possible Fast Retailing Cap and Zozo Stretch

By Travis Lundy

  • With 3.5 months left in the dataset, the data is pretty close to settled. The interesting bits are elsewhere. There are three auto DELETEs and two auto ADDs. Maybe.
  • One auto-ADD is Toshiba, which may have a deal on it. That leaves two to add for sector balance. That could be Nitori (9843 JP) and Zozo (3092 JP).
  • Friday’s move on Fast Retailing brings in the issue of the new capping function. That would be a different US$2bn selldown. Lots of gory details here. 

Rakuten Bank IPO: First Day Trading

By Oshadhi Kumarasiri

  • It appears that Rakuten Bank (5838 JP) received a significant number of subscriptions at the revised offer range, leading the company to set the IPO price at ¥1,400 per share.
  • The grey market trading suggests that shares are currently trading close to the lower end of the previous IPO price range, indicating a potential upside of 20% on the debut.
  • The IPO has potential to rise beyond 20% on debut. However, in the event that it does not pop more than 100%, we would looking to buy more shares.

Money Forward: Lower S&M Spending in 1Q Drives Losses Down

By Shifara Samsudeen, ACMA, CGMA

  • MF reported 1QFY11/2023 results on Friday. Revenue increased 43.0% YoY to ¥6.8bn (vs consensus ¥6.5bn) while operating losses dropped to ¥1.59bn vs ¥1.65bn in 1QFY11/22 (vs consensus ¥2.0bn).
  • The company’s S&M spending is the lowest during first quarter of the year, which drove losses down. However, the company has guided for higher S&M spending in 2Q.
  • Our analysis on Money Forward (3994 JP) BO SAAS vs Non-BO SAAS shows that non-BO businesses’ GPM has continued to decline suggesting that these non-BO businesses only help inflate revenues.

Maintaining Labor Productivity by Cutting Working Hours Was Effective but Risks Should Be Considered

By Aki Matsumoto

  • Many companies have worked to ensure labour productivity by curbing personnel costs by reducing work hours and shifting from full-time to part-time workers, as well as by controlling depreciation.
  • Maintaining labor productivity by converting to part-time and reducing working hours of full-time employees has been an effective measure to ensure operating profits margins, but it also carries risks.
  • Personnel cost/sales have bottomed out in 2018 and are on the rise. With cost structures changing dramatically after the economic reopening, controlling labor costs will be more difficult than ever.

Seven & I: The Biggest Barrier to Change Has Gone

By Michael Causton

  • Seven & I has announced major restructuring of its struggling Ito-Yokado GMS chain – a company that big investors have long demanded be sold off entirely. 
  • The latest round of cuts had to wait until the company’s founder finally passed away, although are likely not going to be the last.
  • Seven & I has long had a coherent plan to rationalise – but was just waiting for the founder to pass – with a series of disposals now likely.

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