Smartkarma Daily Briefs

Bangkok Life Assurance (BLA), JMT Network Services (JMT) and Jaymart (JMART) will replace Com7 (COM7), Ratch Group (RATCH) and Sri Trang Gloves (STGT) in the SET50 INDEX.
Estimated one-way turnover is 2.1% and will result in a one-way trade of THB 1,914m. There is little funding flow on the other index stocks.
The inclusion of Bangkok Life Assurance (BLA TB) is a minor surprise. The deletion of Com7 PCL (COM7 TB) is a much bigger surprise.

ThaiBev’s BeerCo IPO: Third Time’s the Charm?

By Arun George

Thai Beverage (THBEV SP)’s BeerCo is once again pre-marketing an SGX IPO to raise US$0.8-1.0 billion (vs US$2 billion previously), according to press reports.
In 1HFY2022, the group revenue returned to growth due to Vietnam. The easing of restrictions in Thailand should boost volumes in 2HFY2022.
Creditably despite rising raw material costs, the margins remained steady helped by forward buying contracts. However, the unwinding of the forward contracts will likely lead to margin pressures in FY2023.

Smartkarma Corporate Webinar | Golden Agri-Resources: From Seed to Shelf

By Smartkarma Research

For our next Corporate Webinar, we are glad to welcome Golden Agri Resources (GGR SP) Director, Investor Relations, Richard Fung. In the upcoming Webinar, Richard will share a short company presentation, after which he will engage in a fireside chat with Smartkarma Analyst Angus Mackintosh. A live Q&A session will follow.

The Corporate Webinar will be hosted on Tuesday, 5 July 2022, 17:00 SGT.

Register for the Webinar here

Listed on the Singapore Exchange since 1999, Golden Agri-Resources Ltd (GAR) is one of the leading integrated palm oil plantation companies in the world, with a market capitalisation of US$2.6 billion as of 31 May 2022. During 2021, it generated revenue of over US$10 billion and underlying profit of US$603 million. GAR’s integrated operations focus on the technology-driven production and distribution of an extensive portfolio of palm-based products.

GAR encompasses an efficient end-to-end supply chain, from responsible production to global delivery. It cultivates 536 thousand hectares of palm oil plantations in Indonesia, including plasma smallholders; harvesting and extracting fresh fruit bunches into crude palm oil and palm kernel; processing into a broad range of value-added products such as cooking oil, margarine, shortening, biodiesel, and oleochemicals.

GAR has a global market presence with destination refining, ex-tank operations, and sales representative offices in several markets. GAR’s products are sold globally to approximately 100 countries. GAR also has complementary businesses such as soybean-based products in China, sunflower-based products in India, and sugar businesses.

Corporate Webinars by Smartkarma Corporate Solutions feature discussions with IROs and Executives, discussing their companies, the challenges they face, and the opportunities in their sectors and markets.

DXN Holdings Pre-IPO Tearsheet

By Ethan Aw

DXN Holdings (2080694D MK) is looking to raise about US$300m in its upcoming Malaysia IPO. The deal will be run by Maybank, CIMB, CLSA and RHB.
As a global health and wellness direct selling company, DXN’s portfolio consists of health and wellness consumer products such as fortified food and beverages, health and dietary supplements and more.
It has 291 stock keeping units (SKUs) of health and wellness consumer products manufactured in-house and distribution footprints in 50 countries as of the Latest Practicable Date (30 Apr 2022).

Torikizoku Holdings (3193): Earnings Forecast Update. Raising Target Price

By Mita Securities

We update our earnings forecast for Torikizoku Holdings (3193, the company) and raise our target price to 2,500 yen. We reiterate our Hold rating.
On June 10, the company announced 1-3Q FY7/22 sales of 13.260bn yen (-6.9% YoY), OP of -2.583bn yen (-2.588bn yen in 1-3Q FY7/21), and RP of 1.817bn yen (-2.027bn yen in 1- 3Q FY7/21)
We raise our FY7/22 OP forecast from -3.544bn yen to -2.289bn yen (-4.663bn yen in FY7/21), and RP forecast from -575m yen to 2.104bn yen (-315m yen in FY7/21)

Apollo Tyres – Maintaining FY26 Target of USD5bn Revenue with 12-15% ROCE

By Emkay

In its analyst meet, APTY management reiterated its revenue target of USD5bn in FY26, implying a 15% CAGR over FY22-26E vs. a 9% CAGR over FY18-22.
Management maintained the ROCE (pre-tax) target at 12-15% by FY26E (7% in FY22), led by better asset turnover and margins.
In the near term, cost pressures due to an increase in prices of crude derivatives and a lag in the pass-through of commodity inflation are likely to impact margins.

Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Apollo Tyres – Margin Headwinds Owing to Rising RM Prices; Maintain BUY

By Nirmal Bang

Market share gains in TBR & PCR led by R&D investment: APTY’s R&D spends have been consistently ahead of competition over the last 5-10 years (Exhibit 5), which is reflected in its better quality TBR and PCR tyres.

Demand outlook remains positive: The domestic replacement tyre market is witnessing signs of recovery, led by the PCR and T&B segments.

Margin headwinds to persist with elevated crude prices and depreciated INR: Crude derivatives account for ~40% of the RM basket for APTY.

Before it’s here, it’s on Smartkarma

Jun 21

Equity Bottom-Up: Softbank Group, Golden Agri Resources, Belite Bio, Comfortdelgro Corp, Beijing Airdoc Technology and more

By Smartkarma Daily Briefs | Daily Briefs, Equity Bottom-Up

In today’s briefing:

Softbank – Director Shuffling At The AGM
Smartkarma Corporate Webinar | Golden Agri-Resources: From Seed to Shelf
Belite Bio (BLTE US): Lead Drug Candidate Tapping into Niche Market with Massive Opportunity
Comfortdelgro (CD): When to Take Off?
Beijing Airdoc Technology (2251.HK) – Not Optimistic About Turning Loss into Profit

Softbank – Director Shuffling At The AGM

By Mio Kato

With Softbank’s AGM coming up we examine some of the curious events that surround the firm as usual.
Following in the footsteps of former governance director Yuko Kawamoto, VC founder Lip-Bu Tan has also penned a curious resignation message.
Then there are the continuing questions surrounding Kenneth Siegel and his reappointment is not guaranteed in our view.

Smartkarma Corporate Webinar | Golden Agri-Resources: From Seed to Shelf

By Smartkarma Research

The Corporate Webinar will be hosted on Tuesday, 5 July 2022, 17:00 SGT.

Register for the Webinar here

Belite Bio (BLTE US): Lead Drug Candidate Tapping into Niche Market with Massive Opportunity

By Tina Banerjee

Belite Bio (BLTE US) shares jumped 383% from its IPO price of $6 (announced in late April). Its lead candidate LBS-008 is in clinical trial for currently untreatable eye diseases.
LBS-008 continues to be well-tolerated. Interim safety and preliminary efficacy data from ongoing two-year phase 2 trial remained positive in Stargardt disease.
Belite is well-funded to commercialize its pipeline. With the progression of the clinical trial and more data readouts, we believe further stream is left in Belite Bio’s share price.

Comfortdelgro (CD): When to Take Off?

By Henry Soediarko

The number of visitors arriving in Singapore went up by almost 8x YoY and rail and bus ridership already hit 78% of the pre-pandemic level.
Won a bid to provide public transport in Darwin, Australia for the next 6 years, transporting approximately 5.7 million passengers annually (similar to Singapore’s population).
As COE > SGD 100,000, the incentive to own a car in Singapore is even less and is a positive for public transport operators like Comfortdelgro Corp (CD SP) .

Beijing Airdoc Technology (2251.HK) – Not Optimistic About Turning Loss into Profit

By Xinyao (Criss) Wang

Without entering NRDL and public hospital markets, Airdoc’s core product Airdoc-AIFUNDUS would be hard to generate solid performance due to its high pricing but limited value to patients and doctors.
Due to lockdown/pandemic, we lowered our forecast on revenue growth/gross margin in 2022. As competition intensified, Airdoc’s revenue growth and margin could be significantly reduced in the coming years.
The biggest concern for Airdoc is the commercialization prospects. The real turning point for AI medical imaging has not arrived. We are not optimistic that Airdoc will end up profitable.

Before it’s here, it’s on Smartkarma

Jun 21

Most Read: Ping An Insurance (H), SK Telecom, Softbank Group, Com7 PCL, Policybazaar and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Ping An A/H: Position for Premium Contraction
A Detailed Guide About Korea’s FOL Stocks & MSCI Treatments
Softbank – Director Shuffling At The AGM
SET50 Index Rebalance: BLA, JMT, JMART Added; COM7, RATCH, STGT Out
India: AMFI Stock Reclassification Preview

Ping An A/H: Position for Premium Contraction

The Ping An AH premium has traded around 10% over the last few days – this is near its historical highs and close to where reversals take place from.
The AH premium of the broader market is below its highs, while the AH premium on large cap financials has been trending lower over the last few months.
Northbound Stock Connect holdings on the A-shares have been decreasing, while Southbound Stock Connect holdings on the H-shares have been increasing over the last few months.

A Detailed Guide About Korea’s FOL Stocks & MSCI Treatments

Korea has a total of 33 FOL stocks. The Korean government restricts foreign ownership in major national infrastructure operators such as broadcasting companies, airlines, and telecommunication companies.
They each have a different FOL % in the range of 0-49.99%, and five are currently included in the MSCI Standard: SKT, LG Uplus, CJ ENM, KEPCO, & KAL.
Those located on the borderline that will trigger a meaningful event in the MSCI Standard Index are the three telecom companies: SKT, KT, & LG Uplus.

Softbank – Director Shuffling At The AGM

By Mio Kato

With Softbank’s AGM coming up we examine some of the curious events that surround the firm as usual.
Following in the footsteps of former governance director Yuko Kawamoto, VC founder Lip-Bu Tan has also penned a curious resignation message.
Then there are the continuing questions surrounding Kenneth Siegel and his reappointment is not guaranteed in our view.

SET50 Index Rebalance: BLA, JMT, JMART Added; COM7, RATCH, STGT Out

Bangkok Life Assurance (BLA), JMT Network Services (JMT) and Jaymart (JMART) will replace Com7 (COM7), Ratch Group (RATCH) and Sri Trang Gloves (STGT) in the SET50 INDEX.
Estimated one-way turnover is 2.1% and will result in a one-way trade of THB 1,914m. There is little funding flow on the other index stocks.
The inclusion of Bangkok Life Assurance (BLA TB) is a minor surprise. The deletion of Com7 PCL (COM7 TB) is a much bigger surprise.

India: AMFI Stock Reclassification Preview

Nearing the end of the review period, we see 5 stocks moving from MidCap to LargeCap, 2 new listings added to LargeCap and 7 stocks moving from LargeCap to MidCap.
We see 7 stocks moving from SmallCap to MidCap, 3 new listings added to MidCap, and 12 stocks moving from MidCap to SmallCap.
Stock migrating upward have, on average, outperformed stocks that are downward migrations. Stocks moving from MidCap to LargeCap have performed the best.

Before it’s here, it’s on Smartkarma

Jun 21

Industrials: Asiana Airlines, Comfortdelgro Corp and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

HMM-Like Dilution Event: Korean Air Is Nearly Done, But Asiana Airlines Gearing Up
Comfortdelgro (CD): When to Take Off?

HMM-Like Dilution Event: Korean Air Is Nearly Done, But Asiana Airlines Gearing Up

The KAL event is almost over. But we still have Asiana Airlines. The KDB’s Asiana CB conversion should also be considered a foregone conclusion.
Applying the case of KAL, the KDB will likely file conversion when 30 days have elapsed since receiving the repayment notice. For this, the prevailing local consensus is June 10.
Conversion filing on July 8 and listing on July 29 with the 15-day delay rule applied is a likely scenario. Hence, our entry point should be from July 4.

Comfortdelgro (CD): When to Take Off?

By Henry Soediarko

The number of visitors arriving in Singapore went up by almost 8x YoY and rail and bus ridership already hit 78% of the pre-pandemic level.
Won a bid to provide public transport in Darwin, Australia for the next 6 years, transporting approximately 5.7 million passengers annually (similar to Singapore’s population).
As COE > SGD 100,000, the incentive to own a car in Singapore is even less and is a positive for public transport operators like Comfortdelgro Corp (CD SP) .

Before it’s here, it’s on Smartkarma

Jun 21

Health Care: ClouDr Group, Belite Bio, Beijing Airdoc Technology and more

By Smartkarma Daily Briefs | Daily Briefs, Healthcare

In today’s briefing:

ClouDr (智云健康) Pre-IPO – PHIP Updates – Mixed Results, Strong Growth Could Be Masking Some Volatility
Belite Bio (BLTE US): Lead Drug Candidate Tapping into Niche Market with Massive Opportunity
Beijing Airdoc Technology (2251.HK) – Not Optimistic About Turning Loss into Profit

ClouDr (智云健康) Pre-IPO – PHIP Updates – Mixed Results, Strong Growth Could Be Masking Some Volatility

By Clarence Chu

ClouDr Group (16897333D CH) is looking to raise around US$100m in its upcoming Hong Kong IPO.
The firm is a digital chronic condition management solution provider and is market leader in China in terms of the number of SaaS installations in hospitals and pharmacies in 2020.
In this note, we will discuss ClouDr’s recent PHIP updates.

Belite Bio (BLTE US): Lead Drug Candidate Tapping into Niche Market with Massive Opportunity

By Tina Banerjee

Belite Bio (BLTE US) shares jumped 383% from its IPO price of $6 (announced in late April). Its lead candidate LBS-008 is in clinical trial for currently untreatable eye diseases.
LBS-008 continues to be well-tolerated. Interim safety and preliminary efficacy data from ongoing two-year phase 2 trial remained positive in Stargardt disease.
Belite is well-funded to commercialize its pipeline. With the progression of the clinical trial and more data readouts, we believe further stream is left in Belite Bio’s share price.

Beijing Airdoc Technology (2251.HK) – Not Optimistic About Turning Loss into Profit

By Xinyao (Criss) Wang

Without entering NRDL and public hospital markets, Airdoc’s core product Airdoc-AIFUNDUS would be hard to generate solid performance due to its high pricing but limited value to patients and doctors.
Due to lockdown/pandemic, we lowered our forecast on revenue growth/gross margin in 2022. As competition intensified, Airdoc’s revenue growth and margin could be significantly reduced in the coming years.
The biggest concern for Airdoc is the commercialization prospects. The real turning point for AI medical imaging has not arrived. We are not optimistic that Airdoc will end up profitable.

Before it’s here, it’s on Smartkarma

Jun 21

United States: 2-Year US Treasury Note Futures, CRB Commodity Index, Belite Bio, NFT, Celsius Network and more

By Smartkarma Daily Briefs | Daily Briefs, United States

In today’s briefing:

Bond Market Monitor: Between a Rock and a Hard Place
The Commodity Report: CRB Commodity Index Ended the Week 5.1% Lower
Belite Bio (BLTE US): Lead Drug Candidate Tapping into Niche Market with Massive Opportunity
Sporting Crypto – June 20th 2022: Building in a Bear Market
#30 Two other emperors have no clothes

Bond Market Monitor: Between a Rock and a Hard Place

By Warut Promboon

The Fed’s 75-bp rate hike was widely expected by the market.
We expect CT10 of 4% at year end and we see rising risk on the upside now that the war between Russian and Ukraine has no end in sight.
Slowing growth and uncontained inflation is spread-negative for Asian bonds, in our view, as rising rates will increase its refinancing risk.

The Commodity Report: CRB Commodity Index Ended the Week 5.1% Lower

By The Commodity Report

Besides global growth concerns as Central Banks step up their battle against inflation, and China’s zero-covid restrictions may stretch into 2023, it is quite clear what the main story was this week
Russia cut up to 60% of its gas flows to Germany. It will become very hard for Europe to get over the next winter if gas flows remain that low
Rate hiking cycles end when the Fed Funds target rate catches up to where the 2-year T-Note yield has already gone

Belite Bio (BLTE US): Lead Drug Candidate Tapping into Niche Market with Massive Opportunity

By Tina Banerjee

Belite Bio (BLTE US) shares jumped 383% from its IPO price of $6 (announced in late April). Its lead candidate LBS-008 is in clinical trial for currently untreatable eye diseases.
LBS-008 continues to be well-tolerated. Interim safety and preliminary efficacy data from ongoing two-year phase 2 trial remained positive in Stargardt disease.
Belite is well-funded to commercialize its pipeline. With the progression of the clinical trial and more data readouts, we believe further stream is left in Belite Bio’s share price.

Sporting Crypto – June 20th 2022: Building in a Bear Market

By Sporting Crypto

The things that are important in the next crypto cycle will be created when the price is low and attention is fleeting.

Sorare for example is a project that was built during the last time crypto dipped this hard between 2017 and early 2020.

Through this newsletter, and outside of it, I’m lucky enough that many people reach out with their projects very early on. Some for advice, some to evangelise.

#30 Two other emperors have no clothes

By Carbono Insights

Phase 1 of bear markets is a piece of cake: it feels more like a healthy correction.
Phase 2 looks more is peak chaos and peak pain. It’s when hen things go South bad.
Phase 3 is when tedium kicks in, and people genuinely contemplate their lives’ decisions.

Before it’s here, it’s on Smartkarma

Jun 21

Macro: Spooky Chart Update IV and more

By Smartkarma Daily Briefs | Daily Briefs, Macro

In today’s briefing:

Spooky Chart Update IV
Why Last Week May Have Been “The Bottom”
US-China Frictions Could Increase Near-Term Despite High Level Meetings
The Week That Was in ASEAN@Smartkarma – Sea Ltd Lay-Offs, SCMA, and Kiatnakin Bank
Indonesia: Cabinet Reshuffle Motivated by Political Considerations

Spooky Chart Update IV

By Shyam Devani

This chart said stocks would fall at the start of this year
It now says we should step back from being too bearish
I am not going to ignore it at this juncture. Here we look at possible reasons why the stock market may see some relief

Why Last Week May Have Been “The Bottom”

By Cam Hui

Technical and valuation conditions are consistent with past major panic lows
The key risk is a lack of earnings downgrades in the face of growing recession risk.
Our base case scenario calls for a double or multiple bottoms in stock prices and a possible a double-dip recession.

US-China Frictions Could Increase Near-Term Despite High Level Meetings

By Manu Bhaskaran

There is certainly an action-reaction dynamic underway that, if poorly managed, could lead to unintended military incidents.
By threatening to cross red lines such as Taiwan for China and freedom of navigation for the US, frictions could worsen.
While provocative moves by each side are a concern, they are part of a bigger picture in which both sides are keen to avoid a clash.

The Week That Was in ASEAN@Smartkarma – Sea Ltd Lay-Offs, SCMA, and Kiatnakin Bank

By Angus Mackintosh

The Week That Was in ASEAN@Smartkarma is filled with an eclectic mix of differentiated, substantive, and actionable insights, macro and equity bottom-up, from across South East Asia.
The past week saw insights on Sea Ltd on news of lay-offs, Thai Life IPO, Erajaya Swasembada, Thomson Medica, PT Surya Citra Media, and Kiatnakin Bank (KKP TB).
We also saw a list of top ASEAN Picks from Dr Andrew Stotz highlighting his top 14 picks and an update on Carabao Group as a recovery proxy.

Indonesia: Cabinet Reshuffle Motivated by Political Considerations

By Nicholas Chia

President Jokowi replaced two members of his cabinet, a move that is spurred mainly by political considerations.
The agriculture and trade ministers were replaced by a former TNI chief as well as the chairman of a political party that has joined the ruling coalition in parliament.
Going by the retention of certain ministers, the latest reshuffle has broader political implications for the 2024 presidential elections.

Before it’s here, it’s on Smartkarma

Jun 20

South Korea: SK Telecom, Hana Tour Service, Ecopro BM Co Ltd, HYBE and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

SK Telecom / KT Corp: Foreign Room, Passive Flow & Trade Update
TIGER Theme ETF “Tour Leisure” Rebalancing Projections: Hanatour, Asiana, Kangwon Land, & T’way Air
TIGER Theme ETF “Secondary Cell” Rebalancing Projections: SKIET, Ecopro BM, SKI, SKC, & Ecopro
WISE Theme Index “Media Contents” Rebalancing Projections: HYBE, CJ ENM, & Studio Dragon

SK Telecom / KT Corp: Foreign Room, Passive Flow & Trade Update

On 20 May, we recommended selling SK Telecom (017670 KS) and buying KT Corp (030200 KS). That trade is up 12% over the last month.
Foreign investors have sold 2.5m shares of SK Telecom (017670 KS) in the last month while buying 2.8m shares of KT Corp (030200 KS).
With the price ratio trading at a 4 year low, we feel is is time to start unwinding the trade and waiting for a little bit before reversing it.

TIGER Theme ETF “Tour Leisure” Rebalancing Projections: Hanatour, Asiana, Kangwon Land, & T’way Air

This ETF’s AUM has decreased by 17% over the past three months to ₩200B. It has 18 constituents, and it is unlikely that there will be any addition/deletion.
The first thing to note is Hana Tour because the increase in the number of shares through an offering will be reflected its the market cap right before the rebalancing.
Among the top stocks by market cap, Asiana Airlines (020560 KS) (+0,.20x ADTV) and Kangwon Land (035250 KS) (-0.21x ADTV) will likely have a significant passive impact.

TIGER Theme ETF “Secondary Cell” Rebalancing Projections: SKIET, Ecopro BM, SKI, SKC, & Ecopro

This ETF’s AUM has stayed flat over the past three months, sitting at ₩1.3T. It has 28 constituents, and it is unlikely that there will be any addition/deletion.
SKIET is expected to have the most inflow relative to ADTV. Then, we have Ecopro BM, which will increase the number of shares through a rights offering.
On the other hand, among the top-tier stocks, SK Innovation, SKC, and Ecopro Co Ltd deserve our attention for shorting.

WISE Theme Index “Media Contents” Rebalancing Projections: HYBE, CJ ENM, & Studio Dragon

This ETF’s AUM has decreased by 20% over the past three months, remaining at ₩120B. It has 22 constituents, and there won’t be any addition/deletion at the upcoming rebalancing.
As HYBE’s recent share price plunged, we can expect a fairly interesting passive impact from this rebalancing, because its 10% cap reversion is certain to occur despite the price plunge.
CJ ENM (-0.19x ADTV) and Studio Dragon (+0.25x ADTV) are also expected to have a significant passive impact.

Before it’s here, it’s on Smartkarma

Jun 20

Macro: Asia: Global Investors Lose Faith and more

By Smartkarma Daily Briefs | Daily Briefs, Macro

In today’s briefing:

Asia: Global Investors Lose Faith
The Fed Braces For A Harder Landing
A Butterfly Flaps Its Wings in Zurich
Build a Bear

Asia: Global Investors Lose Faith

By Steven Holden

Global managers are at their lowest ever allocation in Asian equities. From a peak of over 17% in 2018, average exposure has fallen to just 12.94%.
Declines were led by China & HK Consumer Discretionary and Communication Services, whilst investors also scaled back exposure to Japan Communication Services, Industrials, Health Care and Consumer Staples
Among Global investors, overweight the benchmark in Asia is by far the non-consensus trade.

The Fed Braces For A Harder Landing

By Cam Hui

The Fed appears intent on tightening policy to fight inflation. . It’s difficult to see how the U.S. economy can sidestep a recession.
The good news is the S&P 500 is at or near fair value, as long as earnings don’t significantly deteriorate.
Renewed insider buying as the market reached its recent lows is another sign that downside risk may be low.

A Butterfly Flaps Its Wings in Zurich

By Cam Hui

The surprise SNB decision to raise rates by 50 bp last week sparked a disorderly VAR-driven unwind that rattled global markets.
We are seeing numerous signs of capitulation by traders and investors.
This volatility too shall pass. Hopefully, the markets can return to a more normal state next week.

Build a Bear

By Mark Tinker

Bond market volatility continues to lead all markets lower, triggering a further round of deleveraging.

Cryotos have been crushed and Credit markets appear to have hit capitulation, even if equities have not.

FX volatility, especially in the Yen, is also causing, as well as reflecting, distress in terms of forced buying/distressed selling and is being exaggerated by the (VaR) volatility based risk management models that trigger further deleveraging of balance sheets.

Before it’s here, it’s on Smartkarma

Jun 20

Japan: Tsi Holdings, Workman Co Ltd, Tokyo Stock Exchange Tokyo Price Index Topix, Toshiba Corp, Onward Holdings, Sanyo Shokai and more

By Smartkarma Daily Briefs | Daily Briefs, Japan

In today’s briefing:

Japan Apparel Diversification: TSI Tries New Markets
Workman Wins as Decathlon Closes Japan Stores
Certainly the Increase in Share Repurchases Is to Be Commended, But……
Toshiba (6502) Fresh Buy Zone
Japan Apparel Reset: Onward Looks to E-Commerce for Growth
Sanyo Shokai: More Unfulfilled Promises

Japan Apparel Diversification: TSI Tries New Markets

TSI seems to be following a strategy of diversify or die. It is using its vast cash resources to invest in and build new businesses with some success.
But it also has a couple of compelling brands in strong growth sectors, particularly in golf, providing growth of nearly 50% last year in one case.
This isn’t enough to sustain overall growth however and more needs to be done to get on to a more secure footing.

Workman Wins as Decathlon Closes Japan Stores

Decathlon entered the Japanese retail market in 2017 with the opportunity to take a significant share of a growing sports and athleisure sector.
But the French firm is already retreating: it will close its two stores and focus on online and wholesaling.
The market is poorer for but it does leave the market wide open for Workman – which built a consumer chain to combat Decathlon – to become dominant.

Certainly the Increase in Share Repurchases Is to Be Commended, But……

By Aki Matsumoto

I would like to discuss the points on the Nikkei article, “Acceleration of Share Buybacks Suggests Undervaluation.”
Companies should clarify their capital allocations policy. My analysis shows that companies that raised valuations could articulate capital allocation policies and communicate with investors on growth investment and shareholder returns.
Since information asymmetries between managers and investors exist, attention should be paid to capital allocation. My analysis shows that companies that retired treasury stock 3 or more-times have higher valuations.

Toshiba (6502) Fresh Buy Zone

By Thomas Schroeder

Toshiba bull trend remains intact with buy support at 5,200/300 above the 5,000 bull/bear pivot. Macro PT remains at 6,500.
RSI buy support to gel with the price buy zone. Sell volumes on the pullback have been tepid in line with a correction.
5,000 breakout point is the bull/bear inflection point and the more aggressive buy zone (low odds of being met).

Japan Apparel Reset: Onward Looks to E-Commerce for Growth

All of Japan’s big apparel firms have radically restructured but there is a lot more work to be done.
Onward has done a great job of transitioning to e-commerce but this is not enough to sustain the business and provide new sources of growth.
Trading will improve but slowly and more dynamism is needed in brand development and marketing.

Sanyo Shokai: More Unfulfilled Promises

Sanyo Shokai has posted losses in every year since FY2016 despite promising a return to profit on an annual basis too.
Its latest 3-year plan is typically optimistic but, equally typically, lacks real substance as to just where this growth will come from.
Of all Japan’s larger apparel firms, Sanyo Shokai has the least promising outlook and that is saying something.

Before it’s here, it’s on Smartkarma