Category

Japan

Jul 04
0

Japan: Seven & I Holdings, Tokyo Stock Exchange Tokyo Price Index Topix, Inpex Corp, Mani Inc and more

By | Daily Briefs, Japan

In today’s briefing:

  • Seven & I Sale of Sogo Seibu Moves Closer
  • Reason for the Declining Concentration of June AGM Dates in Japan Is Likely Mixed
  • INPEX (1605) | The Cheapest Oil Stock in the World
  • Mani Inc (7730 JP): Q2 Result Exceeds Expectation Aided by Demand Recovery; FY22 Guidance Reiterated

Seven & I Sale of Sogo Seibu Moves Closer

By Michael Causton

  • Initial reports suggest that Fortress Investment, part of the Softbank group of funds, is now the frontrunner in negotiations to acquire Sogo Seibu department stores from Seven & I.
  • Reports suggest Fortress is already in discussions with privately owned retailer Yodobashi Camera to take over management of the chain’s better stores, beginning with Seibu Ikebukuro.
  • The loss of ¥500 billion or so in turnover won’t be missed not will the ¥8.8 billion losses but activist investors won’t stop there.

Reason for the Declining Concentration of June AGM Dates in Japan Is Likely Mixed

By Aki Matsumoto

  • While we want to believe that “increased awareness of corporate governance has led to downward trend in the concentration of AGM dates,” in reality they were spread over 3 days.
  • The use of the platform for electronic exercise of voting rights has made progress since it was included in the listing criteria for the prime market.
  • The provision of convocation notices in English has not made much progress since it was not specifically stated in the Corporate Governance Code, which was included in the listing criteria.

INPEX (1605) | The Cheapest Oil Stock in the World

By Mark Chadwick

  • Oil prices have had a good run, and so have oil stocks, but INPEX can still double from here
  • High oil prices and rising production will generate strong operating cash flow growth
  • Total shareholder returns will be close to 10% this year, meanwhile the valuation languishes at 0.6x P/B, way below global peers

Mani Inc (7730 JP): Q2 Result Exceeds Expectation Aided by Demand Recovery; FY22 Guidance Reiterated

By Tina Banerjee

  • Mani Inc (7730 JP) reported Q2FY22 revenue ahead of guidance, mainly driven by demand recovery in the surgical segment and positive effect of foreign exchange. However, profitability declined year-over-year.
  • Despite revenue beat in H1FY22, management reiterated FY22 guidance due to geographical risk. Outlook seems to be uncertain for China and India, which together contribute 33% of total revenue.
  • Mani shares plunged 20% since I published bearish note on the company in January 2022. Investors should avoid Mani due to its uncertain revenue outlook and deteriorating profitability in short-term.

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Jul 03
0

Japan: Toshiba Corp and more

By | Daily Briefs, Japan

In today’s briefing:

  • Asia-Pac Weekly Risk Arb Wrap: Tassal, Toshiba, Link Admin, Link Net

Asia-Pac Weekly Risk Arb Wrap: Tassal, Toshiba, Link Admin, Link Net

By David Blennerhassett

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Jul 02
0

Japan: Kirin Holdings, J Front Retailing, Softbank Group, Askul Corp, Ohsho Food Service, Shimadzu Corp and more

By | Daily Briefs, Japan

In today’s briefing:

  • Kirin Sells The Myanmar JV to MEHL: Not a Fair Valuation But Getting At Least Some Money Is a Bonus
  • J Front (3086) | Posts Strong Q1 Numbers as Thesis Plays Out
  • Softbank Group – First Look at Q1 22 Performance
  • Askul Corp – Q4 22 Results Reaction: Mixed as Growth Looks Appealing but Profits Light
  • Ohsho Food Service (9936): Price Hike Effect Continues; Record Sales for June
  • Shimadzu (7701 JP): Weak Yen Supports Guidance

Kirin Sells The Myanmar JV to MEHL: Not a Fair Valuation But Getting At Least Some Money Is a Bonus

By Oshadhi Kumarasiri

  • Kirin Holdings (2503 JP) announced yesterday that it will transfer its stake in the Myanmar business (51% of share capital) to its JV partner MEHL, via a share buyback of ¥22.4bn.
  • Having disposed most of the other underperforming assets during 2018-21, the Myanmar business was the main issue holding back Kirin’s share price performance.
  • With the Myanmar issue resolved better than anticipated, it seems like the right time for Kirin to get a move on.

J Front (3086) | Posts Strong Q1 Numbers as Thesis Plays Out

By Mark Chadwick

  • J Front reported strong Q1 numbers with OP recovering to +¥7.5b from red ink a year ago
  • The company is reaping the benefits of restructuring and better cost control
  • A recovery in domestic consumption and the opening of borders will drive further appreciation in the share price

Softbank Group – First Look at Q1 22 Performance

By Kirk Boodry

  • Vision Fund’s public portfolio lost $10bn in Q1 marking the third time in four quarters that valuation losses were in the tens of billions
  • Global tech weaness remains the main challenge as portfolio losses are matched with concerns on the private portfolio, especially ARM
  • And worries about ARM also feed into leverage concerns as Softbank’s QoQ decline in reported LTV was driven by an ARM upgrade.  Meanwhile, CDS prices are near all-time highs

Askul Corp – Q4 22 Results Reaction: Mixed as Growth Looks Appealing but Profits Light

By Kirk Boodry

  • Askul posted Q4 results that were largely in-line and issued FY23 targets that are robust for revenue growth (+6%) but accompanied by upfront investment
  • Management also announced it would prepare subsidiary AlphaPurchase for a public listing although the timing has not been determined
  • The miss on profitability guidance is not ideal but the acceleration of top-line growth is attractive

Ohsho Food Service (9936): Price Hike Effect Continues; Record Sales for June

By Mita Securities

  • Ohsho Food Service (9936, the company) disclosed monthly data for its company-owned stores in June (on a preliminary basis)
  • All-store sales of 6.609bn yen (109.0% vs. June 2021) were the record high for June.
  • In June, the company opened one new store (one company-owned store) and closed one store (one franchised store)

Shimadzu (7701 JP): Weak Yen Supports Guidance

By Scott Foster

  • The weak yen should add several billion to operating profit this fiscal year, helping the company meet or exceed guidance.
  • Medical Systems, which were once barely profitable, generated a 9.1% operating margin last year due to growing service revenues and a better product mix.
  • The share price should continue to hold up in a declining market.

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Jul 01
0

Japan: Softbank Group, Shinko Electric Industries, JPY, Tokyo Stock Exchange Tokyo Price Index Topix, Ryohin Keikaku and more

By | Daily Briefs, Japan

In today’s briefing:

  • Softbank Group – Expiration of SenseTime Lock-Up Has Lopped $1.5bn off the VF Valuation
  • JPX-Nikkei 400 2022 Rebal: Final Predictions
  • USDJPY Disconnect
  • The Adoption of the Presence of Female Directors as a Criterion for Voting Was Finally a First Step
  • Ryohin Keikaku (7453) | Oops Something Went Wrong

Softbank Group – Expiration of SenseTime Lock-Up Has Lopped $1.5bn off the VF Valuation

By Kirk Boodry

  • Just as the December quarter was flattered by the last minute IPO of SenseTime Group (20 HK), expiration of the lockup six months later has delivered a corresonding valuation hit
  • Vision Fund is still up on that investment but the public portfolio is flirting with a $10bn loss for the quarter depending on how US shares trade later
  • The discount has improved modestly to 49% from 51% but remains at the high end of the recent range as worries on tech valuations cast a long shadow 

JPX-Nikkei 400 2022 Rebal: Final Predictions

By Janaghan Jeyakumar, CFA

  • JPX-Nikkei 400 is composed of stocks listed on the Tokyo Stock Exchange selected based on multiple metrics relating to size, liquidity, financial performance, and corporate governance.
  • The annual rebalance of the JPX-Nikkei 400 Index takes place in August every year and the cut-off date for the data used for this rebalance is the end of June.
  • In this insight, we take a look at Quiddity’s final predictions for Potential ADDs/DELs for the August 2022 review.

USDJPY Disconnect

By Shyam Devani

  • The slip in US yields has lead the US_Japan yield spread to move lower thereby putting USDJPY out of line with it
  • The danger is that once month end is over, USDJPY may “catch up” by trending down in the short term
  • In addition we see price action developments on USDJPY itself that reflects weakness in the uptrend

The Adoption of the Presence of Female Directors as a Criterion for Voting Was Finally a First Step

By Aki Matsumoto

  • I would like to discuss the Nikkei article, “Japanese asset management companies have decided to steer against a proposal to elect directors for companies that do not have female directors.
  • The reason why major Japanese investment managers have been reluctant to take action on diversity and governance is likely due to the sales policies of their parent companies,
  • Companies with higher percentage of women directors the boards have higher stock prices. I would like to encourage both investment managers and companies to accelerate their efforts in the future.

Ryohin Keikaku (7453) | Oops Something Went Wrong

By Mark Chadwick

  • Ryohin Keikaku (Muji) slashed its earnings guidance for FY8/22 by 32%
  • The retailer is facing a number of headwinds, only some of which are industry wide
  • We remain bearish as Muji lacks the pricing power to push through higher input costs

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Jun 30
0

Japan: Toshiba Corp, Mitsubishi Electric, Z Holdings and more

By | Daily Briefs, Japan

In today’s briefing:

  • Toshiba (6502) Ownership Structure – “Hostage to Toshiba” Larger Than Real World Float
  • Toshiba – Headed For A Showdown
  • Why Do Bigger Companies in Japan Repeat Scandals? – Learning from Mitsubishi Electric –
  • Z Holdings (4689) | PayPay Key to Fintech Growth

Toshiba (6502) Ownership Structure – “Hostage to Toshiba” Larger Than Real World Float

By Travis Lundy

  • Every year, the yukashoken hokokusho shows a breakdown of share ownership by owner category. It only happens once a year for most companies. 
  • It is a crucial input to knowing where the shares are and how people are positioned. It also shows who and how big is Real World Float.
  • This year’s data shows a surprisingly small change year-on-year for Foreign Active Ownership, which is the biggest category. A little musical chairs, but no chairs removed. 

Toshiba – Headed For A Showdown

By Mio Kato

  • Following the resignation of director Mariko Watahiki yesterday, the results for the shareholder votes are in for Toshiba. 
  • Watahiki unsurprisingly had a low approval ratio of 65.87% but activist-linked directors also saw less than stellar approval ratios as did new CEO Taro Shimada. 
  • Toshiba’s path forward looks increasingly murky and lofty valuations bid up on privatisation hopium look increasingly tenuous.

Why Do Bigger Companies in Japan Repeat Scandals? – Learning from Mitsubishi Electric –

By Aki Matsumoto

  • Regarding the Nikkei article, “Mitsubishi Electric to Reform Strict Governance to Revamp Organization,” I would like to summarize the points and discussed the issues.
  • This case proves that we cannot rely on the appearance of board practices alone. We can think of companies with similar organizational structures that have had repeated scandals.
  • I will focus on the board diversity from the perspective of whether Mitsubishi Electric can seriously change its corporate culture to one that accepts different values and discusses issues head-on.

Z Holdings (4689) | PayPay Key to Fintech Growth

By Mark Chadwick

  • Fintech is the key mid-term earnings driver for Z Holdings
  • We are focused on the underlying growth drivers and KPIs 
  • PayPay is at the heart of driving the fintech ecosystem and its growth

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Jun 29
0

Japan: Toshiba Corp, Bank of Kyoto, Rakuten Inc, Hogy Medical, Tokyo Stock Exchange Tokyo Price Index Topix and more

By | Daily Briefs, Japan

In today’s briefing:

  • Toshiba – These Are The Days Of Our Lives
  • Bank of Kyoto – Trading the Holdco Range
  • Rakuten (Neutral) – A Surprising Win with Goto Although Its Mobile Challenges Remain
  • Hogy Medical (3593 JP): Reviving Demand for Premium Surgical Kit Products to Drive Future Growth
  • Challenge Is How to Promote Sustainability in a Japanese Company that Has Inadequate Human Resources

Toshiba – These Are The Days Of Our Lives

By Mio Kato

  • At last year’s Toshiba AGM we had an elected director resign because the sitting chairman was rejected. 
  • This year we have another director resigning because two other directors weren’t rejected. 
  • Now all we are really waiting for in this drama is for Kurumatani’s hitherto unknown identical twin, separated at birth, to show up with a plot for revenge or something…

Bank of Kyoto – Trading the Holdco Range

By Travis Lundy

  • Bank of Kyoto has twice changed/improved its capital governance in the past six months.
  • Silchester International Investors wants it to do more, asking for a small special dividend at tomorrow’s AGM. I don’t think it will get it. 
  • The holdco is now a better holdco trade than it was 6mos ago, and trading the range is the right way to look at it. 

Rakuten (Neutral) – A Surprising Win with Goto Although Its Mobile Challenges Remain

By Kirk Boodry

  • Rakuten’s stake in Goto is worth ¥13bn and the IPO of the latter in April and the subsequent value re-rating could provide some (very) modest offset to operating losses
  • Our forecasts remain unchanged from our mid-month update although we would flag up potential electricity resale upside for Rakuten and the sector from utility resale 
  • We have lowered our price target to ¥1,000 from ¥1,150 but uncertainty over the timing of a Bank listing, mobile recovery and return to profitability keep us cautious

Hogy Medical (3593 JP): Reviving Demand for Premium Surgical Kit Products to Drive Future Growth

By Tina Banerjee

  • Hogy Medical (3593 JP) is high-quality idea on Japan re-opening, with surgical kit, especially premium kit being the main growth driver of the company.
  • With the declining effect of the COVID-19 and resuming elective surgeries in Japan, Hogy expects 5% y/y revenue growth in FY23, driven by an 11% growth in surgical kit products.
  • Hogy is expanding marketing initiatives in Southeast Asian countries. The company is enhancing production capacity of premium kit products, with partial operation of the new plant to start in July.

Challenge Is How to Promote Sustainability in a Japanese Company that Has Inadequate Human Resources

By Aki Matsumoto

  • I would like to discuss the Nikkei article titled “EY Survey Legal Managers on Awareness of Sustainable Society.”
  • The survey also included responses from Japanese companies, stating that “many legal departments in Japanese companies do not have sufficient systems in place to deal with ESG and other issues.
  • The question is how seriously management is discussing how to deal with these issues, as many Japanese companies do not have sufficient human resources, not only in their legal departments. 

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Jun 28
0

Japan: NTT (Nippon Telegraph & Telephone), JMDC Inc, Mitsubishi Heavy Industries, Seven & I Holdings, Rakuten Inc and more

By | Daily Briefs, Japan

In today’s briefing:

  • Last Leg of TOPIX and JPNK400 FFW Rebal – ¥780bn One-Way Flow Wednesday
  • FTSE GEIS Sep 2022 Index Rebalance Preview: Japan
  • Mitsubishi Heavy Industries (7011) | Three Reasons to BUY
  • Seven & I Marches On in the US Despite Headwinds From Inflation
  • Listing a Subsidiary May Tell Market that the Parent Company Isn’t Confident in Generating Cash Flow

Last Leg of TOPIX and JPNK400 FFW Rebal – ¥780bn One-Way Flow Wednesday

By Travis Lundy

  • The last of the three-leg rebalance for TOPIX and JPNK400 index weights takes place Wednesday 29 June at the close. This one is a bit larger than expected in April.
  • There were a large number of cancellations of shares by TSE Prime members in May which ups the predicted value to be traded. 
  • Interestingly, because lots of names have seen share cancellations and FFW drops, the average passive ownership of TSE Float (not other providers’ float) has gone up significantly through this process. 

FTSE GEIS Sep 2022 Index Rebalance Preview: Japan

By Brian Freitas

  • The FTSE Russell September 2022 SAIR will use closing prices from 30 June to calculate the market cap cut-offs to determine the inclusions and exclusions for the All-World/All-Cap indices.
  • We see 1 add for the All-World Index and 5 for the All-Cap Index. We see 3 stocks moving from All-Cap to All-World and 5 stocks moving the other way.
  • There are other stocks that are close adds, upweights, downweights and deletes and price moves over the next few days will determine their status.

Mitsubishi Heavy Industries (7011) | Three Reasons to BUY

By Mark Chadwick

  • The recent correction in the share price offers a good chance for long-term bulls to get into the stock
  • MHI is the core play on Japan’s energy security given its portfolio of gas and nuclear power plant assets
  • The unseasonably HOT weather and potential power cuts, at the same time as soaring energy costs, could be the catalyst for the government to push for nuclear restarts

Seven & I Marches On in the US Despite Headwinds From Inflation

By Oshadhi Kumarasiri

  • Seven & I Holdings (3382 JP) should breeze through its rather unchallenging expectations when it releases its first-quarter results next week.
  • The company has raised its previous guidance multiple times last year and we expect a similar pattern in the first half next year with 7-Eleven US continuing to exceed expectations.
  • Thus, we would buy Seven & I Holdings leading up to earnings expecting a decent upside on rising guidance.

Listing a Subsidiary May Tell Market that the Parent Company Isn’t Confident in Generating Cash Flow

By Aki Matsumoto

  • On June 1, the Nikkei Shimbun carried an article titled “Parent-subsidiary listing, investors cynical about ‘governance barrier'”. I would like to discuss the issues in the article.
  • The dissolution of parent-subsidiary listings has accelerated, with approximately 20% of parent-subsidiary listings having been dissolved for 2 years. On the other hand, plans for new subsidiary listings are underway.
  • Rakuten and Panasonic are telling the market that they are not very good at generating cash flow. Not coincidentally, the stock prices of these companies are suffering from underperformance.

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Jun 27
0

Japan: NTT (Nippon Telegraph & Telephone), Nidec Corp, J Front Retailing, Tokyo Stock Exchange Tokyo Price Index Topix, Z Holdings, Money Forward and more

By | Daily Briefs, Japan

In today’s briefing:

  • TOPIX Rebalance: Flows at the Close on 29 June
  • Nidec (6594 JP): Reconsider Strategy & Management
  • Subscriptions Provide Growth Model for J Front’s Daimaru-Matsuzakaya
  • “Global ESG Funds Invest Less in Japanese Equities.” Why Is This?
  • Z Holdings (4689) | An Online Goldmine
  • Money Forward (3994 JP): Raising Our Rating to Buy. Cash Is King

TOPIX Rebalance: Flows at the Close on 29 June

By Brian Freitas

  • The third tranche of the FFW methodology change for the Tokyo Stock Exchange Tokyo Price Index Topix (TPX INDEX) will be implemented at the close of trading on 29 June.
  • One-Way flow is ~JPY 742bn and will be spread across 2170 stocks. The largest inflow will be on NTT (9432 JP) and the largest outflow on Toyota Motor (7203 JP).
  • Stocks with the largest impact of inflows have outperformed stocks with the largest impact of outflows, but there has been underperformance over the last couple of weeks.

Nidec (6594 JP): Reconsider Strategy & Management

By Scott Foster

  • Nidec’s share price jumped 6.5% on Friday, June 24, suggesting support near ¥8,000.
  • Reconsider the company’s future as CEO Nagamori leads the turnaround of OKK and makes machine tools and industrial robots into a new product division.
  • Nagamori, who will turn 78 in August, is still the Key Man at Nidec.

Subscriptions Provide Growth Model for J Front’s Daimaru-Matsuzakaya

By Michael Causton

  • Subscription usage continues to rise in Japan and a new survey suggests just under 50% of teens and 20s plan to use a subscription service this year.
  • Daimaru-Matsuzakaya’s luxury and designer brand rental business has been so successful that the company had to turn away new members for a while.
  • The department store’s owner, J Front Retailing (3086 JP), sees subscriptions as a third pillar to its business in the future.

“Global ESG Funds Invest Less in Japanese Equities.” Why Is This?

By Aki Matsumoto

  • I would like to discuss about the Nikkei article that says “The number of global ESG funds investing in Japanese equities is low.
  • The actual substance of their initiatives hasn’t reached certain level, their information disclosure is insufficient for overseas investors, and their investment returns are inferior to those of other portfolio companies.
  • These improvements can be made by the managers themselves. However, ironically, greenwashing has not been an issue in Japan due to the lack of proactive disclosure of ESG-related information.

Z Holdings (4689) | An Online Goldmine

By Mark Chadwick

  • Z HD’s media business accounts for 80% of consolidated earnings.
  • We believe that the combination of Yahoo Japan and LINE is driving new synergies and growth opportunities.
  • We believe that the media business alone could justify an EV of ¥4.5t, way above ZHD’s current EV of ¥3.5t

Money Forward (3994 JP): Raising Our Rating to Buy. Cash Is King

By Mita Securities

  • Our new target price 4,000 yen; Raising our rating to Buy

  • We believe that market participants have become increasingly concerned about the sustainability of high growth for loss-making SaaS companies

  • We raise our 2Q (Mar-May) FY11/22 sales forecast from 5.102bn yen to 5.145bn yen (+28.8% YoY, company guidance median 4.912 bn yen)

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Jun 26
0

Japan: Alfresa Holdings, Toshiba Corp and more

By | Daily Briefs, Japan

In today’s briefing:

  • Alfresa Holdings (2784 JP): Looking Ahead Through 2022–25 Mid-Term Management Plan
  • Asia-Pac Weekly Risk Arb Wrap: Toshiba, Uniden, Giordano, ResApp, Infomedia, SPH REIT, Toyo

Alfresa Holdings (2784 JP): Looking Ahead Through 2022–25 Mid-Term Management Plan

By Tina Banerjee

  • Alfresa Holdings (2784 JP) reported revenue decline in FY21. Apart from market wide negative impact of COVID-19 and drug price revision, suspended qualification for public bidding tenders affected the company.
  • In FY22, the company is expected to be back to its growth path with less impact of bidding suspension and increasing focus on high growth areas.
  • According to its 2022–2024 mid-term management plan, Alfresa targets to achieve a revenue of ¥2.7 trillion and operating income margin of 1.5% or higher by FY25.

Asia-Pac Weekly Risk Arb Wrap: Toshiba, Uniden, Giordano, ResApp, Infomedia, SPH REIT, Toyo

By David Blennerhassett

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Jun 25
0

Japan: Z Holdings, iShares MSCI ACWI ETF and more

By | Daily Briefs, Japan

In today’s briefing:

  • Z Holdings (4689) | The Expanding Opportunity in E-Commerce
  • Inflation Peaking?; ACWI, ACWI Ex-US Near Support; Many Bottoms-Up Stock Recommendations

Z Holdings (4689) | The Expanding Opportunity in E-Commerce

By Mark Chadwick

  • Z Holdings has the best ecosystem in Japan with 30% top line growth over the past year
  • We think that Z HD can out grow the competition in E-Commerce this year by leveraging group synergies
  • Z HD has earmarked an aggressive ¥35b to grow its Commerce Business this year 

Inflation Peaking?; ACWI, ACWI Ex-US Near Support; Many Bottoms-Up Stock Recommendations

By Joe Jasper

  • Many indexes (ACWI-US,ACWX-US,etc.) are near support, and we could see a bear market bounce, but until these indexes reverse their downtrends and break above resistance levels, we cannot be bullish.
  • On a positive note, we are starting to see signs that inflation is peaking, as commodity prices have pulled back substantially, and the Energy/Materials Sectors are under significant pressure.
  • If inflation and commodity prices have indeed peaked, global equities are likely in the early stages of a bottoming process.

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