Category

Japan

Japan: Toshiba Corp and more

By | Daily Briefs, Japan

In today’s briefing:

  • Last Week in Event SPACE: Toshiba, Woodside, Genting Berhad, SPH REIT, Virtus Health, Xiamen Port

Last Week in Event SPACE: Toshiba, Woodside, Genting Berhad, SPH REIT, Virtus Health, Xiamen Port

By David Blennerhassett


Before it’s here, it’s on Smartkarma

Japan: Kito Corporation, Sony Corp, Hong Kong Hang Seng Index, Marubeni Corp and more

By | Daily Briefs, Japan

In today’s briefing:

  • Kito (6409) Shareholder Register Getting Interestinger
  • Sony – State Of Play Highlights VR Ambitions
  • Cautiously Optimistic Following Downtrend Reversals; Japan Continues to Lead; Bottoms-Up Stock Rec’s
  • A Pair Trade of Japanese General Trading Companies: Long Marubeni & Short Itochu

Kito (6409) Shareholder Register Getting Interestinger

By Travis Lundy

  • In mid-May 2022, Kito Corporation (6409 JP) announced KKR would launch a Tender Offer to buy out the company at a big premium. I warned about the register.
  • Two large shareholders were there prior to the bid – one “engagement-style” activist and one private company in a similar industry. Both had a 9+% holding visible.
  • Both have now lifted their stakes above 10% post-announcement, at a small spread to terms. This makes things more interesting.

Sony – State Of Play Highlights VR Ambitions

By Mio Kato

  • Sony’s State of Play today highlighted a variety of games headlined by Capcom’s Street Fighter 6 and Resident Evil 4 Remake and Square Enix’s Final Fantasy 16. 
  • The title line-up was strong but the standout in our view was the degree of support Sony appears to be getting for PSVR2. 
  • We had commented on this previously but it is increasingly looking like a key differentiating factor for PlayStation and no longer a gimmick.

Cautiously Optimistic Following Downtrend Reversals; Japan Continues to Lead; Bottoms-Up Stock Rec’s

By Joe Jasper

  • The bear market rally that we were on watch for started last week, confirmed by the bullish reversals on the DAX, Hang Seng, MSCI China (MCHI-US), and China Internet (KWEB-US).
  • Is this just another bear market rally, or will indexes are able to make a higher low and start a new bull market? Either way, it’s a start.
  • We highlight attractive stocks from a bottoms-up perspective, spanning several Sectors. Over half hail from Japan, where the TOPIX Small index is reversing its downtrend.

A Pair Trade of Japanese General Trading Companies: Long Marubeni & Short Itochu

By Douglas Kim

  • We discuss a pair trade among the major Japanese trading companies. We propose going long on Marubeni Corp and going short on Itochu. 
  • We believe Marubeni has one of the most attractive valuations among the five major Japanese trading companies in terms of ROE vs. P/B and Itochu is the least attractive.
  • We like Marubeni’s strength in food and agri businesses. Itochu is more dependent on metals, minerals and energy sectors which tend to be more volatile. 

Before it’s here, it’s on Smartkarma

Japan: Toshiba Corp, Preferred Networks, Tokyo Stock Exchange Tokyo Price Index Topix, Roland Corp, SmartNews, SmartHR, Skylark Co Ltd, Ohsho Food Service and more

By | Daily Briefs, Japan

In today’s briefing:

  • Toshiba (6502) – Now We Have the First Rounds Bids In, And We Wait, But It’s Top of Range
  • Toshiba – Key Takeaway Is Toshiba Tec’s Attractiveness
  • Preferred Networks – The AI Revolutionary
  • The Key to Dissolving Parent-Subsidiary Listings Is More Than Tighter TSE Rules
  • Roland Corp: Not Tuned For Inflation
  • SmartNews – Potentially A Global Champion?
  • Smart HR – Excellent Metrics And In A Growth Area
  • Skylark Holdings (3197): Improving Gradually, but Still Below Target
  • Ohsho Food Service (9936): Price Hikes Not Affecting Popularity; Record Sales in a Single Month

Toshiba (6502) – Now We Have the First Rounds Bids In, And We Wait, But It’s Top of Range

By Travis Lundy

  • Since Toshiba reported lacklustre earnings and guidance, there has been a steady flow of articles in the press about the privatisation process going on behind the scenes.
  • On 25 March, Toshiba let it be known a privatisation process would start. On 31 March, Bain gave notice it would participate. Toshiba has been in talks since 21 April
  • First round bids were due 30 May, and 10 total submissions were made, with 8 privatisation proposals proffered. Now we wait…

Toshiba – Key Takeaway Is Toshiba Tec’s Attractiveness

By Mio Kato

  • Toshiba provided an update today on its management policy and the status of discussions with potential investors. 
  • The management targets unveiled looked plausible but rather optimistic while the only real new information on the potential privatisation was that 8 bids had been submitted. 
  • In the end the most interesting takeaway for us was that Toshiba Tec would play a key role in Toshiba’s data business.

Preferred Networks – The AI Revolutionary

By Mio Kato

  • Preferred Networks is generally considered Japan’s leading AI and deep learning company with collaborations with numerous conglomerates across many industries. 
  • The company offers significant gearing into labour saving technologies and could potentially become a global leader in AI over time. 
  • In addition, it has demonstrated exceptional power efficiency with its deep learning technology which could prove a critical competitive advantage.

The Key to Dissolving Parent-Subsidiary Listings Is More Than Tighter TSE Rules

By Aki Matsumoto

  • I would like to discuss the points about the Nikkei article “Companies should do their best to prevent harmful effects of parent-subsidiary listings.”
  • Recently, more and more companies are evaluating their businesses from the perspective of ROE and ROIC. This is thought to be gradually eliminating parent-subsidiary listings.
  • Rather than hoping to eliminate parent-subsidiary listings by strengthening TSE rules, it’s more important to instill in companies a management philosophy on how to achieve long-term growth in corporate value.

Roland Corp: Not Tuned For Inflation

By Oshadhi Kumarasiri

  • We expect high-end musical instruments to be one of the worse affected among consumer discretionary names during a high inflationary environment.
  • Although Roland Corp (7944 JP) says that demand remains strong, the numbers such as revenue and backlog suggest weakening conditions.
  • In addition, there’s a risk of a recession and it appears that Roland has not made sufficient progress in streamlining operations to maintain profitability in a low revenue environment.

SmartNews – Potentially A Global Champion?

By Mio Kato

  • SmartNews is a news aggregation app using an advertising-based business model originally established in Japan in 2012 with an expansion into the US market in 2014. 
  • The company is interesting in that it funds initiatives to improve the quality of investigative journalism and address problems arising from social media such as increasing polarisation. 
  • However, what truly piques our interest is its demonstrated success in the US which remains unusual for Japanese software companies.

Smart HR – Excellent Metrics And In A Growth Area

By Mio Kato

  • Smart HR offers excellent growth potential with its ARR continuing to climb at a triple digit rate thanks to continuous feature improvements and integrations. 
  • The company boasts extremely high customer loyalty and investors with a strong pedigree including Sequoia. 
  • Perhaps the biggest risk here is deteriorating market sentiment as listed peers have seen prices roughly halve despite healthy growth and strong profitability.

Skylark Holdings (3197): Improving Gradually, but Still Below Target

By Mita Securities

  • Same-store sales have been improving gradually on the back of the recovery of foot traffic, but still below the company’s target
  • As the company has stores throughout Japan, there appears to be a mix of areas where the recovery has been progressing and areas where the recovery has been sluggish
  • Since May 26, the company has been running aggressive promotions. We will watch closely to see if sales will recover in June.


Ohsho Food Service (9936): Price Hikes Not Affecting Popularity; Record Sales in a Single Month

By Mita Securities

  • Although the company implemented price hikes on May 14, the guest count continues to be solid, which gives us a positive impression.
  • All-store sales of 7.384bn yen (120.3% vs. April 2021) were the record high for a single month. The company said that in-store dining sales recovered in a significant manner.
  • In May, the company opened two new stores (one company-owned store and one franchised store) and closed one store (one franchised store)

Before it’s here, it’s on Smartkarma

Japan: Skymark Airlines, Rakuten Bank, USJ LLC, Fanuc Corp and more

By | Daily Briefs, Japan

In today’s briefing:

  • Skymark – Pure Play on Budget Tourism
  • Rakuten Bank – Point Ecosystem Beneficiary
  • USJ – Beneficiary of Reopening and Growing Popularity of Anime and Gaming
  • Fanuc (6954 JP) | Beware of the Cycle

Skymark – Pure Play on Budget Tourism

By Mio Kato

  • While current conditions are likely to be tough for budget airline Skymark it will be a key beneficiary of reopening. 
  • Without significant exposure to international business travel the airline could find favour with investors as a pure play on the reopening theme. 
  • In addition, a weak yen could prove a tailwind for domestic companies looking to boost inbound tourism and Skymark could be a beneficiary here as well.

Rakuten Bank – Point Ecosystem Beneficiary

By Mio Kato

  • Rakuten Bank has grown rapidly to become Japan’s largest online bank with a relatively young demographic focused on city centres, particularly Tokyo. 
  • The COVID pandemic and government initiatives to accelerate Japan’s transition towards a more cashless society have helped drive growth. 
  • However, the key long-term advantage remains its prominent position within the exceptionally strong Rakuten points ecosystem.

USJ – Beneficiary of Reopening and Growing Popularity of Anime and Gaming

By Mio Kato

  • Universal Studios Japan has suffered significantly from the COVID pandemic just as Oriental Land has. 
  • However, as Japan reopens the company should benefit from a resurgence in tourist arrivals. 
  • In addition, it could emerge as a key play on expanding the popularity of Japanese IP overseas.

Fanuc (6954 JP) | Beware of the Cycle

By Mark Chadwick

  • Fanuc’s share price is geared into the machine tool cycle. Unfortunately the cycle is rolling over
  • Fanuc is also facing extreme margin pressure from rising parts and logistics costs
  • We expect the share price to trade down 20% from here and bottom at around 2x book value

Before it’s here, it’s on Smartkarma

Japan: Mercari Inc, Renesas Electronics, Nissui Pharmaceutical, Fast Retailing, TBM, TRIPLE-1, GVE, Campfire, Softbank Group and more

By | Daily Briefs, Japan

In today’s briefing:

  • Mercari (4385 JP): Section Transfer Means TOPIX & FTSE Inclusion
  • Mercari (4385) TOPIX Inclusion, Finally… And It’s Bigger Than It Looks
  • Nikkei 225 Index Rebalance Preview: Market Consultation & Potential Changes
  • Shimadzu (7701) To Buy Out Nissui Pharma (4550) In Tender Offer
  • Fast Retailing: China Near Pandemic Lows and America, Europe and Asia Affected by Rising Inflation
  • TBM – From Papyrus To Paper To Limex?
  • TRIPLE-1 – Power Efficient ASICS
  • GVE – The Platform For Central Bank Digital Currencies
  • CAMPFIRE – A Crowdfunding Platform For Every Occasion
  • Morning Views Asia: Kawasan Industri Jababeka, Softbank Group

Mercari (4385 JP): Section Transfer Means TOPIX & FTSE Inclusion

By Brian Freitas

  • Mercari Inc (4385 JP) was deleted from the MSCI Japan at the close today. Then the company announced that it would move to the Prime Market on 7 June.
  • Transfer to Prime Market will require passive TPX INDEX trackers to buy stock end July and FTSE All-World trackers to buy in September – around 19% of free float together.
  • Short interest is over 13% of free float. Some of the shorts would have covered against the passive MSCI selling today but the remaining shorts could look to cover.

Mercari (4385) TOPIX Inclusion, Finally… And It’s Bigger Than It Looks

By Travis Lundy


Nikkei 225 Index Rebalance Preview: Market Consultation & Potential Changes

By Brian Freitas


Shimadzu (7701) To Buy Out Nissui Pharma (4550) In Tender Offer

By Travis Lundy


Fast Retailing: China Near Pandemic Lows and America, Europe and Asia Affected by Rising Inflation

By Oshadhi Kumarasiri

  • Fast Retailing (9983 JP)’s share price rose 10% towards the top end of the trend channel since reporting 15.8% YoY same-store sales growth in April 2022.
  • However, the growth rate was influenced by weak comps and in April 2022 domestic revenue was 9% below the pre-pandemic level.
  • Meanwhile, Uniqlo’s growth drivers are faltering with China’s revenue near pandemic lows and North America, Europe and Asia affected by rising inflation.

TBM – From Papyrus To Paper To Limex?

By Mio Kato

  • TBM was established in 2011 and has developed “LIMEX” a composite material made from limestone which can be used as a substitute for paper and plastic. 
  • The material benefits significantly from rising environmental awareness as it helps reduce the consumption of pulp, plastics and water as well as reducing transport costs. 
  • With a wide variety of commercial partnerships and use cases LIMEX appears to offer significant expansion potential for TBM.

TRIPLE-1 – Power Efficient ASICS

By Mio Kato

  • TRIPLE-1 was established in 2016 and got its start designing highly power efficient ASICs used for cryptocurrency mining, partnering with TSMC to use its leading-edge nodes. 
  • Since then the company has moved on to develop ASICs specialised in AI applications as well as for 5G base stations. 
  • In all cases the company emphasises power efficiency and with significant gearing into local 5G networks the domestic focus could be a positive rather than a negative.

GVE – The Platform For Central Bank Digital Currencies

By Mio Kato

  • GVE is a Fintech startup operating a CBDC or Central Bank Digital Currency platform in Japan that is compliant with IMF and BIS standards. 
  • The company has a strong technological pedigree and numerous institutional links which could put it in pole position to cooperate on a CBDC for Japan. 
  • Meanwhile, its business model appears somewhat centralised which could offer strong opportunities for monetisation but perhaps slow adoption.

CAMPFIRE – A Crowdfunding Platform For Every Occasion

By Mio Kato

  • CAMPFIRE is Japan’s largest crowdfunding platform and also holds the number two spot in the country with a JV with PARCO. 
  • The company has a strategy of adopting individual crowdfunding platforms according to specific use cases and this tailoring could prove to be a point of differentiation. 
  • Crowdfunding could prove useful in unlocking the artisanal technological capabilities dormant within Japan and CAMPFIRE could be an interesting play on that though consistent red ink is a concern.

Morning Views Asia: Kawasan Industri Jababeka, Softbank Group

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.


Before it’s here, it’s on Smartkarma

Japan: Asahi Group Holdings, Softbank Corp, Electric Power Development C and more

By | Daily Briefs, Japan

In today’s briefing:

  • Asahi (2502 JP) | Is Your Glass Half Full or Half Empty?
  • JPX-Nikkei 400 Rebalance 2022: Leaderboard End-May 2022
  • Japan’s Governance: About an Article on ESG Investors (2)

Asahi (2502 JP) | Is Your Glass Half Full or Half Empty?

By Mark Chadwick

  • Q1 cost pressures surprised the market but the share price has already discounted the news
  • Underlying beer demand is solid as global economies recover from 2 years of Covid restrictions
  • Improving sales mix and higher prices should offset the cost pressures. With Asahi trading at the bottom of its valuation range, our glass is half full on the stock

JPX-Nikkei 400 Rebalance 2022: Leaderboard End-May 2022

By Janaghan Jeyakumar, CFA

  • JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents.
  • A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. We look at the potential forward inclusions and removals every month.
  • Below is a look at potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to come in August 2022 based on trading data as of end-May 2022.

Japan’s Governance: About an Article on ESG Investors (2)

By Aki Matsumoto

  • I would like to discus the Nikkei article “J-Power is under increasing pressure from ‘activist investors’ who are pressuring the company to take ESG actions.”
  • From the standpoint of investment managers, if there is management risk, they will not fulfill their fiduciary responsibility unless they take appropriate actions to eliminate that risk.
  • From J-Power’s perspective, it is difficult to imagine the company making its own management decisions without METI’s consent, given its history of being established as a national policy company.

Before it’s here, it’s on Smartkarma

Japan: NTT (Nippon Telegraph & Telephone), Japan Airport Terminal Co, Life Corp, Takashimaya, Tokyo Stock Exchange Tokyo Price Index Topix, Shiseido Company and more

By | Daily Briefs, Japan

In today’s briefing:

  • TOPIX Rebalance: Flows at the Close
  • Japan Airport (9706): Not the Best Proxy for Japan Reopening.
  • Life Opens Supermarket 4.0: A Hybrid Online-Offline Store
  • Takashimaya to Close Tachikawa
  • About an Article on ESG Investors
  • Shiseido (4911 JP) | Q2 Results Will Make Analysts Blush

TOPIX Rebalance: Flows at the Close

By Brian Freitas

  • The second 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 today.
  • One way flow is ~JPY 745bn and will be spread across ~2170 stocks. The largest inflow will be on NTT (9432 JP) and the largest outflow on Toyota Motor (7203).
  • The stocks with the largest inflows have outperformed the stocks with the largest outflows over the last month and the outperformance could continue going into the last tranche in June.

Japan Airport (9706): Not the Best Proxy for Japan Reopening.

By Henry Soediarko

  • Japan’s reopening has started and pre-departure and on arrival tests for vaccinated tourists have also been abolished. 
  • The beneficiary of this theme is less obvious for Japan Airport Terminal Co (9706 JP) while it is very obvious for Keisei Electric Railway Co (9009 JP)
  • Japan Airport is trading at a PBR premium to Keisei while the former has a higher debt than the latter. 

Life Opens Supermarket 4.0: A Hybrid Online-Offline Store

By Michael Causton

  • Life opened a new, upscale supermarket last month in central Tokyo that is designed to process online orders as easily as serving in-store customers.
  • The new store, replacing Mitsukoshi in Ebisu Garden Place, includes a backroom that acts as a dark store for online orders.
  • This frees up space in the store for higher margin items like deli foods and is a sign of the supermarket’s intentions going forward.

Takashimaya to Close Tachikawa

By Michael Causton

  • Takashimaya will close its store in Tachikawa early next year.
  • This can be seen as a further sign of an improving outlook for a smaller department store sector. 
  • More closures will rid the sector of excess capacity and solidify positioning as a genuinely upscale format for the affluent.

About an Article on ESG Investors

By Aki Matsumoto

  • I will discuss the Nikkei article, “Shareholder proposals on ESG issues may increase in Japan, but the road to their passage will not be easy and should be watched closely.”
  • Japanese asset management companies have begun to move toward ESG compliance. However, a survey conducted by FSA indicated that many asset management companies don’t have personnel specializing in ESG issues.
  • The key to getting shareholder proposals on ESG passed or for a company to become more active in ESG initiatives is for foreign shareholder ratio to be in 30% range.

Shiseido (4911 JP) | Q2 Results Will Make Analysts Blush

By Mark Chadwick

  • Chinese lockdowns are taking their toll on Q2 sales. We expect the upcoming report to be much worse than the last 
  • Estee Lauder’s recent results suggest that travel retail will be a negative shock too 
  • We believe there is one large downgrade to full-year guidance and consensus numbers. Too early turn bullish 

Before it’s here, it’s on Smartkarma

Japan: Bank of Kyoto, Ichigo Inc and more

By | Daily Briefs, Japan

In today’s briefing:

  • Last Week in Event SPACE: BHP, Bank of Kyoto, Incitec Pivot, Yancoal, Virtus
  • Index Rebalance & ETF Flow Recap: FTSE AW/AC, KOSPI2, KQ150, EPRA, China 50/A50, ASX, STAR50, SSE50

Last Week in Event SPACE: BHP, Bank of Kyoto, Incitec Pivot, Yancoal, Virtus

By David Blennerhassett

  • Post-Spin, BHP (BHP AU) should look more like RIO. It’s not clear it does, but it does move around in a way that allows one to harvest ratio noise. 
  • Bank of Kyoto (8369 JP) has been the poster child for “deep value” Japan traders and occasional wannabe activists. It has a huge equity portfolio which dwarfs market cap. 
  • Fourteen years after its acquisition, Incitec Pivot (IPL AU) plans to demerge Dyno Nobel from its fertilizer ops. The split has been a long time coming. 

Index Rebalance & ETF Flow Recap: FTSE AW/AC, KOSPI2, KQ150, EPRA, China 50/A50, ASX, STAR50, SSE50

By Brian Freitas


Before it’s here, it’s on Smartkarma

Japan: Toshiba Corp and more

By | Daily Briefs, Japan

In today’s briefing:

  • Still Bearish, But On Watch for Bear Market Rally; Buying Toshiba 6502-JP, Defensive Sectors

Still Bearish, But On Watch for Bear Market Rally; Buying Toshiba 6502-JP, Defensive Sectors

By Joe Jasper

  • The DAX and Hang Seng are reversing their downtrends while MSCI China (MCHI-US) and China Internet (KWEB-US) are currently testing their respective multi-month downtrends.
  • Reversals of these downtrends would signal a bear market rally in progress.
  • We will need to see more basing, followed by base breakouts, in order to get bullish — a process that would likely take weeks or months.

Before it’s here, it’s on Smartkarma

Japan: Renesas Electronics, Sony Corp, Tokyo Stock Exchange Tokyo Price Index Topix and more

By | Daily Briefs, Japan

In today’s briefing:

  • Nikkei 225 Methodology Change. Again. This Time Better But Still Not Good Enough
  • Sony (6758 JP) | Master of the Metaverse
  • Sony – IR Day One and Kadokawa
  • About an Article on TSE Prime Market

Nikkei 225 Methodology Change. Again. This Time Better But Still Not Good Enough

By Travis Lundy

  • The Nikkei Index Team has suggested a methodology change to the Nikkei 225 Average.
  • It involves capping stocks, creating a method for re-weighting once capped then stocks fall, and they recommend changing to a semi-annual Periodic Review – twice a year rather than once.
  • More interestingly, they also change the “High Liquidity” definition to be related to traded value not volume, which starts to favour higher-market cap stocks with more shares out.

Sony (6758 JP) | Master of the Metaverse

By Mark Chadwick

  • Sony’s hosted its 2022 Corporate Strategy Meeting last week. Our key takeaway is that SONY is shifting towards greater investment in Content, Creators, and Communities.  
  • Sony recognizes that technology is changing the way that content is produced and consumed and is responding with new experiences and monetization models.  
  • Sony will continue to benefit from the evolution of the internet as it becomes more social, immersive and financialized (otherwise known as the metaverse). 

Sony – IR Day One and Kadokawa

By Mio Kato

  • Sony held the first of their two investor days yesterday presenting on the Game & Network Services, Music and Pictures segments. 
  • While there was nothing especially new for those paying attention to the broad flow of news conditions for the content businesses remain strong. 
  • What was interesting to us was the degree of collaboration with Kadokawa.

About an Article on TSE Prime Market

By Aki Matsumoto

  • I will discuss the Nikkei article that “companies that don’t meet the prime market listing criteria but remain in the prime market under transitional measures should increase their corporate value.”
  • It goes without saying that increasing corporate value is the way to increase market capitalization. However, whether the company’s methodology is reasonable in the “plan” should be fully discussed.
  • TSE should proceed with discussions to expand the market to high quality companies that will regain profitability and growth potential, without limiting it to companies to which transitional measures apply.

Before it’s here, it’s on Smartkarma