Japan

In today’s briefing:

Japanese Banks – Cash Balances and the BoJ’s Negative Interest Rate Policy Exit
United Arrows (7606): Q3 FY03/24 Update
3q Follow-Up – CARTA HOLDINGS (3688 JP)

Japanese Banks – Cash Balances and the BoJ’s Negative Interest Rate Policy Exit

By Victor Galliano

The Japanese banks’ share prices have barely moved following the Bank of Japan’s exit from negative interest rates; is it largely discounted or does the continued accommodative stance instil caution?
Japanese banks will benefit from 100% of their deposits at the BoJ earning 0.1%, as opposed to 40% of bank deposits which was the case up to the 20th March
We believe our positive recommendations are all geared into higher domestic interest rates; we highlight Resona, Mizuho and Suruga in this report for their high cash and at bank balances

United Arrows (7606): Q3 FY03/24 Update

United Arrows (7606 JP) is an industry leader in operating clothing select shops in Japan, and is the eighth largest apparel company in the country in terms of sales value.
In FY03/23, United Arrows reported revenue of JPY130.1bn, operating profit of JPY6.4bn, recurring profit of JPY6.9bn, and net income attributable to owners of the parent of JPY4.3bn
In May 2023, the company announced its long-term vision ending in FY03/33 and medium-term management plan ending in FY03/26 as the first step.

3q Follow-Up – CARTA HOLDINGS (3688 JP)

By Sessa Investment Research

FY23/12 saw a strong push towards management initiatives aimed at a V-shaped recovery in financial performance.
On the other hand, conservative guidance was provided for FY24/12, due to the uncertain market sentiment, strategic cost increases, and the need to avoid downward revisions for three consecutive terms in the mid-year.
Although the stock price fell sharply after the 4Q FY23/12 earnings announcement, it has recently been recovering somewhat, perhaps fueled by the recognition and understanding of the conservatism of the guidance and the company’s true earnings potential.

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Mar 25

Daily Brief Japan: ZOZO Inc, Hogy Medical and more

In today’s briefing:

Mar24 Nikkei 225 Rebal: Zozo (3092) And Other ADDs Update
Hogy Medical (3593): A Prescription for Renewed Growth

Mar24 Nikkei 225 Rebal: Zozo (3092) And Other ADDs Update

ZOZO Inc (3092 JP) is +10% since the close after the Nikkei 225 inclusion announcement vs Nikkei225 +2%. Fellow upweight Nitori is up too. Disco and Socionext are up less.
All three inclusions and one upweight see considerable inclusion demand when compared to active holdings. Some more than others.
Some trades here are more interesting than others, still. Cumulative excess volumes are one guide. Fundamentals, and flow dynamics are another.

Hogy Medical (3593): A Prescription for Renewed Growth

By Mark Chadwick

NAVF and Dalton invest heavily in Hogy Medical, eyeing its market dominance and growth potential in disposable surgical equipment
Despite past underperformance, NAVF’s proactive engagement signals a push for a more aggressive overseas expansion
We see a number of continued catalysts for future shareholder value enhancement and improved corporate governance position

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Mar 24

Daily Brief Japan: Nikkei 225, JSR Corp, Shinko Electric Industries, Fast Retailing, TSE Tokyo Price Index TOPIX and more

In today’s briefing:

EQD | Nikkei 225 Flying High, Don’t Burn Your Wings….
(Mostly) Asia-Pac M&A: IntelliCentrics, Chilled & Frozen Logistics, Boral, Orecorp, Link Admin, JSR
Weekly Deals Digest (24 Mar) – Shinko, C&F Logistics, JSR, IntelliCentrics, SciClone, Link Admin
Last Week in Event SPACE: Fast Retailing, Giordano, C&F Logistics, Swire, Japan’s Big Dividend
First Step in Engagement in Term of Listening to Overseas Investors Is Seeking Disclosure in English

EQD | Nikkei 225 Flying High, Don’t Burn Your Wings….

By Nico Rosti

The Nikkei 225 INDEX has been rallying for >3 months, rising more than 28%. Is it too much, too fast?
Short-Term, if we look at the Market Reversal Matrix’s SHORT WEEKLY model for the index, it looks like it could either reverse within a couple of weeks, or stall.
Look for the ~41000 resistance area to place SHORT or hedge your LONG positions.

(Mostly) Asia-Pac M&A: IntelliCentrics, Chilled & Frozen Logistics, Boral, Orecorp, Link Admin, JSR

By David Blennerhassett

I tally 52 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Two new deals were discussed this week on Smartkarma: IntelliCentrics Global Holding (6819 HK) disposal/winding-up/special dividend arb; and Chilled & Frozen Logistics Holdings (9099 JP)‘s hostile Offer.
Key updates took place on: Boral Ltd (BLD AU), Orecorp Ltd (ORR AU), Link Administration (LNK AU), and JSR Corp (4185 JP).

Weekly Deals Digest (24 Mar) – Shinko, C&F Logistics, JSR, IntelliCentrics, SciClone, Link Admin

A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
ECM developments: Lianlian DigiTech (2104619D CH) launches a US$78 million IPO.
Event-Driven developments: Chilled & Frozen Logistics Holdings (9099 JP), JSR Corp (4185 JP), Shinko Electric Industries (6967 JP), IntelliCentrics Global Holding (6819 HK), Sciclone Pharmaceuticals (6600 HK).

Last Week in Event SPACE: Fast Retailing, Giordano, C&F Logistics, Swire, Japan’s Big Dividend

By David Blennerhassett

The trade of being short Fast Retailing (9983 JP) vs Nikkei 225 or Sector Basket is fundamentally slightly short Nikkei 225 froth.
Giordano (709 HK)‘s SGM will likely pivot off how the shareholders under Halcyon Securities vote. Digging a little deeper as to who these shareholders are, provides some (not-altogether) surprising results.
AZ-Com Maruwa Holdings (9090 JP) intends to launch a Tender Offer on Chilled & Frozen Logistics Holdings (9099 JP) without having contacted C&F first. A HOSTILE deal. Yum!

First Step in Engagement in Term of Listening to Overseas Investors Is Seeking Disclosure in English

Companies with the highest Disclosure in English scores have the highest ROE, Tobin’s Q, Market Capitalization, and Foreign Shareholder Ratio, while companies with the lowest scores have the lowest values.
Companies with the highest Disclosure in English scores also show generally higher Board Practices and Key Actions. Both Disclosure in English and these practices are the result of engagement efforts.
If Disclosure in English and corporate governance efforts are advanced through engagement, it can be hypothesized that profitability will also increase through engagement with overseas investors.

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Mar 23

Daily Brief Japan: Japan Airlines and more

In today’s briefing:

Japan Airlines – Encouraging Lifting of Medium Term Expectations to Narrow Recovery Gap to ANA

Japan Airlines – Encouraging Lifting of Medium Term Expectations to Narrow Recovery Gap to ANA

By Neil Glynn

JAL finishing FY24 strongly with another guidance upgrade – upgraded FY26 targets more logical in light of existing ANA targets
Demand momentum particularly helpful as wages rise across Japan and cost control to remain impressive over FY25-FY26 as LCC growth set to dilute FSC inflation
Detailed analysis of JAL’s widening margin gap to ANA suggests revenue solution required – momentum helpful and needs to be watched carefully

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Mar 22

Daily Brief Japan: Chilled & Frozen Logistics Holdings, Nippon Shokubai, Sourcenext Corp, Sun*, Azbil Corp, Organo Corp, LaKeel, Hochiki Corp, TSE Tokyo Price Index TOPIX and more

In today’s briefing:

Chilled & Frozen Logistics (9099) – Hostile Takeover Launched by AZ-Com Maruwa (9090)
Chilled & Frozen Logistics (9099 JP): AZ-COM Maruwa (9090 JP)’s Hostile Offer
Nippon Shokubai (4114) – Business Transformation and Scope for Improving Capital Management
SOURCENEXT (4344): Q3 FY03/24 Update
Sun* (4053): Full-Year FY12/23 Update
Azbil (6845): Q3 FY03/24 Update
Organo (6368): Q3 FY03/24 Update
LaKeel (4074): Full-Year FY12/23 Update
Hochiki (6745): Q3 FY03/24 Update
A Change in Manager’s Mindset that Has Begun Will Lower the Investment Risk for Activist Investors

Chilled & Frozen Logistics (9099) – Hostile Takeover Launched by AZ-Com Maruwa (9090)

Chilled & Frozen Logistics Holdings (9099 JP) last week announced its “Action to Implement Management That is Conscious of Cost of Capital and Stock Price”.
Today it announced AZ-Com Maruwa Holdings (9090 JP) had announced its intention to launch a Tender Offer on C&F Logistics without having contacted C&F first. A HOSTILE deal. Yum.
The deal is proposed at a 50% premium, with the goal of getting to a minimum of 50.00%. This will be interesting.

Chilled & Frozen Logistics (9099 JP): AZ-COM Maruwa (9090 JP)’s Hostile Offer

AZ-Com Maruwa Holdings (9090 JP) has launched a pre-conditional hostile offer for Chilled & Frozen Logistics Holdings (9099 JP) at JPY3,000 per share, a 47.0% premium to the last close.
The pre-conditions primarily relate to regulatory approvals. The tender is expected to start in early May. The Board responded that it will evaluate the offer.
The hostile offer was a reaction to the Board’s lack of engagement. The Board will struggle to reject an attractive offer, which is 37.5% higher than the all-time high.

Nippon Shokubai (4114) – Business Transformation and Scope for Improving Capital Management

By Astris Advisory Japan

Driving strategic revitalization – Nippon Shokubai is a global chemical company with competitive proprietary technology, a track record of sustained free cash flow generation, and a balance sheet with room for optimization.
It has embarked on a business transformation, strategically focused on expanding its Solutions business with higher- margin performance chemicals and identifying energy, electronics, and life science sectors as growth markets.
Organizational changes being conducted aim to enhance human resource development and conduct quicker decision-making.

SOURCENEXT (4344): Q3 FY03/24 Update

Sourcenext Corp (4344 JP) plans, develops, and sells PC software, smartphone apps, and IoT products.
In POCKETALK®, besides the existing device business, the company will focus on sales of software products, including Simultaneous Interpreter for the POCKETALK® for BUSINESS series for corporate customers.
The revision is mainly due to the extended lead time from inquiry to full-scale orders for the POCKETALK for BUSINESS Simultaneous Interpretation web browser version.

Sun* (4053): Full-Year FY12/23 Update

Sun* (4053 JP) provides consulting, software development, recruiting, and other services to companies that seek to create value or businesses, including startups.
In FY12/23, revenue was JPY12.5bn (+16.5% YoY), operating profit JPY1.8bn (+96.8% YoY), recurring profit JPY2.3bn (+99.1% YoY), and net income attributable to owners of the parent JPY1.6bn (+90.4% YoY).
Sun* does not disclose a medium-term business plan with quantitative targets, but it releases qualitative targets related to KPI growth.

Azbil (6845): Q3 FY03/24 Update

Azbil Corp (6845 JP) provides automation services for buildings, factories, and plants and also offers subsistence-related automation services in the lifestyle area.
In FY03/23, sales were JPY278.4bn (+8.5% YoY), operating profit was JPY31.3bn (+10.7% YoY), recurring profit was JPY32.1bn (+8.9% YoY), and net income attributable to owners of the parent was JPY22.6bn.
Azbil in May 2021 announced a new medium-term management plan to cover the four fiscal years from FY03/22 to FY03/25 and new long-term targets for FY03/31.

Organo (6368): Q3 FY03/24 Update

As a comprehensive water treatment engineering company, Organo Corp (6368 JP) engages in the planning, design, procurement, construction, operational management, and maintenance of water treatment plants.
In FY03/23, orders received were JPY173.5bn, revenue was JPY132.4bn, operating profit was JPY15.2bn, recurring profit was JPY16.0bn, and net income attributable to owners of the parent was JPY11.7bn.
Organo Corporation announced revisions to its full-year forecast for FY03/24.

LaKeel (4074): Full-Year FY12/23 Update

LaKeel (4074 JP) is a software development company that uses a new system development method called microservices.
In FY12/23, revenue was JPY7.7bn (+11.2% YoY), operating profit JPY775mn (+0.3% YoY), recurring profit JPY807mn (+10.3% YoY), and net income attributable to owners of the parent JPY540mn.
The company has not announced a medium-term business plan, but has medium-term targets of JPY10.0bn in revenue and an OPM of 15% to be achieved.

Hochiki (6745): Q3 FY03/24 Update

Hochiki Corp (6745 JP) is a major manufacturer of fire alarm and fire extinguishing systems.
In FY03/23, the company posted revenue of JPY85.5bn, operating profit of JPY5.6bn, recurring profit of JPY5.9bn, and net income attributable to owners of the parent of JPY4.4bn.
Hochiki Corporation announced an upward revision of its full-year FY03/24 earnings forecast.

A Change in Manager’s Mindset that Has Begun Will Lower the Investment Risk for Activist Investors

In the past, value traps were macro environment that couldn’t generate profits in deflationary economy, and micro problem of managers who didn’t listen to constructive management improvement proposals from investors.
The introduction of Stewardship Code and Corporate Governance Code, and TSE’s request for change in awareness of companies, has reduced the risk of activist investors’ investment strategies flailing around in vain.
Management awareness has just begun to change, and few companies generate intrinsic value, as evidenced by the fact that ROE hasn’t begun to improve. Activist investors will continue taking interest.

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Mar 21

Daily Brief Japan: ZOZO Inc, Trial Holdings, NEC Corp, Kobe Bussan and more

In today’s briefing:

The Bigly March 2024 “Wednesday-Friday Trade” (Surprising Flows)
Trial Holdings IPO: Trading Debut
NEC (6701 JP): Generative AI (Part 2)
Kobe Bussan: Expect More Growth

The Bigly March 2024 “Wednesday-Friday Trade” (Surprising Flows)

Every year it’s the same trade. This year it is Wednesday and Thursday. There are risks to the analysis – notably allocation.
But there may be ¥1.0-1.2trln+ to buy on one day into the close later this month, then ad hoc buys of ¥630bn and index sells of ~¥600bn 2 days later.
Over the past ten years, the two day return on the March trade is great. This year the Nikkei funding trade makes things more complicated.

Trial Holdings IPO: Trading Debut

Trial Holdings (5882 JP) priced its IPO at JPY1,700 per share to raise gross proceeds of US$256 million. The shares will start trading on 21 March.
We previously discussed the IPO in Trial Holdings IPO: The Investment Case and Trial Holdings IPO: Valuation Thoughts.
The peers have modestly re-rated since the prospectus was released on February 19. The IPO price remains attractive.

NEC (6701 JP): Generative AI (Part 2)

By Scott Foster

CEO Jensen Huang’s keynote address at Nvidia’s GTC event on March 18 was a reminder that generative AI is about building secure and reliable systems, not chatting up the future.
NEC has spent three years developing its own AI supercomputer, creating the best performing Japanese-language large language model (LLM), and testing new AI products in-house before delivering them to clients.
The introduction of generative AI and LLMs into business- and industry-specific solutions should provide meaningful additions to NEC’s telecom services, social infrastructure, aerospace and national security related businesses.

Kobe Bussan: Expect More Growth

By Michael Causton

Discount cash and carry wholesaler/franchisor, Kobe Bussan, posted more record results for FY2023, a reflection of the demand for discount retailing.
Net profits were down due to foreign exchange costs, but the company continues to expand to meet the growing demand for discount retailing,
Kobe is also now building domestic factories to counter exchange rate fluctuations, and a new restaurant and food services arm with big potential to grow its wholesale business.

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Mar 20

Daily Brief Japan: Shinko Electric Industries, Sakura internet, Snow Peak Inc, LIFULL, Trial Holdings, TSE Tokyo Price Index TOPIX and more

In today’s briefing:

Shinko Electric (6967 JP): Tender State of Play
Sakura Internet (3778) | Estimating the Value of 2,500 GPUs
Snow Peak: Cheap MBO
1Q Follow-Up – LIFUL (2120 JP)
Trial Holdings IPO Trading – Demand and Valuation Are Towards the Higher Side
Continued Creation of JPX Prime 150-Type Passive Funds Will Help Solve TOPIX Challenges

Shinko Electric (6967 JP): Tender State of Play

Shinko Electric Industries (6967 JP) pre-conditional tender offer from the JIC alliance is JPY5,920 per share. The gross spread has narrowed from a high of 10.4% to the current 4.2%.
The narrowing spread can be attributed to the JSR Corp (4185 JP) tender launch, which suggests likely China SAMR approval, and Ibiden Co Ltd (4062 JP) giving up recent gains.
Like JSR, we expect China SAMR to allow JIC to withdraw its Shinko merger control filing. There is a good chance the tender launches before the guided late August start.

Sakura Internet (3778) | Estimating the Value of 2,500 GPUs

By Mark Chadwick

The share price of Sakura Internet has risen by over 500%, adding Y230 billion in market cap, since investors began pricing in the AI opportunity
We use pricing data from Amazon AWS to model the revenue opportunity for Sakura’s GPU AI-cloud
We estimate that 2,500 H100 GPUs could yield an equity value of Y49 billion, far less than the value the market has ascribed

Snow Peak: Cheap MBO

By Michael Causton

Snow Peak agreement with Bain Capital to take the outdoor brand private next month seems to have been in the works for a couple of years.
Although sales are expected to rebound this year to near record highs, Snow Peak insists the domestic camping boom is over and will look at long-term growth overseas instead.
Even so, the MBO price looks cheap. Snow Peak is likely to see a rebound in domestic sales in FY2024 and its plans for overseas expansion are solid.

1Q Follow-Up – LIFUL (2120 JP)

By Sessa Investment Research

LIFULL reported an 8% increase in net sales to ¥8.1 bn, driven by overseas acquisitions made during the second quarter of the previous FY.
OP from comparable operations remained steady at around ¥0.15bn. In the previous year, the company recorded an operating profit of ¥0.8bn, but this included ¥0.66bn in profits from the sale of Rakuten LIFULL STAY, a hotel and lodging platform operator, in October of 2022.
In the current term, the company recorded a net loss of ¥0.05bn, but this included about ¥0.2bn in one-off costs for the transition to a new management structure in the overseas business.

Trial Holdings IPO Trading – Demand and Valuation Are Towards the Higher Side

By Sumeet Singh

Trial Holdings (5882 JP) (TH) raised around US$259m after pricing its IPO at the top-end in its Japan IPO.
TH operates a network of retail stores that offer one-stop shopping under its everyday low price model, across a variety of daily necessities, food items and other products.
We have looked at the company’s past performance in our previous notes. In this note, we talk about the trading dynamics.

Continued Creation of JPX Prime 150-Type Passive Funds Will Help Solve TOPIX Challenges

TOPIX-Type passive funds have the challenges of buying stocks that aren’t of high quality and of not providing sufficient engagement. JPX Prime 150 is expected to resolve these issues.
Some believe that JPX Prime 150, a market capitalization-weighted index, shows little difference in performance from TOPIX. However, more careful engagement will contribute to value creation in the long run.
The continued creation of passive funds linked to the JPX Prime 150 Index is expected to further highlight high quality companies.

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Mar 19

Daily Brief Japan: JSR Corp, Tokio Marine Holdings, D.Western Therapeutics Institute Inc. and more

In today’s briefing:

JSR (4185 JP) – Launch of The Official Tender Offer (And the Double Arb)
JSR Corporation (4185 JP): JIC Tender Starts and Should Succeed Despite Shin-Etsu’s Re-Rating
Tokio Marine Cross-Shareholding – At Least US$18bn of Cross-Shareholding to Sell
4Q Follow-Up -D. Western Therapeutics Institute (DWTI) | 4576

JSR (4185 JP) – Launch of The Official Tender Offer (And the Double Arb)

The Tender Offer is finally here. JIC announced the official launch after the close today.
JIC appears to be taking on the SUNY RF risk as-is. The Tender Offer details vs the original expectations in the late June 2023 document are unchanged.
Once started, unless a US court approves an injunction causing regulatory delay, this is done. But there are path events. And of course there is a double arb here.

JSR Corporation (4185 JP): JIC Tender Starts and Should Succeed Despite Shin-Etsu’s Re-Rating

JSR Corp (4185 JP) notes that the pre-condition for JIC’s tender has been satisfied. The offer price remains unchanged at JPY4,350 per share.
The offer remains attractive despite the material re-rating of peers. The tender should succeed when combined with shareholder fatigue and a lack of vocal opposition.
The tender requires a 66.7% minority acceptance rate. The gross and annualised spread for a 23 April payment is 0.6% and 7.1%, respectively.

Tokio Marine Cross-Shareholding – At Least US$18bn of Cross-Shareholding to Sell

By Sumeet Singh

The Japanese Financial Services Agency has asked the general insurers to reduce/eliminate their cross-shareholdings.
Tokio Marine Holdings (8766 JP) had a stake over US$100m in at least 33 listed Japanese stocks, amounting to a total of US$16.5bn.
In this note, we take a look at its stakes in various companies to see which ones could possibly be candidates for further selldowns.

4Q Follow-Up -D. Western Therapeutics Institute (DWTI) | 4576

By Sessa Investment Research

Major milestones with high expectations coming in the next 2-3 years: 1) Phase IIb US trials for H-1337 as “first choice as a second-line Glaucoma drug” for patients who do not respond to PGs
2) 2024 application/approval and 2025 launch of DW- 1002 in Japan, 2023 application and 2024 approval/launch in China, as well as orphan drug designation for combination formula MembraneBlue-DualⓇ (DW-1002 + trypan blue) in the US
3) in Japan, start P2 clinical trials in 2024, P3 trials in late 2025 though 2026, and normal schedule application for approval for regenerative cell-therapy DWR-2206 in 2027

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Mar 18

Daily Brief Japan: Fast Retailing, Roland DG Corp, Aida Engineering, TSE Tokyo Price Index TOPIX and more

In today’s briefing:

Fast Retailing (9983) – Now At Double Downweight Levels
Merger Arb Mondays (18 Mar) – Roland DG, JSR, YSK, CIMC Vehicles, Alumina, QV Equities, Qantm
Aida Engineering (6118) Buyback – Not Big Enough, But Not Small; They Gotta Shrink E.
In the Prime Market, Disclosure in English Also Widens the Gap in the Company’s Attitude

Fast Retailing (9983) – Now At Double Downweight Levels

Fast Retailing (9983 JP) is the largest weight in the Nikkei 225. On Friday, it closed at 11.36% of the Nikkei 225, putting it well above the 10% cap level.
If the stock is above 10% on a pro-forma basis on the base date of 31 July 2024, it will get a capping coefficient. 2.8mm shares (US$2.5bn) to sell.
At Friday’s close, we were borderline above a double-downweight trigger. At Monday’s open, just below. 30mins later? Back well above. Lots of interesting issues and nuances here for a short.

Merger Arb Mondays (18 Mar) – Roland DG, JSR, YSK, CIMC Vehicles, Alumina, QV Equities, Qantm

We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads: APM Human Services Internation (APM AU), Qantm Intellectual Property (QIP AU), Genex Power Ltd (GNX AU), Probiotec Ltd (PBP AU), Alumina Ltd (AWC AU), Silver Lake.
Lowest spreads: Roland DG Corp (6789 JP), Tietto Minerals Ltd (TIE AU), CPMC Holdings (906 HK), Pact Group Holdings (PGH AU), Vinda International (3331 HK), Snow Peak Inc (7816 JP).

Aida Engineering (6118) Buyback – Not Big Enough, But Not Small; They Gotta Shrink E.

Late last week, machine tool and press maker Aida Engineering (6118 JP) made an announcement of a share buyback. Up to 2.3mm shs (3.59%) spending up to ¥2bn.
The company has filed a policy for “Action to Implement Management That is Conscious of Cost of Capital and Stock Price” in its most recent CorpGov report available (J/E) here.
It will be a little smaller than that, but it is worth taking a closer look at the details, etc.

In the Prime Market, Disclosure in English Also Widens the Gap in the Company’s Attitude

Most companies with large market capitalization (i.e., those with a high ratio of foreign shareholders) already disclose their financial statements, timely disclosure materials, and convocation notices in English.
Disclosure in English of corporate governance reports and annual securities reports, which have lagged behind, is gradually increasing among companies with large market capitalization.
Similar to the results of the recent disclosure regarding the ”TSE’s request”, there is also a difference in the disclosure stance between companies with large market capitalization and other companies.

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Mar 17

Daily Brief Japan: NEC Corp, TSE Tokyo Price Index TOPIX, JSR Corp and more

In today’s briefing:

NEC (6701 JP): Generative AI Is the Spark, Not the Driver
Updated Tool and New “Diff File Generator” for TSE “Mgmt Conscious of Capital Cost/Stock Price”
(Mostly) Asia-Pac M&A:QV Equities, TASK, Qantm, Superloop, CIMC Vehicle, JSR, Roland DG, Outsourcing
Weekly Deals Digest (17 Mar) – JSR, Roland DG, CIMC Vehicles, Li Ning, Alumina, QV Equities, Japfa

NEC (6701 JP): Generative AI Is the Spark, Not the Driver

By Scott Foster

The P/E ratio has risen above 20x this fiscal year from no more than 13x in the previous four years, reflecting successful restructuring and investor enthusiasm for AI.
Profit margins are rising, but remain moderate in absolute terms with room for further improvement. The shares may consolidate, but they do not look overvalued.
Management is aiming for generative AI sales of ¥50 billion in three years time. This is less than 2% of total sales, but a positive indicator for NEC’s software business.

Updated Tool and New “Diff File Generator” for TSE “Mgmt Conscious of Capital Cost/Stock Price”

In mid-January, the TSE announced a “name-and-shame” list where they listed all the companies which had put forth a disclosure about 【資本コストや株価を意識した経営の実現に向けた対応】. But they did not actually shame.
The list shows which companies have disclosed a policy/consideration. But no data/links. We have the links. On Feb 1, the TSE put out a presentation and set of case studies.
We created a tool to name everyone, show their reports, provide links, and now a new tool. Put in a name, see the difference between the Old/New Reports.

(Mostly) Asia-Pac M&A:QV Equities, TASK, Qantm, Superloop, CIMC Vehicle, JSR, Roland DG, Outsourcing

By David Blennerhassett

I tally 50 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Two new deals were discussed this week on Smartkarma: WAM Leaders (WLE AU) scrip-deal for QV Equities (QVE AU); and TASK Group (TSK AU)‘s Scheme with PAR Technology (PAR US).
Key updates took place on: Qantm Intellectual Property (QIP AU), Superloop (SLC AU), CIMC Vehicle (1839 HK), JSR Corp (4185 JP), Roland DG Corp (6789 JP), and Outsourcing (2427 JP).

Weekly Deals Digest (17 Mar) – JSR, Roland DG, CIMC Vehicles, Li Ning, Alumina, QV Equities, Japfa