In today’s briefing:
- Japan – Increase in Shorts on Some Interesting* Stocks
- TSI Holdings (3608) – Yet Another Big Buyback; Still Good, Still Cheap, Now W/ Engagement Investors
- Money Forward: Weakening Top Line Growth and Huge Convertible Bond Issuance to Support Growth
- Ushio (6925 JP): Preparing for the Next Growth Cycle
- Aeon Keeps Working After High Profit Growth
- Return Targets and Use of Cash Should Be Disclosed Together with Cost of Capital
Japan – Increase in Shorts on Some Interesting* Stocks
- CyberAgent, Lixil Group, Hakuhodo Dy Holdings, Kobayashi Pharmaceutical, Welcia Holdings, Persol Holdings, GMO Payment Gateway, Kurita Water Industries and Open House have all underperformed the Nikkei 225 over the recent past.
- The underperformance could lead to adjustments in global passive portfolios and liquidity events on some of the stocks.
- Short interest has increased on some stocks and there could be more pre-positioning to come over the next few weeks.
TSI Holdings (3608) – Yet Another Big Buyback; Still Good, Still Cheap, Now W/ Engagement Investors
- In April 2022, I wrote about Tsi Holdings (3608 JP) saying in the first three bullet points it could double in two years. It doubled in one.
- They bought back shares held by JDB in April 2022, then they launched another buyback program in January 2023, and completed it last month.
- Now they have launched another to buy back 8.46% with a ToSTNeT-3 for half on Monday AM. The rest is expected on market through end-March 2024.
Money Forward: Weakening Top Line Growth and Huge Convertible Bond Issuance to Support Growth
- Money Forward (3994 JP) reported 3QFY11/2023 results on Friday. 3Q revenue fell below consensus despite increasing 37.4% YoY while reported operating losses were slightly below consensus estimated operating losses.
- MF also has provided more details on its ¥12bn convertible bond issuance in August to secure funds to further grow its SaaS and fintech businesses.
- This is concerning given the huge debt in the company’s balance sheet and it seems that the company may not be able to make profits in the near-term.
Ushio (6925 JP): Preparing for the Next Growth Cycle
- Ushio is making substantial investments in it core light source technologies, sacrificing short term profit for long-term growth potential.
- Geared to rising demand for EUV mask and IC package lithography, bio-medical equipment, and solid-state light sources. Digital cinema business rebounding from COVID.
- Selling at 21x current EPS guidance, 12x management’s FY Mar-26 EPS target and 0.9x book value. Upside potential to book value while waiting for confirmation of forecast recovery.
Aeon Keeps Working After High Profit Growth
- As outlined in previous reports, Aeon has been working hard to streamline its vast retail empire but also rethinking the fundamentals of retailing for each major format it operates.
- The results are now coming through with a big increase in operating profits in 1H2023, up 23% on last year.
- There is real momentum now, and the new online supermarket business is central to its ambitions to create the first true national FMCG business.
Return Targets and Use of Cash Should Be Disclosed Together with Cost of Capital
- Cash usage and return targets should be presented to investors along with cost of capital, but few companies can successfully envision future design due to poor planning for growth investments.
- Since there’s a significant positive correlation between ROE+DOE and TOPIX, the company should optimize its cash allocation by demonstrating enhanced shareholder returns until it can design a growth investment plan.
- Ajinomoto, which provided cost of capital projections and ROIC targets by business segment, should be commended for its constant communication with investors seeking better disclosure in good times and bad.
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