In today’s briefing:
- Advantest (6857) – Strong SoC Sales, Record Profits, Bullish Guidance, and a Buyback (+ Index Flow)
- Softbank Group – BABA Pressure Has Didi Read Across but a 41% NAV Discount Provides Cushion
- KDDI (Buy) – Q1 22 Results Reaction: Mixed Quarter as Consumer Predictably Weak
- Zozo: Social Fashion Commerce, Omnichannel and New Ventures
- Takeda 1Q: Top Line Beat Consensus – Development Pipeline Continues to Progress
- When Will Kyoto Bank’s Policy Change?
Advantest (6857) – Strong SoC Sales, Record Profits, Bullish Guidance, and a Buyback (+ Index Flow)
- Advantest Corp (6857 JP) yesterday announced Q1 results, with Revenues/OP/NP at record levels, a H1 div hike of 30%, guidance well ahead of consensus, and a buyback.
- They also announced a Mid-Term Plan revision which shows forward guidance better than consensus.
- The buyback is smaller than the last one BUT float is not what you think it is. Understanding float dynamics here is key.
Softbank Group – BABA Pressure Has Didi Read Across but a 41% NAV Discount Provides Cushion
- Alibaba is under pressure again with a direct read-across to Softbank
- Worries on China regulation are bad news for another Softbank holding DIdi Global as it stands alongside Alibaba as a high-profile regulatory target
- Alibaba weakness could drive risk pricing (CDS) and the discount to NAV higher. A silver lining is that discount makes Softbank attractive for investors looking for indirect China exposure
KDDI (Buy) – Q1 22 Results Reaction: Mixed Quarter as Consumer Predictably Weak
- Results for the quarter were mixed with a slight miss for profitability despite one-time gains for financial services taken in the quarter
- Revenue erosion from a reduction in the Rakuten roaming service area was relatively modest whilst there are signs of improvement in erosion from mobile price cuts
- KDDI will reimburse users ¥7bn (v Redex forecast of ¥10bn) for its network outage earlier this month; the operational impact won’t be clear until Q2 churn is reported
Zozo: Social Fashion Commerce, Omnichannel and New Ventures
- Zozo recorded its highest profit ever last year, countering the sceptics once again.
- The company has shrugged off the uncertainties surrounding the departure of its founder and, while sticking to its core values, is looking for new growth beyond fashion e-commerce.
- While there are some headwinds, Zozo has a solid set of strategies in place to offset these and find new growth streams.
Takeda 1Q: Top Line Beat Consensus – Development Pipeline Continues to Progress
- Takeda Pharmaceutical (4502 JP) reported 1QFY03/23 results yesterday. Reported revenue grew 2.4% YoY to JPY972.5bn (vs consensus JPY929.6bn) while OP decreased 39.4% YoY to JPY150.5bn (vs consensus JPY173.1bn).
- Decline in OP was due to one-time gain from the sale of Japan diabetes portfolio of JPY131.4bn in 1Q last year, however, excluding this, OP increased 28.4% YoY in 1QFY03/2023.
- Takeda’s share price dropped 1.5% at the end of today’s trading as investor sentiment has changed post earnings as some of the company’s key drugs have started experiencing generic erosion.
When Will Kyoto Bank’s Policy Change?
- The current shareholder structure of Kyoto Bank, where domestic financial institutions are the top shareholders and still continue to hold cross-shareholdings, will make it difficult to pass the shareholder proposal.
- In environment of continued sluggish bank earnings, the dividend income from policy shareholdings and the huge unrealized gains on stocks are valuable assets for weathering this difficult business environment.
- Kyoto Bank’s policy will change when the interest rate environment changes and earnings are expected to improve, or when the shareholder structure changes due to a significant reduction in cross-shareholdings.
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