In today’s briefing:
- JX Advanced Metals (5016 JP): IPO Fast-Entry 30% Away; Index Review Inclusion in Aug & Sep 2025
- Aoyama Zaisan Networks Company (8929 JP) – Laying the Groundwork for Sustained Growth
- Japanese Big Cap Banks – Three Scorecard Stand-Outs, and One Wildcard
- Restar (3156 JP) – Positioning for Future Demand Upturn
- Geo Holdings (2681 JP) – Q3 Sales Improve, but Costs Weigh on OP
- Shareholder Benefits to Return Amid Rise in Foreign Ownership and Dissolution of Cross-Shareholdings
JX Advanced Metals (5016 JP): IPO Fast-Entry 30% Away; Index Review Inclusion in Aug & Sep 2025
- JX Advanced Metals (5016 JP) is scheduled to be listed on 19 March 2025, at the prime market of the Tokyo Stock Exchange at an expected valuation of ~$5.3bn.
- Fast-Entry inclusion for the one global index can take place on 25 March if the stock price surges by ~30% or more on the first trading day.
- Review inclusion given failed fast-entries for both global indices, is expected in August and September 2025.
Aoyama Zaisan Networks Company (8929 JP) – Laying the Groundwork for Sustained Growth
- Well positioned to capitalize on Japan’s intergenerational wealth transfer megatrend – The company continues to demonstrate positive growth momentum as evidenced by the double-digit topline growth in Q1-4 FY12/24.
- The recent Chester Group acquisition should reinforce its position to ride the powerful trend in Japan’s aging demographics and intergenerational wealth transfer.
- We think the company’s strategic approach towards allocating capital to the growth of the business while minimizing shareholder dilution through share buybacks demonstrates a commitment to shareholder value and financial discipline.
Japanese Big Cap Banks – Three Scorecard Stand-Outs, and One Wildcard
- We introduce our Japanese big cap banks scorecard; from this, we pick Resona, Mizuho and SMFG with our wildcard being Shizuoka
- The scorecard metrics measure leverage to higher interest rates, LDRs, levels of cash balances, bond exposures, cross-holdings and valuations; from this, we derive a weighted ranking for each bank
- We remove Concordia from our buy list; we prefer Shizuoka for its better leverage to rising rates and high ratio of cross-holdings to market capitalization with a holdings reduction plan
Restar (3156 JP) – Positioning for Future Demand Upturn
- Q1-3 FY3/25 results underlined Restar’s positive sales growth profile (+11.2% YoY) driven by its roll-up M&A strategy, a strong demand environment for cameras and PC-related products in consumer products, and smartphone demand driving EMS activity YoY.
- However, headwinds persist in the form of continued delay in demand recovery from the Industrial sector, a sales mix lowering gross margin, and negative impact from a strengthening Japanese yen.
- We have not seen concrete evidence of cost savings from post-merger integration activities.
Geo Holdings (2681 JP) – Q3 Sales Improve, but Costs Weigh on OP
- Sales improve in Q3 but personnel and store opening costs weigh on OP – Although Q1-3 FY3/25 sales declined -3.4% YoY to ¥316.16bn, reflecting the difficult annual comps for new games and consoles in H1, in Q3 the absence of this drag meant that this quarter alone rose +4.3% YoY to ¥116.43bn.
- Demand for reuse clothes and smartphones remained robust, buoyed by store openings, year-end sales for clothes and price conscious consumers.
- However, increased hiring, base salary increases and credit card fees continued to eat into OP, which in FY3/25 Q1-3 fell -26.4% YoY to ¥9.82bn.
Shareholder Benefits to Return Amid Rise in Foreign Ownership and Dissolution of Cross-Shareholdings
- Most shareholder benefits items can be used in Japan. There’s history of more companies abolishing shareholder benefits programs because they believed that shareholder returns should conducted rather than shareholder benefits.
- Amid rising foreign ownership and the dissolution of cross-shareholdings, more companies have begun to reverse the trend toward companies approaching individual shareholders with shareholder benefits programs.
- The fact that stock prices of companies offering shareholder benefits tended to fall lower during stock market plunges may be due to the fact that they were mostly defensive stocks.
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