In today’s briefing:
- Rakuten Bank – Big TOPIX Inclusion Next Week
- Rakuten (4755 JP): The Current Playbook
- Ferrotec. Accelerating Growth Across Multiple Niche Semi Segments
- Tokyo Electron (8035 JP): Dubious Guidance
- Aeon: All Signs Point to Higher Returns
Rakuten Bank – Big TOPIX Inclusion Next Week
- Rakuten Bank priced its IPO low and then immediately bounced. Earnings came in as forecast, and the forecast next year did too. Highish PBR, high ROE, not-so-high-PER on low ROA.
- The stock fell on 16 May after Rakuten Bank announced its capital raising. That was probably a knee-jerk reaction, and had no reason.
- Next week sees the TOPIX inclusion. And the Real World Float has gotten smaller since the offering. And some of those people aren’t going to sell near-term.
Rakuten (4755 JP): The Current Playbook
- Since the announcement of the placement, Rakuten (4755 JP)’s shares are down -15.7% from the undisturbed price of JPY707 per share (12 May prior to press reports of the placement).
- To understand how the shares will trade as the offer is launched, we think it is instructive to look at recent large Japanese placements. Pricing date is likely 24 May.
- So far, Rakuten’s shares have mostly followed the pattern of previous large placements. Investors participating in previous large Japanese placements tend to secure positive returns.
Ferrotec. Accelerating Growth Across Multiple Niche Semi Segments
- Delivered FY’23 net sales of ¥$211 billion, up 57.5% sequentially.
- FY’23 operating profit of ¥35 billion was up 63% sequentially
- Our favourite Japanese semi stock with a TTM P/E <5
Tokyo Electron (8035 JP): Dubious Guidance
- Guidance for 1H of FY Mar-24 should be easy to beat. The sharp rebound that management is forecasting for 2H is open to question.
- TSMC and Micron plan long-term expansion in Japan and Rapidus will be a new customer. But exports to China – the company’s largest market – will be restricted.
- The share price has spiked, but uncertainty is high, visibility is low and valuations are not compelling.Management’s MAGIC medium-term targets look like … magic.
Aeon: All Signs Point to Higher Returns
- Aeon just announced record revenues of more than ¥9 trillion for FY2022.
- Its supermarkets, mall developments and drugstores continue to strengthen and even the GMS business had a good year even if it still a way to go to generate consistent profit.
- Meanwhile, Aeon plans to pour ¥150 billion a year into group-wide digital technologies, after launching the most advanced food online operation Japan has seen yet this month.
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