In today’s briefing:
- Shimano (7309) | Join the Race
- W Scope (6619): Don’t Sell Too Early
- Terumo Corp (4543 JP): A COVID Recovery Play; Cardiac & Vascular Business to Drive Multi-Year Growth
- Nitori’s Biggest Challenge, the Succession Plan, Is an Even Bigger Risk
Shimano (7309) | Join the Race
- Shimano’s stock price has declined by 25% year to date on expectations that bike sales will soon start going downhill
- We model a GFC-style recession and find that Shimano’s valuation has already reflected the worst case scenario
- If we are heading for a collapse, then Ferrari N.V. (RACE US) should be acting more like Shimano. The valuation discount between the two is as wide as ever
W Scope (6619): Don’t Sell Too Early
- Revised guidance with 17.6% higher sales that caused a 40% increase in operating profit and an increase in EPS by 344% by 1H 2022.
- Spin off its Korean subsidiary by this August for up to KRW 900 bn or USD 692 million or almost as big as W Scope Corp (6619 JP)currently.
- The company is trading at a 65% PBR discount to its Chinese peers which are bigger but less growth catalysts. Don’t sell too early.
Terumo Corp (4543 JP): A COVID Recovery Play; Cardiac & Vascular Business to Drive Multi-Year Growth
- Terumo Corp (4543 JP) earns 56% revenue from cardiac and vascular segment, which is the fastest growing segment of the company. The segment is seeing continued recovery from COVID impact.
- For FY23, Terumo guided for cardiac and vascular segment revenue of ¥445.5B (+12% y/y) and adjusted operating profit of ¥113.4B (+22% y/y), leading to operating margin of 25.5% (+200bps y/y).
- Over the next five years, Terumo aims for high single-digit revenue growth from the segment, through new product launches and expanding adoption of existing products across disease areas.
Nitori’s Biggest Challenge, the Succession Plan, Is an Even Bigger Risk
- Nitori attributed the missed profit guidance to foreign currency forward contract approach changes a few years ago, which resulted in missed foreign currency projections.
- Since Nitori changed its FX forward approach several years ago for a reason, it’s concerned about the impact on Nitori’s business if it were to return to its original approach.
- The approach of relying on the market views of Mr. Nitori is not sustainable. The biggest challenge, the Succession problem, adds to the risk of finding a market genius.
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