Daily BriefsJapan

Daily Brief Japan: Shinsei Bank, Rakuten Inc, Toshiba Corp, Ryohin Keikaku, Z Holdings, Shidax Corp, Tokyo Stock Exchange Tokyo Price Index Topix and more

In today’s briefing:

  • Thinking Strategically About a Shinsei Position – Things To Do NOW
  • Rakuten – Sale of Stake in Securities Business Eases Funding Pressure
  • Toshiba (6502 JP): Kioxia Nanoimprint Update – Look to the Next Cycle
  • Ryohin Keikaku: A Beat Can Turn Around Price Performance
  • Z Holdings / PayPay – A Focus on Margin Improvement as ZHD Moves to Consolidate
  • Shidax Outlook May Change – Better Governance Matters
  • Activist Investors Will Grow Their Presence, as Japanese Equities Would Be Good Fit for The Approach

Thinking Strategically About a Shinsei Position – Things To Do NOW

By Travis Lundy

  • SBI Holdings (8473 JP)‘s subsidiary has reportedly filed its application to become a Bank Holding Company, the definition being a company holding a 50% or greater stake in a bank.
  • The day after I last wrote, Shinsei announced it had received approval to change its name to SBI Shinsei Bank as of 4 January 2023.
  • My expectation is the move above 50% happens sooner rather than later. And in that case, investors should think about their approach. Get your cowbells ready.

Rakuten – Sale of Stake in Securities Business Eases Funding Pressure

By Kirk Boodry

  • Rakuten is reportedly selling a stake in its Securities unit for ¥80bn, which probably means a near-term IPO of that business is off the table
  • It may also give Rakuten greater flexibility on the timing of a Rakuten Bank IPO should pricing for that be problematic
  • In terms of surfacing the value of Rakuten’s fintech assets this is good news but it is mobile losses that have held the shares back. We remain at Neutral.

Toshiba (6502 JP): Kioxia Nanoimprint Update – Look to the Next Cycle

By Scott Foster

  • Canon’s reported capital spending plan suggest that commercial production of nanoimprint lithography tools could start in time for the next semiconductor up-cycle.
  • If this is the case, Kioxia is likely to be the main beneficiary. In the meantime, LightStream recommends that investors in Toshiba hedge against tech/semi weakness.
  • Technical hurdles remain formidable, but nanoimprint lithography has the potential to be much cheaper than EUV.

Ryohin Keikaku: A Beat Can Turn Around Price Performance

By Oshadhi Kumarasiri

  • Our analysis points to a significant earnings beat for Ryohin Keikaku, whose share price is down more than 50%-YTD and is currently hugging the bottom-end of the long-term trend channel.
  • With freight and logistics down more than 50% since June 2022, we are expecting Ryohin Keikaku (7453 JP)’s gross margin to return to around 49-50%.
  • In addition, the company’s monthly sales growth figures indicate that FQ4 revenue should be around ¥114.6bn compared to ¥105.8bn for consensus.

Z Holdings / PayPay – A Focus on Margin Improvement as ZHD Moves to Consolidate

By Kirk Boodry

  • The PayPay conversion is complete and management is focused on managing costs, which is reassuring for ZHD financial targets and for an eventual IPO
  • There was less said about the latter, however, whilst detail on the valuation gain that parent Softbank Corp needs to hit its own operating income target has not been confirmed
  • Our valuation of ¥500bn for PayPay looks more reasonable as 50-73% YTD declines in public comps have brought trading multiples in line (PayPay at 5x FY22e revenue versus 5-8x)

Shidax Outlook May Change – Better Governance Matters

By Travis Lundy

  • On 8 September, I went over the Oisix ra daichi (3182 JP) bid for the stake in Shidax Corp (4837 JP) held by Unison Capital. 
  • The founding Shida family had a deal whereby when the company raised capital years ago, the family had ROFR to buy or nominate a buyer of the Unison stake.
  • The problem? Shidax’ independent board said this was unfair to minorities. The back and forth has continued but there may now be hope for a better deal. 

Activist Investors Will Grow Their Presence, as Japanese Equities Would Be Good Fit for The Approach

By Aki Matsumoto

  • Given the increased stock market volatility, it’s not surprising that activist investment strategies are a good fit for investors seeking investment strategies that are less correlated with stock market fluctuations.
  • Japanese companies that have lower valuations, less effective steps to maximize their corporate value, and face many challenges in their governance practices are are well suited to activist investor approach.
  • Unlike passive investors who have an impact on the overall stock market, activist investors’ purchases will have a limited impact on the overall market, but their presence will be significant.

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