In today’s briefing:
- Nikkei 225 Vs TOPIX Dynamics
- ECM Weekly (21st May 2023) – Alibaba, Cainiao, Baba Cloud, Nexus, DXN, Growatt, Rakuten, JD Ind
- Olympus Corp (7733 JP): FY23 Result Missed Expectation; Initiated Muted FY24 Forecast
- If Japan Were Treasure Trove of Value Stocks, Global Investors Would Not Underweight Japanese Stocks
Nikkei 225 Vs TOPIX Dynamics
- This past week saw dramatic moves in Japanese stock markets. TOPIX +3.1% N225 +4.8% – up the 6th week in a row – closing at their highest in 33 years.
- Flows were positive the week before, and I expect we’ll see next week they were positive this past week. But most striking was the interplay between Nikkei 225 and TOPIX.
- If foreign inflows increase, Nikkei is likely to outperform TOPIX both because of its existence and previous use, and its construction. And that means watching one’s trades, shorts, and executions.
ECM Weekly (21st May 2023) – Alibaba, Cainiao, Baba Cloud, Nexus, DXN, Growatt, Rakuten, JD Ind
- Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
- On the IPO front, JD.com Inc (ADR) (JD US) and Alibaba (ADR) (BABA US)‘s spin-off’s continue to draw interest.
- The REIT were out in full force this week for placements as interest rates globally appear to be approaching their peak.
Olympus Corp (7733 JP): FY23 Result Missed Expectation; Initiated Muted FY24 Forecast
- Olympus Corp (7733 JP) announced mixed FY23 result. While revenue was slightly ahead of forecast, both operating and net profits missed guidance. Excluding Fx, revenue increased just 4.5% in FY23.
- Operating profit increased 28% YoY to ¥187 billion, below forecast of ¥198 billion, mainly due to high-than-expected SG&A expenses, which accounted for 47.7% of revenue versus forecast of 47.2%.
- Due to continuing macroeconomic uncertainties and waning Fx benefit, Olympus expects FY24 revenue to be ¥914B (+4% YoY) and operating profit to be ¥163B (-13% YoY).
If Japan Were Treasure Trove of Value Stocks, Global Investors Would Not Underweight Japanese Stocks
- It’s hoped Buffett’s visit to Japan will encourage managers to review their business strategies to develop products with competitive advantage and value, so that more companies can expect sustainable growth.
- Companies with low OP Margin will need to rethink their fundamental strategy to raise OP Margin for mid-to-long term, as ROE may only temporarily rise even if cash is reduced.
- There are many stocks in Japan with low valuations, but while there are many cash cow companies, there aren’t many undervalued stocks that can generate cash flow for sustainable growth.
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