Daily BriefsJapan

Japan: Advantest Corp, Capcom Co Ltd, CyberAgent Inc, M3 Inc, Shiseido Company, ZOZO Inc, Shin Etsu Chemical and more

In today’s briefing:

  • Breaking Down Advantest’s Big Buyback
  • Capcom – On Track for ¥60bn in OP This Year
  • CyberAgent 3Q: Recurring Strong Results Ease Concerns over Gaming Revenues; Guidance Revised Upwards
  • M3: Medlive IPO Helped OP Surge in 1Q; Expect Earnings Weakness to Come Through in 2H
  • Japanese Cosmetics Industry: 2Q21 Statistics Update
  • Conviction Call Zozo – Spend Per Member Refuses to Drop but Hurdles Get Steeper Going Forward
  • Japan’s Governance: Board Evaluation

Breaking Down Advantest’s Big Buyback

By Travis Lundy

On 28 July after the close, semiconductor & components test systems manufacturer Advantest Corp (6857 JP) reported Q1 results (with slides), revised its earnings forecast for the full year (revenues +10% vs end-April forecast for the year to 31 March 2022, OP and NP +17% and change), revised its “forecast” for its dividends, raising the H1 div from ¥38 to ¥50/share. This increase, even if the regular portion of the H2 div is kept flat, would raise the annual dividend to above the level of last year’s (which included a ¥10 commemorative dividend in H2). 

It also announced a plan to buy back shares – with a buyback program of up to 10 million shares (5.1% of shares out ex-treasury stock), spending up to ¥70 billion, with the program scheduled to run from 2 August 2021 through 24 March 2022. 

The reasoning is that in the Second Mid-Term Management Plan announced 24 May 2021, the total shareholder return ratio including treasury stock acquisition was targeted at a base rate of 50% or higher. The revision of the earnings forecast along with expected stronger operating cashflow prods the company to launch a buyback.  

So they have, and the dynamics are interesting because despite MSCI suggesting the company has 100% float, I see a Real World Float far, far below that. 


Capcom – On Track for ¥60bn in OP This Year

By Mio Kato

Capcom handily beat consensus estimates at 1Q with revenue of ¥48.4bn (+27.8%) and OP of ¥23.6bn (+37.4%). Consensus had been as low as ¥13.4bn in early May so the beat is significant. Yet, it failed to meet our ¥25-30bn on account of a write-off of some game assets (“several billion yen”) and deferring revenue for RE8 due to free DLC which we had not expected. Without those factors we believe OP would have come extremely close to ¥30bn. We remain confident that ¥60bn in OP is on the cards for the full year though it is plausible that Capcom could push out sales into next FY and come in slightly below that.


CyberAgent 3Q: Recurring Strong Results Ease Concerns over Gaming Revenues; Guidance Revised Upwards

By Shifara Samsudeen, ACMA, CGMA

CyberAgent Inc (4751 JP) reported its 3Q FY09/21 financial results after market on 28th. CyberAgent’s revenue for the quarter increased 70.3% YoY while operating profit grew 23.2% YoY during the period. Revenue beat consensus by 8.9% while OP beat consensus by 53.9%. The company has once again revised its FY2021 forecasts upwards given that it has already reached its OP target for the year which was set in 2Q FY09/2021.


M3: Medlive IPO Helped OP Surge in 1Q; Expect Earnings Weakness to Come Through in 2H

By Shifara Samsudeen, ACMA, CGMA

M3 Inc (2413 JP)  reported 1QFY03/2022 results on Wednesday which saw revenues growing 30.8% YoY while reported operating profit grew 38.2%YoY during the quarter (excl. the impact from stake disposal of Medlive Technology (2192 HK)). M3’s operating profits during 1QFY03/2022 benefitted from the IPO of Medlive Technology on Hong Kong Stock Exchange in July 2021 with a profit attribution of JPY9.1bn (19.6% of total revenues in 1Q and 36.9% of operating profits excl. Medlive IPO impact).

Source: Company disclosures

The reported revenue was 3.8% higher than consensus estimates while reported operating profits beat consensus by a huge margin of about 50%.


Japanese Cosmetics Industry: 2Q21 Statistics Update

By Oshadhi Kumarasiri

Cosmetics exports grew 32.8% YoY and 15% QoQ in 2Q21 to more than offset the weaknesses in the domestic cosmetics market which remained 26% and 31% below the pre-COVID level in April and May 2021 respectively.

The earnings season of the Japanese cosmetics commences with quarterly results from Pola Orbis Holdings (4927 JP) and Kose Corp (4922 JP) on 30th July 2021. Kao Corp (4452 JP), Fancl Corp (4921 JP) and Shiseido Company (4911 JP) are scheduled to report their quarterly results early next week.

We analyse the 2Q21 cosmetic industry statistics, using the monthly data released by the Ministry of Economy, Trade and Industry (METI) and the Ministry of Finance.


Conviction Call Zozo – Spend Per Member Refuses to Drop but Hurdles Get Steeper Going Forward

By Mio Kato

Zozo posted strong results with revenue beating consensus by 3.4% and OP beating by 10.9%. We had expected revenue to be weaker than consensus based on weak data points on web traffic but revenue growth of +15.4% YoY was materially stronger than our +4% estimate (consensus +11.7%) thanks to elevated spend per member driven by state of emergency declarations. Despite the strong results, guidance remains challenging and a clear miss remains on the cards if spend per member normalises.


Japan’s Governance: Board Evaluation

By Aki Matsumoto

Board evaluation seems to be a minor item among the corporate governance evaluation items. Recently, I have had many opportunities to hear analysts ask questions about governance at analyst meetings, but I have not heard any questions about board evaluation, perhaps because of the limited time available. The composition of the board of directors and the number of committees can be evaluated numerically, which makes it easier to evaluate relative to other companies and the overall average. However, since this item is one of the items mentioned in the preamble of the Corporate Governance Report, it has to be read sequentially in order to evaluate it, which may be one of the reasons why it is not as prominent as the other items. In this sense, I strongly hope that the disclosure of corporate governance reports in English will be further advanced.


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