Japan: Cosmo Energy Holdings, NTT (Nippon Telegraph & Telephone), KDDI Corp, BASE Inc, Mitsubishi Heavy Industries, Nexon, Internet Initiative Japan, Softbank Group and more

• Cosmo Energy Holdings (5021 JP), subject of a selldown by its major shareholder (discussed here), then a large stake purchase by activist Murakami-san (discussed here) announced earnings and a buyback.
• The buyback is large enough to matter to other shareholders. 
• The shareholder structure is interesting enough that investors need to pay attention to the possibilities.

• The three Japanese telecoms reported earnings this week. Softbank Corp (9434 JP) was disappointing (and slightly confusing). KDDI Corp (9433 JP) was much of a muchness.
• NTT (Nippon Telegraph & Telephone) (9432 JP)  looked the best, and announced the largest buyback – ¥400bn or 3%. But it comes from a government sale, not the market. 
• Nevertheless, the company is doing what it promised and executing on its promise. And despite the “bullishness” in the revenue forecast, earnings forecasts to March 2023 look conservative.

• KDDI reported earnings today, offering a near meaningless March 2022 results presentation slide deck, and an only slightly more meaningful new Mid-Term Plan.
• The only clarity provided is on the bit which makes up about a third of future OP as the two-thirds (mobile telephony ARPU-related revenues) will see considerable pain this year. 
• The buyback is nice, but KDDI is no longer cheap, and may have relative upside only against Softbank Corp. 

• Guidance for modest growth in FY22 operating income is broadly in line with expectations and reassuring after a range of potential outcomes in reports from NTT and Softbank  
• The company has issued a mid-term plan with a positive message on growth from new businesses and in-line guidance for capex/shareholder returns but a lack of FY24 finanical targets
• On balance, the message is positive as a stable business and rising shareholder returns makes KDDI an attractive option in a frothy market

• BASE Inc (4477 JP) is up more than 27% today as the Mothers Index bounced back 4.5% following a steep sell-off during the last one-month period.
• Nevertheless, results were disappointing on both the top line and the bottom line with Q1 revenue and operating loss of ¥2,512m (consensus ¥2,659m) and ¥272m (consensus ¥139.2m) respectively.
• After disappointing the market with a guidance range that was significantly below consensus in 2021, Base Inc has withheld from providing 2022 guidance.

• MHI reported a strong 7% growth in the order backlog to ¥5,500 billion
• MHI is a beneficiary of the global energy crisis, geared into gas turbine and nuclear supply chains
• The stock is trading below book value (10 year average 1x) at a time when the core energy order book is as strong as ever

• Downtrends remain intact for Japan’s TOPIX/Nikkei 225, Hong Kong’s Hang Seng, Europe’s EURO STOXX50, Germany’s DAX, China (MCHI-US), and all the MSCI global indexes (ACWI, ACWI ex-US, EM, and EAFE).
• The majority of these indexes are in well-defined downtrends; that means when the downtrends eventually reverse, it will be clear and we will be ready to buy/turn bullish.
• Relative strength on Japan’s TOPIX is reversing topside a 4.5-year downtrend, signaling Japan is emerging as leadership. We highlight buy opportunities in Japan and also in defensive Sectors

• Q4 and FY22 guidance beat driven by growth in corporate DX demand and margin discipline
• Company expects FY22 double-digit revenue growth as mobile headwinds fade and has re-set its mid-term profitability target. Implied FY23 OP is 28% higher than year-ago forecasts
• Near-Term profitability beat ties in to shareholder returns and FY21 DPS has been raised to ¥48 from ¥46 with further growth in FY22. We remain at Buy.

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

1. China Jinmao Holdings
2. Guangzhou R&F Properties
3. Sunac China Holdings
4. Greenland Hong Kong Holdings
5. Evergrande

and more…