In today’s briefing:
- Nintendo (7974) – Earnings Forecasts⬇︎ Stock Split, Buyback, and HOW TO SELL WELL
- Another BIG SONY (6758) Buyback, But…
- Sony – That Revenue Guidance Tho
- Nintendo – A Stock Split And Not Much Else
- Nikkei Remains a Compelling Short
- Comany (7945) – Another Ridiculously Low-Priced MBO
- Chiyoda – Just Getting Started
- SMM – Guidance Makes Little Sense
- Japan’s Governance: About an Article on Natural and Human Capital Disclosures
- Daikin (6367 JP) | Blowing Cold Air on the Guidance
Nintendo (7974) – Earnings Forecasts⬇︎ Stock Split, Buyback, and HOW TO SELL WELL
- Nintendo has announced in-line-ish results for March 2022, and quite disappointing forecasts for March 2023. Mio Kato called it on 30 March as a sell. Excellent timing.
- Nintendo has a buyback tomorrow and if you don’t like the guidance, you should DEFINITELY read on below.
- But Nintendo also announced something truly extraordinary – a stock split. Everyone pooh-poohs the impact of a stock split but… in this case it is probably not nothing.
Another BIG SONY (6758) Buyback, But…
- A release showed up on TDNET last week that Sony Corp (6758 JP) had completed its ¥200bn 25mm share (2.02%) buyback program announced 28 April 2021.
- The details showed they had actually bought back 8.2mm shares spending only ¥97bn, despite the shares trading below T-1 Announcement Date Price for four months straight.
- Today, with earnings, SONY announced a NEW buyback. ¥200bn, 25mm shares, 2.02%. Same as last year.
Sony – That Revenue Guidance Tho
- Sony results were in-line with revenue of ¥9.92trn barely below ¥10trn consensus and OP of ¥1.20trn also just below consensus at ¥1.21trn.
- Guidance was interesting however as Sony guided for revenue of ¥11.4trn and a slight decline in OP.
- We believe that is either extreme conservatism or potentially a sign of very aggressive and interesting investment plans.
Nintendo – A Stock Split And Not Much Else
- Nintendo results were in-line with both revenue and OP within 1% of consensus.
- Guidance was extremely weak missing consensus by 5.5% at the revenue line and 20.5% at the OP line.
- Nintendo gonna Nintendo so this is nothing to panic about but it isn’t positive either… though the stock split is.
Nikkei Remains a Compelling Short
- Nikkei remains a compelling short with uptick resistance at 26,600/800 with the next downside target at 25,000. RSI bear wedge is a compelling set up.
- Nikkei offers downside on the back of the RSI bear wedge with firm trend and price resistance just under 27k. Sideways congestion sides with fresh lows.
- USD/JPY looking more crowded near 132 as the rising wedge matures for a pullback trade.
Comany (7945) – Another Ridiculously Low-Priced MBO
- Comany Inc (7945 JP)‘s Chairman Tsukamoto is 71. Together with younger Tsukamoto family members he is conducting an MBO to buy out minorities at a 76% premium.
- This most likely gets done, and it is tough to trade anyway because it is horribly illiquid.
- But it is another example of an MBO done at the wrong price. TOB PER is low. But the entire thing is financed by net receivables. Ex-receivables, EV is zero.
Chiyoda – Just Getting Started
- Chiyoda results were slightly weak driven by a poor gross margin in the fourth quarter but revenue guidance was punchy at ¥500bn vs. consensus at ¥354bn.
- We had flagged previously that Chiyoda would be moving to the favourable portion of the construction s-curve shortly and that appears to be coming through.
- That drove OP guidance of ¥20bn which is far above consensus at ¥14bn and could eventually help Chiyoda reduce potential dilution.
SMM – Guidance Makes Little Sense
- SMM beat at the PTP level by 10% driven by the surge in nickel prices but guided for just ¥194bn undershooting consensus by 9.3%.
- We do not find guidance credible at all as it would defy historical trends to a very large degree.
- In fact we believe that excluding one-off gains from the sale of Sierra Gorda, PTP could actually be up YoY.
Japan’s Governance: About an Article on Natural and Human Capital Disclosures
- The Nikkei article reported that, “Disclosure of sustainability-related information in securities reports is expected to become mandatory from fiscal 2023.”
- The requirement to disclose information on sustainability in annual reports, which are legal documents, is extremely significant.
- The use of international standards for sustainability disclosure will make comparative analysis with other companies easier, and is expected to help raise the bar for companies that lag behind.
Daikin (6367 JP) | Blowing Cold Air on the Guidance
- Daikin reported FY3/22 OP ¥316 bn, in-line with guidance and Nikkei preview. The company guided for FY3/23 OP of ¥340 billion (+7.5% yoy) on a 9% rise in projected sales
- Guidance seems conservative as the company is using a USD/JPY rate of ¥116 and EUR/JPY ¥126. We highlight sales/margin risks making guidance a stretch
- Daikin’s premium valuation multiple will come under pressure in a rising interest rate environment. We would sell into today’s bounce.
Before it’s here, it’s on Smartkarma
