In today’s briefing:
- FTSE EPRA Nareit Developed Asia Preview: A Few More Inclusions
- Short-Term Itochu Buyback – A Cushion, But Style Bias Matters More
- Mercari – US GMV Is Downside Risk but Profitability Is a Larger Upside Risk
- HCM – Buy for the Commodity Upswing
- BayCurrent: Strong Earnings and an Upgrade to Guidance; Drop in Multiples Offers a Good Entry Point
- Shift: Strong Earnings Momentum to Continue with Expanding Software Testing into Metaverse Market
- Cainz Takes on Nitori with Tokyu Hands Takeover
- Japan’s Governance: Kusuri No Aoki Holdings (3549): 2QFY5/2022 Financial Results Briefing
- Qoo10 Japan to Launch ¥10 Billion Fashion Mall Rival to Zozo
FTSE EPRA Nareit Developed Asia Preview: A Few More Inclusions
- The next FTSE EPRA Nareit Index review will use data from 21 February. The changes will be announced on 2 March and implemented at the close on 18 March.
- Potential inclusions at the review include Heiwa Real Estate, One REIT and ESR Kendall Square REIT while there is a possibility of Digital Core REIT (DCREIT SP) being included.
- Digital Core REIT (DCREIT SP) could be included if it publishes audited financial statements in the next week. Else inclusion could take place at the June rebalance.
Short-Term Itochu Buyback – A Cushion, But Style Bias Matters More
- Itochu today announced a buyback program to buy US$500mm+ in the next 10 weeks.
- Net income growth, a rising dividend, and balanced risk book help it perform with low beta and medium correlation to peers.
- The low volatility-relative multiple is supportive, and the buyback helps, but style bias vs Peers matters more.
Mercari – US GMV Is Downside Risk but Profitability Is a Larger Upside Risk
- Mercari is down 33% since 22 November, actually underperforming the 31% decline in Mothers.
- YoY numbers for the US may only modestly beat the 20% growth target for the year and this reset of expectations may have been the driver of the decline.
- However, we expect significant upside surprises on profitability and that is our focus.
HCM – Buy for the Commodity Upswing
- Hitachi Construction Machinery continues to trade under ¥3,000 following the revelation that it would not be bought out by Hitachi.
- There was little new at its conference call following the Itochu stake purchase announcement save some potential positives on the logistics front.
- Nevertheless, with the stock trading at five-year lows vs. TOPIX and Komatsu, and consensus looking light we are extremely bullish here.
BayCurrent: Strong Earnings and an Upgrade to Guidance; Drop in Multiples Offers a Good Entry Point
- Baycurrent Consulting (6532 JP) reported 3QFY02/2022 results last week. Revenue for the quarter increased 39.0% YoY to JPY15.0bn while OP increased 57.5% YoY to JPY3.7bn.
- The company has revised both its revenue and OP guidance upwards for full-year FY02/2022E to JPY56.5bn and JPY21bn respectively.
- The company has already met 73.5% and 72.7% of its revenue and OP target, we expect earnings beat for the full-year as fourth quarter is the strongest.
Shift: Strong Earnings Momentum to Continue with Expanding Software Testing into Metaverse Market
- Shift reported its 1QFY08/2022 results last week. Revenue for the quarter increased 51.5% YoY to JPY14.3bn while OP more than tripled to JPY1.95bn vs JPY548m a year ago.
- Both Enterprise and Entertainment segments saw strong growth in revenue as well as improvement in GPM during the period.
- Shift’s share price gained 7.4% following its earnings announcement and we expect the company’s strong earnings momentum to continue over the next few years.
Cainz Takes on Nitori with Tokyu Hands Takeover
- Iconic retail chain, Tokyu Hands, is to be acquired by Cainz, Japan’s leading home centre retailer.
- Tokyu Hands remains as popular as ever thanks to its unique merchandising, but it has struggled to be profitable for a long time.
- Cainz should be able to fix this and Hands will be part of Cainz’s plans to become the Workman Co Ltd (7564 JP) of home retailing – bringing competition to Nitori.
Japan’s Governance: Kusuri No Aoki Holdings (3549): 2QFY5/2022 Financial Results Briefing
- There was no supplementary explanation from financial perspectives regarding the details of plans to open new stores in each region, plans for supermarket M&As, or the amount of these investments.
- Aoki has yet to come up with effective pricing policies and sales promotion to boost SSSG. Its higher prices are leading to a decline in the frequency of store visits.
- Its goal of “providing customers with one-stop shopping” is based on the assumption that consumers will not “buy separately” at discount drugs and discount supermarkets.
Qoo10 Japan to Launch ¥10 Billion Fashion Mall Rival to Zozo
- Qoo10 has become one of the most popular Japanese malls among young women for all things Korean, particularly cosmetics and fashion.
- The online mall now wants to exploit this by creating a new dedicated fashion mall with better promotional opportunities for merchants of all nationalities.
- This should bring more competition to ZOZO Inc (3092 JP) and Rakuten Inc (4755 JP).
Before it’s here, it’s on Smartkarma
