Daily BriefsJapan

Japan: SUMCO Corp, Premier Anti-Aging, Japan Post Holdings, SBI Sumishin Net Bank, Sony Corp, JPY, Monogatari Corp, KOMEDA Holdings Co Ltd, Tokyo Stock Exchange Tokyo Price Index Topix, MonotaRO Co Ltd and more

In today’s briefing:

  • Sumco Placement Quick Update – A Slightly Wider Discount than 2015
  • Premier Anti-Aging: Up More than 300%, But Remains Undervalued on Fundamentals
  • Japan Post – Post Office Business Delivers a Perfect Setup
  • SBI Sumishin Net Bank Pre-IPO Tearsheet
  • Sony Part 3: State of Play
  • JPY Crosses Continue to Trend
  • Monogatari Corporation (3097): September Sales. King Is Strong
  • Komeda Holdings (3543): September Wholesale Sales
  • Japan’s Governance: Cash Holdings
  • MonotaRO (3064): August Sales

Premier Anti-Aging: Up More than 300%, But Remains Undervalued on Fundamentals

By Oshadhi Kumarasiri

  • Premier Anti-Aging (4934 JP) is a relatively small Japanese cosmetics company with a limited number of brands focusing on the skin cleansing segment. The company’s shares rose more than 350% from the IPO price during its first year on the mothers section of the Tokyo Stock Exchange. However, valuation multiples remain towards the low side compared to peer multiples.
  • We think Premier Anti-Aging could re-rate towards the peer average multiples over the medium term. The downside risk is rather low for Premier Anti-Ageing but the share price momentum currently remains unsupportive. Thus, we would wait till a shift in the price momentum before considering a long position.

Japan Post – Post Office Business Delivers a Perfect Setup

By Mio Kato

As Japan Post Holdings’ government sell-down to the magic 33.4% mark gets underway, we examine the prospects for the stock once this major overhang is out of the way. We begin by examining the actual post office and logistics businesses.

SBI Sumishin Net Bank Pre-IPO Tearsheet

By Clarence Chu

SBI Sumishin Net Bank (0186804D JP) will be looking to raise at least US$360m in its upcoming IPO. As the prospectus is not public yet, this tearsheet is based on the firm’s past annual reports.

SBI Sumishin Net Bank is a Japanese digital bank owned by a 50-50 joint venture between Sumitomo Mitsui Trust Bank, Japan’s largest trust bank, and SBI Group, a financial services firm. The deal, if successful, would be Japan’s first online-only bank to go public. The bank began operations in Sept 2007 and its main product offering are mortgages, where it had cumulatively handled around JPY6.5tn in value in Feb 2021. As of Jun 2021, the digital bank has accumulated around JPY6.4tn in deposits.

Sony Part 3: State of Play

By Drawbridge Research

This is the third and final part of our three part series on Sony Group. In this note we look at Sony’s Gaming and Network Services (G&NS) segment and the fundamental pillars supporting its profitability. By doing this we uncover that the business is dependent on the technical competitiveness and the catalogue of game titles available on PlayStation, Sony’s console platform. We look at the primary known threat to the business’s profitability, which is cloud gaming. Breaking down how cloud gaming is technically achieved we are able to compare the technical limitations and advantages of both console based and cloud based gaming. Through this we can determine whether cloud gaming posses a disruptive threat as a substitute to Sony’s entrenched console platform, or if instead cloud gaming can be viewed as a complimentary service supporting further growth. In regard to the PlayStation business, we also analyse the current heightened level of deal activity in the game development space. Consolidation amongst game developers and increased ownership by the platform operators is seen as being indicative of a maturing gaming industry. Given this we look at Sony’s level of investment in gaming software to ascertain whether the company’s consistently strong performance over the past 2 decades in the home console market has allowed the company to gain a critical mass of IP and third party titles on its platform to continue attracting gamers.

Final comments outline how the company’s subsidiaries are effectively collaborating to create value no other company can, and why this second layer of value creation is being missed. The research note then concludes the series by valuing Sony via a sum of the parts valuation and valuing the financial business at the implied valuation Sony paid in early 2020.

JPY Crosses Continue to Trend

By Shyam Devani

This note takes a thorough look, through a technical lens, of major JPY crosses as nearly all show bullish breakouts across the board.

When seen in conjunction with rising yields, higher commodity prices, and stable stocks, we get a fuller picture of the reflationary trends that have re-emerged across markets except in Japan where deflationary concerns (even in the face of rising wholesale prices) are never far away. This keeps the JPY the favoured funding currency, as usual.

Keep in mind that US yields are likely to continue higher still – the target for US 5-year yield is 1.80% which will probably take a few months to achieve. Such a development would most likely put US 10-year yield well above 2.00%.

The only trend, at this juncture, that is beginning to look mature is the rally in Brent Crude, which has effectively met the $85 target area that has been in place for over a month. That does not mean we will reverse but instead could slow down or consolidate ahead of big levels just below $90.

Monogatari Corporation (3097): September Sales. King Is Strong

By Mita Securities

Company profile

Monogatari Corporation is a restaurant company based in Aichi Prefecture that operates “Yakiniku King” nationwide. As of June 30, 2021, the company had 584 stores in Japan (340 directly-owned stores and 229 FC stores) and 15 overseas stores (directly-owned). Sales in FY6/21 were 64.0bn yen.

Komeda Holdings (3543): September Wholesale Sales

By Mita Securities

Company profile

Komeda HD, based in Aichi Prefecture, operates “Komeda’s Coffee” through franchise system nationwide. The company has 914 stores at the end of February 2021 and is the largest full service coffee shop operator in Japan. FY2/21 sales were 28.8bn yen.

Japan’s Governance: Cash Holdings

By Aki Matsumoto

In this article, we will examine cash holdings. We have discussed the importance of capital allocation in several articles on this site. If we consider that cash holdings are the result of allocating funds to business investments such as capital expenditures and shareholder returns such as dividends and share buybacks, we can see cash holdings as one of the results of capital allocation.

MonotaRO (3064): August Sales

By Mita Securities

Company profile

MonotaRO is an EC company that sells indirect materials (MRO products) used in factories, construction sites, and auto repair shops. The company has over 18 million products and 5.83 million registered accounts (as of the end of March 2021). The company is a consolidated subsidiary of W.W. Grainger.

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