In today’s briefing:
- Toshiba (6502) – Now We Have the First Rounds Bids In, And We Wait, But It’s Top of Range
- Toshiba – Key Takeaway Is Toshiba Tec’s Attractiveness
- Preferred Networks – The AI Revolutionary
- The Key to Dissolving Parent-Subsidiary Listings Is More Than Tighter TSE Rules
- Roland Corp: Not Tuned For Inflation
- SmartNews – Potentially A Global Champion?
- Smart HR – Excellent Metrics And In A Growth Area
- Skylark Holdings (3197): Improving Gradually, but Still Below Target
- Ohsho Food Service (9936): Price Hikes Not Affecting Popularity; Record Sales in a Single Month
Toshiba (6502) – Now We Have the First Rounds Bids In, And We Wait, But It’s Top of Range
- Since Toshiba reported lacklustre earnings and guidance, there has been a steady flow of articles in the press about the privatisation process going on behind the scenes.
- On 25 March, Toshiba let it be known a privatisation process would start. On 31 March, Bain gave notice it would participate. Toshiba has been in talks since 21 April
- First round bids were due 30 May, and 10 total submissions were made, with 8 privatisation proposals proffered. Now we wait…
Toshiba – Key Takeaway Is Toshiba Tec’s Attractiveness
- Toshiba provided an update today on its management policy and the status of discussions with potential investors.
- The management targets unveiled looked plausible but rather optimistic while the only real new information on the potential privatisation was that 8 bids had been submitted.
- In the end the most interesting takeaway for us was that Toshiba Tec would play a key role in Toshiba’s data business.
Preferred Networks – The AI Revolutionary
- Preferred Networks is generally considered Japan’s leading AI and deep learning company with collaborations with numerous conglomerates across many industries.
- The company offers significant gearing into labour saving technologies and could potentially become a global leader in AI over time.
- In addition, it has demonstrated exceptional power efficiency with its deep learning technology which could prove a critical competitive advantage.
The Key to Dissolving Parent-Subsidiary Listings Is More Than Tighter TSE Rules
- I would like to discuss the points about the Nikkei article “Companies should do their best to prevent harmful effects of parent-subsidiary listings.”
- Recently, more and more companies are evaluating their businesses from the perspective of ROE and ROIC. This is thought to be gradually eliminating parent-subsidiary listings.
- Rather than hoping to eliminate parent-subsidiary listings by strengthening TSE rules, it’s more important to instill in companies a management philosophy on how to achieve long-term growth in corporate value.
Roland Corp: Not Tuned For Inflation
- We expect high-end musical instruments to be one of the worse affected among consumer discretionary names during a high inflationary environment.
- Although Roland Corp (7944 JP) says that demand remains strong, the numbers such as revenue and backlog suggest weakening conditions.
- In addition, there’s a risk of a recession and it appears that Roland has not made sufficient progress in streamlining operations to maintain profitability in a low revenue environment.
SmartNews – Potentially A Global Champion?
- SmartNews is a news aggregation app using an advertising-based business model originally established in Japan in 2012 with an expansion into the US market in 2014.
- The company is interesting in that it funds initiatives to improve the quality of investigative journalism and address problems arising from social media such as increasing polarisation.
- However, what truly piques our interest is its demonstrated success in the US which remains unusual for Japanese software companies.
Smart HR – Excellent Metrics And In A Growth Area
- Smart HR offers excellent growth potential with its ARR continuing to climb at a triple digit rate thanks to continuous feature improvements and integrations.
- The company boasts extremely high customer loyalty and investors with a strong pedigree including Sequoia.
- Perhaps the biggest risk here is deteriorating market sentiment as listed peers have seen prices roughly halve despite healthy growth and strong profitability.
Skylark Holdings (3197): Improving Gradually, but Still Below Target
- Same-store sales have been improving gradually on the back of the recovery of foot traffic, but still below the company’s target
- As the company has stores throughout Japan, there appears to be a mix of areas where the recovery has been progressing and areas where the recovery has been sluggish
Since May 26, the company has been running aggressive promotions. We will watch closely to see if sales will recover in June.
Ohsho Food Service (9936): Price Hikes Not Affecting Popularity; Record Sales in a Single Month
- Although the company implemented price hikes on May 14, the guest count continues to be solid, which gives us a positive impression.
- All-store sales of 7.384bn yen (120.3% vs. April 2021) were the record high for a single month. The company said that in-store dining sales recovered in a significant manner.
- In May, the company opened two new stores (one company-owned store and one franchised store) and closed one store (one franchised store)
Before it’s here, it’s on Smartkarma
