Daily BriefsJapan

Japan: Toshiba Corp, Rakuten Inc, NTT (Nippon Telegraph & Telephone), Internet Initiative Japan, Suzuki Motor, Matsumotokiyoshi Holdings Co., Ltd., Isetan Mitsukoshi Holdings Ltd and more

In today’s briefing:

  • Toshiba Support Cracked
  • Seiyu: Back in the Mainstream Thanks to Rakuten
  • NTT (Buy) – Olympic Promotions Almost Over; Meanwhile We Have Updated Numbers
  • Internet Initiative Japan (Buy) Well-Positioned for Corporate IT Spend, Raising Forecasts/Valuation
  • Suzuki – Could Be the Only J-Auto to Miss at 1Q
  • Japan’s Governance: Founder Family Ownership / Case of Drugstore Industry
  • Isetan-Mitsukoshi Targets Wealthy

Toshiba Support Cracked

By Thomas Schroeder

Toshiba Corp (6502 JP) short sell call at 4,800-900 is starting to work and has broken pattern support and seeing downside gaps unfolding. Fresh resistance lies at 4,800.

Rising wedge support and trendline support break on July 16,  was the catalyst for Toshiba to roll over to to pressure initial support at 4,500. We like selling a bounce.

Bear targets at 4,000 and 3,750.


Seiyu: Back in the Mainstream Thanks to Rakuten

By Michael Causton

In 2002, Seiyu was saved by the foreign might of Walmart. Today it is about 25% smaller but over the same 20 years, it has gone from a ¥90 billion loss to an estimated ¥40 billion operating profit last year. Now, with the backing of its new majority owners, KKR & Co Inc (KKR US) and Rakuten Inc (4755 JP), Seiyu has announced ambitious plans to become Japan’s largest online supermarket by 2025. This is increasingly likely thanks to Rakuten’s new reach through its new joint venture with Japan Post Holdings (6178 JP). 

Right now, online food retailing is a two horse race between Amazon and Rakuten, with Z Holdings nowhere in sight.


NTT (Buy) – Olympic Promotions Almost Over; Meanwhile We Have Updated Numbers

By Kirk Boodry

NTT senior management will not attend the Olympic opening ceremonies and with consumer-linked product demonstrations less relevant with no spectators, NTT’s promotional activity is winding down. On balance, Olympic sponsorship does not impact the valuation or investment case – any PR spend here would have went elsewhere – but we did enjoy following their participation in the torch relay on Twitter and their 2020 Olympic website is worth a look. We have tweaked our forecasts for FY21 based on management Q4 guidance and we remain at Buy with a ¥3,600 FY21-end target price.   


Internet Initiative Japan (Buy) Well-Positioned for Corporate IT Spend, Raising Forecasts/Valuation

By Kirk Boodry

Internet Initiative Japan (3774 JP) (IIJ) has moved from strength to strength over the last 12-18 months as long-term relationships with corporate customers translate into higher revenue as new services are introduced and corporate IT budgets increase. Just as impressive, results for FY20 indicate margin improvement will come along more quickly than expected and we have raised our forecasts to reflect that with c. 30% higher operating income over the next three years driving a corresponding increase in our target price from ¥3,270 to ¥4,300. With 21% potential upside, we remain at Buy.


Suzuki – Could Be the Only J-Auto to Miss at 1Q

By Mio Kato

While we expect results to be broadly strong for Japanese automakers thanks to favourable forex trends and strong unit volumes in North America, Suzuki unfortunately does not benefit greatly from these. Rather, it is highly negatively impacted by commodity prices, and we believe consensus does not adequately reflect this.


Japan’s Governance: Founder Family Ownership / Case of Drugstore Industry

By Aki Matsumoto

As I mentioned in my previous article, “Japan’s Governance: Unclear Medium-Term Management Plan – Kusuri No Aoki (3549),” I would like to focus on the drugstore industry, which continues to grow among retailers. 1990s was the starting point for the growth of drugstore chains in Japan, and although the industry continues to grow at a high rate, it is now entering a phase of consolidation. After more than 20 years since their inception in the 1990s, many major drugstore chains have reached a point where the founders are stepping down and handing over management to their successors.


Isetan-Mitsukoshi Targets Wealthy

By Michael Causton

Isetan-Mitsukoshi is one of Japan’s most prestigious retailers – or at least it was up until the advent of the pandemic. Facing ongoing sales falls as customers are kept away from its stores, the company knows it has to evolve if it is to survive. As well as more online sales and a few merchandise tweaks, it is going after the rich like never before. Given that the wealth market is one of the few growing segments in Japan, this makes sense but the venerable department store still has a long journey ahead to improve returns.


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