In today’s briefing:
- Toyota – Guidance Meaningless With A ¥115 Assumption
- Ricoh (7752) Buyback – Big, But Not. But Not Small.
- Chukyo (8530) + Aichi (8527) Bank to Create Aichi Fin’l Group – Interesting Structure Adds Value
- Softbank Corp Q4 21 Results Reaction: Behind the Headlines, Disappointing Guidance
- Shinko Electric (6967 JP): Reality Check – Risk on the Downside
- Beenos Decides to Lock-In Profits from Incubator Investments
- Capcom – Can They Keep Suppressing Profit?
- FTSE EPRA Nareit Developed Asia Preview: Two Adds Near the Inclusion Threshold
- Toyota Guides for a 22% Profit Drop–Tough to Buy This Dip For Now
- Inpex – Upside Remains After Revised Guidance
Toyota – Guidance Meaningless With A ¥115 Assumption
- Toyota results were weak missing by 2.9% and OP by 8.5% due to weak volumes, material costs and some evidence of pulling forward costs.
- Guidance was for a sharp YoY decline from ¥3trn in OP to just ¥2.4trn but this assumes limited price hikes and ¥115/$ so… who cares?
- We expect the weak yen, rising hybrid penetration and volume recovery to drive OP into the ¥3.6-4.0trn range.
Ricoh (7752) Buyback – Big, But Not. But Not Small.
- Ricoh Company Ltd (7752 JP) announced earnings disappointed, but guidance is above forecast as some Q4 business was pushed back.
- The company also announced a buyback. The headline at 7.5% of shares out is big. Reality is lower.
- This sets up a somewhat complex dynamic of flows in near space and far space, and relative to peers. But we look at it anyway.
Chukyo (8530) + Aichi (8527) Bank to Create Aichi Fin’l Group – Interesting Structure Adds Value
- Chukyo Bank (8530 JP) and Aichi Bank (8527 JP) have decided to join forces to become the largest regional lender in the Nagoya area.
- This is probably driven by MUFJ’s efforts to rid itself of non-core assets, but in doing so, it is allowing for an accretive structure for minorities.
- This ends up being a cheap bank on a slightly complicated pro-forma basis.
Softbank Corp Q4 21 Results Reaction: Behind the Headlines, Disappointing Guidance
- Softbank Corp will meet its mid-term business plan commitment of ¥1,000bn in FY22 operating income but it needs a boost from valuation gains from PayPay to get there
- Operationally, it is forecasting a 11% EBITDA decline driven by mobile revenue erosion and higher marketing expense with the lack of a growth contribution from Z Holdings apparent
- The good news is the dividend is unchanged. We expect a better story from NTT and KDDI later in the week but stable returns provide support
Shinko Electric (6967 JP): Reality Check – Risk on the Downside
- Shinko may look attractively valued, but it is highly geared to a slowdown in demand. Rising materials costs and depreciation accentuate downside gearing.
- Management is guiding for another year of strong sales growth, but may be ignoring the possibility of a decline in remote-work and other COVID-related demand.
- Rolling over, but still up 6.7x since March 2020. Not worth the risk in the current environment.
Beenos Decides to Lock-In Profits from Incubator Investments
- Beenos Inc (3328 JP) results beat with revenue at ¥7.2bn (+4.6% vs consensus) and OP of ¥431m (+21.4% vs consensus).
- FY22 guidance was raised across Beenos’ core e-commerce businesses due to the favourable impact of the yen depreciation on overseas demand and changes to shipping methods and rates.
- What caught our eye the most was Beenos’ decision to gradually realise gains from its VC investments.
Capcom – Can They Keep Suppressing Profit?
- Capcom results were previously flagged with a late guidance upgrade and so were unsurprising.
- Guidance was a touch above consensus at both the revenue and OP levels but look somewhat conservative even on assumed unit volumes.
- But we think there is significant upside to unit volumes and Capcom’s biggest challenge will be to hold down profit so they can generate double digit growth the year after.
FTSE EPRA Nareit Developed Asia Preview: Two Adds Near the Inclusion Threshold
- The next FTSE EPRA Nareit Index review will use data from 23 May. The changes will be announced on 1 June and implemented at the close on 17 June.
- Potential inclusions at the review include Frasers Hospitality Trust (FHT SP) and Ichigo Inc (2337 JP), though both are very close to the basis point threshold for inclusion.
- Digital Core REIT (DCREIT SP) has still not published an audited annual report in English and is unlikely to be included in the index at the June rebalance.
Toyota Guides for a 22% Profit Drop–Tough to Buy This Dip For Now
- Toyota is famous for conservative guidance, but today’s FY3/23 estimates of a 22% decline in pretax profit raised some eyebrows. Raw materials & logistics are to blame.
- Adjusting for various conservative assumptions by Toyota for FY3/23, flat profits are possible, but margin deterioration appears unavoidable.
- On flat profits in FY3/23, the 12x PER & 5.5x EV/EBITDA are not particularly cheap. Toyota is in the “Guidance Dog House” until it can produce a significant beat.
Inpex – Upside Remains After Revised Guidance
- Inpex delivered the expected strong 1Q with revenue of ¥485bn (+6.5% vs. consensus) and OP of ¥228bn (-3.8% vs. consensus).
- Guidance was revised to ¥1,851bn (+7.2% vs. consensus) at the revenue line and to ¥924bn (+9.5% vs. consensus) at the OP line.
- The company’s revised guidance reasonably matches with 1Q market conditions for crude oil prices and ¥/$ but the depreciating yen means upside still remains.
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