Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>Yesterday 14 February, Dentsu announced bte profits, and guidance for 2022 which appears in-line to slightly strong in terms of revenue, slightly weak/conservative in terms of IFRS/GAAP OP.</li>
<li>The company also announced what appears to be a BIG buyback. </li>
<li>Looks are deceiving, but somehow not, but there are catches in both directions. If you have a flow axe, it is worth knowing the flow details.</li>
</ul>


Yesterday 14 February, Dentsu announced bte profits, and guidance for 2022 which appears in-line to slightly strong in terms of revenue, slightly weak/conservative in terms of IFRS/GAAP OP.
The company also announced what appears to be a BIG buyback. 
Looks are deceiving, but somehow not, but there are catches in both directions. If you have a flow axe, it is worth knowing the flow details.


Dentsu BIG Buyback - Both Larger and Smaller Than It Appears

Leading International Investment Research, Edison Investment Research

Edison Investment Research

Leading International Investment Research

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisors and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting.

Equity Bottom-Up

<p>A strong Q4 performance in recovering markets means Dentsu has posted good figures for FY21 and enters FY22 with positive momentum, particularly in the Customer Transformation and Technology (CT&T) activities. The strategic plan remains to build this area to 50% of revenue less cost of sales (RLCoS), from 29.1% in FY21. Medium-term guidance for group organic growth in RLCoS is upgraded from 3–4% to 4–5%, with 4% guided for FY22. A ¥40bn share buyback is planned, funded from year-end net cash following September’s sale (and leaseback) of the Shiodome building. The share price remains at a substantial discount to peers.</p>

A strong Q4 performance in recovering markets means Dentsu has posted good figures for FY21 and enters FY22 with positive momentum, particularly in the Customer Transformation and Technology (CT&T) activities. The strategic plan remains to build this area to 50% of revenue less cost of sales (RLCoS), from 29.1% in FY21. Medium-term guidance for group organic growth in RLCoS is upgraded from 3–4% to 4–5%, with 4% guided for FY22. A ¥40bn share buyback is planned, funded from year-end net cash following September’s sale (and leaseback) of the Shiodome building. The share price remains at a substantial discount to peers.

Dentsu Group - Upgrade to organic growth guidance

<p>Dentsu posted a very strong performance for Q321, with revenue less cost of sales (RLCoS) up 27.8% on an organic basis and a substantial uplift in operating margin to 23.5%, from 12.2% in Q221. Full-year guidance is raised, having been lifted in August, with an indication of a FY21 margin of 18.0% after greater intended investment in Q4. Proposed board changes for the new year split the chairman and CEO roles, with the existing CEO retiring and appointments of independent non-executives planned. The better performance and balance sheet strength support an uplift in DPS, with ¥113.5 now expected for the full year (previously ¥101). </p>

Dentsu posted a very strong performance for Q321, with revenue less cost of sales (RLCoS) up 27.8% on an organic basis and a substantial uplift in operating margin to 23.5%, from 12.2% in Q221. Full-year guidance is raised, having been lifted in August, with an indication of a FY21 margin of 18.0% after greater intended investment in Q4. Proposed board changes for the new year split the chairman and CEO roles, with the existing CEO retiring and appointments of independent non-executives planned. The better performance and balance sheet strength support an uplift in DPS, with ¥113.5 now expected for the full year (previously ¥101). 

Dentsu Group - Strong Q3 lifts full-year guidance further

Pan-Asia Index Flows & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Pan-Asia Index Flows & Special Situations

<div><p>JPX-Nikkei 400 is composed of common stocks whose main market is the TSE1, TSE2, JASDAQ, and Mothers sections (which will become the Prime Market, Standard Market, or Growth Market next April) of the Tokyo Stock Exchange. This is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents selected based on several factors including market capitalization, trading value, operating profits, and ROE.</p></div><p>A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. This review is conducted using the final business day of June as the base date. </p><div><p>Quiddity provides quantitative research on pre-event basket strategies surrounding this Index Rebalance event and others. Below is a look at potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to come in August 2022. </p></div>

JPX-Nikkei 400 is composed of common stocks whose main market is the TSE1, TSE2, JASDAQ, and Mothers sections (which will become the Prime Market, Standard Market, or Growth Market next April) of the Tokyo Stock Exchange. This is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents selected based on several factors including market capitalization, trading value, operating profits, and ROE.A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. This review is conducted using the final business day of June as the base date. Quiddity provides quantitative research on pre-event basket strategies surrounding this Index Rebalance event and others. Below is a look at potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to come in August 2022. 

JPX-Nikkei 400 Rebalance 2022: Leader Board End-Sep 2021

<p>Dentsu Group’s interim results show a strong recovery in Q221 for both Dentsu Japan (DJN) and Dentsu International (DI), with organic revenue less cost of sales (LCoS) up 15.0% in Q221, giving an increase of 5.4% for H121. The pick-up in operating margins is well ahead of expectations and the targets for FY22e (20% for DJN and 15% for DI) may even be achieved in FY21 as the transformation plan kicks in. Management has issued new guidance for FY21, including a good uplift in the planned dividend. </p>

Dentsu Group’s interim results show a strong recovery in Q221 for both Dentsu Japan (DJN) and Dentsu International (DI), with organic revenue less cost of sales (LCoS) up 15.0% in Q221, giving an increase of 5.4% for H121. The pick-up in operating margins is well ahead of expectations and the targets for FY22e (20% for DJN and 15% for DI) may even be achieved in FY21 as the transformation plan kicks in. Management has issued new guidance for FY21, including a good uplift in the planned dividend. 

Dentsu Group - Growth and margin progress ahead of plan

Japan

TOHO CO., LTD. produces and distributes motion pictures for cinema, television, and video.  The Company also sells character merchandise based on their media productions, distributes foreign films, operates musical theaters, and produces musical shows. In addition, Toho manages movie theaters in urban areas.

TOKYO BROADCASTING SYSTEM HOLDINGS, INC. is a media company that broadcasts television and radio programs nationally.  The Company offers a variety of TV programs & film production, visual & music software production, and cable television programming.  Tokyo Broadcasting System provides digital satellite broadcasting services and also operates real estate business.

FUJI MEDIA HOLDINGS, INC., a member of the Fuji-Sankei Group, produces and broadcasts a variety of television programs and sells commercial spots through a network system.  The Company is advancing into digital satellite broadcasting.

KADOKAWA DWANGO CORP is a holding company established through the merger of DWAN GO and KADOKAWA. The company publishes a variety of books and magazines as well as produces movies and videos.  KADOKAWA DWANGO CORP also develops and makes int ernet communication tools for cellular phones.

CyberAgent, Inc. operates blog media website, Ameba.  The Company also operates internet advertising agency, foreign exchange trading website, and creates PC and mobile contents such as advertisements and games. CyberAgent invests in companies with internet related business.

HAKUHODO DY HOLDINGS INCORPORATED is a holding company established through the merger of Hakuhodo Inc., Daiko Advertising Inc., and Yomiko Advertising Inc. The Company, through its subsidiaries, provides comprehensive advertising services.

TOEI ANIMATION CO., LTD. plans and produces animated cartoon movies.  The Company also grants broadcasting rights and licenses for other companies to produce and sell the animated characters' merchandise.  Toei Animation stages its own promotional shows and events to advertise movies.

Nippon Television Holdings Inc is a commercial television broadcaster which provides programs through a national network system.  The Company is expanding into digital satellite broadcasting. Nippon Television also operates publication and entertainment business such as concerts and exhibitions. The Company is affiliated with Yomiuri Shimbun.

TV Asahi Holdings Corporation produces and broadcasts a variety of television programs mainly in the Tokyo area. The Company sells commercial spots through a network system. TV Asahi also provides patent maintenance for music publication, entertainment planning, sales of broadcasting equipment, and TV shopping.

SKY Perfect JSAT Holdings, Inc. is a holding company, which manages financial operations for its subsidiaries. As a group, the Company provides broadcasting and data transmission services via satellites. SKY Perfect JSAT delivers digital TV programs including movies, music, sports and entertainment to its subscribers.

Pearson plc provides education products and services to institutions, governments and individual learners in over 80 countries. The Company's major revenue markets are North America, 'Core' including the UK, Italy and Australia and 'Growth' including Brazil, China and South Africa. It also owns the Financial Times, 50% of the Economist and 47% of Penguin Random House.

Madison Square Garden Sports Corp. is a professional sports company that owns and operates sports franchises.

Madison Square Garden Sports Corp. (MSGS US)

The New York Times Company operates media businesses.  The Company publishes daily newspapers and operates Internet websites.  The newspapers and websites distribute news and entertainment.

Liberty Global plc owns interests in broadband, distribution, and content companies operating outside the continental United States, principally in Europe, Asia, and Latin America.

Liberty Broadband Corporation invests in communication companies. The Company has principal assets in TruePosition and Time Warner Cable.

Nexstar Broadcasting Group, Inc, is a television broadcasting company focused on the acquisition, development, and operation of television stations in medium using traditional media, e-MEDIA, digital and mobile media platforms. Nexstar Broadcasting Group, Inc offers its services in the central east part of United States.

Nexstar Broadcasting Group, Inc (NXST US)

Compagnie du Cambodge is an investment holding company that invests in companies active in agriculture, industry, real estate and finance.  The Company owns and operates plantations in Malaysia and forests in Cameroon.

JC Decaux SA offers advertising services.  The Company sells advertising on street furniture such as bus shelters, free standing panels, columns, and automatic toilets, billboards, and posters on buses, trains, and subways, and at railroad stations and airports.

CTS Eventim AG & Co. KGaA produces, sells, brokers and distributes entry tickets for concerts, theater productions, artistic, sporting and similar events. The Company operates an online booking system that allows event promoters to sell their tickets over a variety of distribution channels. CTS also sells tickets directly over the Internet and a call center and offers system support services.

ITV plc is a United Kingdom media company covering broadcasting, news, and production.  The Company owns all of the regional Channel 3 licenses in England and Wales.  ITV owns ITV1, a commercial television channel, as well as ITV2, a partial interest in GMTV, and other interests.

DENTSU INC. mainly provides comprehensive advertising services.  The Company also provides marketing and event planning & promotion services.  Dentsu has associated companies in the US, Europe, and Asia.

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Dentsu Inc (4324 JP)

Dentsu BIG Buyback - Both Larger and Smaller Than It Appears

Dentsu (4324) announced earnings and a large buyback. That buyback is larger than it appears, but actually smaller, but then larger again, but it...

Travis Lundy

Dentsu Group - Upgrade to organic growth guidance

A strong Q4 performance in recovering markets means Dentsu has posted good figures for FY21 and enters FY22 with positive momentum, particularly in...

Edison Investment Research

Dentsu Group - Strong Q3 lifts full-year guidance further

Dentsu posted a very strong performance for Q321, with revenue less cost of sales (RLCoS) up 27.8% on an organic basis and a substantial uplift in...

Edison Investment Research

JPX-Nikkei 400 Rebalance 2022: Leader Board End-Sep 2021

A look at the evolution potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to come in August 2022 based on end-September 2021 data.

Janaghan Jeyakumar, CFA

Dentsu Group - Growth and margin progress ahead of plan

Dentsu Group’s interim results show a strong recovery in Q221 for both Dentsu Japan (DJN) and Dentsu International (DI), with organic revenue less...

Edison Investment Research

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