Category

Japan

Dec 05
0

Daily Brief Japan: Nomura Research Institute, Daiei Kankyo and more

By | Daily Briefs, Japan

In today’s briefing:

  • NRI (4307) Likely Prices Today – Expect Weakness Then Strength
  • Daiei Kankyo (9336): TSE Prime IPO and Index Demand

NRI (4307) Likely Prices Today – Expect Weakness Then Strength

By Travis Lundy

  • On 25 November Nomura Research Institute Ltd (4307 JP) announced that Jafco Co Ltd (8595 JP) and Nomura Holdings (8604 JP) would conduct a Secondary Offering of NRI Shares. 
  • The sale is 36.97mm shares plus a greenshoe. It’s a big deal ($1bn) including greenshoe after JPY has just strengthened, but underperformance both before and after announcement sets up well. 
  • Expect weakness today, but the stock is now at a two-year low, and the PER multiple premium is now at the lowest 3mo average premium in 5yrs. Expect retail buying.

Daiei Kankyo (9336): TSE Prime IPO and Index Demand

By Travis Lundy

  • Daiei Kankyo (9336 JP) – designer, builder, operator/maintainer of waste management/recycling, soil purification, waste-to-energy, and similar infrastructure – will IPO on the TSE Prime market on 14 December.  
  • The business is somewhat unexciting, but likely a non-growing, non-shrinking business which could roll up others. 
  • The TSE Prime listing will mean it will have a TOPIX Inclusion at the end of January.

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Dec 04
0

Daily Brief Japan: Hisamitsu Pharmaceutical Co, Toyo Construction and more

By | Daily Briefs, Japan

In today’s briefing:

  • Hisamitsu Pharmaceutical (4530 JP): Set to Benefit from Roaring OTC Business and New Rx Drug Launch
  • (Mostly) Asia-Pac Weekly Risk Arb Wrap: Bigtincan, Carbon Revolution, Warrego, Toyo, Hitachi T’sport

Hisamitsu Pharmaceutical (4530 JP): Set to Benefit from Roaring OTC Business and New Rx Drug Launch

By Tina Banerjee

  • Hisamitsu Pharmaceutical Co (4530 JP) reported revenue growth of 8% y/y and 26% q/q to ¥33B in Q2FY23, mainly driven by a 14% y/y 47% q/q increase in OTC business.
  • This year, the company received FDA approval for Xelstrym transdermal system for ADHD. Xelstrym is the first-and-only FDA-approved transdermal amphetamine patch.  
  • With the resumption of sporting/outdoor events in Japan, Salonpas is expected to continue its growth trajectory. For FY23, Hisamitsu is targeting Salonpas revenue of ¥32.5 billion (+4.5% y/y).

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Bigtincan, Carbon Revolution, Warrego, Toyo, Hitachi T’sport

By David Blennerhassett

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Dec 03
0

Daily Brief Japan: Toshiba Corp, JPY and more

By | Daily Briefs, Japan

In today’s briefing:

  • Toshiba Privatisation In Trouble
  • USD/JPY Target Undershoot

Toshiba Privatisation In Trouble

By Travis Lundy

  • After a few successive rounds of Management and Board Proposals were shot down, last March Toshiba Corp (6502 JP) embarked on a process to generate a privatisation proposal.
  • The result has ended up with one, maybe two privatisation proposals in the offing. The “leading” candidate’s proposal will not fly as proposed. The other is MIA for the moment.
  • That leaves a complicated situation. Activists+active holders are stuck with Toshiba and vice versa. They want change, and out, and financiers do too. Change happens. The question is how.

USD/JPY Target Undershoot

By Thomas Schroeder

  • Our high conviction USD sell call at DXY 114/113 comprised the AUD, ZAR, Euro, KRW and JPY. Our focus today is the USD/JPY undershooting our 135 target.
  • AUD is near our 0.6850 but could stretch to 0.69. USD/ZAR met the 17.10 PT. Euro target remains at 1.0650 just under the 1.07 MT resistance. USD/KRW 1,298 PT met.
  • DXY 103 downside target with risk to 102 while aligning the US 10yr yield target of 3.50%/45%. NFP is the swing factor for yield today.

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Dec 02
0

Daily Brief Japan: Fuji Oil Holdings, Skymark Airlines, Tokyo Stock Exchange Tokyo Price Index Topix and more

By | Daily Briefs, Japan

In today’s briefing:

  • Itochu Keeps Buying Fuji Oil, Takeover Offer Could Be Possible With Shares Near The Cyclical Bottom
  • Skymark IPO – Valuation
  • Again, It Is the BOJ’s ETF Issue that Makes Us Think

Itochu Keeps Buying Fuji Oil, Takeover Offer Could Be Possible With Shares Near The Cyclical Bottom

By Oshadhi Kumarasiri

  • Itochu Corp (8001 JP) has restarted accumulating Fuji Oil Holdings (2607 JP) shares, with an acquisition of 3.5m shares during the last-quarter to take its ownership percentage in Fuji-Oil to 44%.
  • With both earnings and valuations at a cyclical bottom, Itochu could be encouraged to accumulate more Fuji Oil shares in the short term, resulting in Fuji Oil outperforming its peers.
  • We think even a takeover offer could be possible while the share price is hovering near the cyclical bottom.

Skymark IPO – Valuation

By Mio Kato

  • Skymark is a little difficult to value given wide dispersions in peer multiples and earnings recovery trajectories. 
  • However, on balance we believe the issue looks to be on the cheap side. 
  • In addition, there are several quirks to the balance sheet, not all of which are negative.

Again, It Is the BOJ’s ETF Issue that Makes Us Think

By Aki Matsumoto

  • Although the stock split doesn’t raise the intrinsic value of the stock, the stock price is likely to rise on the speculation that future purchases into the NISA are expected.
  • As cross-shareholdings decline, the companies are actively engaging in IR activities with individual investors to secure shareholders who share the company’s position against foreign shareholders who are increasing their presence.
  • Some believe that NISA will be used as receptacle for the disposal of BOJ’s ETF holdings, but companies may hope that the silent shareholder hold ETFs as long as possible.

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Dec 01
0

Daily Brief Japan: Toyo Construction, Softbank Group, Appier Group, Nippon Shinyaku, Rakuten Inc, Sky Perfect Jsat and more

By | Daily Briefs, Japan

In today’s briefing:

  • Toyo Construction (1890) – Creeping Up On The Next “Tender Offer Start Date”….. Uh…. Maybe
  • Softbank Group (9984 JP) –The Masa Hurdles
  • Appier (4180) Nearing A TSE Prime (And TOPIX) Announcement?
  • Nippon Shinyaku (4516 JP): Viltepso Has Strong Muscle Power; New Seizure Drug Launch in Japan
  • Rakuten (Neutral) – Follow up After Results: Mobile Issues Far from Over
  • Sky Perfect JSAT (Buy) – Q2 Follow up Plus Amazon Proof of Concept for Space Compass

Toyo Construction (1890) – Creeping Up On The Next “Tender Offer Start Date”….. Uh…. Maybe

By Travis Lundy

  • In March 2022, Toyo Construction (1890 JP) agreed to be taken over by equity affiliate stake owner INFRONEER Holdings (5076 JP) at what was a low price.
  • Nintendo Founder Family Office “YFO” objected, and bought 25+% of the company, then offered to buy it out 30% higher. Toyo Construction objected.
  • Four months later they finally signed an NDA and then started negotiating. Early in November the target date for a Tender Offer start by YFO was pushed to early December.

Softbank Group (9984 JP) –The Masa Hurdles

By Victor Galliano

  • Masayoshi’s debt with Softbank group is big, and due to the poor performance of SoftBank Vision Fund 2, Masa’s equity interest as a co-investor is now zero
  • Internal hedge fund Northstar, in which Masa has a 33.3% stake, is in liquidation leaving Masa’s share of his Northstar debt to SoftBank at USD1.2bn
  • SoftBank’s collateral on Masa debt includes the Vision Fund 2 equity, as well as SoftBank shares and other personal assets; we expect SoftBank’s NAV discount of c 25% to widen

Appier (4180) Nearing A TSE Prime (And TOPIX) Announcement?

By Travis Lundy

  • On 17 Feb 2022, Janaghan Jeyakumar, CFA wrote about Appier Group (4180 JP) suggesting it was a TOPIX inclusion candidate in the not-distant future.
  • In mid-August 2022, he reiterated his opinion. Three days later, the company said they had applied for TSE Prime membership. We are coming up on the timing for an announcement.
  • It would mean buying, but the shareholder structure is interesting, and intentions are not easy to read. But if they announce imminently, the calendar makes the event even more interesting.

Nippon Shinyaku (4516 JP): Viltepso Has Strong Muscle Power; New Seizure Drug Launch in Japan

By Tina Banerjee

  • Driven by continued strong performance of Viltepso and other partnered drugs, Nippon Shinyaku (4516 JP)  is expected to report accelerated revenue growth momentum.
  • Viltepso is expected to be the top selling drug of Nippon Shinyaku in FY23. For FY23, the drug is expected to report revenue of ¥14.7 billion (+90% y/y).
  • In November, Nippon Shinyaku launched Fintepla (fenfluramine) for the treatment of seizures in patients with Dravet syndrome (DS) as an add-on therapy to other anti-epileptic medicines in Japan.

Rakuten (Neutral) – Follow up After Results: Mobile Issues Far from Over

By Kirk Boodry

  • Rakuten’s successful junk bond sale means the Rakuten Bank IPO will happen next year and not in December as some had feared
  • More detail on mobile shows that network costs including D&A are 4x that of service revenue and slightly higher QoQ. Roaming alone is higher than service revenue 
  • And that means Rakuten can’t aggressively go after new subscribers unless it wants operating losses to accelerate. Bad for Rakuten but good news for incumbents KDDI, NTT and Softbank. 

Sky Perfect JSAT (Buy) – Q2 Follow up Plus Amazon Proof of Concept for Space Compass

By Kirk Boodry

  • We are publishing updated forecasts and commentary for Sky Perfect after meeting the company post-results 
  • Media results were predictably weak but the company hopes to make up ground in H2 as it ramps up marketing spend to support sport packages that launch in Spring
  • Amazon’s reveal that it has tested LEO-based satellite software highlights cloud platform interest in space ICT infrastructure like that being pursued by Sky Perfect JSAT and NTT

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Nov 30
0

Daily Brief Japan: Sony Corp, SBI Holdings, J Front Retailing, Tokyo Stock Exchange Tokyo Price Index Topix and more

By | Daily Briefs, Japan

In today’s briefing:

  • SONY (6758) | Regulators – Duty Calls
  • JPX-Nikkei 400 Rebal 2023: End-Nov 2022
  • J Front Gets into Gaming to Drive Young Customers to Buildings
  • Is TSE Being Too Strict with the Honor Students and Too Lenient with the Underdogs?

SONY (6758) | Regulators – Duty Calls

By Mark Chadwick

  • The next six months will be critical for the future of the global gaming industry as Regulators carry out further investigations into the Microsoft acquisition of Activision
  • This is particularly important for SONY, where games account for around one third of consolidated revenue and profits
  • This is a battle for the future of subscription services and cloud streaming – Call of Duty yields unprecedented power over the industry. Regulators need to do their Duty. 

JPX-Nikkei 400 Rebal 2023: End-Nov 2022

By Janaghan Jeyakumar, CFA

  • JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents.
  • A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. We look at the potential forward inclusions and removals every month.
  • Below is a look at potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to come in August 2023 based on trading data as of end-November 2022.

J Front Gets into Gaming to Drive Young Customers to Buildings

By Michael Causton

  • J Front has acquired a stake in an e-sports management business and will use this to target younger people, drawing them into its buildings through themed events.
  • Event marketing has become a key weapon for department stores and shopping buildings and should help bring in more young people.
  • J Front is also using technology to bring in more HNWIs – where the real profits lie.

Is TSE Being Too Strict with the Honor Students and Too Lenient with the Underdogs?

By Aki Matsumoto

  • There are 236 companies with a trading unit of more than 500,000 yen, while there are 967 companies with a trading unit of less than 50,000 yen on the TSE.
  • It’s fair to amend the law to abolish the share unit system, but changing the law takes time. It’s also unclear why “between 50,000 yen and 500,000 yen” is appropriate.
  • While TSE still allows 300 companies that don’t meet the listing criteria to be listed on prime market, TSE requires companies with higher stock prices to increase their administrative burden.

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Nov 28
0

Daily Brief Japan: Nomura Research Institute Ltd, Kakaku.com Inc, Electric Power Development C and more

By | Daily Briefs, Japan

In today’s briefing:

  • Nomura Research Institute (4307) Large Secondary Offering – Demand Profile and Index Implications
  • Kakaku.com Inc.: A Deep-Dive View
  • 2023 High Conviction: J-Power Stands Out As Japan Goes Carbon Neutral
  • Nomura Research Placement – Somewhat Well Flagged, past Deals Have Done Well but Momentum Is Weak

Nomura Research Institute (4307) Large Secondary Offering – Demand Profile and Index Implications

By Travis Lundy

  • On Friday, Nomura Research Institute Ltd (4307 JP) announced that Jafco Co Ltd (8595 JP) and Nomura Holdings (8604 JP) would each sell NRI shares in a Secondary Offering.
  • JAFCO is selling to fund a giant buyback. Nomura is selling to round out the offering size. The total is 37mm shares plus greenshoe of 5.5mm shares. 
  • At Friday’s price that is ~¥140bn (including greenshoe), 7% of shares out, 10% of float, and about 25% of Real World Float. There are index implications.

Kakaku.com Inc.: A Deep-Dive View

By Steven Chen

  • Kakaku.com Inc. can be a rare species among listed companies in Japan;
  • We had multiple email exchanges and meetings with the management team for a deep-dive view covering corporate cultural, management style, capital allocation, business model, and competitive strength.
  • We would wait for a 20%-30% pullback in the share price before looking to add to our position but would certainly remain reluctant to sell any share that we own.

2023 High Conviction: J-Power Stands Out As Japan Goes Carbon Neutral

By Oshadhi Kumarasiri

  • Operating under the brand name J-Power, Electric Power Development C (9513 JP) is leading Japan’s efforts to make carbon dioxide-free electricity by 2050.
  • The company’s investments in gasification and carbon dioxide separation technology and carbon dioxide-free hydrogen generation from coal are close to commercialisation.
  • With the technology to serve other power producers to develop their own environmentally-friendly power projects, J-Power could turn into a global-leader in the power generation space in the next decade.

Nomura Research Placement – Somewhat Well Flagged, past Deals Have Done Well but Momentum Is Weak

By Sumeet Singh

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Nov 27
0

Daily Brief Japan: Jafco Co Ltd, Socionext, Nitori Holdings, Shionogi & Co and more

By | Daily Briefs, Japan

In today’s briefing:

  • JAFCO (8595) Yields to Murakami Greenmail – Big Asset Sale, Big Buyback
  • Socionext (6526 JP) TOPIX Inclusion – Great Performer Deserves Profit-Taking
  • Nitori Retreats from the US but Gets Muscular in Japan and Asia
  • Shionogi & Co (4507 JP): Oral COVID-19 Drug Got Approval; Files Approval for COVID-19 Vaccine

JAFCO (8595) Yields to Murakami Greenmail – Big Asset Sale, Big Buyback

By Travis Lundy

  • Jafco Co Ltd (8595 JP) has long been known as a “cheap” listed “venture fund” because of its additional large (for it) holding in Nomura Research Institute Ltd (4307 JP).
  • Well-Known Japanese activist Yoshiaki MURAKAMI and his related companies bought a stake. JAFCO responded with a “Policy” (poison pill). Murakami-san ducked and dodged then bought more. Now the exit. 
  • JAFCO will sell its Nomura Research shares in a Secondary Offering, and conduct a large buyback via tender offer. Like other Murakami exits, this one is not designed for you. 

Socionext (6526 JP) TOPIX Inclusion – Great Performer Deserves Profit-Taking

By Travis Lundy

  • Socionext (6526 JP) was offered in a range of ¥3,480-3,650, oversubscribed, IPOed at ¥3,650 and closed ¥4200 on Day 1. We can assume that was the “right price.” 
  • Since then, while peers are up 19.8% in the 6 weeks since then, Socionext is up 66%. This year’s biggest Japan IPO has been a big winner.
  • The TOPIX inclusion is on Tuesday at the close. Beware, you don’t know who is in the stock and who is not.

Nitori Retreats from the US but Gets Muscular in Japan and Asia

By Michael Causton

  • Nitori is one of few Japanese retailers to brave the US market. The US has beaten Nitori for now and it will instead focus on Japan and Asia. 
  • Nitori’s ability to leverage its efficient supply chains to lower prices will likely lead it to further dominance at home and allow it to invest in the rest of Asia.
  • The company expects pressures on costs to ease in 2023 as the Yen rises but is working on reducing the cost of goods and operations.

Shionogi & Co (4507 JP): Oral COVID-19 Drug Got Approval; Files Approval for COVID-19 Vaccine

By Tina Banerjee

  • On November 22, Shionogi & Co (4507 JP) received emergency regulatory approval for Xocova  in Japan for COVID-19. It is Japan’s first homegrown oral antiviral for SARS-CoV-2 infection.
  • On November 24, Shionogi has filed for manufacturing and sales approval of S-268019, a recombinant protein-based preventive vaccine, for use in priming and booster (third) doses, against COVID-19.
  • Although Shionogi continues to expect ¥110 billion revenue from COVID-19-related products in FY23, the company has raised overall revenue guidance to ¥410 billion from ¥400 billion.

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Nov 26
0

Daily Brief Japan: Tokyo Stock Exchange Tokyo Price Index Topix and more

By | Daily Briefs, Japan

In today’s briefing:

  • High Cost of TOPIX, Which Currently Contains Illiquid Stocks, Is Considered to Be Borne by Users

High Cost of TOPIX, Which Currently Contains Illiquid Stocks, Is Considered to Be Borne by Users

By Aki Matsumoto

  • It’s unclear whether the stocks that lost ％ TOPIX had been overpriced or whether selling pressure caused temporary underperformance. However, it’s clear these illiquid stocks are unsuitable for institutional investors.
  • While users want TOPIX liquidity to increase, TSE insists on aligning its criteria for TOPIX stock selection with prime market listing criteria, which takes precedence over the interests of users.
  • Rather than asking these companies to take on daunting task of dramatically raising both profit margins and growth, TSE should bring TOPIX criteria to threshold that institutional investors invest in.

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Nov 25
0

Daily Brief Japan: Lockon Co Ltd, Suzuki Motor, Shiseido Company, Skymark Airlines and more

By | Daily Briefs, Japan

In today’s briefing:

  • Meituan Index Flows Clarifications on the Tencent Distribution; Prosus Comments on Its Holdings
  • Suzuki (7269 JT) | Ex-Maruti Valuation Now NEGATIVE
  • Shiseido: International Cosmetics Brands Sent Packing by Chinese Rivals
  • Skymark IPO – Ready For Takeoff

Meituan Index Flows Clarifications on the Tencent Distribution; Prosus Comments on Its Holdings

By Travis Lundy

  • Days after the Tencent (700 HK) announcement about its planned distribution of the bulk of the Meituan (3690 HK) shares it owns, the Hang Seng Index team clarified index treatment.
  • It will be treated in HS Indices as a “listed non-cash distribution” for Tencent. There is theoretically wiggle room on the Meituan side, but it appears it will follow JD.com.
  • That means Meituan selling on 4 January at the close, limbo for two months, then Meituan buying. Full model below.

Suzuki (7269 JT) | Ex-Maruti Valuation Now NEGATIVE

By Mark Chadwick

  • Suzuki is our top pick in the auto sector in Japan as a key beneficiary of strong demand for autos in India
  • Suzuki reported better-than-expected 2Q earnings – but the stock price has not reacted
  • Suzuki remains mispriced. Suzuki’s market cap is negative if we strip out the value of Maruti

Shiseido: International Cosmetics Brands Sent Packing by Chinese Rivals

By Oshadhi Kumarasiri

  • The success of domestic brands in the low-cost cosmetics segment seems to be cascading into mid and high-price segments within the Chinese cosmetics market.
  • This could be bad news for Shiseido Company (4911 JP), whose investors are expecting the company to maintain its historical superiority in the Chinese cosmetics market.
  • We think that there’s a good chance for FY+2 EV/OP to return to the 12-20x range once the market price-in Shiseido’s weakening competitive position in the mainland China market.

Skymark IPO – Ready For Takeoff

By Mio Kato

  • Skymark will be re-listing following a successful turnaround under the guidance of ANA and Integral. 
  • Listing proceeds will mainly be directed towards improving the fuel efficiency of its fleet. 
  • Skymark offers an attractive play on reopening in Japan as it is geared into the simpler domestic market where elevated cargo rates and revenue per passenger are not downside risks.

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