Category

Japan

Sep 01
0

Daily Brief Japan: Sekisui House, Kyocera Corp, Fujikura Ltd and more

By | Daily Briefs, Japan

In today’s briefing:

  • FTSE EPRA Nareit Index Rebalance: Two Adds for Japan
  • Kyocera (6971 JP) Founder Kazuo Inamori Passes – Implications for Holdings
  • JPX-Nikkei 400 Rebal 2023: End-Aug 2022

FTSE EPRA Nareit Index Rebalance: Two Adds for Japan

By Brian Freitas

Kyocera (6971 JP) Founder Kazuo Inamori Passes – Implications for Holdings

By Travis Lundy

  • Kazuo Inamori (稲盛和夫), founder of Kyocera Corp (6971 JP) and KDDI Corp (9433 JP) precursor company DDI (Dai Ni Den Den), and former chairman of JAL overseeing restructuring, has passed.
  • In his own name, he owns 10.212mm shares of Kyocera, and likely other assets. Inheritance tax would be due 10 months from now. 
  • Kyocera is not blowing out the lights compared to peers, but it is relatively inexpensive to its history and peers. If the shares are sold, Kyocera can buy them.

JPX-Nikkei 400 Rebal 2023: End-Aug 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-August 2022.

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Aug 31
0

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

By | Daily Briefs, Japan

In today’s briefing:

  • The Crux of the Problem Is the Company’s Reluctance to Increase the Number of Diverse Shareholders

The Crux of the Problem Is the Company’s Reluctance to Increase the Number of Diverse Shareholders

By Aki Matsumoto

  • If stock price is high, then a stock split is the way to go, and stockbrokers have provided a mechanism for trading shares in less than single-unit in the past.
  • The issue isn’t “the trading unit should be lowered because people can’t buy shares with high stock prices” but “let’s improve so that people can become shareholders with one share.
  • If Japanese companies are reluctant to increase the number of diverse shareholders, this would be in line with their slower progress in solving issues: diversity, human rights, and environment.

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Aug 30
0

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

By | Daily Briefs, Japan

In today’s briefing:

  • ESG Mutual Funds Are Not to Be ESG Investing for Show

ESG Mutual Funds Are Not to Be ESG Investing for Show

By Aki Matsumoto

  • Not many individual investors understand the value of ESG investing and buy ESG investment trusts, as inflows/outflows from ESG investment trusts have much to do with market volatility.
  • It’s unclear how much ESG investing contributed to the performance, as aspects were saved by the performance of sectors in which they invest and by the benefits of weak yen.
  • Efforts must be made to help individual investors understand the value of ESG investing and encourage long-term investment. To this end, investment managers should establish investment approach to ESG investing.

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Aug 29
0

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

By | Daily Briefs, Japan

In today’s briefing:

  • Shiseido (4911 JP) | Wrinkle Free
  • Is the Stagnant Birth Rate Caused by Gender Disparity or Stagnant Income?

Shiseido (4911 JP) | Wrinkle Free

By Mark Chadwick

  • We turn Bullish on Shiseido. The market has now digested the weak results for 2022 and can look to a recovery over the next year
  • Recent commentary from Estee Lauder’s CEO suggest that China is recovering and that the outlook is bright
  • Shiseido is one of the key beneficiaries as Japan re-opens its borders to foreign travellers

Is the Stagnant Birth Rate Caused by Gender Disparity or Stagnant Income?

By Aki Matsumoto

  • Support through reform of social systems needs to develop environment conducive to childrearing, not to mention Scandinavian case. The generation with old view of family is obstacle to these reforms.
  • As real incomes declined, the number of dual-earner families increased and the fertility rate declined. The decline in the fertility rate is related to the decline in income per worker.
  • Meanwhile, companies managed to maintain profit margins by holding down labor costs. Declining real incomes, declining birth rates, management distancing itself from diverse values, and stagnant profit margins are interrelated.

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Aug 27
0

Daily Brief Japan: Jafco Co Ltd, Softbank Group and more

By | Daily Briefs, Japan

In today’s briefing:

  • JAFCO (8595) Down as Murakami Affiliates Sell the Pop on the Poison Pill, So Buy the Range Dip
  • Softbank Group – Back Where We Started

JAFCO (8595) Down as Murakami Affiliates Sell the Pop on the Poison Pill, So Buy the Range Dip

By Travis Lundy

  • Entities related to noted Japanese activist Yoshiaki Murakami had bought 11+%, suggested 15%, proposed 51%, and pestered Jafco Co Ltd (8595 JP) for an asset sale and super-large buyback. 
  • JAFCO decided to launch a poison pill process as a hostile takeover defence mechanism, with the Record Date at August month-end.
  • The shares popped. I was bearish. It turns out Murakami affiliates sold the pop. And this starts the range trade.

Softbank Group – Back Where We Started

By Kirk Boodry

  • The Softbank share price and discount to NAV are largely back to where they were before the Q1 report earlier this month
  • The early settlement of Alibaba derivative contracts has eased leverage worries although that may be less obvious within Softbank’s net calculation of that measure
  • But worries about tech valuations, particularly in the private portfolio, remain robust. We have updated our main tables below

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Aug 26
0

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

By | Daily Briefs, Japan

In today’s briefing:

  • Softbank (9984 JP) – This Time, It’s Chime
  • More Companies Submitted Shareholder Proposals, but All Were Rejected. Where Is the Problem?

Softbank (9984 JP) – This Time, It’s Chime

By Victor Galliano

  • US fintech Chime, another high-profile fintech in Softbank’s Vision Fund 2 portfolio, sees its secondary market valuation in the private market fall by nearly 50% on a year-to-date basis
  • Chime had been planning to IPO in 1H 2022, with its IPO valuation estimated at close to USD40bn; poor market conditions have led to the IPO being shelved
  • Chime’s reduced valuation is another hit to Softbank’s portfolio, which has yet to feature a recent “down round”, and which we believe negatively impacts its Vision Fund 2 in particular

More Companies Submitted Shareholder Proposals, but All Were Rejected. Where Is the Problem?

By Aki Matsumoto

  • Even though shareholder proposals have increased, only 77 of the more than 2,000 companies with a fiscal year ending in March have submitted shareholder proposals, or only a few percent.
  • Japanese institutional investors begins to examine the content of proposals and exercise their voting rights. It’s serious matter that until now they haven’t exercised them in accordance with Stewardship Code.
  • It will still take substantial amount of time to move away from a shareholder meeting protected by a cross-shareholding structure and toward a shareholder meeting that promotes dialogue with shareholders.

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Aug 24
0

Daily Brief Japan: Toshiba Corp, Healthcare & Medical Investment Corporation, Oriental Land, Fanuc Corp, Japan Airlines and more

By | Daily Briefs, Japan

In today’s briefing:

  • Toshiba (6502) Update – No Longer Worthwhile to Be Short Toshiba Vs Peers
  • FTSE EPRA Nareit Developed Asia Preview: A Few Inclusion Possibilities
  • Oriental Land: Consensus Is Not in Touch with Reality
  • Fanuc (6954 JP) | Lights Out in China
  • Japan Transport: Japan Airlines (Long) Vs ANA Holdings (Short)

Toshiba (6502) Update – No Longer Worthwhile to Be Short Toshiba Vs Peers

By Travis Lundy

  • Since late June when I recommended to not be long Toshiba vs Peers, Toshiba has fallen 9.5% vs Peers (-6% on its own and an equal-weighted Peer Basket is +3.9%).
  • If one assumes the likelihood of a privatisation has not gone down, and the likely takeout price is the same, back-end adjusted, probability-adjusted IRRs are up 6-8%, to decent levels.
  • This changes my recommendation from Bearish to Probability-Adjusted Bullish, but it is nuanced, and it is still a range trade.

FTSE EPRA Nareit Developed Asia Preview: A Few Inclusion Possibilities

By Brian Freitas

Oriental Land: Consensus Is Not in Touch with Reality

By Oshadhi Kumarasiri

  • With Q1 park attendance falling short of expectations, it seems unlikely that Oriental Land (4661 JP) will beat FY23 guidance as expected by consensus.
  • The consensus medium outlook is also questionable as the management seems less keen on opening Fantasy Springs as soon as possible.
  • At over 29.2x EV/consensus FY27 OP (56.5x at LSR-FY27-OP), on exaggerated medium-term growth targets, Oriental Land probably has more downside than some of the expensive tech names on the market.

Fanuc (6954 JP) | Lights Out in China

By Mark Chadwick

  • Machine tool orders have recorded 20 consecutive months of growth – we expect a turn in cycle and remain bearish 
  • Expectations for gradual recovery as China recovers from lockdowns, but power-saving measures are a new risk
  • Weak end demand for mobile, PC, and consumer electronics are likely to foreshadow capex cuts in 2023 

Japan Transport: Japan Airlines (Long) Vs ANA Holdings (Short)

By Douglas Kim

  • Momentum has favored Japan Airlines’ share price vs ANA Holdings this year and we expect this outperformance to continue in the short term (next 3-6 months).
  • So our pair trade involves going long Japan Airlines (9201 JP) and going short on Ana Holdings (9202 JP). 
  • Four major reasons why we like Japan Airlines vs ANA Holdings include: a) better valuations, b) higher EBITDA margins, c) stronger leverage ratios, and d) higher proportion of overseas business.

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Aug 23
0

Daily Brief Japan: Daiwa House Reit Investment, Softbank Group, Fast Retailing, Tokyo Stock Exchange Tokyo Price Index Topix and more

By | Daily Briefs, Japan

In today’s briefing:

  • Daiwa House REIT Placement – Well-Flagged but Low on DPU Accretion
  • Softbank Short Resistance
  • Fast Retailing: The Fast Retailing to Topix Ratio Hitting Resistance Near The Pre-COVID Peak
  • Can Companies Barely Meet Independent Director Requirement and Shy Away from Diversity Create Value?

Daiwa House REIT Placement – Well-Flagged but Low on DPU Accretion

By Ethan Aw

  • Daiwa House Reit Investment (8984 JP) is looking to raise around US$98m to acquire four new properties. 
  • Overall, the deal is well flagged with Daiwa House REIT (DHR) making capital raises almost an annual routine. The acquisition would be accretive to DPU as well.
  • In this note, we will look at the assets to be acquired, impact on forecast and portfolio, and run the deal through our framework.

Softbank Short Resistance

By Thomas Schroeder

  • Softbank (9982 JP) is knocking on 6,000 compelling resistance that sets up a short trade just under this barrier. 5,300 lower pattern support is the level to test/break.
  • RSI is also building energy for a powerful breakout from the triangle/flat range with a bear spin.
  • 6,000 is a stiff barrier and if it caps will set in motion a higher degree decline to retest the 4,200-macro support line.

Fast Retailing: The Fast Retailing to Topix Ratio Hitting Resistance Near The Pre-COVID Peak

By Oshadhi Kumarasiri

  • Fast Retailing (9983 JP)  has rallied 60% during the last three-months on better-than-expected Q3 performance and a relatively strong bounce in Topix exceeding the upper-end of the trend-channel by 3%.
  • Although 20% below the all-time high, reached during the COVID pandemic, the Fast Retailing to Topix  ratio is currently near the pre-COVID peak and starting to show some resistance.
  • We would look to short Fast Retailing  with expectations of weakness in overseas markets such as North America and Europe in addition to the already struggling Chinese market.

Can Companies Barely Meet Independent Director Requirement and Shy Away from Diversity Create Value?

By Aki Matsumoto

  • The number of companies that meet the requirement has increased since the listing criteria for prime market specified specific numbers. However, the majority of companies have managed to meet 30%.
  • It’s clear that once the numerical criteria for board diversity as well as ％ independent directors were specified, it would have gone all the way. But this couldn’t be done.
  • It is concerned that Japanese companies may be distancing themselves from the need to listen to a wide range of opinions and create new value.

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Aug 22
0

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

By | Daily Briefs, Japan

In today’s briefing:

  • More Companies Are Hiring Women Directors, but to Solve the Fundamental Problem of Diversity

More Companies Are Hiring Women Directors, but to Solve the Fundamental Problem of Diversity

By Aki Matsumoto

  • It shows that many companies still do not recognize the importance of diversity and that the hiring of women independent directors is merely a numbers game.
  • In Japan, there is the belief that a close-knit organization is more effective in achieving its goals, and there is a practice of excluding different opinions by emphasizing homogeneity.
  • In addition to the repeated disregard for women’s rights, the deep-seated problem of accepting this disregard is the reason diversity has not truly progressed.

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Aug 21
0

Daily Brief Japan: Artspark Holdings and more

By | Daily Briefs, Japan

In today’s briefing:

  • TOPIX Inclusions Pre-Event: Artspark Holdings (3663 JP)

TOPIX Inclusions Pre-Event: Artspark Holdings (3663 JP)

By Janaghan Jeyakumar, CFA

  • After market close on Friday, Japan-based UI/UX software solutions company Artspark Holdings (3663 JP) announced (link) they will be working towards a Segment transfer from Standard market to Prime market.
  • If a TSE-listed name moves from the Standard Market to the Prime Market, a TOPIX Inclusion event will be triggered.
  • In this insight, we take a look at the ability of Artspark Holdings (3663 JP) to meet the Prime Market Segment Transfer Requirements and the TOPIX Inclusion Implications.

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