Japan

• Yamauchi No.10 Family Office and Toyo Construction (1890 JP) have been going back and forth in the last few weeks, with TC trying to figure out if it accepts YFO.
• The Infroneer Tender Offer ends today, and with that – perhaps coincidental timing and perhaps not – YFO has formally announced an intention to launch a Tender Offer.
• That puts the ball back in Toyo Construction’s court. The deal would be at ¥1,000/share and would launch in late June… if TC is ready and willing.

• Square Enix results were mildly above consensus (by 2.4% at the revenue line and 3.4% at the OP line). 
• The company did not provide guidance on account of the pending transfer of its overseas development studios. 
• However, we expect the sale to lift a significant burden from the bottom line enabling significant YoY OP growth.

• Daifuku’s 4QFY22 was strong with revenue of ¥143bn (+3.8% vs. consensus) and OP of ¥17.3bn (+8.2% vs. consensus). 
• Guidance was relatively strong at the top line, 1.1% above but margin assumptions were far too conservative resulting in a 4.1% miss vs. consensus. 
• One may think that creates upside potential but guidance for 2H to grow vs. 1H is optimistic and valuations are too stretched to withstand a deceleration in earnings momentum.

• Yamaha’s 1QFY22 was weak with revenue of ¥482bn (-1.5% vs. consensus), and OP of ¥40.1bn (-17.3% vs. consensus). 
• The company’s FY22 guidance remained unchanged projecting ¥2,000bn in revenue (-2.0% vs. consensus) and OP guidance of ¥190bn (-4.5% vs. consensus). 
• Beating guidance significantly will now be difficult without price hikes but valuations are too cheap to ignore.

• Convenience stores in Japan aren’t known for their fashion prowess although most sell the odd sock and underwear.
• FamilyMart Co Ltd (8028 JP) sees an opportunity to both expand sales categories and increase margins with higher value fashion basics supplied by its new parent Itochu Corp (8001 JP).
• Itochu is a leading fashion supplier and has created a hit product range for Familymart as well as another in cosmetics.

• Medipal Holdings (7459 JP) reported strong revenue growth in pharmaceutical wholesale business, while its cosmetics distribution business reported lower-than-expected revenue in FY22. FY23 operating profit target was set below consensus.
• Lower demand for hygiene-related products in domestic market and lesser foreign tourists arrival in Japan are expected to negatively impact Medipal’s cosmetics distribution business.
• NHI drug price revisions are the biggest challenge in pharmaceutical wholesale business. Medipal’s largest revenue contributing drug, Takecab saw a 15.8% price reduction effective April 1.

• There are 22 deletions for the MSCI Japan Index at the May SAIR. The changes were expected and there is large short buildup on quite a few of the stocks.
• Over the last month, the largest increase in shorts as a percentage of passive selling was on Mercari Inc, Ryohin Keikaku, Tokyo Century Corp, Sohgo Security Services, Pola Orbis Holdings.
• The deletions have underperformed the TOPIX by 22% over the last 6 months and by 10% over the last two months. Position for a bounce post implementation.

• Faith Inc (4295 JP) is a very smallcap contents management and platform business. As a business, one could give it a miss forever, but it is cash-rich. 
• The company is doing a very large buyback, and for someone who decided they’d be interested, there is a large block for sale. 
• The thing is… one would have to act quickly and aggressively.

• Harmonic Drive posted revenue that was a touch above guidance but just below consensus and rather weak OP of just ¥2.23bn. 
• While that was just below consensus it represented a deviation from typical gross margin and SG&A trends that is concerning. 
• More troubling however is the drop in orders and particularly the composition thereof.

• I have considered the Nikkei article, “How to lead Toshiba, which has been split at the seams over security and the Corporate Governance Code, down the path of revitalization.”
• Toshiba may not have made serious business decisions on its own for many years because it’s been working in tandem with METI as a company responsible for METI’s key policies.
• Toshiba has adopted its Company with US-type 3-Committees for over 10-years, but provides a case of how board practices that are just for appearances don’t improve actual practices and performance.

• USD pullback in Asia is expected to be limited but does show near term risk of a shakeout of crowded positioning (JPY and SGD bets). CAD is a conviction short.
• USD/INR met the 77.80 target to lock in gains. USD/KRW is a top USD long near trendline at 1,265/70.
• USD/CNH pullback support at 6.70. AUD short zone lifted on SPX and RSI alignment. SPX flat breakout points will drive the USD in coming sessions.

• SMC 4QFY22 was in-line with consensus revenue estimates at ¥185bn, but missed at the OP level with ¥52.7bn (10% below consensus) in a now familiar pattern for the sector. 
• The company’s FY23 guidance was strong projecting revenue of ¥805bn (+4.5% vs. consensus) and OP of ¥265bn (+6.9% vs. consensus). 
• The problem is that this ignores the typical cyclicality for the company and we believe OP will in fact be down YoY.

• Asahi Group Holdings (2502 JP)’s 1Q22 OP of ¥9.0bn from ¥496.9bn revenue was significantly below the consensus OP of ¥34.0bn from ¥489.4bn revenue.
• Yet the company maintained its aggressive 2022 guidance, which expects domestic beer volume growth while prices are scheduled to increase by 6-10%.
• We don’t find this estimate credible, especially given that Asahi generates most of the domestic revenue from the price-sensitive high malt beer segment.

• On May 16, Ohsho Food Service (9936, the company) announced FY3/22 full-year sales of 84.775bn yen (+5.1% YoY), OP of 6.959bn yen (+14.6% YoY), and RP of 13.024bn yen (+89.7% YoY)
• 4Q (Jan-Mar) OP was 1.938bn yen (+33.7% YoY; +6.0% QoQ), and OPM was 8.8% (7.2% in 4Q FY3/21; 8.2% in 3Q)
• The company’s guidance for FY3/23 is sales of 90.029bn yen (+6.2% YoY), OP of 7.516bn yen (+8.0% YoY), OPM 8.3% (+0.1ppt YoY) and RP of 8.627bn yen (-33.8% YoY)

• Aeon has finally published numbers on its e-commerce growth and performance.
• It has a ¥1 trillion target for FY2025 and while this is still a far off target, Aeon is making progress. 
• Digital sales have doubled in the past two years and Aeon is now well ahead of Seven & I which continues to fail to present a coherent e-commerce plan.

• The company has made multiple investments in Mekari since its first investment in 2018
• This investment is a large one, equivalent to approximately 6.2bn yen. We understand that the largest investment the company has made in the past was approximately 3.4bn yen in Smartcamp (a consolidated subsidiary).
• The company’s balance sheet at the end of 1Q FY11/22 showed 5.4bn yen in investment securities and 4.8bn yen in goodwill

• Kito Corporation (6409 JP) was taken private in 2003. It was re-IPOed by Carlyle in 2007 but Konecranes stayed an investor until 2016. Then it unwound.
• Today, Kito announced the best results since pre-covid and forecasts for growth. They also announced KKR unit Crosby would launch a Tender to buy them out at a 62% premium.
• Shareholder structure is highly unusual, and interesting to boot, especially looking at the most recent arrival in the top two. The fact there is a break fee is… telling.

• Dowa missed at the PTP line by 4.5% and guided for just ¥55bn in ordinary profit for FY23 vs. consensus at ¥68bn. 
• That drove the stock down 13% today making it give up all the gains it had made since early December. 
• While the reaction might be understandable on the misses if this were trading expensively, it is 0.74x book.

• Despite supply chain and material cost headwinds Mazda beat consensus FY OP estimates by 15% despite being in-line on revenue. 
• Guidance was also 17% above consensus but we think both should be ignored because guidance is being sandbagged and consensus remains clueless. 
• We expect sales volumes to beat Mazda’s guidance slightly and for OP generation to be ¥240-300bn rather than ¥120bn.

• Mitsubishi UFJ Financial (MUFG) (8306 JP) announced results today. Operating Income +0.8%, Operating Earnings +45.9%, Net Profit +45.5% to ¥1.13trln. 
• The forecast for Mar23 is for a “target” of Net Income of >¥1trln. The DPS for Mar23 is set at ¥32 vs ¥28 last year and ¥25 the year before.
• And MUFG announced both the delay of the closing of Union Bancorp sale to calendar H2, and a big buyback of ¥300bn. 

• Recruit Holdings (6098 JP) reported 4Q and full-year FY03/2022 results today. Revenue grew 23.9% YoY to JPY759.9bn while OP more than doubled to JPY45.4bn during 4QFY03/2022.
• Full-Year revenues grew 26.5% YoY to JPY2,871.7bn which was about 3.0% above the upper range of guidance (JPY2,700-2,800bn) while OP of JPY378.9bn was within the guidance of JPY350-380bn.
• Though full-year results were strong, 4QFY03/2022 results show that the company’s earnings have begun to weaken with normalisation of recruitment and staffing markets with Covid conditions easing off.

• freee (4478 JP)  reported 3QFY06/2022 results on Friday. Revenue grew 35.7% YoY to JPY3.65bn (vs consensus JPY3.63bn) driven by strong growth in paying users.
• Operating losses declined to 18.5% of revenues during the quarter from 24.0% in the same period a year ago.
• The company’s shares moved up by about 9% at the end of Friday’s close following its earnings announcement.

• FY3/22 EBITDA rose 96% driven by the recovery in the global labour market. Macro conditions suggest the coming year will be less exciting 
• EBITDA is expected to rise just 2% this year, adjusting for changes in stock-based comp 
• However, the 32% decline in the stock price YTD suggests the market is on top of the weaker outlook. We see 40% upside to the stock price 

• Honda 4QFY22 was mixed with revenue of ¥3,876bn (-0.7% vs. consensus) and OP of ¥200bn (+33.1% vs. consensus). 
• The company’s FY23 guidance was weak projecting just ¥16,250bn (-2.2% vs. consensus) in revenue and OP of ¥810bn (-15.1% vs. consensus). 
• Those numbers are laden with Honda conservatism, but we nevertheless foresee smaller potential beats by Honda than for peers.

• Yamaha Motors’ stock crashed 9% after a poor quarterly report
• However, there were a number of temporary issues impacting costs in the quarter. Management reiterated its guidance for the full year
• Given that demand for its marine engines and motorbikes remains on track, we think the stock is too cheap, trading below book value 

• Same-store sales for company-owned stores were 123.9% vs. April 2021 (108.1% for March), 743.9% vs. April 2020 (93.9% for March), and 102.7% vs. April 2019 (91.3% for March)
• Sales have been strong, as operating restrictions were lifted in late March. In particular, the Yakiniku division (Japanese BBQ) performed much better than in the pre-pandemic period
• The number of domestic company-owned stores at end of April was 365 (+5 MoM, +25 vs. end FY6/21).

• Japan Post Holdings (6178 JP) and its two main components Japan Post Insurance (7181 JP) and Japan Post Bank (7182 JP) reported excellent earnings for the year to March 2022…
• ….but not so excellent forecasts for the year to March 2023. Some of that is conservative. Some is “finger-in-the-air”, and some of it is the vagaries of insurance sales accounting.
• But they all pay high dividends and Japan Post Holdings announced a ¥200bn buyback. And remember, there will likely Never Be Another JPH Equity Offering, Ever Again. Ever. 

• On Friday 13 May, two days after earnings, Capcom Co Ltd (9697 JP) announced a share buyback via Tender Offer from its CEO. 
• The Announcement talks about how buying the shares back “contributes to the improvement of capital efficiency such as earnings per share (EPS) and return on equity (ROE) of the Company.”
• Then another company announcement erases 99% of that accretion, and money out the door. ROE goes up because cash goes out, and pro-forma EPS rises from ¥161.59 to ¥161.61. Whoopee!

• Japan Post Holdings beat by 1.5% at the revenue line and 1% at the NP line with each of the three major businesses beating guidance slightly. 
• Guidance was, as usual, for NP to decline YoY and at ¥400bn was slightly below consensus at ¥428bn. 
• The more important news was a buyback for ¥200bn or 7.6% of outstanding shares.

• Kintetsu Group Holdings Co L (9041 JP) has announced a Tender Offer to acquire the shares in Kintetsu World Express (9375 JP) that it doesn’t hold (it controls 47%)
• This is not a done deal, but they only need about 20% of the remaining 53%. 
• At a 40% premium to last after a great year, this is still being done at the wrong price. But it will likely get done

• Yamaguchi Financial Group In (8418 JP) is the holding company for three western Japan regional banks. Cheapish/overcapitalised, restructuring painfully, but aimed at 5% ROE and capital efficiency.
• To that end, it is buyback back a lot of stock. 
• Compared to its Real World Float, it really is a lot of stock, and it is on-market.

• Sales of semiconductor equipment are running ahead of guidance. Management now sees a considerably stronger 2H and 19% operating profit growth in FY Dec-22 as a whole.
• In the longer term, Japan – U.S. semiconductor cooperation should benefit Horiba and other companies in the Japanese semiconductor industry.
• Selling at 10.5x new EPS guidance for FY Dec-22. Not meaningfully cheap if a down-cycle is coming, but attractive if it is not imminent and security concerns support demand.

• Q4 and FY21 results released Thursday were largely in-line with forecasts although guidance for FY22 missed consensus as upfront costs for entering the tower business ramp up
• For FY22, JTower will compete the transfer of 2,000 DoCoMo towers (c. one-third) and 90% of NTT East/West towers with the handover starting in Q3 
• By FY26, JTower expects annual revenue of ¥30bn (+51% CAGR from ¥6bn in FY22) and EBITDA margins of 60% (¥18bn in EBITDA v ¥ 1.6bn)

• I have considered the Nikkei article on “FSA to create ‘Code of Conduct’ for Institutions evaluating corporate ESG Initiatives by the end of 2022.”
• FSA will align itself with the moves of regulators around the world who believe that ESG evaluation has become more influential in the market as ESG investing is expanding globally.
• Since IOSCO has already set forth specific disclosure items related to ESG evaluation, the FSA will compile these items in a future Council meeting going forward.

• FY 22 Q1 result was good although not unexpected thanks to mgt guidance. 
• Cash on hand may be reduced but it counts a very big Korean EV battery makers as the top customers thus some safety is in place. 
• W Scope Corp (6619 JP) should be able to expand its customer base beyond the big Korean battery maker. 

• Toshiba announces meh-to-weak earnings and surprisingly conservative revenue guidance for next year given better order books and backlog and much higher USD/yen.
• The company announced a slightly higher March 2022 dividend (giving money to past shareholders) and a big special dividend and higher March 2023 dividend.
• The Privatisation Proposal Process continues. It may get a result, or not. New director choices will wait. Now we start a quiet period where privatisation news competes with analyst bearishness.

• On Friday, Wacoal Holdings (3591 JP) announced earnings, adoption of IFRS this year (US GAAP til now), dividends, a div hike and higher earnings this year, and a HUGE buyback.
• The buyback is for up to 5.5mm share (8.95% of shares) spending up to ¥10bn.
• Given the structure of the shareholder base, this opens up interesting possibilities.

• Sakata Inx Corp (4633 JP) and Toyo Ink Sc Holdings (4634 JP) are finally getting around to unwinding the rest of their cross-holdings from their decision 5yrs ago.
• This is highly accretive. +10% on EPS this year on a weighted average basis and +16.8% on a spot basis. 
• The reason is good governance and capital efficiency. A side effect is it shifts the shareholder structure more in favor of economic investors. 

• Maxell Ltd (6810 JP) has been restructuring itself and the cost-cutting and rationalising of sales efforts and regions has led to post-relisting record OP.
• But another (non-cash) write-off this past year has led to the third year of net losses in a row.
• The company has, however, taken its actual cashflows and turned them into a large buyback

• Toshiba reported results on Friday which were just a touch above their revised February guidance at ¥3.35trn in revenue and ¥159bn in OP. 
• Guidance was poor with revenue of ¥3.3trn below consensus ¥3.4trn and OP of ¥170bn noticeably below consensus’ ¥202bn. 
• The nomination of directors was also postponed and some segments showed a marked deterioration in profitability.

• The NTT (9432 JP) / NTT Data (9613 JP) transaction is a little complicated, but the end goal appears, like before, to push operating control below holdcos on the chain. 
• Both Link Administration (LNK AU) and Dye & Durham tanked over the unfortunate timing of an ACCC delay and MAC disconnect – before a price recovery to close the week.
• MCB says the AGL Energy Ltd (AGL AU) de-merger plan is bad, and now analysts say it is “underwhelming.” Duh.  But the alternative? Underwhelming too, but less independent.

• Cosmo Energy Holdings (5021 JP), subject of a selldown by its major shareholder (discussed here), then a large stake purchase by activist Murakami-san (discussed here) announced earnings and a buyback.
• The buyback is large enough to matter to other shareholders. 
• The shareholder structure is interesting enough that investors need to pay attention to the possibilities.

• The three Japanese telecoms reported earnings this week. Softbank Corp (9434 JP) was disappointing (and slightly confusing). KDDI Corp (9433 JP) was much of a muchness.
• NTT (Nippon Telegraph & Telephone) (9432 JP)  looked the best, and announced the largest buyback – ¥400bn or 3%. But it comes from a government sale, not the market. 
• Nevertheless, the company is doing what it promised and executing on its promise. And despite the “bullishness” in the revenue forecast, earnings forecasts to March 2023 look conservative.

• KDDI reported earnings today, offering a near meaningless March 2022 results presentation slide deck, and an only slightly more meaningful new Mid-Term Plan.
• The only clarity provided is on the bit which makes up about a third of future OP as the two-thirds (mobile telephony ARPU-related revenues) will see considerable pain this year. 
• The buyback is nice, but KDDI is no longer cheap, and may have relative upside only against Softbank Corp. 

• Guidance for modest growth in FY22 operating income is broadly in line with expectations and reassuring after a range of potential outcomes in reports from NTT and Softbank  
• The company has issued a mid-term plan with a positive message on growth from new businesses and in-line guidance for capex/shareholder returns but a lack of FY24 finanical targets
• On balance, the message is positive as a stable business and rising shareholder returns makes KDDI an attractive option in a frothy market

• BASE Inc (4477 JP) is up more than 27% today as the Mothers Index bounced back 4.5% following a steep sell-off during the last one-month period.
• Nevertheless, results were disappointing on both the top line and the bottom line with Q1 revenue and operating loss of ¥2,512m (consensus ¥2,659m) and ¥272m (consensus ¥139.2m) respectively.
• After disappointing the market with a guidance range that was significantly below consensus in 2021, Base Inc has withheld from providing 2022 guidance.

• MHI reported a strong 7% growth in the order backlog to ¥5,500 billion
• MHI is a beneficiary of the global energy crisis, geared into gas turbine and nuclear supply chains
• The stock is trading below book value (10 year average 1x) at a time when the core energy order book is as strong as ever

• Downtrends remain intact for Japan’s TOPIX/Nikkei 225, Hong Kong’s Hang Seng, Europe’s EURO STOXX50, Germany’s DAX, China (MCHI-US), and all the MSCI global indexes (ACWI, ACWI ex-US, EM, and EAFE).
• The majority of these indexes are in well-defined downtrends; that means when the downtrends eventually reverse, it will be clear and we will be ready to buy/turn bullish.
• Relative strength on Japan’s TOPIX is reversing topside a 4.5-year downtrend, signaling Japan is emerging as leadership. We highlight buy opportunities in Japan and also in defensive Sectors

• Q4 and FY22 guidance beat driven by growth in corporate DX demand and margin discipline
• Company expects FY22 double-digit revenue growth as mobile headwinds fade and has re-set its mid-term profitability target. Implied FY23 OP is 28% higher than year-ago forecasts
• Near-Term profitability beat ties in to shareholder returns and FY21 DPS has been raised to ¥48 from ¥46 with further growth in FY22. We remain at Buy.

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

1. China Jinmao Holdings
2. Guangzhou R&F Properties
3. Sunac China Holdings
4. Greenland Hong Kong Holdings
5. Evergrande

and more…

• Softbank results were about as ugly as expected and the only major new information in our view was that they took a small (too small) write-down on their private holdings. 
• Masayoshi Son did Masayoshi Son things regaling investor with tales of “To the moon bro!” but offered little of substance to suggest a turnaround was near. 
• Ultimately we keep coming back to the question of where margin calls might be struck.

• Softbank reported record losses, as expected, including some writedowns in the private portfolio. That may not be enough to assuage concerns with valuations still in free fall
• Management says tech’s day will come again and it is best to be more defensive for now, including a slower pace of investing, which we think is positive
• Concern on weak tech and high leverage likely keep the discount in the mid-50s range.  There was nothing today to signal an inflection is at hand

• TEL generated ¥169bn in OP in 4Q, well above consensus at ¥150bn and even our ¥160bn estimate. 
• The issue is that this was on ¥565bn in revenue, well above ourselves and consensus, due to ramping R&D and depreciation expenses. 
• Those expenses also meant that guidance of ¥716bn in OP was just barely above consensus at ¥692bn.

• Subaru 4QFY22 was relatively strong compared to previous quarters with revenue of ¥737bn (+4.4% vs. consensus) but material prices pushed OP down to ¥13.3bn (-48.6% vs. consensus). 
• The FY23 guidance was relatively weak at just ¥3,500bn in revenue (+4.5% vs. consensus) and OP guidance of ¥200bn (-1.0% vs. consensus). 
• However with the yen where it is we believe Subaru is on track for a return to double digit OPM and OP of ¥370-450bn.

• Q4 results and FY22 guidance are in line with expectations and management is confident it is on track to meet its FY23 ¥370 EPS commitment
• Returns to shareholders modestly better than expected with a ¥400bn buyback and the possibility of a further dividend hike later in the year still on the table
• We remain positive on NTT shares which trade at an attractive 10-11x EPS with further support from expanding shareholder returns

• Nissan generated total revenue of ¥2,271bn (-12.0% vs. consensus) and OP of ¥56bn (+33.3% vs. consensus) in 4QFY22. 
• This enabled the company to hit ¥247bn in OP vs. our start of year projection of ¥250bn (when guidance was for breakeven). 
• Guidance looked superficially weak at ¥10trn in revenue (-0.4% vs. consensus) and ¥250bn in OP ¥250bn (-21.1% vs. consensus) but margin assumptions are silly and we expect ¥500bn in OP. 

• Sumco 1Q revenues were on the strong side, 1.5% above consensus but OP beat by 9.9%. 
• As we have been flagging, consensus is underestimating operating leverage and that was before the weakening of the yen. 
• Revenue guidance for 2Q was 4.9% above consensus and OP 12.8% higher but we expect results to be an even larger beat.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• Greenland Holdings Corp
• Softbank Group

• Takeda Pharmaceutical (4502 JP) reported 4QFY03/2022 results yesterday. Reported revenue grew 13.4% YoY to JPY873.3bn (vs consensus JPY825.7bn) while the company reported operating losses of JPY1.7bn.
• Revenue from Top 14 drugs grew 20.3% YoY, while revenue from top-seller Entyvio grew 15.0% YoY during the quarter. Excluding Entyvio, other top 13 drugs grew 23.3% during the period.
• Takeda’s shares moved down 2.0% at the end of yesterday’s trading and down 3% during today’s trade as profit drop disappointed the market.

• Olympus Corp (7733 JP) reported strong double-digit revenue growth in Q4 on continued medical business recovery. Net profit has more than doubled and 40% ahead of consensus.  
• The company has achieved growth to above pre-pandemic level in FY22 and CAGR of >7% over last two years. Operating margin improved significantly to 19.3%.
• Olympus is on track to achieve more than 20% operating margin in FY23. Management projected a record high net profit of ¥154 billion for FY23.

• 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 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 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 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 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 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 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.

• 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 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 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.

• Nintendo has announced in-line-ish results for March 2022, and quite disappointing forecasts for March 2023. Mio Kato called it on 30 March as a sell. Excellent timing. 
• Nintendo has a buyback tomorrow and if you don’t like the guidance, you should DEFINITELY read on below.
• But Nintendo also announced something truly extraordinary – a stock split. Everyone pooh-poohs the impact of a stock split but… in this case it is probably not nothing.

• A release showed up on TDNET last week that Sony Corp (6758 JP) had completed its ¥200bn 25mm share (2.02%) buyback program announced 28 April 2021. 
• The details showed they had actually bought back 8.2mm shares spending only ¥97bn, despite the shares trading below T-1 Announcement Date Price for four months straight. 
• Today, with earnings, SONY announced a NEW buyback. ¥200bn, 25mm shares, 2.02%. Same as last year. 

• Sony results were in-line with revenue of ¥9.92trn barely below ¥10trn consensus and OP of ¥1.20trn also just below consensus at ¥1.21trn. 
• Guidance was interesting however as Sony guided for revenue of ¥11.4trn and a slight decline in OP. 
• We believe that is either extreme conservatism or potentially a sign of very aggressive and interesting investment plans.

• Nintendo results were in-line with both revenue and OP within 1% of consensus. 
• Guidance was extremely weak missing consensus by 5.5% at the revenue line and 20.5% at the OP line. 
• Nintendo gonna Nintendo so this is nothing to panic about but it isn’t positive either… though the stock split is.

• Nikkei remains a compelling short with uptick resistance at 26,600/800 with the next downside target at 25,000. RSI bear wedge is a compelling set up.
• Nikkei offers downside on the back of the RSI bear wedge with firm trend and price resistance just under 27k. Sideways congestion sides with fresh lows.
• USD/JPY looking more crowded near 132 as the rising wedge matures for a pullback trade.

• Comany Inc (7945 JP)‘s Chairman Tsukamoto is 71. Together with younger Tsukamoto family members he is conducting an MBO to buy out minorities at a 76% premium. 
• This most likely gets done, and it is tough to trade anyway because it is horribly illiquid.
• But it is another example of an MBO done at the wrong price. TOB PER is low. But the entire thing is financed by net receivables. Ex-receivables, EV is zero.

• Chiyoda results were slightly weak driven by a poor gross margin in the fourth quarter but revenue guidance was punchy at ¥500bn vs. consensus at ¥354bn. 
• We had flagged previously that Chiyoda would be moving to the favourable portion of the construction s-curve shortly and that appears to be coming through. 
• That drove OP guidance of ¥20bn which is far above consensus at ¥14bn and could eventually help Chiyoda reduce potential dilution.

• SMM beat at the PTP level by 10% driven by the surge in nickel prices but guided for just ¥194bn undershooting consensus by 9.3%. 
• We do not find guidance credible at all as it would defy historical trends to a very large degree. 
• In fact we believe that excluding one-off gains from the sale of Sierra Gorda, PTP could actually be up YoY.

• The Nikkei article reported that, “Disclosure of sustainability-related information in securities reports is expected to become mandatory from fiscal 2023.”
• The requirement to disclose information on sustainability in annual reports, which are legal documents, is extremely significant.
• The use of international standards for sustainability disclosure will make comparative analysis with other companies easier, and is expected to help raise the bar for companies that lag behind.

• Daikin reported FY3/22 OP ¥316 bn, in-line with guidance and Nikkei preview. The company guided for FY3/23 OP of ¥340 billion (+7.5% yoy) on a 9% rise in projected sales
• Guidance seems conservative as the company is using a USD/JPY rate of ¥116 and EUR/JPY ¥126. We highlight sales/margin risks making guidance a stretch 
• Daikin’s premium valuation multiple will come under pressure in a rising interest rate environment. We would sell into today’s bounce.

• NTT (Nippon Telegraph & Telephone) (9432 JP) and NTT Data Corp (9613 JP) this morning announced a 1pm joint presser. Imaginations ran wild and NTT went up 12+%.
• The reality is more subdued (as it should have been for a during-market-hours-presser) and it involves a restructuring of a small NTT subsidiary which happens to own NTT Data shares.
• But it is still positive. It is something of a win-win for both parties.

• When we reviewed Appier’s 2021 results we rambled on about the US for about half of our note discussing explosive growth potential. 
• We said that while Appier touted a >50% QoQ growth rate in the US we suspected it was actually closer to 100%. 
• In 1Q it accelerated to >180% QoQ growth prompting the sell side to go all surprised Pikachu.

• NTT and NTT Data will reorganize overseas assets into a new operating company run through NTT Data
• The transaction results in little change for consolidated results at NTT Group although segment reporting may change and it will buy up to ¥100bn more of NTT Data
• Restructuring could help unlock the potential of Dimension Data which has been a consistent laggard since NTT acquired it in FY11

• Denso 4QFY22 revenue was strong at ¥1,506bn (+4.8% vs. consensus) but increases in raw material prices resulted in OP of just ¥85bn (-31.8% vs. consensus). 
• The company’s FY23 guidance was conservative projecting just ¥6,350bn (+2.2% vs. consensus at +15.1% YoY) but OP guidance was for ¥560bn (+5.3% vs. consensus).  
• We expect volume to grow further and the depreciating Yen should favourably impact ASPs next year.

• Canon Inc (7751 JP) on Monday announced a share buyback programme.
• It isn’t very big. But it bears consideration because of other things going on. 
• Shareholder structure is of much more importance than many investors appreciate. Here even more so.

• Same-store sales were in line with the pre-pandemic levels, and our impression is neutral.
• Same-store sales of other revolving sushi formats in April (compared to April 2021 and April 2019) were 105.3% and 104.2% for Sushiro (Food & Life Companies), 108.4% and 94.5% for Genki Sushi, and 103.7% and 87.1% for Kappa Sushi, respectively.
• The number of stores at the end of April was 512 in Japan (+2MoM), 37 in the U.S. (+/-0 MoM), and 45 in Taiwan (+/-0 MoM)

• Skylark Holdings (3197, the company) disclosed monthly data for April (on a preliminary basis). All of its restaurants resumed normal operations on March 22
• April same-store sales were significantly higher than in April 2021. Although the sales are still weaker than the pre-pandemic levels, the situation has been improving.
• Same-store sales were 110.6% vs. April 2021 (99.0% for March), 182.0% vs. April 2020 (92.8% for March), and 77.4% vs. April 2019 (71.0% for March)

• Compared to our forecast, operating revenue and the number of new guarantees executed were lower. On the other hand, credit-related expenses were lower than our assumption
• The company’s OP guidance for FY3/23 is 40.970bn yen (+3.8% YoY), more conservative than our forecast of 43.137bn yen and the QUICK consensus forecast of 43.653bn yen
• The company disclosed that it purchased two RMBS, etc. in FY3/22. The total amount of the underlying assets was 60bn yen.