Japan

In today’s briefing:

Katakura (3001 JP) MBO/Tender Fails
Mitsui Fudosan Logistics Park (3471 JP): Strong DPU Accretion Could Trigger Outperformance Vs Peers
Capcom – Monster Hunter Rise PC Launches Even as Stock Hits 12 Month Low
Nippon Paint Placement Quick Update – Better Positioned After Delivering the Largest Correction
Japan’s Governance: How Far Corporate Governance Has Progressed in 2021? (4) – Change in ROA and ROE
Komeda Holdings (3543): Robust Earnings and Store Openings

Katakura (3001 JP) MBO/Tender Fails

The Katakura (3001 JP) MBO has failed. Nearly 60% tendered but I expect 85-90% of that 60% came from corporate and financial crossholders.
A new activist is in at ¥2,350/share, and that activist wants a higher price.
It is not clear there is a lot of downside here, but it is not clear what drives it up near-term either.

Mitsui Fudosan Logistics Park (3471 JP): Strong DPU Accretion Could Trigger Outperformance Vs Peers

Yesterday after the close, Logistics JREIT Mitsui Fudosan Logistics Park Inc (3471 JP) (“MFLP”) announced a follow-on equity offering to fund part of their recently announced property acquisition.
The primary offer quantity is 32,380 units. In addition, there will also be an over-allotment quantity of 1,620 units. The total size of this offering could be roughly ¥20bn (~US$175mn).
Below is a closer look at the details of this offering and the potential of this offering to trigger strong secondary market performance in the following weeks.

Capcom – Monster Hunter Rise PC Launches Even as Stock Hits 12 Month Low

Early last year we very wrongly called Capcom as our top short-term pick as we expected an earnings blowout in 1QFY22.
The blowout duly came with OP 37% above clueless sell side expectations and… the stock tanked.
Almost a year later the stock languishes 28% lower just as the PC version of Monster Hunter Rise launches.

Nippon Paint Placement Quick Update – Better Positioned After Delivering the Largest Correction

By Sumeet Singh

A group of shareholders of Nippon Paint Holdings, plan to raise around US$1.4bn via selling nearly 6% of the stock.
We covered most aspects of the deal in our previous note, Nippon Paint Holdings Placement – Nothing particularly exciting, needs to correct.
In this note, we will talk about the updates and share price movement since then.

Japan’s Governance: How Far Corporate Governance Has Progressed in 2021? (4) – Change in ROA and ROE

I suspect that there are other incentives for companies to improve their corporate governance practices (especially board practices) than improved performance (improved ROA and ROE).
Companies that improved ROA used cash raised on B/S from increased profits to return profits to shareholders through increased dividends, but still lacked conviction in using cash for future growth.
It is inferred that companies with higher ROE tend to use cash to buy back their own shares.

Komeda Holdings (3543): Robust Earnings and Store Openings

Komeda Holdings (3543) announced 3Q FY2/22 results (IFRS). The impression continues to be positive.
Monthly data announced by the company shows that the positive trend of wholesale sales continued in December (which is included in 4Q).
Our impression is that store openings are progressing ahead of the company’s plan of 940-950 total stores at the end of FY2/22.

Before it’s here, it’s on Smartkarma

Jan 12

Japan: Shinsei Bank, Softbank Group, Oracle Corp Japan, Net Protections, Yaskawa Electric, Tokyo Stock Exchange Tokyo Price Index Topix, Nippon Paint Holdings, MonotaRO Co Ltd, Torikizoku, Sony Corp and more

In today’s briefing:

TSE Announces Market Structure Revisions: Still Much Ado About Nothing
Softbank – The Credit Suisse Dispute
TOPIX January 2022 FFW Rebalance – Much Nothing To Do
TOPIX Inclusion: Net Protections (7383 JP)
Yaskawa – Peak Out in Sight
Japan’s Governance: How Far Has Corporate Governance Progressed in 2021(3)
Nippon Paint Short Targets 917
MonotaRO (3064): December Sales Announced.
Torikizoku Holdings (3193): December Sales; Implications of Infection Spread
Sony – Audio Visual Immersion

TSE Announces Market Structure Revisions: Still Much Ado About Nothing

Today the TSE announced its long-awaited segmentation of the 3,777 stocks listed on the five major venues, and where they will move on 4 April 2022.
TSE1 represented just under 98% of Japan’s float market cap as of today’s close. As some TSE1 members will move to TSE Standard, TSE Prime will represent 97+%.
There are tiny changes to TOPIX because of the moves – roughly 3bp of flow per quarter starting Oct 2022. The FFW Model Revision will be far more interesting.

Softbank – The Credit Suisse Dispute

The FT reports that Credit Suisse is increasingly aggressive in its dispute with Softbank over the lack of payment of funds to its clients related to Katerra and Greensill.
Masayoshi Son apparently denies any knowledge of the Katerra deal which Credit Suisse is attempting to refute with documentation from Greensill.
The flare up with one of its major previous financial partners is telling and the whole episode does not look good for Softbank’s governance image.

TOPIX January 2022 FFW Rebalance – Much Nothing To Do

The January 2022 FFW rebalance is not very large – about US$225mm a side.
30% of the interest is in two names – Net Protections (7383 JP) as an add because of its recent IPO and Oracle Corp Japan (4716 JP) as a sell.
This event may get overshadowed by the TSE Market Structure revamp announced the same day.

TOPIX Inclusion: Net Protections (7383 JP)

Japan-Based Buy-Now-Pay-Later (“BNPL”) service provider Net Protections (7383 JP) (“NPH”) was listed in the First Section of the Tokyo Stock Exchange (TSE) on 15th December 2021.
When a company gets listed on the TSE First Section, it subsequently gets included in the TOPIX Index requiring TOPIX-tracking funds to purchase the stock during an Inclusion Event.
Usually, this presents interesting trading opportunities to generate sharp market-neutral returns in the space of few trading days. Below is a look at the details for NPH’s Inclusion Event.

Yaskawa – Peak Out in Sight

Yaskawa’s stock has been broadly flattish since the beginning of 2021 despite an accelerating earnings profile.
This is largely due to valuations remaining elevated at over 20x EV/EBIT.
Thus, while we continue to favour the name vs. FA peers we remain cautious.

Japan’s Governance: How Far Has Corporate Governance Progressed in 2021(3)

This article analyzes how changes in market capitalization correlate with changes in performance and corporate governance ratings.
Note that the % change in market cap as of December 2020 and December 2021 for 1,704 companies confirms a positive correlation that is more significant with ROA than ROE.
Companies that improved their Metrical score by 10 ppt or more increased their market capitalization the most, followed by companies that improved Metrical score by 5 ppt to 10 ppt.

Nippon Paint Short Targets 917

By Thomas Schroeder

Nippon Paint denotes a series of high conviction bear wedge patterns that will see a new low after gapping below pivotal support.
Bear wedge break below 1,200 (with a nasty gap) is now sell/short resistance.
917 is viable base line support and the zone to prove for a bull cycle turn.

MonotaRO (3064): December Sales Announced.

Parent company sales in December were 16.678bn yen (+20.5% YoY), above the company’s target
The number of new customer acquisitions was 106.5 thousand accounts(-3.8% YoY), below the company’s target.
Jan-Dec cumulative parent sales were 182.467bn yen (+20.2% YoY), 97.7% vs. the full-year guidance of 186.759bn yen (+23.0% YoY)

Torikizoku Holdings (3193): December Sales; Implications of Infection Spread

December sales data: Recovery continues, but still weaker than non-izakaya restaurants
The number of stores at the end of December was 615 (unchanged MoM). The number of directly-owned stores was 384 (+1 MoM)
Possible expansion of areas with shortened business hours requirements

Sony – Audio Visual Immersion

Sony had some interesting panels at CES 2022 focusing on immersion in entertainment on both the audio and visual fronts.
Following on from the PSVR2 announcement they help to outline Sony’s roadmap for driving forward entertainment technology.
And of course there were some links to Epic and Unreal Engine…

Before it’s here, it’s on Smartkarma

Jan 11

Japan: Lawson Inc, Komatsu Ltd, Takeda Pharmaceutical, Nippon Building Fund and more

In today’s briefing:

Lawson: Fuelled up and Ready To Go
Japan’s Governance: Komatsu (6301) ESG Presentation
Takeda: Excessive Reaction to Recent Setback in Trials; Drop in Share Price Offer Attractive Entry
Nippon Building Fund Placement – Weak Sentiment, However, Past Deals Have Performed Well

Lawson: Fuelled up and Ready To Go

Lawson Inc (2651 JP) released rather disappointing 3QFY22 results last week with revenue and OP falling short of consensus by 4.5% and 22.2% respectively.
Lower than expected profitability is driven by Lawson’s heavy upfront investments on future growth.
With consensus unjustly penalising Lawson for growth investments, we think that there’s around ¥10.0bn upside to FY+2 consensus OP of Lawson.

Japan’s Governance: Komatsu (6301) ESG Presentation

By Shifara Samsudeen, ACMA, CGMA

Komatsu’s “Business and ESG Presentation” provided us with an opportunity to confirm our leading technology and global business development.
Komatsu’s advantage in the electrification of construction machinery will increase because of the high technological barriers for large machines with high profit margins.
Komatsu’s corporate governance is generally higher than Universe’s in each of the criteria, but there are still some major challenges to be addressed.

Takeda: Excessive Reaction to Recent Setback in Trials; Drop in Share Price Offer Attractive Entry

Takeda is currently trading at JPY3,175 per share, slightly above its all-time low of JPY3,105 per share. Shares are currently at a 27% discount to its peak in March 2021.
The company has been divesting its non-core assets and reorganising its business around five core areas: GI, Rare Diseases, Plasma-Derived Therapies, Oncology, Neurosciences and Others.
Takeda’s share price started plunging after the suspension of a phase 2 study of TAK-994 in October 2021 following the emergence of a safety signal.

Nippon Building Fund Placement – Weak Sentiment, However, Past Deals Have Performed Well

By Clarence Chu

Nippon Building Fund (8951 JP) is looking to raise around US$260m in its Primary Offering, to fund the acquisition of two properties.
Target acquisitions are expected to be accretive however, the deal comes amidst weaker sector sentiment and analysts have grown more pessimistic on the REIT’s unit price.
In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

Before it’s here, it’s on Smartkarma

Jan 10

Japan: Shinsei Bank, Nippon Paint Holdings, Horiba Ltd, Square Enix Holdings and more

In today’s briefing:

Nikkei 225 Deletions/Additions in March(?) 2022 Due to TSE Market Structure Changes
Nippon Paint (4612) – A BIG Secondary Which Is a Tough Sell, with Variable Index Implications
Horiba (6856 JP): New Growth Opportunity in Hydrogen Energy
Nippon Paint Holdings Placement – Nothing Particularly Exciting, Needs to Correct
Square Enix – WAGMI

Nikkei 225 Deletions/Additions in March(?) 2022 Due to TSE Market Structure Changes

The TSE will move to a new cash equity market structure on 4 April 2022. There will be three new sections: TSE Prime, TSE Standard, and TSE Growth.
The Nikkei Index Team in July 2021 announced a change to the Nikkei 225 Average Guidebook language which said constituents had to be members of TSE Prime going forward.
At least one Nikkei 225 name and possibly two are headed for TSE Standard when the TSE makes its announcement on 11 January 2022. Suggested treatments are discussed.

Nippon Paint (4612) – A BIG Secondary Which Is a Tough Sell, with Variable Index Implications

When Wuthelam took control of Asia’s largest coatings business, Nippon Paint Holdings (4612 JP), in August 2020, I was bearish. It was great for the Goh family but minorities lost.
At the time, I said “Float is low”, and “There are cross-holders who don’t need to be there. This would be a very good sell for them. “
17 months later, 6 financial institutions will now sell their cross-holdings. There is float impact and some immediate index impact.

Horiba (6856 JP): New Growth Opportunity in Hydrogen Energy

By Scott Foster

Measurement and analysis to qualify hydrogen fuel cells, vehicle engines and fueling stations, electrolysis and other hydrogen production processes should be a new growth driver for Horiba.
Semiconductor equipment demand losing momentum, but should hold up in 2022. Weak demand for auto emission measurement systems is a key risk.
Reasonably valued at 15x EPS guidance for FY Dec-21 and 1.45x book value, with a dividend yield of 2.0%.

Nippon Paint Holdings Placement – Nothing Particularly Exciting, Needs to Correct

By Sumeet Singh

A group of shareholders of Nippon Paint Holdings, plan to raise around US$1.4bn via selling nearly 6% of the stock.
The shares haven’t done much this year and despite having corrected by around 40% since the start of 2021, they are trading just about inline with analyst average target price.
In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

Square Enix – WAGMI

By Mark Chadwick

Blockchain games are gaining popularity and traction with new players. There are now over 1.4m people playing blockchain games daily
The economics of blockchain gaming and NFT is driving a flood of new investment into the space, with $4b committed by VCs in 2021. This year will be significantly higher
Square Enix understands that blockchain games are here to stay despite opposition from “legacy fans.” We expect further announcements on blockchain gaming to drive the stock

Before it’s here, it’s on Smartkarma

Jan 09

Japan: Nippon Paint Holdings, Mitsubishi Heavy Industries, Mitsui O.S.K. Lines and more

In today’s briefing:

Nippon Paint (4612 JP): Secondary Offering & Index Implications
MHI (7011 JP): Opportunity or Value Trap?
Index Rebalance & ETF Flow Recap: MSCI, FTSE, HSCEI, KS200, KQ150, ASX200, STAR50, PCOMP, JDH, Sea

Nippon Paint (4612 JP): Secondary Offering & Index Implications

By Brian Freitas

Nippon Paint Holdings (4612 JP) will offer up to 140.133m shares in a secondary offering. Six financial institutions will sell shares aimed at lowering ‘strategic holdings’ and improving stock liquidity.
There will also be an over-allotment option for 17.63m shares. In total, the offering size could reach JPY 198bn. There will be an increase in the stock free float.
We expect MSCI/FTSE to implement the changes at the time of the event. TOPIX is a wild card since they may not see a 5-6% increase in FFW as significant.

MHI (7011 JP): Opportunity or Value Trap?

By Scott Foster

MHI is selling at 9.9x EPS guidance and 0.7x book value, with a dividend yield of 3.0%. We see potential upside of at least 25% beyond the New Years bounce.
The shares have underperformed for several years due to serious managerial errors. But the mess is being cleaned up and new growth opportunities have emerged.
Risks include limited margins in the energy and aerospace & defense sectors and the possibility of renewed investment in the failed regional jet aircraft project.

Index Rebalance & ETF Flow Recap: MSCI, FTSE, HSCEI, KS200, KQ150, ASX200, STAR50, PCOMP, JDH, Sea

By Brian Freitas

The review period for the HSI, HSCEI, HSTECH, HSCI, PCOMP and the FTSE All-World/All-Cap indices ended on 31 December. The changes will be announced in the next few weeks.
We expect an upweight for JD Health (6618 HK) at the MSCI Feb QIR, while there will be buying in Sea Ltd (SE US) due to the tranched inclusion.
Inflows continue into the Tracker Fund of Hong Kong Ltd (2800 HK) and Hang Seng H Share Index ETF (2828 HK) even as the markets head lower.

Before it’s here, it’s on Smartkarma

Jan 08

Japan: Toshiba Corp, Descente Ltd, Skylark Co Ltd and more

In today’s briefing:

Toshiba – The 3D Dilemma
Descente: The Next Goldwin?
Skylark Holdings (3197): December Sales; Industry Update; Omicron

Toshiba – The 3D Dilemma

After a brief respite in their never-ending drama over the holiday period Toshiba is again in the news as 3D reiterates their demands for a “review of all options”.
We have lost count of the number of reviews which haven’t resulted in a PE sale.
The question is exactly why 3D appears to be so aggressive even relative to other less than bashful activists.

Descente: The Next Goldwin?

By Michael Causton

Descente Ltd (8114 JP) is about the same size as Goldwin but has traditionally depended for half of its sales on South Korea.
Itochu Corp (8001 JP) acquired control in a fraught battle with management, in order to reduce this dependence. As a result, Descente managed a return to the black in 1H202.
It has ambitious plans to create a set of brands strong both at home and abroad by copying much of Goldwin’s playbook, particularly its investment in retail and online.

Skylark Holdings (3197): December Sales; Industry Update; Omicron

December SSS: Recovery progresses thanks to promotions. Same-store sales rebounded on the back of a recovery in the foot traffic
Same-store sales were 114.4% vs. December 2020 (December 2020 = 100%; 95.3% for November), and 89.8% vs. December 2019
Our view on Omicron variant risk. the adverse impact on profits should be mitigated by the expectation of subsidy income if requests for shorter hours are issued

Before it’s here, it’s on Smartkarma

Jan 07

Japan: Softbank Group, Nippon Building Fund, Monex Group Inc, Fast Retailing, Comforia Residential REIT, Eisai Co Ltd and more

In today’s briefing:

TOPIX-Nikkei Skew Trade Looking Increasingly Juicy
Nippon Building Fund (8951) – Calculating Passive Tracking of J-REITs and Index Events Around Offers
Monex – Bitcoin Breakdown Means This Needs a Hedge
Nippon Building Fund (8951): Offering Could Trigger Outperformance Vs TSEREIT Index
Fast Retailing: An Earnings Miss Could Be Around the Corner
Comforia Residential REIT (3282 JP): Offering Could Trigger Outperformance Vs Comps
Japan’s Governance: Corporate Governance Evaluation of Pharmaceutical Companies

TOPIX-Nikkei Skew Trade Looking Increasingly Juicy

Our suggested TOPIX-Nikkei skew trade continues to grind out positive returns with relatively low volatility.
With Nikkei starting to noticeably underperform over the last few days we believe faster outperformance could be ahead.
In particular we believe two of the worst performing legs here could start to contribute.

Nippon Building Fund (8951) – Calculating Passive Tracking of J-REITs and Index Events Around Offers

Nippon Building Fund (8951 JP) announced a smallish primary offering to assist in funding a portion of its Asset Replacement Campaign involving sales and purchases and an uplift in DPU.
That is an occasion to look at how much of float is held by passive trackers.
A test was done on the top 10 J-REITs on a holder-by-holder basis to see what one could expect at a minimum. The result may surprise some.

Monex – Bitcoin Breakdown Means This Needs a Hedge

We said previously that we would remain positive on Monex until there were signs of a crypto currency breakdown.
That now appears to be happening and we are thus leery of the pure long trade here.
However, earnings trends are reasonable and we still like the name so we would examine hedging options.

Nippon Building Fund (8951): Offering Could Trigger Outperformance Vs TSEREIT Index

Today after the close, Nippon Building Fund (8951 JP)(“NBF”) announced a follow-on equity offering to fund part of their recently announced property acquisition.
The primary offer quantity is 47,500 units. In addition, there will also be an over-allotment quantity of 2,500 units. The total size of this offering could be roughly ¥33bn (~US$285mn).
Below is a closer look at the details of this offering and the potential of this offering to trigger strong secondary market performance in the following weeks.

Fast Retailing: An Earnings Miss Could Be Around the Corner

It is going to be challenging for Fast Retailing (9983 JP) to meet the 1QFY22 consensus revenue and OP, when it releases the first quarter results next week.
Comps were quite strong in the last year, driven by pent-up demand and consensus is expecting 1QFY22 to be marginally higher than the same period of the previous year.
We think there could be a substantial miss in 1QFY22, driven by lower than expected performance in Uniqlo’s Japan and Chinese businesses.

Comforia Residential REIT (3282 JP): Offering Could Trigger Outperformance Vs Comps

Yesterday after the close, Comforia Residential REIT (3282 JP) (“CRR”) announced a follow-on equity offering to fund part of their recently announced property acquisition.
The primary offer quantity is 22,960 units. In addition, there will also be an over-allotment quantity of 1,140 units. The total size of this offering could be roughly ¥7.4bn (~US$64mn).
Below, we take a look at the attractiveness of CRR’s latest offering with greater emphasis on the potential for strong post-offering secondary market performance.

Japan’s Governance: Corporate Governance Evaluation of Pharmaceutical Companies

Since I am interested in Eisai’s corporate governance initiatives, this article would like to analyze them in conjunction with the situation of pharmaceutical companies.
Eisai has an outstandingly high rating, except for the fact that it has anti-takeover measures. The other 3 companies that have anti-takeover will need to improve corporate governance practices considerably.
The growth policy is reasonable and clearly explained, but there is still room for improvement in the use of the retained cash and disclosures in English for Eisai.

Before it’s here, it’s on Smartkarma

Jan 06

Japan: Katakura Industries, Sony Corp, Fast Retailing, Keiyo Co Ltd, Japan Prime Realty Investmen, Adastria Co Ltd, Tokyo Stock Exchange Tokyo Price Index Topix, Kura Sushi Inc and more

In today’s briefing:

Katakura Tender Offer Bump Now Looks Off. It Is Take-The-Loss or Hold-On-For-Later
Sony – PSVR2 On the Horizon
Japan’s Boycott of Winter Olympics Could Be the Tipping Point
Very Large Keiyo (8168 JP) Buyback NOT Necessarily Bullish
Japan Prime Realty Placement – Expected Deal, Has Corrected in the past Month
Adastria to Expand Beyond Fashion with Zetton Acquisition
Japan’s Governance: About the Article on Capital Increase in 2021
Kura Sushi (2695): Significant Sales Growth Due to “Demon Slayer” Effect

Katakura Tender Offer Bump Now Looks Off. It Is Take-The-Loss or Hold-On-For-Later

The Katakura Industries (3001 JP) MBO was launched in early November at a price which was too light but activist/long-time holder Oasis agreed to sell (with an up-and-out exception).
Another would-be activist bought Oasis’ shares at a premium to the Tender, encouraging hopes of a bump in the Tender Offer Price.
Yesterday, the bidder dashed those hopes, and today the shares fell, but not to the TOB Price. This has longer-term designs.

Sony – PSVR2 On the Horizon

Sony announced details for the PlayStation VR2 today confirming many rumoured specifications.
In addition, it announced that a title from its key Horizon franchise would be coming to VR.
This points to a commitment from Sony to support AAA VR titles and should allow it to once again dominate VR.

Japan’s Boycott of Winter Olympics Could Be the Tipping Point

Considering the geopolitical relationship over the last 100 years, it doesn’t take much for Chinese people to start developing an anti-Japan sentiment.
The relationship between the two countries was already reaching nervy levels, before Tokyo’s decision to snub the 2022 Winter Olympics.
We think the Japanese government’s decision to not send a government delegation to the Winter Olympics could be all that is needed to spark an anti-Japan sentiment among Chinese consumers.

Very Large Keiyo (8168 JP) Buyback NOT Necessarily Bullish

Keiyo announced a large (9.2% of shares out) ToSTNeT-3 buyback for tomorrow morning at JPY 855/share.
Normally this would be an occasion for looking at the significant accretion.
This time there are possible offsets which are less encouraging.

Japan Prime Realty Placement – Expected Deal, Has Corrected in the past Month

By Clarence Chu

Japan Prime Realty Investment (8955 JP) aims to raise around US$130m in its Primary Offering, to fund its acquisition of the Tokyo Tatemono Higashi Shibuya Building and repay borrowings.
The deal is somewhat anticipated, given that the REIT’s asset replacement strategy has been in the works for a couple of months now.
In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

Adastria to Expand Beyond Fashion with Zetton Acquisition

By Michael Causton

For a decade Adastria Co Ltd (2685 JP) was the fastest growing fashion retailer but, as it matured and the apparel market stagnated, growth rates declined.
The company now wants to become a diversified lifestyle retailer with food as a major element so, to speed things along, it will acquire restaurant business Zetton Inc (3057 JP).
It is also investing in overseas retailers to spearhead expansion abroad, a strategy that will include Zetton’s leading chain, Aloha Table.

Japan’s Governance: About the Article on Capital Increase in 2021

The Nikkei newspaper reported that “Equity financing in 2021 is expected to triple from the previous year to 3.7 trillion yen, the highest level in 11 years since the GFC.
The increase in the number of public offerings by Japanese companies to foreign investors could be a reflection of the declining demand from Japanese investors to invest in Japanese companies.
The inability to find investment opportunities is the essence of the problem for Japanese companies. More importantly, they need to find and invest in investment opportunities for sustainable growth.

Kura Sushi (2695): Significant Sales Growth Due to “Demon Slayer” Effect

December SSS: Powerful “Demon Slayer” effect continues. Same-store sales were 117.5% vs. December 2020
The number of stores at the end of December was as follows: 501 stores in Japan (+3 MoM); 35 stores in the U.S. (+2 MoM); and 42 stores in Taiwan (+/-0 MoM)
The company plans to run the “BT21 campaign” in January and February. BT21 is a globally popular character brand

Before it’s here, it’s on Smartkarma

Jan 05

Japan: Softbank Group, Japan Prime Realty Investmen, Square Enix Holdings, Ohsho Food Service, Tokyo Stock Exchange Tokyo Price Index Topix and more

In today’s briefing:

Softbank Group – SenseTime Rally Offsets Some of China Weakness but Q3 Vision Fund in the Red
Japan Prime Realty REIT (8955 JP): Offering Could Trigger Outperformance Vs TSEREIT Index
Square Enix – Is the 7% NFT Bump Sustainable?
Ohsho Food Service (9936): Record High Sales for December
Japan’s Governance: How Far Has Corporate Governance Progressed in 2021 (2)

Softbank Group – SenseTime Rally Offsets Some of China Weakness but Q3 Vision Fund in the Red

By Kirk Boodry

We estimate Vision Fund portfolio companies lost $2.1bn in value in Q3 as upside from new listings was not enough to offset valuation losses from the current portfolio.
A strong debut for SenseTime boosted Q3 gains by $2.3bn and +$1.7bn this week. That takes the sting out of weak Didi Q3 results but China remains a challenge.
Shares trade at a 49% discount to NAV because investment losses both lower NAV and boost balance sheet concerns.

Japan Prime Realty REIT (8955 JP): Offering Could Trigger Outperformance Vs TSEREIT Index

Today after the close, Japan Prime Realty Investment (8955 JP) (“JPR”) announced a follow-on equity offering to fund part of their recently announced property acquisition.
The primary offer quantity is 38,100 units. In addition, there will also be an over-allotment quantity of 1,900 units. The total size of this offering could be roughly ¥16bn (~US$135mn).
Below, we take a look at the attractiveness of JPR’s latest offering with greater emphasis on the potential for strong post-offering secondary market performance.

Square Enix – Is the 7% NFT Bump Sustainable?

Square Enix rose 7.5% yesterday driven by some New Year commentary on integration of NFTs from President Yosuke Matsuda.
The share price jump stands in contrast to broadly negative and suspicious reactions from consumers.
The handling of the issue could be tricky as Ubisoft is finding out but we believe there is positive potential.

Ohsho Food Service (9936): Record High Sales for December

Ohsho Food Service (9936, the company) disclosed monthly data for its directly-owned stores for December (on a preliminary basis)
Same-store sales were 105.3% vs. December 2020 (same month last year = 100%; 100.6% for November)
In December, the company opened one new store (one directly-owned store) and closed no store

Japan’s Governance: How Far Has Corporate Governance Progressed in 2021 (2)

With regard to the key actions actually taken by listed companies, this article will take a look at how much the efforts of companies have improved over the past year.
We have reviewed the effective use of cash and assets, but we have not been able to confirm any clear use that would lead us to expect growth.
While stock prices and valuations are rising, the slight decline in the ratio of foreign shareholders may have something to do with the sluggish growth in ROE and ROA.

Before it’s here, it’s on Smartkarma

Jan 04

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

In today’s briefing:

Crackdown on Live-Streaming E-Commerce Could Derail The Recovery of Japanese Cosmetics
Japan’s Governance: How Far Has Corporate Governance Progressed in 2021? (1)

Crackdown on Live-Streaming E-Commerce Could Derail The Recovery of Japanese Cosmetics

With life getting back to the usual ways following changes due to COVID-19, the Japanese cosmetics sector was expected to experience an uplift in earnings, mainly through inbound demand.
However, the extension of China’s common prosperity crackdowns to the live-streaming e-commerce business, could more than offset a possible recovery in inbound demand.
Thus, we fear that there is additional downside risk to Japanese cosmetics multiples in the short term.

Japan’s Governance: How Far Has Corporate Governance Progressed in 2021? (1)

I would like to have figures to see how far the corporate governance has been enhanced as a result of the efforts of companies for 2021.
The ratio of independent directors and Nomination and Compensation Committees, which were specifically mentioned in the revised Corporate Governance Code as areas for improvement, have been improved.
Items that weren’t specifically mentioned in the revised Corporate Governance Code as requiring improvement, such as chair of board, female directors, and anti-takeover measures, were evaluated with only limited improvement.

Before it’s here, it’s on Smartkarma