In today’s briefing:
- Sep24 Nikkei 225 Rebal Final Predictions – Fastie Capped, Still 1 ADD, 1 DELETE, 1 Dark Horse and ?s
- True Wind Raises Partial Offer for Sun Corp Further, Leaving an Interesting Back End
- Nikkei 225 Index Rebalance Preview (Sep 2024): Review Period Done; Fast Retailing Capping Confirmed
- Sun Corporation (6736 JP): Third’s Time a Charm for True Wind’s Final Offer
- Japanese Big-Cap Banks – Rates Story Takes Centre Stage, Along with Banks’ JGB Exposure
- English Language Disclosure Will Raise Investment of Overseas Investors and Lead to Higher Valuation
- Daiichi Sankyo (4568 JP): Starts FY25 on Firm Note; Enhertu Flying Higher Highs; Guidance Reaffirmed
- Nihon Chouzai (3341 JP): Q1 FY03/25 flash update
- Arealink Co Ltd (8914 JP): 1H FY12/24 flash update
- Strike (6196 JP): Q3 FY09/24 flash update
Sep24 Nikkei 225 Rebal Final Predictions – Fastie Capped, Still 1 ADD, 1 DELETE, 1 Dark Horse and ?s
- The Sep 2024 Nikkei 225 Review base date is here. As before, I see one ADD, one DELETE, one capping, and one Very Dark Horse.
- The rules are clear, but not. This causes confusion. There may be unwritten rules keeping the Very Dark Horse out til next time.
- The Nikkei Index Team announced Fast Retailing (9983 JP) would be capped. I didn’t expect that now. That means $2.2bn+ of selling 30Sep and a reverse funding trade.
True Wind Raises Partial Offer for Sun Corp Further, Leaving an Interesting Back End
- On 10 June, Sun Corp subsidiary Cellebrite DI (CLBT US)‘s SPAC sponsor True Wind Capital launched a Tender Offer for 19% of SunCorp at a premium but discount to NAV.
- The price was too low. CLBT shares rose. They lifted the TOB price by 8% to ¥4750. Still too low. It was trading there. Now they have lifted to ¥5500.
- Now a 49% premium to undisturbed, 29.4% premium to all-time high prior to the first tender. Changes in terms means this could get done. More bullish than it looks.
Nikkei 225 Index Rebalance Preview (Sep 2024): Review Period Done; Fast Retailing Capping Confirmed
- The review period for the Nikkei 225 (NKY INDEX) September rebalance ended yesterday. There could be three changes at the rebalance with sector balance in focus for the additions.
- Fast Retailing (9983 JP)‘s capping in the index has been confirmed and its index weight will drop by around 0.9% resulting in big selling at the close on 30 September.
- Passive trackers will need to buy between 3.5-35x ADV (2.4%-24% of real float) on the inclusions and sell between 3.7-42.5x ADV on the deletions.
Sun Corporation (6736 JP): Third’s Time a Charm for True Wind’s Final Offer
- True Wind has increased its partial offer for Sun Corp (6736 JP) to JPY5,500 and materially lowered the minimum number of shares to be purchased from 3.3m to 1.1m.
- True Wind’s previous two offers were a non-starter due to an unattractive price and an onerous minimum acceptance threshold. The final offer addresses both these issues.
- The offer will succeed due to the low minimum acceptance threshold and the 25% price uplift vs. the 19% value increase in the Cellebrite stake (since the offer announcement).
Japanese Big-Cap Banks – Rates Story Takes Centre Stage, Along with Banks’ JGB Exposure
- The Bank of Japan has raised its short-term interest rate to 0.25% from 0.1% ahead of the core of consensus expectations, and BoJ plans to pare back purchases of JGBs
- We focus on those big-cap Japanese banks that are well geared into higher domestic rates through loan books and BoJ deposits, that also have lesser exposure to rising JGB yields
- We stay broadly positive on Japanese bank shares, despite their performance; we add Chiba to the buy list of Resona, Mizuho, SMFG and Concordia, whilst keeping Kyoto as a sell
English Language Disclosure Will Raise Investment of Overseas Investors and Lead to Higher Valuation
- The issue of the discrepancy between disclosure documents in English highly remanded by overseas investors and actual disclosures in English by companies has not been resolved.
- Companies with the highest English language disclosure scores had superior ROE, valuation, market capitalization and foreign ownership, and corporate governance. Companies with the lowest English disclosure scores showed the opposite.
- Through overseas investor engagement, companies are likely to improve its corporate governance practices and has actually taken actions that have led to improved capital profitability.
Daiichi Sankyo (4568 JP): Starts FY25 on Firm Note; Enhertu Flying Higher Highs; Guidance Reaffirmed
- Daiichi Sankyo (4568 JP) announced better-than-expected Q1FY25 result, with all key parameters exceeding expectation. Q1 revenue increased 24% to ¥436B, mainly driven by 59% growth in Enhertu sales to ¥130B.
- For its approved indications, Enhertu maintained #1 market share for new patients in U.S. The drug is expected to have blockbuster status in both US and Europe this year.
- Despite a good progress in Q1FY25, especially on profitability front, Daiichi Sankyo has reaffirmed FY25 guidance. Better-than-anticipated Enhertu revenue and Fx should lead to guidance revision later this year.
Nihon Chouzai (3341 JP): Q1 FY03/25 flash update
- Sales reached JPY86.4bn (+5.6% YoY), operating loss was JPY236mn, recurring profit was JPY85mn, net loss was JPY140mn.
- Sales were JPY76.6bn (+6.0% YoY), operating profit was JPY1.7bn (-40.5% YoY), 7 new pharmacies opened, 2 closed.
- Sales were JPY9.9bn (-5.6% YoY), operating loss was JPY461mn, 492 products offered, 47.6% in-house manufactured products.
Arealink Co Ltd (8914 JP): 1H FY12/24 flash update
- Revenue: JPY12.9bn (+15.4% YoY), Gross profit: JPY4.4bn (+12.2% YoY), Operating profit: JPY2.5bn (+15.3% YoY).
- Self-Storage segment: Revenue JPY10.0bn (+17.2% YoY), Gross profit JPY3.7bn (+17.8% YoY), Operating profit JPY2.7bn (+17.5% YoY).
- Land Rights Consolidation: Revenue JPY2.1bn (+9.6% YoY), Gross profit JPY538mn (-18.1% YoY), Operating profit JPY340mn (-9.3% YoY).
Strike (6196 JP): Q3 FY09/24 flash update
- Revenue increased 45.3% YoY to JPY13.3bn, driven by a rise in deals closed and large-scale projects.
- Cost of revenue grew 51.1% YoY to JPY4.7bn, influenced by higher incentive salaries and personnel costs.
- SG&A expenses rose 16.6% YoY to JPY3.6bn due to increased rent expenses from headquarters expansion in March 2023.