In today’s briefing:
- Sony – Guidance Upgrade
- KRX New Deal Index Rebalance Preview (March): More Flow for LG Energy
- ASKUL (2678) – Large, Accretive, Not Enough for Prime So Look For More
- Pan Pacific International Valuation: All Signs Points to a Large Upside in the Short Term
- Premier Closes In On Myer (MYR AU)
- Z Holdings (Buy) Q3 21 Results Reaction: Mostly Positive as Ad Sales Continues to Impress
- Aisin – Toyota Production Plan Indicates Further Upside
- Denso – Slightly Disappointing Margins but It’s All About the Production Ramp
- Selected European Holdcos and DLCs: January ‘22 Report
- CJ ENM: Potential Block Sale of Its Stake In Netmarble & Concerns About Corporate Reorganization
Sony – Guidance Upgrade
- Sony posted a strong quarter on the back of resilient margins in gaming and stellar performance in the pictures segment.
- Guidance was raised to ¥1.2trn above the top of consensus at ¥1.185trn but results will likely be around ¥1.3trn, a little below the ¥1.37trn we called in early 2021.
- Next year should see further growth and we expect firm performance going forward.
KRX New Deal Index Rebalance Preview (March): More Flow for LG Energy
- The review period for the KRX New Deal indices ended on 31 January. The changes will be announced toward the end of February and implemented on 10 March.
- We expect LG Energy Solution (373220 KS) to be included in the Battery and BBIG indices, while Kakao Pay (377300 KS) should be added to the Internet Index.
- The largest selling is expected to be on Douzone Bizon (012510 KS) due to a potential downweight in the Internet index and a deletion from the BBIG index.
ASKUL (2678) – Large, Accretive, Not Enough for Prime So Look For More
- Askul Corp (2678 JP) today announced a 4.9% buyback, likely via ToSTNeT-3, designed to lower the holding of parent Z Holdings (4689 JP), to meet TSE Prime Tradable Share criteria.
- While 5.1% earnings accretive, it will not be enough, and the structure suggests despite significant excess cash, the next tranche won’t come immediately.
- There is short-term strategy, and there is longer-term positioning. Both may work in this case.
Pan Pacific International Valuation: All Signs Points to a Large Upside in the Short Term
- With momentum behind defensive/semi defensive names in the Japanese market, Pan Pacific International Holdings (7532 JP)’ seems to have one of the best risk reward ratios among Japanese retail players.
- PPI’s undervaluation is visible in valuation multiples across the board with all multiples trading near the past 10-year low level.
- Thus, we would buy PPI with a target of 40% upside in the short term.
Premier Closes In On Myer (MYR AU)
- Premier Investments (PMV AU) has added a further 3.9% in Myer Holdings (MYR AU) taking its stake to just short of 20%.
- There is no love lost between the boards of Premier and Myer since Premier took a 10.8% stake in March 2017.
- Premier has attempted to spill the board in the past. That scene looks set to repeat itself. That or a takeover.
Z Holdings (Buy) Q3 21 Results Reaction: Mostly Positive as Ad Sales Continues to Impress
- Q3 21 in-line for revenue but well ahead for EBITDA on solid advertising growth leading to an upgrade in management’s full-year EBITDA target.
- Operational results were encouraging with double-digit gains in ad sales and 7% eCommerce growth despite strong year-ago comps.
- Impairment losses for equity associate Demae-Can sting but the overall story is positive.
Aisin – Toyota Production Plan Indicates Further Upside
- Aisin’s 3Q revenue of ¥1,004bn (+13.1% QoQ, -4.3% YoY) and OP of ¥54bn (5.4% OPM) reassured investors and the stock closed 4% higher.
- Revenue was 1.7% higher than consensus estimates while OP was 4.9% lower but Aisin maintained guidance.
- The real story is the production ramp from here however and risk-reward for Aisin remains phenomenally skewed.
Denso – Slightly Disappointing Margins but It’s All About the Production Ramp
- Denso announced 3QFY22 during market hours today posting revenue of ¥1,426bn and OP of ¥97bn.
- Reported revenue was 4.2% higher than the consensus estimates while OP was 17.8% lower.
- The market reacted negatively to the weak OP print but we think the focus should be all on the upcoming volume ramp.
Selected European Holdcos and DLCs: January ‘22 Report
- There is just one DLC in this report, Rio Tinto, following the unification of BHP and Shell.
- Discounts to NAV of holdcos have shown mixed performance: Alba, 41.3%; GBL, 26.9%; Heineken Holdings, 18.2%; Industrivärden, 12.1%; Investor AB, 11.6%; Kinnevik B, 8.8%(premium); Porsche Automobile Holding, 39.2%.
- Recommended trades: GBL vs. listed assets, Industrivärden vs. listed assets, Investor vs. listed assets, Porsche vs. VW (long 1 PAH3 GR/short 0.5136 VOW GR), Rio Tinto.
CJ ENM: Potential Block Sale of Its Stake In Netmarble & Concerns About Corporate Reorganization
- According to a local media outlet called ETNews, CJ ENM is considering on selling about half of its stake in Netmarble to potentially acquire the controlling stake in S.M. Entertainment.
- Although CJ ENM is the lead candidate to acquire SM Entertainment, other contenders including Kakao Corp and Naver are not totally out of the M&A race.
- Overall, we would wait on buying CJ ENM at current levels. We think that the market is still concerned about CJ ENM overpaying for SM Entertainment.
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