In today’s briefing:
- Rakuten – Sale of Stake in Securities Business Eases Funding Pressure
- Toshiba (6502 JP): Kioxia Nanoimprint Update – Look to the Next Cycle
- Z Holdings / PayPay – A Focus on Margin Improvement as ZHD Moves to Consolidate
- Ryohin Keikaku: A Beat Can Turn Around Price Performance
- A Senior Korean Govt Official Provides the Likely Time of the End of Indoor Mask Mandate
- We are Not Crashing, It’s Just Volatile
- MicroPort NeuroTech (2172.HK) 22H1 – Advantages Deserve Recognition, but with Overvaluation Risk
- 85: Watchlist Update: Adding Sherwin-Williams
Rakuten – Sale of Stake in Securities Business Eases Funding Pressure
- Rakuten is reportedly selling a stake in its Securities unit for ¥80bn, which probably means a near-term IPO of that business is off the table
- It may also give Rakuten greater flexibility on the timing of a Rakuten Bank IPO should pricing for that be problematic
- In terms of surfacing the value of Rakuten’s fintech assets this is good news but it is mobile losses that have held the shares back. We remain at Neutral.
Toshiba (6502 JP): Kioxia Nanoimprint Update – Look to the Next Cycle
- Canon’s reported capital spending plan suggest that commercial production of nanoimprint lithography tools could start in time for the next semiconductor up-cycle.
- If this is the case, Kioxia is likely to be the main beneficiary. In the meantime, LightStream recommends that investors in Toshiba hedge against tech/semi weakness.
- Technical hurdles remain formidable, but nanoimprint lithography has the potential to be much cheaper than EUV.
Z Holdings / PayPay – A Focus on Margin Improvement as ZHD Moves to Consolidate
- The PayPay conversion is complete and management is focused on managing costs, which is reassuring for ZHD financial targets and for an eventual IPO
- There was less said about the latter, however, whilst detail on the valuation gain that parent Softbank Corp needs to hit its own operating income target has not been confirmed
- Our valuation of ¥500bn for PayPay looks more reasonable as 50-73% YTD declines in public comps have brought trading multiples in line (PayPay at 5x FY22e revenue versus 5-8x)
Ryohin Keikaku: A Beat Can Turn Around Price Performance
- Our analysis points to a significant earnings beat for Ryohin Keikaku, whose share price is down more than 50%-YTD and is currently hugging the bottom-end of the long-term trend channel.
- With freight and logistics down more than 50% since June 2022, we are expecting Ryohin Keikaku (7453 JP)’s gross margin to return to around 49-50%.
- In addition, the company’s monthly sales growth figures indicate that FQ4 revenue should be around ¥114.6bn compared to ¥105.8bn for consensus.
A Senior Korean Govt Official Provides the Likely Time of the End of Indoor Mask Mandate
- In the past few days, a senior government Korean official announced that the indoor mask mandates will likely be lifted in March 2023.
- Although this is not officially finalized, we believe that there is a very high probability of the Korean government finally ending the indoor mask mandate sometime in March 2023.
- The end of the indoor mask mandate is likely to have a positive impact on the Korean cosmetics companies. Nonetheless, we are still concerned about the relatively high valuation multiples.
We are Not Crashing, It’s Just Volatile
- Listening to sentiment alone would lead investors to believe we are 50% down on the S&P 500 and we have another 50% to go.
- But, this simply is not true. When benchmarking the markets recent price action by sector, this bear market, on a technical basis, has the hall marks of every market bottom since 2000.
- Recollecting Howard Marks book, “Mastering the Market Cycle”, there was a particular part that was of importance.
MicroPort NeuroTech (2172.HK) 22H1 – Advantages Deserve Recognition, but with Overvaluation Risk
- Among domestic enterprises, MicroPort NeuroTech (2172 HK)’s product richness takes the lead. With the support of Microport Scientific (853 HK), the production quality system and capacity are relatively more guaranteed.
- Fierce competition and centralized procurement are the major challenges, but the rich domestic distribution network and promising internationalization prospects would help NeuroTech find way out.
- By reducing the size of the IPO to maintain a good share price, at the expense of stock liquidity, it doesn’t really solve the problem.There’s risk of overvaluation for NeuroTech.
85: Watchlist Update: Adding Sherwin-Williams
- Sherwin-Williams continues the home improvement theme started last month by Home Depot and Lowe’s (HD, LOW | Disclosure: None).
- SHW is the dominant player in the architectural coatings industry.
- The scientific-sounding industry classification translates into paint for the interior and exterior of buildings.
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