In today’s briefing:
- Nikkei 225 Index Rebalance Preview (Sep 2024): Review Period Done; Fast Retailing Capping Confirmed
- Portfolio Update: July 2024
- China Comm Const (1800 HK): Robust Growth Prospects Accelerating
- CMS Info Systems- Forensic Analysis
- Azoom (3496 JP): Q3 FY09/24 flash update
- TRS: Lack of Trifecta a Drag
- Meiwa Corp (8103 JP): Q1 FY03/25 flash update
- Mitsubishi Kakoki Kaisha (6331 JP): Q1 FY03/25 flash update
- Ns Tool Co Ltd (6157 JP): Q1 FY03/25 flash update
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.
Portfolio Update: July 2024
- Welcome back to the portfolio updates series!
- This month, I am a few days early with the update. The reason is that my wife and I are celebrating our wedding next weekend, followed by an extended vacation, during which I will be disconnected for a couple of weeks.
- As a result, the next stock deep dive will not be released until the last week of August.
China Comm Const (1800 HK): Robust Growth Prospects Accelerating
- China Communications Construction (1800 HK)‘s overseas contracts surged sharply in 2Q24 as market share gained. Slow domestic contracts are transient as bond issues will accelerate.
- Its backlog continued to grow to 4.7x 12-month forward revenue, which is higher than the 5-year average of 4.1x. Improving margin trend in 1Q24 will sustain into 2H24.
- With a projected ROE of 8.4% for the next two years, its 0.2x P/B is inexpensive. It is also attractive based on dividend yields of 7.7% and 8.4%, respectively.
CMS Info Systems- Forensic Analysis
- CMS Info Systems Ltd (CMSINFO IN) is the market leader in the Indian cash management and managed services industry.
- The company has shown good growth in recent years, and this has mostly come from the managed services and card market.
- Among major forensic takeaways, the company has been taking continuous hit on its debtors which undermines the growth quality. Cautious must also be given to payables, depreciation rate and ESOPs.
Azoom (3496 JP): Q3 FY09/24 flash update
- Sales increased 26.3% YoY to JPY7.6bn, with operating profit up 36.9% YoY to JPY1.3bn.
- Idle Asset Utilization segment Q3 sales were JPY7.4bn (+27.4% YoY), with an operating profit of JPY1.3bn (+39.1% YoY).
- Visualization segment Q3 sales were JPY149mn (-6.0% YoY), with an operating loss of JPY9mn (profit of JPY5mn in Q3 FY09/23).
TRS: Lack of Trifecta a Drag
- TRS experienced a continuation of sales growing within its packaging and aerospace segments. TRS’s specialty products segment remains a laggard to the rest of the business with demand eroding.
- The recovery within the packaging business should have been the main highlight of TRS’s Q2. However, the weakness within specialty products resulted in TRS missing our estimates for the quarter.
- We are updating our full year estimates after TRS lowered its adjusted EPS and sales guidance.
Meiwa Corp (8103 JP): Q1 FY03/25 flash update
- Revenue increased by 6.2% YoY to JPY39.7bn, with significant contributions from Automotive & Battery Materials, Second, and Third Business segments.
- Operating profit rose 15.4% YoY to JPY780mn, while recurring profit surged 95.1% YoY to JPY1.1bn, driven by improved earnings at equity-method affiliates.
- Net income attributable to owners of the parent grew 181.0% YoY to JPY756mn, with a notable increase in equity in earnings of affiliates.
Mitsubishi Kakoki Kaisha (6331 JP): Q1 FY03/25 flash update
- For Q1 FY03/25, the company reported revenue of JPY11.9bn (+29.2% YoY), operating profit of JPY1.1bn (+228.1% YoY).
- The company maintained its 1H and full-year forecasts and resolved to dispose of 7,000 treasury shares.
- The medium-term management plan targets FY03/25 revenue of JPY55.0bn, OPM of 5.0% or more, and ROE of 7.0% or more.
Ns Tool Co Ltd (6157 JP): Q1 FY03/25 flash update
- Q1 FY03/25 results: Sales JPY2.3bn (+3.3% YoY), Operating profit JPY338mn (+3.5% YoY), Operating profit margin 14.9% (+0.1pp).
- Automotive sector: No significant improvement in tool demand despite anticipated recovery from domestic car production resurgence.
- Overseas sales increased YoY, particularly in Greater China and parts of Asia, offsetting low sales in primary markets.
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