In today’s briefing:
- TOPIX Jan FFW Change – Visional (4194), Anycolor (5032), Furuya Metal (7826)
- Yamae Group Placement – Would Result in a Large Dilution, Although Its Momentum Has Been Strong
- Investors Expect a Feasible Management Strategy Rather than an Accurate Cost of Capital
- Hisamitsu Pharmaceutical (4530 JP): OTC Business Is on Strong Footing; FY24 Guidance Raise
TOPIX Jan FFW Change – Visional (4194), Anycolor (5032), Furuya Metal (7826)
- Late last week, the TSE announced the changes in FFW for companies which have FY-end in the calendar Q2. Changes at 30 Jan close also include Phased Weighting Changes.
- There are two additions and 61 upweights (including net effect of PWR/PWIs). There are 456 down-weights with two-way flows of about US$1bn. There is a tiny funding trade.
- Visional (4194 JP) and Furuya Metal (7826 JP) are the two adds. Other large dollar upweights are Asahi Intecc (7747 JP) and Anycolor (5032 JP).
Yamae Group Placement – Would Result in a Large Dilution, Although Its Momentum Has Been Strong
- Yamae Group Holdings (7130 JP) is looking to raise US$115m from a primary follow-on. As per the firm, proceeds will be used to pay down its acquisition-linked debt.
- We would argue that the deal is somewhat well flagged given the firm’s track record of acquisitions, with the most recent being Confex Holdings.
- That being said, the deal would result in a large dilution for the firm, and would be a large one to digest at 48 days of Yamae’s three month ADV.
Investors Expect a Feasible Management Strategy Rather than an Accurate Cost of Capital
- Although there’s range in the cost of capital, a sense of level is shared among investors, so even if a company estimates lower, it will be found to be incorrect.
- The essential problem isn’t scrutiny of the cost of capital, but rather that many companies produce low returns. Investors are skeptical that companies produce returns above their cost of capital.
- If stock prices do not rise, investors will continue to demand that companies improve their management, attributing this to the negative gap between the cost of capital and return.
Hisamitsu Pharmaceutical (4530 JP): OTC Business Is on Strong Footing; FY24 Guidance Raise
- Hisamitsu Pharmaceutical Co (4530 JP) has reported double-digit revenue and net profit growth in Q3FY24, mainly driven by 21% YoY growth in Salonpas focused OTC pharmaceutical products.
- The company attributes OTC product revenue growth to aggressive sales promotion activities in Japan and overseas, recovery of domestic economic activity and inbound demand, and impact of the weaker yen.
- Encouraged by Salonpas revenue recovery, Hisamitsu has raised FY24 guidance. The company has revised FY24 revenue guidance upward by 7% to ¥141 billion (up 10% YoY) from ¥132 billion.
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