In today’s briefing:
- Canon (7751) – Buyback Progress Update
- Interest Will Be Focused on when the TSE Will Begin Cleaning up the Prime Market
- Japan Among the Latest to Break Out; Buy Ideas in Growth/Cyclicals and Consumer Staples
- Amvis Holdings Inc (7071 JP): An Expanding Hospice Business in Japan
Canon (7751) – Buyback Progress Update
- Canon Inc (7751 JP) announced a buyback on 5 August. That was its 17th ¥50bn buyback in 15 years. And its first “second buyback within a single year” since 2014.
- History suggests outperformance of Peers until the end of the buyback (and it has done well here), then underperformance post-buyback.
- Consensus forward EPS and EBIT ratios vs Peers suggest Canon shares have more to catch up, but some of that would involve reclaiming historical “quality premium.”
Interest Will Be Focused on when the TSE Will Begin Cleaning up the Prime Market
- The listing criteria regarding trading volume is much simpler than other criteria. It’s clear that an average daily trading value of 20 million yen isn’t sufficient liquidity for many investors.
- Many companies that fail to meet listing standards have low expectations for future cash flows, which leads to low valuations and is the reason for sluggish trading volume.
- Keeping these companies in prime market is expected to lead to more focus on this issue, as the gap between these companies and their exact opposites will widen further.
Japan Among the Latest to Break Out; Buy Ideas in Growth/Cyclicals and Consumer Staples
- The theme we have seen over the past four weeks is an increasing number of indexes reversing 4-10-month downtrends and/or breaking above important resistance levels, with no failed breakouts.
- We continue to believe that global equities are going through a bottoming process, but the real test will come during the eventual pullback, which we believe we are now experiencing.
- We are watching to see whether these breakout levels and important moving averages (e.g., 50-day MAs) will hold.
Amvis Holdings Inc (7071 JP): An Expanding Hospice Business in Japan
- Amvis Holdings Inc (7071 JP) is expected to have revenue CAGR of 57% and 600 basis points net profit margin improvement during FY18–23, driven by aggressive business expansion.
- Amvis plans to have 100 hospice facilities by 2025–2026 from 58 at the end of FY22. FCF is steadily improving, due to the high profitability of the business.
- With a float of 27.4%, Amvis is just maintaining the listing criterion on the Tokyo Stock Exchange’s Standard market. It has announced stock split, with record date of September 30.
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