In today’s briefing:
- TOPIX Inclusions: Who Is Ready (Jun 2023)
- Nikkei 225 Sep 2023 Review – Still Fastie, Nitori, Zozo, and Lasertec as Interesting Names
- Hogy Medical (3593 JP): Mixed FY23 Result; Soaring Cost to Negatively Impact Profit in FY24
- AViC (9554 JP) – 2Q Follow Up
- Companies with High Frequency of Share Retirements Tend to Have a High Awareness of Cash Allocation
TOPIX Inclusions: Who Is Ready (Jun 2023)
- Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
- Zuiko Corp (6279 JP), Anycolor (5032 JP), and Lifedrink (2585 JP) will have TOPIX Inclusion events at the end of June (Zuiko) or July 2023 (the other two).
- One of our pre-event TOPIX Inclusion candidates CELSYS (3663 JP) has experienced sharp price moves over the last few weeks.
Nikkei 225 Sep 2023 Review – Still Fastie, Nitori, Zozo, and Lasertec as Interesting Names
- The Nikkei 225 Sep 2023 review has 2 months left of data collection. That means the rankings are quasi-fixed. So then the question is what to do with them.
- There is a consultation in progress. You still have one week to respond, but that doesn’t change the names.
- The top inclusion is the big one in dollar terms but low in liquidity. The next two are likely to be consumer names, and much more impactful.
Hogy Medical (3593 JP): Mixed FY23 Result; Soaring Cost to Negatively Impact Profit in FY24
- Hogy Medical (3593 JP) reported mixed FY23 result. Revenue and operating profit were ahead of guidance while net profit missed guidance mainly due to a one-off loss of ¥464M.
- For FY24, Hogy guided for 5% revenue growth. However, operating, and net profits are expected to decline 23% and 19%, respectively, due to rising costs and exchange rate fluctuations.
- While Hogy will continue cost cutting and improving productivity, the company is not expected to fully offset the cost pressure. Hence near-term outlook for the company remains bleak.
AViC (9554 JP) – 2Q Follow Up
- AViC announced its 2HFY9/23 earnings on May 15.
- For 1H,Oct.–Mar., AViC posted net sales of ¥730 mn, +30.1% YoY, and operating profit of ¥140 mn, a slight year-on-year decline of 5.1%.
- On account of a deterioration in the funding environment for start-up companies, AViC lost some of its start-up clients, which account for a percentage of clients that is not insignificant, and saw others cut their budget.
Companies with High Frequency of Share Retirements Tend to Have a High Awareness of Cash Allocation
- With increasing pressure to buy back treasury stock to raise ROE, more companies with few tradable shares are expected to promptly retire treasury stock in the future.
- Companies that have retired treasury stock three or more times show not only higher stock price valuations, but also superior growth policy scores, cash holding scores, and dividend policy scores.
- Rather than simply focusing on the share repurchase, the focus should be on the overall cash allocation that led to it, including investment in growth and shareholder returns.
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