In today’s briefing:
- Daito Trust Construction (1878) – Big Buyback, Dense Register, 120% Payout This Year
- EQD | Nikkei 225 (NKY)’s November Rally: How Far Can It GO?
- Astellas Pharma (4503 JP): Underwhelming H1 Result; Massive Cut in FY24 Profit Guidance
- Valuations Will Rise when the Management Changes To “Maximizing Shareholder Interest”
Daito Trust Construction (1878) – Big Buyback, Dense Register, 120% Payout This Year
- Daito Trust last week announced H1 earnings, its 50% dividend payout ratio, and a ¥50bn stock buyback which results in a shareholder payout ratio of ~120% over the next year.
- This should help to keep ROE high, and as it is a clear distribution of surplus, it should help keep the multiple up.
- It is worth looking at shareholder structure to see how this buyback will be taken.
EQD | Nikkei 225 (NKY)’s November Rally: How Far Can It GO?
- The Nikkei closed the month of October down, 4 months down in a row (CC=-4), very OVERSOLD MONTHLY. The 30600 support indicated in our last MONTHLY insight did hold somehow.
- We think the Nikkei could continue to rally in November, but this explosive, fast rally, at one point will have to retrace back, before it can continue up.
- The index could rally for 2 months, into December. The target prices for the end of the rally are near 34000.
Astellas Pharma (4503 JP): Underwhelming H1 Result; Massive Cut in FY24 Profit Guidance
- Astellas Pharma (4503 JP) reported just 0.6% YoY revenue growth to ¥767B in H1FY24, while operating profit plunged 57% YoY and net profit decreased 67% YoY.
- Generic competition in Lexiscan impacted topline. Increase in SG&A expenses related to new drug launch and higher amortization of intangible assets, pulled down the operating as well as net profit.
- Astellas has downwardly revised FY24 forecasts for profit items by more than 50% after taking into consideration the increases in higher expenses.
Valuations Will Rise when the Management Changes To “Maximizing Shareholder Interest”
- The average P/B has remained flat since March end, when TSE requested improvements for companies with P/Bs below 1x, and TOPIX has risen in line with the rise in BPS.
- Given the lack of progress in improving ROE, companies have many issues to resolve in improving returns through the appropriate allocation of cash and capital.
- Since it’s no longer possible to show early results simply by leaving it to managers, the use of TOB/MBO will be a shortcut to raising shareholder returns and corporate value.
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