Daily Brief Japan: Dentsu Inc, Tokyo Stock Exchange Tokyo Price Index Topix, Torex Semiconductor and more

Dentsu experienced difficult trading conditions in its first half, with US client hesitancy, poor Chinese macro conditions and a one-off hit from a problematic project in the DACH region, compounded by demanding comparatives. These ease in H223, and trading should also benefit from one-off events like the Rugby World Cup, as well as the contribution from Tag, consolidated from 1 July. FY23 guidance is now for organic net revenue growth of 0% to -2% (was 1–2%) and a 17.0% operating margin (was 17.5%). With the inclusion of Tag, operational cost savings and lower interest following debt restructuring, guidance for EPS is unchanged. We have updated our forecasts to reflect this, with a knock-on into FY24. The valuation remains well below peers and long-term average metrics.

• The relationship between % of female managers and P/B doesn’t appear to be as strong as the significant correlation found between % of female directors and the value creation indices
• Currently, companies in business categories where women have greater opportunities to play active roles (new business models) are appointing female employees to management positions, and such  companies have higher P/Bs.
• Since the gender wage gap is attributed to % of female managers, unless a company has significant opportunities for women to play active roles, the gender wage gap is large.