In today’s briefing:
- Nikkei 225 Index Rebalance Preview (Sep 2024): Ranking, Capping, Funding & Other Changes
- KLINE (9107) – More Profit, More Shareholder Return 3mo Buyback Inbound
- Chilled & Frozen’s Target Opinion Statement; Chotto Matte (Four Counterbidders)
- Nintendo (7974) | Negative Surprise….Not Really
- A Common Case of a Company with a Low ROE but with the Founding Family Serving as Successive CEOs
- DIC (4631): Full-Year FY12/23 Update
- Seven & I Letting Go of Ito-Yokado at Last?
Nikkei 225 Index Rebalance Preview (Sep 2024): Ranking, Capping, Funding & Other Changes
- The review period for the Nikkei 225 (NKY INDEX) September rebalance ends in July. There could be three changes at the rebalance with sector balance in focus for the additions.
- Depending on the changes, passive trackers will need to buy between 5-16x ADV (10.1%-24% of real float) on the inclusions and sell between 4-42x ADV on the deletions.
- Fast Retailing (9983 JP) will be capped to 10% of the index weight while Tokyo Electron (8035 JP) is also close to the 10% cap.
KLINE (9107) – More Profit, More Shareholder Return 3mo Buyback Inbound
- Kawasaki Kisen Kaisha (9107 JP) today announced earnings. Ocean Network Express earnings were out earlier and beyond that, Consolidated Revs beat, OP faltered, but NP was spot on guidance.
- Guidance for the year to March 2025 is well ahead of consensus on revenue, slightly ahead on OP, and just a wee bit ahead on NP.
- But the company raised its 5yr MTMP Shareholder Return from ¥500bn to ¥700bn and set a new ¥100bn (5.5%) buyback to be executed in the next 3 months.
Chilled & Frozen’s Target Opinion Statement; Chotto Matte (Four Counterbidders)
- Today, after the close, Chilled & Frozen Logistics Holdings (9099 JP) released a required (by the FIEA) Target Opinion Statement saying “Opinion Withheld.”
- C&F notes that it had received 9 possible counter-proposals, offered due dili to a certain extent, and by May 1, had 4 binding offers.
- There are interesting competitive dynamics at play here, but cross-holding concentration matters. The question is… How much is enough?
Nintendo (7974) | Negative Surprise….Not Really
- Operating profit: FY3/24 OP was 529 billion yen (+4.9% YoY) vs analyst estimates of 537 billion (1.5% miss)
- FY3/25 Operating guidance is 400 billion yen, significantly below analyst expectations of 480 billions (-16% miss).
- The initial market reaction may be negative, we would use that as an opportunity to buy into the stock for the cyclical upturn in FY3/26.
A Common Case of a Company with a Low ROE but with the Founding Family Serving as Successive CEOs
- The reason why the approval for the shareholder proposal on profit appropriation exceeded 40% is that the proposal was easy to understand and easy to get approval from other shareholders.
- Although domestic institutional investors don’t currently vote against a low ROE when it comes to improvement measures, they may take a more aggressive stance if ISS raises its ROE criteria.
- The trend of top management being reappointed even with continued low ROE is likely to continue for a while longer, but the time frame is definitely getting smaller.
DIC (4631): Full-Year FY12/23 Update
- Dic Corp is a chemical company with a top global market share in products such as printing ink, organic pigments, and PPS compounds.
- DIC recorded FY12/23 sales of JPY1,038.7bn, operating profit of JPY17.9bn, recurring profit of JPY9.2bn, and net loss attributable to owners of the parent of JPY39.9bn.
- On February 13, 2024, DIC Corporation announced revisions to its long-term management targets in DIC Vision 2030.
Seven & I Letting Go of Ito-Yokado at Last?
- Seven & I’s plans to consolidate its supermarket operations and list in 2027 remain speculative but the timing shows that management was swayed more by the founder’s death than activists.
- It will need to bring Ito-Yokado (IY) back to profit first and, although it wants to keep at least a 15% stake, there is the strong possibility of a sale.
- What matters more is not IY stores but the new SIP format. With CVS saturated, SIP is only way to grow within Japan but this depends on Ito-Yokado supply chains.
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