In today’s briefing:
- Fuji Soft (9749) – Much Better Governance Process But The Stock Has Run Too Far
- Japan – Increasing Shorts on Some Interesting* Stocks; Positioning Appears Light
- Merger Arb Mondays (15 Jan) – Shinko Electric, Benefit One, T&K Toka, Taisho, IJTT, IRC, Weiqiao
- Saizeriya (7581 JP): Asia Business Slightly Beat While Japan Operating Profit Missed
- Sumitomo Pharma (4506 JP): FY24 Guidance Seems to Be Aggressive; Downtrend Will Likely To Continue
Fuji Soft (9749) – Much Better Governance Process But The Stock Has Run Too Far
- After 3D Investment Partners bought a large slug of Fuji Soft Inc (9749 JP) in early 2022, the company started a review of governance and capital allocation.
- The company updated investors in August, and bought in 4 listed subs in November-December 2023. The August update suggested a Q1 2024 decision on use/ownership of real estate.
- The Final Report is due in a month. In the meantime, the stock rallied Friday off a news article suggesting the Board was reviewing take-private proposals. Yes, but…
Japan – Increasing Shorts on Some Interesting* Stocks; Positioning Appears Light
- Some stocks have continued to underperform the Nikkei 225 (NKY INDEX) and their peers and could be deleted from global passive portfolios next month.
- Stocks that were expected to be deleted (but could now be safe) have outperformed the Nikkei 225 (NKY INDEX) over the last couple of weeks.
- There has been two-way flow in a lot of stocks with market participants increasing and covering short positions as the stock prices have moved around.
Merger Arb Mondays (15 Jan) – Shinko Electric, Benefit One, T&K Toka, Taisho, IJTT, IRC, Weiqiao
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads – Hollysys Automation Technologies (HOLI US), Shinko Electric Industries (6967 JP), JSR Corp (4185 JP), Probiotec Ltd (PBP AU), Irc Ltd (1029 HK), Orecorp Ltd (ORR AU).
- Lowest spreads – Tietto Minerals Ltd (TIE AU), T&K Toka Co Ltd (4636 JP), Pact Group Holdings (PGH AU), Benesse Holdings (9783 JP), Taisho Pharmaceutical Holdin (4581 JP).
Saizeriya (7581 JP): Asia Business Slightly Beat While Japan Operating Profit Missed
- Saizeriya (7581 JP) reported FY1Q24 results (September to November) last week. Sales grew 22% yoy, and was 2% higher than company guidance. Operating profit grew 104%.
- Operating profit for the Asia business, the key growth driver of the company, was Y3.3bn, up 56% yoy and above management guidance.
- Overall thesis remains intact, as the Asia business performed slightly better than expectations.
Sumitomo Pharma (4506 JP): FY24 Guidance Seems to Be Aggressive; Downtrend Will Likely To Continue
- Sumitomo Pharma (4506 JP) still expects FY24 revenue of ¥362 billion (down 35% YoY). This implies H2FY24 revenue of ¥209.4 billion, up 37% compared with H1FY24.
- To achieve this target, North America needs to perform strongly. H1FY24 revenue from North America has shown a progress rate of just 35% against full-year FY24 revenue guidance.
- With the absence of any strong catalyst, we expect recent rally in Sumitomo shares fueled by encouraging clinical trial result and new drug approval in China, will be short-lived.
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