In today’s briefing:
- Hoya (7741) – Record Revenues/Earnings, a Small Buyback, but Nikkei 225 Flows May Dominate
- Softbank Corp (Buy) – Q1 22 Results Reaction: Largely In-Line with Reduced Expectations
- Toyota’s Q1 EBIT Missed by 28%; FY3/23 Guidance Effectively Lowered
- Bunka Shutter (5930 JP) – Big Buyback Vs Big CB Means No Accretion, Minimal Flow Impact
- Yamaha Corporation: Guidance Seems Optimistic With Inflation Starting to Affect Demand Conditions
- Nextage (3186 JP): Long-Term Potential Not Yet Discounted
- Share Buybacks Exceed BOJ’s ETF Purchases, but BOJ’s Presence Is Significant in Another Aspect
Hoya (7741) – Record Revenues/Earnings, a Small Buyback, but Nikkei 225 Flows May Dominate
- Hoya Corp (7741 JP) today announced great Q1 earnings and a bullish above-consensus revenue forecast for this fiscal year. It also announced a small share buyback.
- However, the dominant factor in flows near-term will be pre-positioning for a possible Nikkei 225 inclusion in September. That is what will push the stock around. In or not.
- Hoya has recently outperformed a Peer Basket despite forward expected EPS and EBIT not seeing relative improvement. That suggests some relative risk if it doesn’t get selected for Nikkei 225.
Softbank Corp (Buy) – Q1 22 Results Reaction: Largely In-Line with Reduced Expectations
- Softbank Corp (9434 JP) results were weak as expected as mobile price reductions carved into the consumer revenue base
- Management released some further details on PayPay including a revenue number that implies continued improvement in take rates and plans to carve out a new segment for financial services
- Both KDDI and Softbank net adds were weaker sequentially v Q4 which bodes well for NTT and possibly Rakuten
Toyota’s Q1 EBIT Missed by 28%; FY3/23 Guidance Effectively Lowered
- Toyota’s Q1 operating profit was 28% below consensus estimates, while pretax profit only undershot by 4%. Support for 2nd & 3rd-tier suppliers was the main cause.
- While full-year operating profit target was maintained & EPS slightly raised, this was due to bigger forex tailwinds. Ex-forex, FY3/23 operating profit was lowered by 28%.
- Much of FY3/23’s negatives are one-off, which paves the way for higher profits in FY3/24. But support for suppliers while rivals grow earnings is somewhat of a concern.
Bunka Shutter (5930 JP) – Big Buyback Vs Big CB Means No Accretion, Minimal Flow Impact
- Today Bunka Shutter (5930 JP) reported iffy, if predictably seasonal Q1 earnings, and FY22 forecasts. They also announced a big buyback which caused the stock to pop, then come back.
- It came back because the stock has a decently large slightly in-the-money CB with 13 months to maturity. A big pop will get a big re-hedge.
- Over the next year, despite the large buyback, EPS accretion and net buyback flow impact should be minimal. And the stock isn’t as cheap as it “looks.”
Yamaha Corporation: Guidance Seems Optimistic With Inflation Starting to Affect Demand Conditions
- Even though Q1 topped consensus through favourable FX movements, it seems inflationary pressure is starting to affect all business units of Yamaha Corp (7951 JP).
- The company raised revenue guidance due to favourable FX movements but maintained the OP at the previous level due to rising procurement and energy costs.
- However, with inflation starting to affect demand, these estimates are likely to be revised down over the next few quarters.
Nextage (3186 JP): Long-Term Potential Not Yet Discounted
- The July 4 upward revision to FY Nov-22 sales and profit guidance appears to have been discounted, but the company’s long-term growth potential has not.
- Sales could more than double over the next several years as Nextage takes share in Japan’s highly fragmented and consolidating used car market. Margins also have room to expand.
- Prospective P/E ratio headed down from 18x this fiscal year to 12x and below on a medium-term view.
Share Buybacks Exceed BOJ’s ETF Purchases, but BOJ’s Presence Is Significant in Another Aspect
- Of course, When the BOJ’s ETF purchases were active, there were concerns about their impact on stock price formation, but now the impact is much smaller.
- However, the BOJ has a presence in listed companies as a silent major shareholder, it is highly questionable whether its voting rights are being properly exercised.
- While the silent major shareholder exists, overseas investors have played major role in enhancing corporate governance. In addition to cross-shareholding structures, they also have to contend with the silent shareholder.
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