In today’s briefing:
- JAPAN GOVERNANCE CHANGES II – Who Could Surprise on Buybacks? Quant Rankings
- Merger Arb Mondays (08 May) – Toshiba, AAG, Lian Beng, Penguin, Golden Energy, Estia
- JAPAN FLOW: Foreign Investor Inflows May Increase
- Ihi (7013) | Multiple Engines for Growth
- A Case Study of How Nothing Will Change Unless Management Changes
JAPAN GOVERNANCE CHANGES II – Who Could Surprise on Buybacks? Quant Rankings
- Japanese companies are buying back more stock than ever before, and recent moves by the TSE and METI are effectively pushing for more.
- The new goal is to lift PBR and ROE. The easiest way to lift ROE is reduce E. Low-PBR Cos with excess assets and cross-holdings (outbound and inbound) are targets.
- In this insight I look at several possible rankings for potential large buyback targets.
Merger Arb Mondays (08 May) – Toshiba, AAG, Lian Beng, Penguin, Golden Energy, Estia
- We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads 111 Inc (YI US), Estia Health (EHE AU), United Malt Group Ltd (UMG AU), Aag Energy Holdings (2686 HK),Origin Energy (ORG AU), Metro Pacific Investments Co (MPI PM).
- Lowest spreads Liontown Resources (LTR AU), Healius (HLS AU), Penguin International (PBS SP), Lian Beng (LBG SP), Mincor Resources NL (MCR AU), Blackmores Ltd (BKL AU), Arcland Service (3085 JP).
JAPAN FLOW: Foreign Investor Inflows May Increase
- For years I have tracked investor category flows in Japanese stocks because I find them quite informative. I write about them every so often in an insight series JAPAN FLOW.
- The series, which I have written about for years, suggests foreign investors invest in Japan pro-cyclically and that correlates well to one relatively simple indicator.
- The policy backdrop points to greater corporate buying, greater foreign flow, greater selling by individuals and trust banks. The current timing probably matches.
Ihi (7013) | Multiple Engines for Growth
- We look for the new MTP to present a growth outlook in the Aerospace division driven by a recovery in the civilian aircraft market
- IHI is a key beneficiary of structural growth themes of higher defense spending and energy transition
- We believe that the market has been overly concerned about a growth plateau. At 9x TEV / NTM EBIT, the stock is a bargain versus global peers
A Case Study of How Nothing Will Change Unless Management Changes
- Underlying Canon’s long-standing underperformance, which had frustrated shareholders, was the lack of diversity on the board, which gave domestic institutional investors an excuse to vote against re-election of inside directors.
- Canon’s voluntary Nominating Committee also has challenges: with Mr. Mitarai, CEO since 1995, chairing the NC, it’s hard to imagine that discussions and decisions are conducted with objectivity and independence.
- Although a female independent director might be hired at next AGM in response to the low approval rate for Mitarai’s reappointment, it’s not expected to make any significant changes immediately.
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