In today’s briefing:
- Japan’s Governance Changes I – The PBR 1.0 Target
- TOPIX Inclusions: Who Is Ready (Apr 2023)
- Zenkoku Hosho (7164) | The (Hibiki) Path to a Higher Share Price
- Tokyo Electron (8035 JP): Recovery Likely to Be Slow
- Takara Bio (4974 JP): Shrinking COVID-19 Testing Demand to Impact Near-Term Revenue Growth
Japan’s Governance Changes I – The PBR 1.0 Target
- The TSE went through a multi-year period of planning a “Market Restructuring” which ended on 4 April 2022 as the TSE split into three Sections, TSE Prime, Standard, and Growth.
- After that, the TSE formed a “Council of Experts” (some very senior people) that would follow up on the changes, and recommend new measures. In January, new rule proposals dropped.
- There was talk of a hard end to the transition period. Also, the Council harped on Awareness of Capital Cost and Efficiency. Most notably, for companies with PBR < 1.
TOPIX Inclusions: Who Is Ready (Apr 2023)
- Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
- In the last two months, Amvis Holdings Inc (7071 JP), AXXZIA Inc (4936 JP), and Sosei Group (4565 JP) have confirmed their moves to the Prime Market.
- These names appeared in our lists (A or B) of candidates with high “readiness” for TOPIX Inclusions in our recent insights.
Zenkoku Hosho (7164) | The (Hibiki) Path to a Higher Share Price
- The share price has declined by 15% from its March high, perhaps on misplaced concerns about its HTM bond book and capitalization.
- We have little concern about a collapse in the Japanese housing market and see little impact from higher defaults on capitalization.
- We see a modest 19% downside if management continues to build up excess capital. Hibiki’s plan points to over 20% upside.
Tokyo Electron (8035 JP): Recovery Likely to Be Slow
- Samsung is finally cutting semiconductor production while Micron makes further cuts to both production and capital spending.
- Demand for Japanese semiconductor production equipment has stopped growing and the Japanese government plans to restrict exports in the months ahead.
- An optimist would say that the bad news is now all in the price, but this is not good for Tokyo Electron (TEL) and its shares are not cheap.
Takara Bio (4974 JP): Shrinking COVID-19 Testing Demand to Impact Near-Term Revenue Growth
- Takara Bio Inc (4974 JP) has raised FY23 revenue, operating profit, and net profit guidance by 1%, 5%, and 5%, respectively, due to better-than-anticipated sales of the COVID-19 testing-related reagents.
- Takara Bio is heavily exposed to the COVID-19-related reagent revenue. However, the company is witnessing decline in general research reagent revenue in Japan.
- With the shrinking demand for the COVID-19 testing and slower-than-expected recovery in general research reagent in Japan, revenue is expected to decline 25% YoY in FY24.
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