In today’s briefing:
- JGC (1963 JP) – A ToSTNeT Buyback Is NOT a ToSTNeT Buyback and Adjusted EV Vs Adjusted EBITDA Is OK.
- Japan Watch: Kazuo Ueda – Who?
- Tokyo Electron (8035 JP): MAGIC Versus Reality
- Last Week in SPACE: Adani Group, Hongkong Land, Toshiba, Haw Par, Renault/Nissan
- Weekly Deals Digest (12 Feb) – Pertamina Geothermal, Toshiba, Newcrest, Nitro, Boustead, Sabana
- “Stable Dividend” Tradition May Have Something to Do with Rewarding Cross-Held Shareholders
JGC (1963 JP) – A ToSTNeT Buyback Is NOT a ToSTNeT Buyback and Adjusted EV Vs Adjusted EBITDA Is OK.
- Engineering & Construction firm Jgc Corp (1963 JP) on Friday announced 9M results. Full-Year forecasts were revised, with revenue lowered, but OP, RP, and NP unchanged.
- The company then also announced a ToSTNeT-3 buyback of up to 4.77% of shares out for ¥20bn to be executed Monday 13 February pre-open. But details matter.
- Four Important Takeaways: 1) sometimes a ToSTNeT-3 buyback is not a ToSTNeT-3 buyback, 2) that can be a good sign, and 3) sometimes Adjusted EV vs Adjusted EBITDA is OK.
Japan Watch: Kazuo Ueda – Who?
- Ueda seems like a centrist candidate compared to Amamiya (dove) or Yamaguchi (hawk)
- Ueda, if he gets the nod on Tuesday, is likely to slowly but surely distance himself from YCC
- We continue to like JPY on the prospects of tighter USD-JPY rates spreads
Tokyo Electron (8035 JP): MAGIC Versus Reality
- The market welcomed TEL’s 3Q results and new guidance, but sales, profits and margins continue to decline year-on-year.
- An optimistic consensus sees a new cyclical high in the second half of the decade, but avoids the question of disengagement from China.
- Inventories are at a record high. Valuations out to FY Mar-25 do not look attractive.
Last Week in SPACE: Adani Group, Hongkong Land, Toshiba, Haw Par, Renault/Nissan
- The MSCI revised the Adani Group weighting after reviewing FF. Adani Enterprises (ADE IN)affected. Adani Green (ADANIGR IN), Adani Power (ADANI IN), and Adani Ports (ADSEZ IN) not affected.
- Hongkong Land (HKL SP) is dirt cheap at 0.3x P/B. It is a China re-opening play. Plus the company is buying back shares.
- The Nikkei didn’t write an article on Toshiba (6502 JP) when everyone else did. They waited another day, with what appears to be a zinger on price at “about ¥2trln“.
Weekly Deals Digest (12 Feb) – Pertamina Geothermal, Toshiba, Newcrest, Nitro, Boustead, Sabana
- A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
- ECM developments – Pertamina Geothermal (0125738D IJ) guides to the low end of the IDR875-880 price range and Hesai Group (HSAI US) has a good debut.
- Event-Driven developments – Newcrest Mining (NCM AU), Nitro Software Ltd (NTO AU), Toshiba Corp (6502 JP), Ihara Science (5999 JP), Boustead Projects (BOCJ SP), Sabana Industrial REIT (SSREIT SP).
“Stable Dividend” Tradition May Have Something to Do with Rewarding Cross-Held Shareholders
- The Nikkei article addresses high-dividend investing as short-term strategy, while “Quality Income” is in demand by long-term investors seeking stable long-term performance. Both strategies have different investor segments and needs.
- Many Japanese companies have basic policy of “stable dividends,” but it is easier for shareholders seeking to increase shareholder interests to understand a dividend policy based on clear cash allocations.
- Given that Metrical’s analysis also found no correlation between changes in market capitalization and dividend policy scores, linking dividends and stock price is a difficult problem.
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