In today’s briefing:
- Keyence(6861 JP) | The Rise of the Phoenix – A Company like No Other
- Seiko Epson(6724 JP)| Neutral 2Q Earnings; Negative Outlook – Remain Bearish
- Aeon: Making Omnichannel a Reality
- Do Not Miss the Movement of Deemed Cross-Held Shares, Which Are the Last Resort of Cross-Held Shares
Keyence(6861 JP) | The Rise of the Phoenix – A Company like No Other
- Keyence reported record 2Q Sales and OP, thoroughly beating street expectations. The company recorded high double-digit growth in all regions – even in Europe.
- Pricing power is on display 10-35% price hikes to shore up the dip in GPM to 81.3%, depressed on higher raw material costs. Sets up for future earnings growth.
- The share price has underperformed the TOPIX -26%YTD. Valuations at the bottom of the recent range. We expect a share price recovery and are bullish.
Seiko Epson(6724 JP)| Neutral 2Q Earnings; Negative Outlook – Remain Bearish
- 2Q Earnings Neutral; Mainly FX driven. The company sidestepped the worse of what we are seeing in broader printer market (See XEROX; Canon)
- The outlook remains Negative. Macro conditions set to be worse in H2 vs H1. Core Home & Office Printing Business key IJP unit sales struggling with severe margin pressures.
- Ongoing share buyback mildly supportive but unlikely to be a game changer with falling earnings. Target-based 0.8x PBR implying ¥1700 TP.
Aeon: Making Omnichannel a Reality
- In search of ¥1 trillion in ‘digital-related’ sales by 2026, Aeon opened its first, built-from-scratch online-offline marketing store in Yokohama this month.
- The new Aeon SC introduces a range of features and processes to make e-commerce a natural supplement to the store and the shopping experience.
- Aeon has a way to go to reach its targets for e-commerce but is moving in the right direction and has a clearer direction than rival, Seven & I.
Do Not Miss the Movement of Deemed Cross-Held Shares, Which Are the Last Resort of Cross-Held Shares
- Clearly, the pace of decline of deemed cross-held shares held in retirement benefit trusts is slower than the pace of decline of ordinary cross-held shares held on the balance sheet.
- Companies with deemed shareholdings tend to have larger total assets than companies with general policy shareholdings (policy shareholdings account for 7.3% of total assets).
- Although they are less visible, the reduction of deemed shareholdings will come later because shares of important business partners and banks are contributed to retirement benefit trust as deemed shareholdings.
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