In today’s briefing:
- Koito Mfg (7276) – New Medium Term Plan, BIG Buyback, Even Bigger Shareholder Returns Planned
- Quiddity JPX-Nikkei 400 Rebal 2024: End-Mar 2024 Estimates and Another Trade Reco
- Rakuten Bank (5838 JP) Stands Out from the Other Asian Digital Banks
- Okinawa Cellular (9436) – Dominant Local Market Leader Enhancing Shareholder Value
Koito Mfg (7276) – New Medium Term Plan, BIG Buyback, Even Bigger Shareholder Returns Planned
- Koito Manufacturing (7276 JP) is a $4bn marketcap (~$6bn sales) Toyota Group auto parts manufacturer specialising in lighting parts, famous for being a T.Boone Pickens target in the 1980s.
- As Toyota Group’s leaders restructure their cross-holdings and try to get to 1.0x PBR and a high enough ROE to sustain it, capital efficiency is on the block.
- Koito today announced a revised Mid-Term Management Plan, a change in KPIs (higher), a large shareholder return plan, and a large buyback. As always, the fun is in the details.
Quiddity JPX-Nikkei 400 Rebal 2024: End-Mar 2024 Estimates and Another Trade Reco
- JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents, adjusted every year in August.
- We look at the rankings of the potential ADDs/DELs every month for the next rebal, based on most recent trading data.
- Every month we provide trade suggestions. The last three months have seen market-neutral returns of +3.0%, +6.5%, +3.2% respectively for the one-month periods. A new trade is suggested below.
Rakuten Bank (5838 JP) Stands Out from the Other Asian Digital Banks
- Despite Rakuten Bank shares’ re-rating, we believe it remains attractive, with its strong balance sheet and its low cost base with undemanding valuations compared to its Asian digital banking peers
- Rakuten Bank is well positioned to benefit from the negative interest rate policy exit in Japan, with its low LDR, high cash balances, growing loan book and healthy capital ratio
- It continues to leverage off the Rakuten Group eco-system, as a low cost source of new customers; nearly a third of clients use Rakuten Bank as their primary Japanese bank
Okinawa Cellular (9436) – Dominant Local Market Leader Enhancing Shareholder Value
- 50% mobile market share with scope to improve shareholder returns – Okinawa Cellular is the operating company for parent KDDI’s (9433) mobile and FTTH brands in Japan’s southernmost prefecture, with a dominant 50% mobile carrier market share.
- The company benefits from the parent’s centralized R&D initiatives limiting its costs, and economies of scale through the joint procurement of handsets.
- With sector-leading operating margins and a strong track record of free cash flow generation, management actively allocates capital to shareholder returns, resulting in an estimated total shareholder payout ratio of 127.8% for FY3/24.
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