In today’s briefing:
- TOPIX “Big April Basket” 2024 Expectations: More High-Conviction Names; Better Trade Ideas
- Sankei Real Estate (2972) Sponsor Buy Now On And It Isn’t Small (Even if the REIT Is)
- Hidden Value in Plain Sight: Teikoku’s (3302) Potential Unlock
- (Mostly) Asia M&A, Feb 2024: Lawson, Altium, CSR, TCM, Boral, APM, Roland DG, Ssangyong Cement
- 4Q Follow-Up -Golf Digest Online | 3319
- 3Q Follow-Up -Japan System Techniques | 4323
TOPIX “Big April Basket” 2024 Expectations: More High-Conviction Names; Better Trade Ideas
- The Tokyo Stock Exchange (TSE) calculates Free-Float Weight (FFW) for each listed company and uses this value as a key component of TOPIX Index Calculation.
- For companies with “low liquidity” the FFW will be multiplied by a fixed liquidity factor of 0.75 to derive the final FFW used for index calculation.
- Every April, the application of this liquidity factor is reviewed by the TSE. In this insight, we take an early look at what could happen in April 2024.
Sankei Real Estate (2972) Sponsor Buy Now On And It Isn’t Small (Even if the REIT Is)
- Last October, I wrote about the plan the sponsor of Sankei Real Estate (2972 JP) had to exchange buildings with the REIT to clean it up, then buy more units.
- Today they announced the completion of the Portfolio Rebalancing Plan started in March 2023. And the plan to buy more units. The assets transferred out were gone at end Jan-2024.
- Now that’s done, and there are units to buy. Maximum 46,652 units over maximum 220 days.
Hidden Value in Plain Sight: Teikoku’s (3302) Potential Unlock
- Teikoku, a stable disaster equipment leader, is undervalued due to excessive cash and cross-holdings.
- Regulatory pressure, industry trends, and potential Hulic asset sales create an opportunity to unlock hidden value.
- Despite fair current pricing, potential share repurchases and improved capital allocation offer up to 40% upside.
(Mostly) Asia M&A, Feb 2024: Lawson, Altium, CSR, TCM, Boral, APM, Roland DG, Ssangyong Cement
- For the month of February 2024, 15 new transactions (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$20bn.
- The average premium for the new transactions announced (or first discussed) in February was ~33%.
- This compares to the average premium for transactions in 2023 (117 transactions), 2022 (106), 2021 (165), 2020 (158), and 2019 (145 ) of 39%, 41%, 33%, 31%, and 31% respectively.
4Q Follow-Up -Golf Digest Online | 3319
- On the surface, FY23/12 consolidated OP -68% YoY, profit ATOP -53%, and FY24/12 initial guidance for a profit ATOP net loss may appear to indicate a challenging earnings environment.
- However, closer examination reveals steady earnings improvement, and the new MTP through FY26/12 targets recouping major overseas growth investments.
- The table below shows sequential improvement in the amount change YoY for Group EBITDA, OP and profit ATOP every quarter, with profits at all 9 levels posting YoY gains in the 4Q.
3Q Follow-Up -Japan System Techniques | 4323
- 3Q Earnings Summary: In cumulative 3Q FY2024/3, Japan System Techniques recorded net sales of ¥18,527 mn (+11.4% YoY), operating profit of ¥1,614 mn (+3.5% YoY), ordinary profit of ¥1,648 mn (+2.7% YoY), and profit attributable to owners of parent (hereinafter, net profit) of ¥1,099 mn (-5.8% YoY).
- Cumulative 3Q sales, operating profit, and ordinary profit came in at record highs.
- Operating profit growth fell short of sales growth owing to planned increases in upfront investments for personnel expansion, education and training expenses, and IT infrastructure enhancements.
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