In today’s briefing:
- Index Rebalance & ETF Flow Recap: NKY, ASX, Liontown, J&T Express, JP/IN Positioning, IndusInd Bank
- Last Week In Event SPACE: Shinko Electric Industries, MGM China, Decente, Sankei Real Estate,
- Challenge Is to Simultaneously Reduce Cash on Hand and Achieve Profitability over Cost of Capital
Index Rebalance & ETF Flow Recap: NKY, ASX, Liontown, J&T Express, JP/IN Positioning, IndusInd Bank
- Light & Wonder (LNW US)/ Light & Wonder (LNW AU) replaced United Malt Group Ltd (UMG AU) in the S&P/ASX 200 (AS51 INDEX) last week.
- Newcrest Mining (NCM AU) stops trading this week and should be replaced by Newmont Mining (NEM US) CDIs in the ASX indices.
- Another week of ETF outflows for China with the largest outflows from trackers benchmarked to the CSI 1000 Index.
Last Week In Event SPACE: Shinko Electric Industries, MGM China, Decente, Sankei Real Estate,
- If Descente Ltd (8114 JP) earnings disappoints, buy the dip. Itochu Corp (8001 JP) is buying for the long-term.
- MGM China Holdings (2282 HK) has gained market share in mass table market, VIP, and total revenue. Yet MGM’s FY24E EV/EBITDA is ~40% below its two-year forward average EV/EBITDA pre-Covid.
- If you had a J-REIT portfolio, Sankei Real Estate (2972 JP) would go in and push something else out or smaller. I think one gets beta-plus, which is usually called alpha.
Challenge Is to Simultaneously Reduce Cash on Hand and Achieve Profitability over Cost of Capital
- Managers self-analyze the factors that lead to P/B of below 1x, as companies fail to appreciate their growth potential and to ensure profitability in excess of their cost of capital.
- This seems to be dilemma in that companies’ failure to realize sufficient profitability, along with insufficient growth investments, prevents them from sharing the image of corporate value growth with investors.
- Managers believe that the first step is to improve ROE by reshuffling business portfolios and promoting profitability improvement, but reducing excess cash and increasing shareholder returns should be pursued simultaneously.
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