In today’s briefing:
- Japan: Potential Passive Selling in November
- 7&I Holdings (3382 JP) – Artisan Writes Another Letter – Based on Content, They Should Sell Any Pop
- Wa Inc (7683 JP) – Equity Offering, and TOPIX Inclusion But Very Lopsided Register
- Fair for Managers Who Are Protected by Cross-Shareholding and Get Inflated Payout Due to Weak Yen?
- Daiichi Sankyo (4568 JP) Valuation Update – Are We There Yet?
- GENOVA (9341 JP): 70% Rally Over the Last Two Months; Here’s Why Outperformance to Continue
- Onward Goes Young with Wego
- IDOM Inc (7599 JP): 1H FY02/25 flash update
- Takashimaya (8233 JP): 1H FY02/25 flash update
- Vector Inc (6058 JP): 1H FY02/25 flash update
Japan: Potential Passive Selling in November
- Up to 9 stocks could be deleted from global passive portfolios in November. The deletion will lead to liquidity events where trackers will need to sell multiple days of ADV.
- There has been a buildup of shorts on nearly all these stocks though the extent of the pre-positioning varies.
- The increase in shorts is smaller than the estimated passive selling, though there is a fair amount of variability across the names.
7&I Holdings (3382 JP) – Artisan Writes Another Letter – Based on Content, They Should Sell Any Pop
- Some two weeks after it became apparent Alimentation Couche-Tard (ATD CN) had lobbied a bid in for Seven & I Holdings (3382 JP), Artisan Partners wrote a letter.
- It was full of misguided analysis, ungrounded insinuation of a general nature without specifying where they would have a problem. It seemed to be complaint for the sake of complaint.
- Today another public letter. This time there are a couple of worthwhile suggestions, some accusations of fiduciary impropriety based on no evidence, and an implicit admission they should have sold?
Wa Inc (7683 JP) – Equity Offering, and TOPIX Inclusion But Very Lopsided Register
- Yesterday WA Inc (7683 JP) announced that on the five year anniversary of its listing in 2019, the stock would move to TSE Prime on 1 November 2024
- They also announced a secondary offering of 2.86mm shares including greenshoe. That’s 15% of shares out but the offering will double total float. This is almost a re-IPO.
- This will lead to a TOPIX inclusion on 27 December which will be smaller than the offering. This will be all retail.
Fair for Managers Who Are Protected by Cross-Shareholding and Get Inflated Payout Due to Weak Yen?
- It’s understandable that compensation is paid for managing a global business and achieving significant growth, but it’s also paid for bloated performance in yen terms due to the weak yen.
- Employee engagement is very important for value-added products and more money should be spent on human capital. Otherwise, higher profit margins are unlikely to be achieved.
- The election of directors at AGMs rarely results in rejection of the company’s proposal. Cross-shareholdings should be reduced so that managers whose “employment” is protected by cross-shareholdings don’t receive commensurate compensation.
Daiichi Sankyo (4568 JP) Valuation Update – Are We There Yet?
- At a 51 NPE, Daiichi Sankyo was priced for perfection.
- We do like their focus on the high growth oncology segment, however, we felt that the valuation left no room for error.
- Post the two disappointing trial announcements, at a 39 NPE, the valuation is become more palatable and getting closer to our mid-thirties target entry point.
GENOVA (9341 JP): 70% Rally Over the Last Two Months; Here’s Why Outperformance to Continue
- GENOVA (9341 JP) recorded better-than-expected sales and operating profit in Q1FY25, driven by continued strong demand. With the progress achieved in Q1FY25, the company is expected to beat H1FY25 guidance.
- Medical Platform business has been experiencing steady growth in both the number of articles and page views, leading to creation of multiple contracts and improve the platform’s unit contract price.
- The company had 14K customers for the Medical Platform Business and the Smart Clinic Business in Q1FY25, a mere 8% of its estimated potential customer base of 173K clinics.
Onward Goes Young with Wego
- Most of Onward’s current customers are in their 40s and older but the purchase of casual clothing retailer, Wego, increases its exposure to people in their teens and 20s.
- It will accelerate development of new omnichannel brands to match as part of plans to grow sales by 50% in the next six years and more than double operating profits.
- Onward itself has been transformed by a switch to omnichannel and after years of slashing stores and sales now looks set to become a growth business again.
IDOM Inc (7599 JP): 1H FY02/25 flash update
- In 1H FY02/25, sales rose JPY46.0bn (22.6%) YoY, driven by large store operations and retail unit sales.
- Operating profit increased JPY3.0bn (42.1%) YoY, with gross profit per retail unit rising to JPY440,000 (+60,000 YoY).
- Revised FY02/25 forecast projects sales of JPY500.0bn (+19.1% YoY), operating profit of JPY20.3bn (+26.0% YoY).
Takashimaya (8233 JP): 1H FY02/25 flash update
- The company revised its FY02/25 forecast, projecting operating revenue of JPY495.0bn and operating profit of JPY55.0bn.
- Operating revenue and profit grew YoY across segments, with notable growth in Domestic Department Store and Contract and Design.
- Takashimaya Financial Partners Co., Ltd. saw increased revenue from card transactions and expanded its Social Lending business.
Vector Inc (6058 JP): 1H FY02/25 flash update
- Revenue decreased 4.1% YoY to JPY27.4bn, while operating profit increased 39.5% YoY to JPY2.1bn.
- PR and Advertising saw significant profit growth due to provisions reversal, while Direct Marketing faced profit decline.
- Revenue forecast downgraded; 1H revenue fell short due to client loss and food safety impact.
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