In today’s briefing:
- JAPAN ACTIVISM: Mitsui Fudosan (8801) Responds to Elliott with Buyback, Amended Long-Term Plan
- Fast Retailing(9983) | Not So Fast
- How Long Will the Escape from Deflation Be a Greater Factor in Stock Price Rises than ROE?
JAPAN ACTIVISM: Mitsui Fudosan (8801) Responds to Elliott with Buyback, Amended Long-Term Plan
- 9 weeks ago, the FT reported Elliott Management had a stake in Mitsui Fudosan (8801 JP) and had asked them to sell cross-holdings and do a ¥1trln buyback.
- The stock popped 7% the next day to ¥1302, on the highest volume since the covid crash, hesitated a day, then powered almost 20% higher through the end of March.
- Today, Mitsui Fudosan responded with an Amendment to their Plan out to 2030. It has a higher dividend, a share buyback, higher EPS target growth, and higher ROE target. But…
Fast Retailing(9983) | Not So Fast
- Fast Retail missed analyst estimates for Q2 sales and operating profit. Revenue growth slowed to 5% YoY
- Full year operating profit guidance maintained at Y450 billion, just slightly below the street
- The stock is trading at 27x EV/EBIT, in-line with historical averages, but still expensive in absolute terms and versus global peers
How Long Will the Escape from Deflation Be a Greater Factor in Stock Price Rises than ROE?
- Net profit per listed company increased 4.4 times over the 33 years from 1989 to 2023, which means only a modest 4.5% annual growth.
- The reason why ROE has been sluggish since FY 2005 is due to the slow growth of Net Profit Margin, the decline of Asset Turnover, and the flat financial leverage.
- When the escape from deflation becomes a reality, the key is to have products ready to pass on prices, and defense by cash alone is not sufficient for this purpose.
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