In today’s briefing:
- MODEC (6296 JP): The Current Playbook
- JAPAN ACTIVISM: Murakami Now 29% of Mitsui Matsushima. Activism? Or Effort to Make Murakami Listco
- Japan Post Insurance – Weakening Policies In Force and Meaningful Hits from Non-Operational Items
- Investors Still Do Not Trust the Profit Margin Improvement in the Mid-Term Management Plan
- Onward to Omnichannel
MODEC (6296 JP): The Current Playbook
- Since the US$535 million secondary placement announcement, Modec Inc (6269 JP)’s shares are down 15% from the undisturbed price of JPY3,320 per share (14 May).
- Looking at recent large Japanese placements is instructive to understand the potential trading pattern. So far, Modec’s shares have followed the pattern of previous large placements.
- The offering will likely be priced on 22 May. Investors who have participated in previous large Japanese placements tend to secure positive returns.
JAPAN ACTIVISM: Murakami Now 29% of Mitsui Matsushima. Activism? Or Effort to Make Murakami Listco
- Noted Japanese activist MURAKAMI Yoshiaki and his entities and relations went from 4.98% to 19.88% of Mitsui Matsushima (1518 JP) at an average ¥3,500/share from 2 May through 10 May.
- Then they bought an additional 5.44% on 13 May, just before earnings, in the midst of a huge run-up, paying 40% more for that 5% than the first 5%.
- I thought that might be the end, but in two days, they have bought an additional 9+%. There is something else going on. It is worthy of your attention.
Japan Post Insurance – Weakening Policies In Force and Meaningful Hits from Non-Operational Items
- Japan Post Insurance (7181 JP) shows us that worsening policies in force is far more important to earnings than staggering growth of new policies.
- Returns and profit growth are weak and this should matter more than a puritanical focus on new policies, embedded value.
- Non-Operational line items, likely hedging costs and reserve adjustments, are cancelling out most all positives in operations.
Investors Still Do Not Trust the Profit Margin Improvement in the Mid-Term Management Plan
- Since shareholder proposals related to “TSE requests” are unlikely to be passed at the AGM, many companies are likely to have capital profitability improvement plans that merely indicate effort targets.
- The outperformance of TOPIX by the company that announced the medium-term management plan can be attributed to the short-term outperformance of the company that announced the share repurchase.
- Investors don’t trust the contents of “mid-term management plan” because they are focusing on more reliable shareholder return rather than betting on improving operating margins over the uncertain three-year horizon.
Onward to Omnichannel
- Until recently, Onward Holdings looked set for a gradual decline into insignificance like its main channel of regional department stores.
- But Onward has instead become an exemplar of how to make omnichannel retailing work, with growing sales across both online and a burgeoning new store network.
- Like some other old apparel firms, Onward is showing that there is significant upside top and bottom line growth in premium apparel markets.
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