In today’s briefing:
- Nikkei the First to Crack
- Nippon Prologis REIT (3283 JP): Offering Could Be a Catalyst for Outperformance Vs Peers
- Daifuku (6383) | Attractive Valuation Drivers Despite near Term Risks
- A Profitable Japanese Microcap Trading at a 53% Discount to NCAV.
Nikkei the First to Crack
- Japan has been a top long in Asia, the rising wedge had us reducing our long. Friday saw a pronounced RSI bear wedge break and price crack.
- Japan faces rotation pressure into core Asia and will shift Japan into the bear camp on a muted recovery attempt.
- Japan’s macro cycle remains trapped in a sideways range. Buy support near 26,000 and sell resistance near 29,000.
Nippon Prologis REIT (3283 JP): Offering Could Be a Catalyst for Outperformance Vs Peers
- Japan’s largest logistics REIT Nippon Prologis Reit (3283 JP) (“NPR”) announced a US$170mn follow-on equity offering to fund their recent acquisition of three logistics facilities.
- The primary offer quantity will be 76,570 units out of which 44,410 units and 32,160 units are expected to be allocated for domestic and international investors, respectively.
- Below is a closer look at the details of this offering and the potential of this offering to trigger strong secondary market performance in the following weeks.
Daifuku (6383) | Attractive Valuation Drivers Despite near Term Risks
- Daifuku is a growth stock that has fallen by 26% YTD reflecting near term risks to growth and margins
- We believe that Daifuku is a major beneficiary of continued investment in automation, especially in e-commerce and logistics
- We analyse Daifuku’s core valuation drivers and see around 16% upside for the stock
A Profitable Japanese Microcap Trading at a 53% Discount to NCAV.
The cash comes from a one-off asset sale. CEL hasn’t been building cash on the balance sheet for years. While management has no intention of paying out the cash at present, they plan to use it for acquisitions. It won’t stay on the balance sheet for ever.
CEL’s operating business is not a great business, but it’s not terrible either. CEL earned an average of 15% pretax on capital employed over the last three years (FY20-FY22). The operating business earns above its cost of capital, is consistently profitable and ~40% of earnings are paid out as dividends.
Management has a lot of skin in the game. CEL’s founder and president, Masatsugu Shinno, owns 60% of the company, which aligns his interests with shareholders.
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