In today’s briefing:
- Renault & Nissan “Agree” On New Terms – A Diet Nothing🍔, Exchangeable into Shaq Fingerguns
- TOPIX Inclusion: AXXZIA Inc (4936 JP) – Time to Take Profits
- JPX-Nikkei 400 Rebal 2023: End-Jan 2023
- Japanese Department Stores: An Opportunity to Trade FQ3 Earnings This Week
- NEC (6701) | Strong Network Revenues
- Nihon M&A: Weak Earnings and Guidance for Full-Year Seems Too Optimistic
- Tobila Systems: A Deep-Dive View
Renault & Nissan “Agree” On New Terms – A Diet Nothing🍔, Exchangeable into Shaq Fingerguns
- Today, a Nikkei article suggested (after other media suggested last week) that Renault SA (RNO FP) and Nissan Motor (7201 JP) have come to agreement about their new deal.
- Post-Close, an announcement. Two striking things about this “agreement” a) it comes many months after they started negotiating, and b) we have few details, and c) we’re missing a bit.
- Renault agrees to cap voting rights in Nissan. Nissan agrees to invest in RNO’s EV spinoff, and so far, they agree to strengthen the Alliance. What’s missing is interesting/key.
TOPIX Inclusion: AXXZIA Inc (4936 JP) – Time to Take Profits
- Japan-Based skincare and cosmetics maker AXXZIA Inc (4936 JP) announced on 9th November 2022 they were planning to move from TSE Growth to TSE Prime.
- Travis Lundy was Bullish on this name as he discussed in AXXZIA (4936 JP) – TOPIX Inclusion Is Likely In February and the stock has gained around 12% since then.
- Today after the close, AXXZIA Inc (4936 JP) announced they had received the approval for their Prime Market move in February which could lead to a TOPIX Inclusion in March.
JPX-Nikkei 400 Rebal 2023: End-Jan 2023
- JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents.
- A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. We look at the potential forward inclusions and removals every month.
- Below is a look at potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to come in August 2023 based on trading data as of end-January 2023.
Japanese Department Stores: An Opportunity to Trade FQ3 Earnings This Week
- Two of the biggest department store chains in Japan, H2 O Retailing (8242 JP) & Isetan Mitsukoshi Holdings Ltd (3099 JP) are set to disclose FQ3 earnings this week.
- The ones with FQ3 ending in November, J Front Retailing (3086 JP) and Takashimaya (8233 JP) surprised to the upside with 6% and 8% price gains on earnings.
- Our analysis indicates that H2O Retailing & Isetan Mitsukoshi could deliver stronger FQ3 results. Thus, we would look to trade Japanese Department Stores before earnings this week.
NEC (6701) | Strong Network Revenues
- We remain bullish on NEC as we believe that the company is one of the key beneficiaries of the shift to standalone 5G
- NEC’s Network Services registered double-digit revenue and profit gains in Q3 on the back of growth in 5G equipment sales and IP income.
- We believe that the current share price (+4% over the past 12m) and valuation (10x PE, 0.8x PB) do not reflect the positive mid-term outlook
Nihon M&A: Weak Earnings and Guidance for Full-Year Seems Too Optimistic
- Nihon M&A Center (2127 JP) reported 3QFY03/2022 results. Revenue declined 9.9% YoY to JPY9.8bn (vs consensus JPY13.6bn) while OP dropped 21.9% YoY to JPY3.2bn (vs consensus JPY6.1bn).
- Though there had been an increase in the no. of transactions completed during the quarter, revenue declined due to price pressures.
- Share price has declined 22.8% during today’s trade due to weaker-than-expected earnings and we think full-year FY03/2022E guidance is too hard to achieve.
Tobila Systems: A Deep-Dive View
- This is our second Insight into Tobila Systems – the absolute dominator in the niche of fraud/spam call and message filtering services in Japan;
- We like the high-quality, unique assets owned by the company, although capital allocation appears to stand out as a wild card in our formula of long-term shareholder-value creation;
- At the current level, we would hold the shares firmly and wait patiently for more opportunistic offerings from Mr. Market to accumulate more shares.
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