In today’s briefing:
- Nikkei 225 Sep 2023 Rebalance Gets Interestinger – Possible Fast Retailing Cap and Zozo Stretch
- Rakuten Bank IPO: First Day Trading
- Money Forward: Lower S&M Spending in 1Q Drives Losses Down
- Maintaining Labor Productivity by Cutting Working Hours Was Effective but Risks Should Be Considered
- Seven & I: The Biggest Barrier to Change Has Gone
Nikkei 225 Sep 2023 Rebalance Gets Interestinger – Possible Fast Retailing Cap and Zozo Stretch
- With 3.5 months left in the dataset, the data is pretty close to settled. The interesting bits are elsewhere. There are three auto DELETEs and two auto ADDs. Maybe.
- One auto-ADD is Toshiba, which may have a deal on it. That leaves two to add for sector balance. That could be Nitori (9843 JP) and Zozo (3092 JP).
- Friday’s move on Fast Retailing brings in the issue of the new capping function. That would be a different US$2bn selldown. Lots of gory details here.
Rakuten Bank IPO: First Day Trading
- It appears that Rakuten Bank (5838 JP) received a significant number of subscriptions at the revised offer range, leading the company to set the IPO price at ¥1,400 per share.
- The grey market trading suggests that shares are currently trading close to the lower end of the previous IPO price range, indicating a potential upside of 20% on the debut.
- The IPO has potential to rise beyond 20% on debut. However, in the event that it does not pop more than 100%, we would looking to buy more shares.
Money Forward: Lower S&M Spending in 1Q Drives Losses Down
- MF reported 1QFY11/2023 results on Friday. Revenue increased 43.0% YoY to ¥6.8bn (vs consensus ¥6.5bn) while operating losses dropped to ¥1.59bn vs ¥1.65bn in 1QFY11/22 (vs consensus ¥2.0bn).
- The company’s S&M spending is the lowest during first quarter of the year, which drove losses down. However, the company has guided for higher S&M spending in 2Q.
- Our analysis on Money Forward (3994 JP) BO SAAS vs Non-BO SAAS shows that non-BO businesses’ GPM has continued to decline suggesting that these non-BO businesses only help inflate revenues.
Maintaining Labor Productivity by Cutting Working Hours Was Effective but Risks Should Be Considered
- Many companies have worked to ensure labour productivity by curbing personnel costs by reducing work hours and shifting from full-time to part-time workers, as well as by controlling depreciation.
- Maintaining labor productivity by converting to part-time and reducing working hours of full-time employees has been an effective measure to ensure operating profits margins, but it also carries risks.
- Personnel cost/sales have bottomed out in 2018 and are on the rise. With cost structures changing dramatically after the economic reopening, controlling labor costs will be more difficult than ever.
Seven & I: The Biggest Barrier to Change Has Gone
- Seven & I has announced major restructuring of its struggling Ito-Yokado GMS chain – a company that big investors have long demanded be sold off entirely.
- The latest round of cuts had to wait until the company’s founder finally passed away, although are likely not going to be the last.
- Seven & I has long had a coherent plan to rationalise – but was just waiting for the founder to pass – with a series of disposals now likely.
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