In today’s briefing:
- Oriental Land (4661) As Nikkei 225 Candidate – What Is Float? What Is “The Tricky Twist”?
- TOPIX Index Upweights: An Early Preview Of “The Big April Basket” 2023
- Softbank Group (Neutral) – Japan’s Global Tech Play: Initiation of Coverage and Q3 Preview
- Omron (6645) | Q3 Beat, New Management Team
- Sky Perfect JSAT (Buy) – Q3 22 Results Reaction: Satellite Growth Offsets Media Weakness
- Could the Turnaround Be Due to a Change in Management?
Oriental Land (4661) As Nikkei 225 Candidate – What Is Float? What Is “The Tricky Twist”?
- As discussed in Nikkei 225 March Review – Quiddity Leaderboard (Jan 2023) (and earlier versions), Oriental Land (4661 JP) is a candidate to join the Nikkei 225 in March 2023.
- As of early January, it was the top-ranked impact name with 11.8 days of ADV to buy, and if it underperformed the Nikkei from there, there’d be more to buy.
- With the data collection period now complete, it is top-ranked, still. And it is still ~10-12 days to buy. Understanding shareholder structure, however, is key. So I dive in.
TOPIX Index Upweights: An Early Preview Of “The Big April Basket” 2023
- The Tokyo Stock Exchange (TSE) calculates Free-Float Weight (FFW) for each listed company and uses this value as a key component of TOPIX Index Calculation.
- For companies with “low liquidity” the FFW will be multiplied by a fixed liquidity factor of 0.75 to derive the final FFW used for index calculation.
- Every April, the application of this liquidity factor is reviewed by the TSE. In this insight, we take an early look at what could happen in April 2023.
Softbank Group (Neutral) – Japan’s Global Tech Play: Initiation of Coverage and Q3 Preview
- In this deep dive report, we initiate coverage on Softbank Group with a ¥6,300 target price and Neutral recommendation
- We are cautious on global tech and consider that the main risk to the story but a recovery in China sentiment provides some offset
- For Q3 results next week, we expect the defensive theme of the last two quarters to continue
Omron (6645) | Q3 Beat, New Management Team
- We expected the market to react positively to the Q3 beat. There are clouds on the order horizon, but that is well-known
- A big management shuffle was also announced. We think the new CEO and CFO will follow the same LT Vision, but need to do more to meet rising capital costs
- Our core bullish thesis rests on growth in Industrial Automation. As expectations for interest rate hikes fade, we think investors will start to price in a 2023/4 order recovery
Sky Perfect JSAT (Buy) – Q3 22 Results Reaction: Satellite Growth Offsets Media Weakness
- As expected space segment revenue growth accelerated as global/mobile sales took off offsetting media revenue erosion
- User trends in the video business remain weak although Q3 subscriber losses improved QoQ despite this being the seasonally weakest quarter
- We are leaving our forecasts unchanged and remain at Buy
Could the Turnaround Be Due to a Change in Management?
- Fujikura and JVC Kenwood, which could generate cash flow by restructuring their business portfolios, were evaluated as “value stocks” due to the gap between their corporate value and stock prices.
- Fujikura and JVC Kenwood haven’t posted record profits in 17 and 11 years, respectively. The key to solving why it took so long may be the change in top management.
- If management doesn’t listen, structural reforms won’t be implemented, even if shareholders repeatedly suggest restructuring business portfolio. This is why it’s important for shareholders to replace management that continues underperforming.
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