In today’s briefing:
- Rakuten Securities IPO: The Bear Case
- Japan Watch: The pros and cons for Ueda
- Screen Holdings (7735 JP): Export Restrictions Add to Uncertainty
- Oriental Land: A Potential Beat Next Quarter, but Unrealistic Consensus for Long-Term
- Santen Pharmaceutical (4536 JP): Aims to Ride Patent Cliff Through Focus on Improving Profitability
Rakuten Securities IPO: The Bear Case
- Rakuten Securities (RAKUSEC JP), a leading Japanese online brokerage, seeks to raise US$500 million. Rakuten Group (4755 JP) (80.01%) and Mizuho Financial Group (8411 JP) (19.99%) are its shareholders.
- In Rakuten Securities IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
- The key elements of the bear case rest on rapidly slowing operating revenue and commissions growth, lowest per-account monetisation rates vs peers and mid-tier profitability.
Japan Watch: The pros and cons for Ueda
- The JPY market is one big roller-coaster at the moment as the market constantly tries to sniff out potential clues on when the Bank of Japan will catch up to the rest of the G10 central banks with a tighter policy.
- In this piece, we look at the pros and cons of moving already this Friday for the Bank of Japan, but let’s take a look at the current back-drop before we move to the actual policy decision.
- Markets started pricing in an elevated risk of a further increase to the yield-curve-control cap on Friday after a spike in wage data three weeks ago.
Screen Holdings (7735 JP): Export Restrictions Add to Uncertainty
- Japan’s new restrictions on exports of semiconductor production equipment to China are a potential threat to Screen.
- TSMC’s announcement that 2023 capex is likely to be at the low end of the forecast range is another negative.
- Share price consolidation should continue until guidance is lowered or verified.
Oriental Land: A Potential Beat Next Quarter, but Unrealistic Consensus for Long-Term
- There is a possibility that Oriental Land (4661 JP)‘s revenue and OP in 1QFY24 could surpass the consensus estimates by 8% and 21%, respectively.
- However, the outlook for the next three quarters may be different, as consensus appears inflated with annual OP expectations of ¥154.5bn compared to the company’s guidance of ¥122bn.
- We find medium term consensus expectations unrealistic, leading to potential downside for Oriental Land. We expect FY+2 EV/OP to decline from 46x to 20-30x.
Santen Pharmaceutical (4536 JP): Aims to Ride Patent Cliff Through Focus on Improving Profitability
- Santen Pharmaceutical (4536 JP) expects generic competition for mainstay product in Japan in FY24, while overseas business should continue stable growth. The company guided for FY24 revenue of ¥273B (-2%).
- Due to the absence of impairment loss, Santen is expected to report operating profit of ¥32B in FY24 from an operating loss of ¥3B in FY23.
- Santen has unveiled new medium-term management plan, which calls for revenue of ¥280B, core operating profit of ¥56B, core ROE ratio of 13%, and core EPS growth rate of 10%+.
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