In today’s briefing:
- Roland DG (6789 JP): Taiyo Bumps as Brother (6448 JP) Now Faces a Dilemma
- EQD | Nikkei’s Downtrend Could Continue in May (But the Bottom Is Near)
- Last Week in Event SPACE: HK Southbound, Jardine Cycle, Keisei/Oriental Land, BHP/Anglo American
- Few Companies Have Started to Move Yet, but Can They Raise R & D Investment to Regain Pricing Power?
Roland DG (6789 JP): Taiyo Bumps as Brother (6448 JP) Now Faces a Dilemma
- Roland DG Corp (6789 JP) has re-recommended Taiyo’s revised offer of JPY5,370, which is 6.7% higher than its previous JPY5,035 offer and 3.3% higher than Brother Industries (6448 JP)’s JPY5,200 offer.
- The Board articulates a compelling case on Brother’s offer dis-synergies, which will help swing some shareholder opinion towards Taiyo (irrespective of the price).
- Brother could bump, but it would not address the issue of satisfying the condition precedent (non-completion of Taiyo offer) and securing the Board’s recommendation.
EQD | Nikkei’s Downtrend Could Continue in May (But the Bottom Is Near)
- The Nikkei 225 (NKY INDEX) is closing the month of April in negative territory, first month down after 3 months up.
- Our seasonal model indicates that May could also close down, but the index should find strong support in the 37770-36750 price area.
- The month of May is a coin flip: the index could close up or down, caution is advised.
Last Week in Event SPACE: HK Southbound, Jardine Cycle, Keisei/Oriental Land, BHP/Anglo American
- The CSRC has announced five capital market cooperation measures for the Hong Kong Southbound Connect programs including RMB dual counters and REITs.
- Jardine Cycle & Carriage (JCNC SP)‘s current implied stub value and simple ratio are both highly elevated.
- A simple Keisei Electric Railway Co (9009 JP)model says “this doesn’t present me with enough upside to warrant it unless I am also really bullish Oriental Land (4661 JP).”
Few Companies Have Started to Move Yet, but Can They Raise R & D Investment to Regain Pricing Power?
- Asset Turnover and ROA deteriorated as a result of accumulating cash on hand rather than investing. There was also insufficient R&D to create products that could have stronger pricing power.
- Conditions are ripe for investment expansion, as demand for equipment replacement is rising due to long-standing CapEx restraints, and there is no need to accumulate more cash.
- Companies are now in the stage of raising return on capital to increase reinvested cash flow from the stage of temporarily increasing earnings through price pass-through.
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