In today’s briefing:
- Sep24 Nikkei 225 Rebal – Still 1 ADD (Ryohin Keikaku), 1 DELETE, and 1 Very Large Very Dark Horse
- Kansai Food Market (9919) Minorities Get Squeezed into H2O Retailing (8242)
- Mitsui E&S – Near Record ROE as Profit Continues to Expand From Multiple Drivers
- Eisai Co Ltd (4523 JP): Leqembi Is Gathering Momentum; Imminent Competition May Spoil the Party
- Nissin Corp (9066) – A Dirt Cheap $400m JP Logistics Company…
- Tokyo Communications Group (7359 JP) – Actively Pushing to Become a Digital Business Conglomerate
- HTCR: HeartCore reports 1st quarter 2024 results and updates investment community on current operations.
- Nippon Paint (4612 JP): Strong 1Q24; Overlooked Proxy For China Property
Sep24 Nikkei 225 Rebal – Still 1 ADD (Ryohin Keikaku), 1 DELETE, and 1 Very Large Very Dark Horse
- The Sep 2024 Nikkei 225 Review data set is mostly done, and one can interpolate results relatively accurately. It still leaves us with one ADD, one DELETE, and capping fun.
- Recently, Yanai-san sold more Fast Retailing (9983 JP). There is more Real World Float- more active holders own more stock (which may mean less interest to buy later).
- There is a dark horse candidate which is on investor radar for other reasons. It would not be out of the question, but the precedent is old, and different.
Kansai Food Market (9919) Minorities Get Squeezed into H2O Retailing (8242)
- Two and a half years ago, H2O Retailing (8242 JP) the 10.9% owner, arranged to merge its own units into Kansai Super Market (9919 JP) to get control. OK Corp complained.
- OK Corp offered to double the price in a Tender Offer but wouldn’t go hostile. KSM/KFM said no go. Shares popped to ¥2,000+ then when the deal failed, they fell.
- H₂O ended up with 58% (64.9% of votes now). The ultimate goal was to swallow it paying zero premium. On 15 May, it announced the merger to do just that.
Mitsui E&S – Near Record ROE as Profit Continues to Expand From Multiple Drivers
- Profit continues to expand at Mitsui E&S after its transition to a holding company, now reporting over 400% profit growth for 9 months YTD.
- The company is doing well to keep its operating costs down, with an improving funding structure and balance, as its revenue grows more than COGs.
- We wonder if there will be more revisions upward to profit, with new initiatives and with a more proven recent track record.
Eisai Co Ltd (4523 JP): Leqembi Is Gathering Momentum; Imminent Competition May Spoil the Party
- Eisai Co Ltd (4523 JP) has guided for FY25 Leqembi revenue of ¥56.5B (~$366M), with ¥43.5B from U.S., and ¥10.0B from Japan. In FY24, Leqembi reported worldwide revenue of ¥4.2B.
- Leqembi is expected to grow significantly due to increase in prescriptions following the progress in the development of AD diagnosis and treatment pathways in the U.S. and Japan.
- The current rally can be short lived, as the competitor drug is expected to get FDA approval in 3Q24.
Nissin Corp (9066) – A Dirt Cheap $400m JP Logistics Company…
- Nissin Corp (TYO 9066) bought back 23.6% of their outstanding shares in a single day on May 10th and also doubled their dividend.
- The result? The stock went up about 39% (up 72% YTD).
- I already had a full sized position in Nissin Corp and despite being up big on it I added to my position at ¥4,265.
Tokyo Communications Group (7359 JP) – Actively Pushing to Become a Digital Business Conglomerate
- Tokyo Communications Group’s core businesses currently include its Media business, where it plans and develops free game apps for smartphones and uses a portion of the app’s screen space to generate advertising revenue, and its Platform business, where it operates a consultation service based on a pay-as-you-go model.
- The company also functions as an investment company with the aim of achieving company-wide growth while diversifying risks by allocating the cash flow generated by these core businesses into various promising digital businesses.
The company’s main business at the time of its founding consisted of developing and operating free game apps for smartphones.
HTCR: HeartCore reports 1st quarter 2024 results and updates investment community on current operations.
- HeartCore Enterprises is an established software development and consulting company based in Tokyo, Japan and operates in five core offerings and solutions.
- These include 1) Content Management in which the core product is HeartCore CMS, 2) Digital Transformation which includes Controlio, myInvenio, Apromore and HeartCore Robo, 3) GO IPO, a consulting service that helps Japanese companies prepare for a U.S. Nasdaq public listing, 4) Sigmaways, that specializes in infrastructure modernization, and 5) other revenues.
- We believe the company is poised for strong growth due to its entry in the U.S. market and solid results from the Go IPO offering.
Nippon Paint (4612 JP): Strong 1Q24; Overlooked Proxy For China Property
- According to public news, China is considering asking local governments to purchase significant amount of unsold homes in the country.
- Nippon Paint Holdings (4612 JP) is a good proxy for exposure to China property with downside protection.
- China made up 40% of Nippon Paint’s operating profit (1Q24 numbers). Nippon Paint is the absolute leader in decorative paint in China, with 25% market share in 2023 (TUC).
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