In today’s briefing:
- Seven & I: ValueAct’s Proposals Unlikely to Be Considered, Investor Activism Effectively Over
- Amvis Holdings Inc (7071 JP): Strong H1FY23 Result; FY23 Guidance Unchanged; Expansion Continues
- Intelligent Wave Inc. (4847 JP) – 3Q Follow-Up
- Cash Flow Return Is Necessary Condition for Higher Stock Valuations; Shareholder Return Is Byproduct
- Japan Remains Leadership; Actionable Pullback in Europe; Downgrading China/Hong Kong
Seven & I: ValueAct’s Proposals Unlikely to Be Considered, Investor Activism Effectively Over
- Last week, shareholders of Seven & I Holdings (3382 JP) rejected all four of the board nominees proposed by ValueAct.
- ValueAct, seeing their higher vote count as a modest success, sent a letter to Seven & I, requesting a resumption of discussions despite the failed attempt to remove senior leadership.
- We think the company is unlikely to seriously consider Value Act’s proposals any longer, indicating the end of the investor activism campaign.
Amvis Holdings Inc (7071 JP): Strong H1FY23 Result; FY23 Guidance Unchanged; Expansion Continues
- Amvis Holdings Inc (7071 JP) recorded 42% revenue growth to ¥14.7B in H1FY23, driven by 33% increase in bed capacity and stable utilization rate. Operating profit grew 37% to ¥3.9B.
- The company has guided for FY23 revenue of ¥30.7B (+33% YoY), operating profit of ¥7.9B (+28% YoY), and net profit of ¥5.4B (+26% YoY).
- Amvis announced plans to open 16 facilities, steadily progressing to achieve the target of opening 23 facilities in FY24. The company targets utilization rate of 82–85% for existing facilities.
Intelligent Wave Inc. (4847 JP) – 3Q Follow-Up
- IWI held an in-person briefing for 3Q FY23/6 results on Friday, May 12 at the Securities Analysts Association of Japan Kabutocho Heiwa Bldg. Annex 3F, which was also livestreamed via IR.
- Stock Investment Information portal site Bridge Salon.
- In SIR’s opinion, this 3Q results presentation hosted by IWI’s CEO and Representative Director Kunimitsu Sato was the most upbeat since he assumed office in Sep-2020.
Cash Flow Return Is Necessary Condition for Higher Stock Valuations; Shareholder Return Is Byproduct
- The most important factor in increasing stock valuations is overseas investors, and a clue can be found in exploring what kind of companies they tend to invest in.
- It is a company with high cash holdings and a high growth policy score, i.e., a company that generates ample cash flow. This should be considered a necessary condition.
- As foreign ownership increases, shareholder returns such as share buybacks will also be implemented to review cash allocations and improve board practices, so these can be considered byproducts.
Japan Remains Leadership; Actionable Pullback in Europe; Downgrading China/Hong Kong
- There continues to be little traction above $93 on the MSCI ACWI (ACWI-US), which remains the top-end of our anticipated 2023 trading range.
- At the same time, we cannot get too bearish until there is a break below $90.50 short-term support.
- EURO STOXX 50 pulling back to 4100-4200 buy area. TOPIX holding above 2120 support. Buy ideas within Technology, Construction Materials, gold miners, Utilities, other defensives.
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