In today’s briefing:
- Seven & I: An Update on Investor Activism
- EQD | Nikkei 225 (NKY) Rising but for How Long?
- The Essence of the Matter Is the Low Return on Cash Flow Generated by the Company’s Business
- 2Q Follow-Up – Frontier Management Inc. (7038 JP) – Aug. 23, 2023
Seven & I: An Update on Investor Activism
- Sogo & Seibu’s labor union threatens strike if job protection talks stall. This emphasizes the number of considerations Seven & I Holdings (3382 JP) had to consider during changes.
- Had ValueAct shown more patience, they might have worked with Seven & I to improve the struggling Eto Yokado supermarkets business.
- Thus, ValueAct’s investor activism campaign seem unlikely to achieve a full restructuring of underperforming businesses at Seven & I.
EQD | Nikkei 225 (NKY) Rising but for How Long?
- Rebound on Nikkei 225 INDEX may not last for long, 2-3 weeks tops, it will encounter resistance no later than mid of September (most unfavorable month for stocks gains).
- Resistance levels to watch vary, depending on number of weeks up. For this week and the next, a new pullback could start from 32476 and 32817.
- If the index goes =>33000, it means it is rallying and will not correct into September, the rally then could last into October.
The Essence of the Matter Is the Low Return on Cash Flow Generated by the Company’s Business
- It’s necessary to clearly present cash allocation policy to investors and communicate with them, but unless this policy is convincing and feasible, investors cannot envision an increase in corporate value.
- Companies that use ROE or ROIC as KPIs and disclose their cost of capital are still limited. The low return on cash flow may be the reason behind this.
- As TOPIX is correlating more rapidly with nominal GDP than with P/B after 2020, there’s increasing need to communicate to investors that free cash flow will grow through cash allocation.
2Q Follow-Up – Frontier Management Inc. (7038 JP) – Aug. 23, 2023
- In 2Q, net sales rose 26%, operating profit rose 28%, and net profit rose 46%.
- The strong growth in net profit is attributed to the absence of the loss on valuation of investment securities recorded in the previous year.
- Management Consulting business continued to perform well with sales rising 16%.
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