In today’s briefing:
- March 2024 Nikkei 225 Rebal – Socionext, Disco and a Consumer Goods Stock (Ryohin Keikaku?) To ADD
- Ueda’s BOJ Looking Like Ueda’s Pre-BOJ Opinions, but Normalisation Is “A Work in Progress.”
- Fanuc (6954) | Not Out of the Woods Yet
- Alfresa Holdings (2784 JP): Better-Than-Expected H1FY24 Performance; FY24 Guidance Raised
- Fewer TOPIX Remaining Companies Show the Difficulty of Producing Convincing Disclosures
March 2024 Nikkei 225 Rebal – Socionext, Disco and a Consumer Goods Stock (Ryohin Keikaku?) To ADD
- In March 2024 Nikkei 225 Rebal – Look for Zozo, Ryohin Keikaku, and Maybe a Socionext Split I suggested Socionext (6526 JP) needed a stock split to get in.
- Today after the close, Socionext reported H1, guided up full-year earnings (still too conservative), raised its div, and announced a 5:1 stock split for Jan1 2024.
- DISCO Corp (6146 JP) is now likely to be a top 75, which leaves the question of which Consumer Goods stock would likely be added.
Ueda’s BOJ Looking Like Ueda’s Pre-BOJ Opinions, but Normalisation Is “A Work in Progress.”
- In July the BOJ lifted the YCC range to allow flexibility at 0.5% and a red line at 1.0%. Today it moved the “reference” to 1.0% with no red line.
- This allows 10yr yields to move higher, but the Board’s insistence on negative rates and YCC staying in place tells you steeper for longer makes shorting long JGBs tough.
- The move today helps encourage the market mechanism to take control of dampening volatility, the same way it did when the BOJ stepped away from ETF buying in 2021.
Fanuc (6954) | Not Out of the Woods Yet
- Q2 2023 results for FANUC Group showed a 3.7% decrease in consolidated net sales, a 24.5% drop in consolidated operating income, and mixed performance in its divisions.
- Some positives: operating profit exceeding analyst expectations and an operating margin increase to 17.2%. However, declining robot orders, challenges in the US region, and high inventory remain concerns
- We believe that the stock is currently trading around fair value (20x EV/EBIT). However, we still see risks to the downside given macro concerns
Alfresa Holdings (2784 JP): Better-Than-Expected H1FY24 Performance; FY24 Guidance Raised
- Alfresa Holdings (2784 JP)‘s H1FY24 revenue, operating profit, and net profit are expected to exceed the previous expectations due to greater-than-expected growth in the ethical pharmaceuticals business.
- Encouraged by the growth in the pharmaceutical market and better-than-expected H1FY24 performance, the company has raised FY24 revenue, operating profit, and net profit guidance by 4%, 30%, and 36%, respectively.
- New FY24 guidance implies, H2FY24 revenue run-rate will be similar to H1F24, while H2FY24 operating profit will accelerate to ¥20.1 billion from ¥15.9 billion in H1FY24.
Fewer TOPIX Remaining Companies Show the Difficulty of Producing Convincing Disclosures
- 439 companies that will be excluded from TOPIX aren’t expected to face further selling pressure, but 43 companies that remain in TOPIX may have a positive impact in the future.
- Only 43 companies (8.9%) succeeded in exceeding 10 billion yen in tradable market capitalization; compared to 22.3% rise in TOPIX, the stock performance of the TOPIX exclusion candidates were lackluster.
- These companies with small market capitalizations represent a challenge that has made it difficult for them to attract investor attention and to come up with convincing disclosures.
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