Daily Brief Japan: Sun Corp, SCREEN Holdings, Dentsu Inc and more

• The reason why Sun Corp (6736 JP) has traditionally traded at a large discount to its potential outcome is the possibility of inefficient or delayed value realisation. 
• Materially ALL of the value of the company is in its holding in Cellebrite DI (CLBT US). True Wind Capital, the SPAC sponsor of CLBT, just bought 19% of SunCorp. 
• They bought that for the CLBT, or the value realisation thereof. And now with the slightly surprising Tender Offer result, the chances of a better outcome are now higher.

• Screen has rebounded from its recent low, but strong 1H results, the recent weakening of the Yen and reasonable valuation point to further short-term upside. 
• However, management is guiding for slightly lower operating profit in 2H, and Intel’s capex cuts also support a cautious outlook. 
• Screen expects slower growth in 2025 wafer fab equipment demand than SEMI, and neither appear to have factored in concern over insufficient return on investment in AI. 

Dentsu’s H124 figures show sequential quarterly improvements, with the group posting organic growth of 0.2% in Q2. Encouragingly, this is in part ascribed to improved pitch win rates in all four reporting regions, underpinning growth projections through H224 and into FY25, despite the persistent difficult macroeconomic backdrop. The One dentsu initiative is driving collaborative efforts across group capabilities and geographies and we expect this to be at the heart of the new medium-term strategy, to be unveiled in H2. In the meantime, the Business transformation (BX) offering is proving effective in Japan and is now to be rolled out more widely. The shares continue to be valued well below peers and we would expect this discount to narrow with improving operational performance.