In today’s briefing:
- Japanese Regional Banks – Three Key Positive Picks
- Japan Governance | Will Reforms Unlock Valuations
- Shift: Market Overreacts to Temporary Dip in Earnings
Japanese Regional Banks – Three Key Positive Picks
- We explore twelve Japanese regional banks to look for key beneficiaries of the improving interest rate outlook, along with valuations, credit quality and capital adequacy
- The global interest rate outlook is in some flux, with the Fed’s and ECB’s prospects of near-term easing being tempered; this should support Japanese JGB yields and domestic bank valuations
- We are positive on three banks that are big beneficiaries of rising domestic interest rates; top pick Tokyo Kiraboshi Financial, Gunma Bank and higher risk option Suruga Bank
Japan Governance | Will Reforms Unlock Valuations
- Reforms Drive Improvement: Japan’s corporate reforms, catalyzed by governance codes and TSE pressure, are fostering capital efficiency, shareholder value, and long-term equity gains.
- “Name and Shame” Initiative Impact: TSE’s disclosure initiative reveals 54% of Topix 500 companies enhancing capital efficiency, with early indications suggesting positive longer-term performance trends.
- Future Alpha Opportunities: Expectation of increased disclosure in the coming months, particularly from proactive companies; potential for market surprises from obstructive firms trading below book value.
Shift: Market Overreacts to Temporary Dip in Earnings
- Shift Inc (3697 JP) reported 1QFY08/2024 results last week. Revenue and OP increased 29.5% and 0.4% YoY to ¥25.1bn and ¥1.8bn respectively.
- Both revenue and OP were below consensus estimates which triggered a more than 25% drop in Shift’s share price over the last 5 days.
- We think the weaknesses in the company’s 1Q earnings were temporary and we expect the company’s earnings to show recovery going forward
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