In today’s briefing:
- Toshiba (6502) – Whoop! There It Is!
- TOPIX Inclusions: Who Is Ready (Feb 2023)
- AGC (5201 JP) – A Big Buyback
- Ihara Science (5999 JP) Sees the Chairman Launch an MBO. I Might Expect Excitement.
- FANCL: The Flagship FANCL Brand in Trouble
- Ihara Science (5999 JP): JPY2,980 MBO Tender Offer
- Sumitomo Electric Industries (5802 JP) – LT Momentum Confirms Material Upside Potential in 2023
- Fujifilm: Robust Quarter; Recent M&A to Drive Healthcare and Materials Biz Further
- IIJ (Buy) – Q3 22 Results Reaction: Solid Quarter as Recurring Sales Expand
Toshiba (6502) – Whoop! There It Is!
- As mentioned yesterday here and more clearly by Mio Kato in Toshiba – Good News?, the Nikkei was strangely silent over the fact that loan details were agreed.
- The Nikkei comes out with a surprise article this morning saying they hear the Commitment Letter has been handed over. It also says the “Final Bid” is “about ¥2trln.”
- Toshiba shares quickly reacted badly quickly. The article deserves parsing and I try to clarify the arguments.
TOPIX Inclusions: Who Is Ready (Feb 2023)
- Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
- This insight is a follow-up to TOPIX Inclusions: Who Is Ready (Jan 2023)
- Our top pick from the last insight CELSYS (3663 JP) (previously known as Artspark) has gained ~14% in roughly a month.
AGC (5201 JP) – A Big Buyback
- AGC Inc (5201 JP) today announced Q4 earnings where revenues were great, OP was slightly disappointing, and Net Profits were awful because of significant impairments.
- The company, however, announced a large buyback – its first in 5 years and equivalent to all the buybacks in the previous five years.
- The buyback should have impact on what is an interesting name with broad institutional ownership and not overwhelming liquidity.
Ihara Science (5999 JP) Sees the Chairman Launch an MBO. I Might Expect Excitement.
- Ihara Science (5999 JP) announced an MBO by the chairman.
- It’s at an all-time high, but it is not especially attractive. The register is also really interesting.
- This is a smallcap but i would not be surprised to see a bumpitrage effort. In fact, I’d be surprised if we didn’t.
FANCL: The Flagship FANCL Brand in Trouble
- Fancl Corp (4921 JP) delivered 3QFY23 results yesterday, which saw revenue and operating profit decrease by 2.5% and 5.0% YoY respectively to ¥28.3bn (consensus ¥29.8bn) and ¥3.1bn (consensus ¥3.4bn).
- Cosmetics growth being the main reason for Fancl’s FY+2 EV/OP of 22.4x, recent trends look scary with cosmetics revenue and OP down 24% and 27% respectively from the pre-COVID level.
- Therefore, we would look to short Fancl expecting shares to fall around 25-30% in the short term.
Ihara Science (5999 JP): JPY2,980 MBO Tender Offer
- Ihara Science (5999 JP) has recommended an MBO tender offer (Chairman and Toku Corporation) of JPY2,980 per share, a 31.3% premium to the undisturbed price (7 February).
- The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 66.25% ownership ratio.
- While the tender price represents an all-time share price, it is light in comparison to peer and historical multiples. This suggests deal risk. The offer runs from 9 Feb-24 Mar.
Sumitomo Electric Industries (5802 JP) – LT Momentum Confirms Material Upside Potential in 2023
- At TMA we deliver high probability outcomes by focusing on our 3 pillars of technical analysis. •1) Response to key levels. •2) Price action. •3) Momentum confirmation.
- Q1 2023 is confirming that the base built around the historically significant 50 quarter MA since Q3 2021 is likely to be a material LT bottom.
- Both price action and LT momentum triggers (particularly the quarterly RSI) are confirming a sustainable LT uptrend in 2023 and potentially well into 2024. Potential 20% upswing.
Fujifilm: Robust Quarter; Recent M&A to Drive Healthcare and Materials Biz Further
- FUJIFILM Holdings (4901 JP) delivered 3QFY03/2023 results today. Revenue and OP increased 13.5% and 4.1% YoY respectively to JPY744.4bn (consensus JPY717.1bn) and JPY81.8bn (consensus JPY80.0bn).
- Covid-19 related projects running its course had a slight impact on healthcare segment but we would not be too worried as new product launches and markets will offset that decline.
- Market continues to value Fujifilm as an image company and not a healthcare stock and there is more than 30% upside to the current share price.
IIJ (Buy) – Q3 22 Results Reaction: Solid Quarter as Recurring Sales Expand
- IIJ delivered double-digit revenue growth for a third consecutive quarter as corporate demand for digitization remains robust
- In addition the expected expansion of cloud (+15%) and security service (+21%) sales, mobile sales grew 9% as IIJ moved clearly past the impact of industrywide rate reductions
- Quarterly EBITDA reached a record high even with modest margin contraction YoY
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