In today’s briefing:
- Toshiba (6502) Update – No Longer Worthwhile to Be Short Toshiba Vs Peers
- FTSE EPRA Nareit Developed Asia Preview: A Few Inclusion Possibilities
- Oriental Land: Consensus Is Not in Touch with Reality
- Fanuc (6954 JP) | Lights Out in China
- Japan Transport: Japan Airlines (Long) Vs ANA Holdings (Short)
Toshiba (6502) Update – No Longer Worthwhile to Be Short Toshiba Vs Peers
- Since late June when I recommended to not be long Toshiba vs Peers, Toshiba has fallen 9.5% vs Peers (-6% on its own and an equal-weighted Peer Basket is +3.9%).
- If one assumes the likelihood of a privatisation has not gone down, and the likely takeout price is the same, back-end adjusted, probability-adjusted IRRs are up 6-8%, to decent levels.
- This changes my recommendation from Bearish to Probability-Adjusted Bullish, but it is nuanced, and it is still a range trade.
FTSE EPRA Nareit Developed Asia Preview: A Few Inclusion Possibilities
- The FTSE EPRA Nareit Index September rebalance will use data from 22 August. The changes will be announced on 31 August and implemented at the close on 16 September.
- Healthcare & Medical Investment Corporation (3455 JP) is a potential inclusion, while there are a few others that are close adds on market cap & other criteria.
- Healthcare & Medical Investment Corporation (3455 JP) is also an inclusion to the FTSE All Cap Index at the September rebalance and the EPRA Nareit inclusion will increase passive inflows.
Oriental Land: Consensus Is Not in Touch with Reality
- With Q1 park attendance falling short of expectations, it seems unlikely that Oriental Land (4661 JP) will beat FY23 guidance as expected by consensus.
- The consensus medium outlook is also questionable as the management seems less keen on opening Fantasy Springs as soon as possible.
- At over 29.2x EV/consensus FY27 OP (56.5x at LSR-FY27-OP), on exaggerated medium-term growth targets, Oriental Land probably has more downside than some of the expensive tech names on the market.
Fanuc (6954 JP) | Lights Out in China
- Machine tool orders have recorded 20 consecutive months of growth – we expect a turn in cycle and remain bearish
- Expectations for gradual recovery as China recovers from lockdowns, but power-saving measures are a new risk
- Weak end demand for mobile, PC, and consumer electronics are likely to foreshadow capex cuts in 2023
Japan Transport: Japan Airlines (Long) Vs ANA Holdings (Short)
- Momentum has favored Japan Airlines’ share price vs ANA Holdings this year and we expect this outperformance to continue in the short term (next 3-6 months).
- So our pair trade involves going long Japan Airlines (9201 JP) and going short on Ana Holdings (9202 JP).
- Four major reasons why we like Japan Airlines vs ANA Holdings include: a) better valuations, b) higher EBITDA margins, c) stronger leverage ratios, and d) higher proportion of overseas business.
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