In today’s briefing:
- Toshiba (6502 JP) – Weak Sauce from JIP
- KLine (9107) Buyback Redux-Squared – Post-Buyback Could Get Squeezy
- Softbank Group – Accelerated Buyback in October Drove Share Price Surge
- TOPIX Inclusion: Socionext (6526 JP) – Momentum Is Fading, Exit Now.
- NTT Q2 Results and a New Buyback
- Nintendo (7974) | No Christmas Present This Year
- NTT (Buy) – Q2 22 Results Reaction: Expanded Buyback Is Second Largest Ever
- Takeda: A Deep Dive into Takeda’s Dengue Vaccine
- The First Step in Major Shift in Management Strategy Is for Sapporo to Sell Its Cross-Shareholdings
- Calbee – Price Hikes to Deliver Upside As Buybacks Provide Downside Protection
Toshiba (6502 JP) – Weak Sauce from JIP
- Media reported last night that JIP would bid ¥2.2trln for Toshiba. That’s about ¥5,000-5,100/share.
- This morning, there is a bit more clarification. Funnily, that means there is less info here than people think.
- But it is not a great look for either JIP or Toshiba at this point.
KLine (9107) Buyback Redux-Squared – Post-Buyback Could Get Squeezy
- Kawasaki Kisen Kaisha (9107 JP) had a shareholder return program in place in May. Earnings forecasts on 3 Nov were slightly disappointing so the stock sold off but…
- The large buyback allowed investors to try to game the situation. Some may have, but this morning on the execution, VERY few Real World Float holders sold.
- That leaves the stock squeezy going into a buyback to repurchase 20% of the Max Real World Float (including short-created longs).
Softbank Group – Accelerated Buyback in October Drove Share Price Surge
- Softbank Group (9984 JP) massively ramped up share buybacks in October driving a 31% increase in the share price
- Average Daily Volume (ADV) was 28% higher in October and 46% higher for the last half of the month. October buyback volumes were the second highest for a month ever
- Whether Softbank announces additional buyback plans likely depends on the timing of the ARM IPO and that partly depends on Q2 performance
TOPIX Inclusion: Socionext (6526 JP) – Momentum Is Fading, Exit Now.
- Japan-Based System-On-Chip designer and IP purveyor Socionext (6526 JP) was listed in the “Prime” section of the Tokyo Stock Exchange (TSE) on 12th October 2022.
- When a company gets listed in the Prime section, it subsequently gets included in the TOPIX Index requiring TOPIX-tracking funds to purchase the stock during an Inclusion Event.
- Usually, this presents interesting trading opportunities to generate sharp market-neutral returns in the space of few trading days. Below is a look at the details for Socionext’s TOPIX Inclusion Event.
NTT Q2 Results and a New Buyback
- NTT (Nippon Telegraph & Telephone) (9432 JP) announced Q2 results today during market hours. The stock had been trading up 1.1% on the day, but fell 1% in 5 minutes.
- It then spent the rest of the day grinding higher to end just higher than just before results.
- NTT announced another buyback – this one on-market. It is only a little bit of a surprise.
Nintendo (7974) | No Christmas Present This Year
- The share price is roughly flat since we turned Bearish on Nintendo citing concerns that the cycle had peaked
- Q2 results released today suggest that the hardware cycle has indeed peaked – Switch hardware guidance cut
- We see a lack of catalysts for the stock price over the next several months and remain bearish
NTT (Buy) – Q2 22 Results Reaction: Expanded Buyback Is Second Largest Ever
- Results were mostly positive with strong forex-boosted revenue growth and mobile outperformance
- An expansion of the buyback program helps sentiment as an additional Y150bn program takes FY22 buybacks to the highest single-year total since 2005
- Comments at the analyst meeting focused on underlying costs but management seems positive that it can manage with cost efficiencies
Takeda: A Deep Dive into Takeda’s Dengue Vaccine
- Takeda’s dengue vaccine TAK-003/QDENGA has been approved in Indonesia and is awaiting consent from the EU. The company is also seeking approval from the US, Latam and other Asian countries.
- The company plans to launch the vaccine in December or early next year which will become the industry’s first immunisation against dengue after the problems faced by Sanofi’s Dengvaxia.
- In this insight, we take a look at Takeda Pharmaceutical (4502 JP) ‘s decade long journey into its dengue vaccine and its potential.
The First Step in Major Shift in Management Strategy Is for Sapporo to Sell Its Cross-Shareholdings
- It is doubtful that independent outside directors are actually able to actively bridge the gap between shareholders and the board of directors, as the Corporate Governance Code states in Japan.
- Behind the lack of willingness on the executive team to make major changes in the way things have been done is high % of specified shareholders (40%), including cross-held shares.
- No major change in business strategy is expected unless foreign shareholder ratio exceeds 30%. In order for the current large shareholders’ equity to decline, Sapporo should sell its cross-held shares.
Calbee – Price Hikes to Deliver Upside As Buybacks Provide Downside Protection
- Calbee Inc (2229 JP)’s share price fell 4% today from the top end of the trend channel as 2QFY23 OP fell short of consensus by ¥658m to ¥4.9bn.
- There was also a ¥3.5bn downgrade to full-year OP guidance on higher-than-expected energy and raw material costs. However, this seems too conservative, especially with 10-20% price hikes in September-November.
- In addition, share buy-backs are starting to become a regular part of shareholder returns with ¥12.0bn per-year in share buybacks in the previous fiscal year and the current fiscal year.
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