In today’s briefing:
- Toyo Construction (1890 JP): Pot Shots and Warning Shots
- Companies that Buy Back Their Own Shares but Do Not Increase Their Share Price Should Consider Why
- Shizuoka – Indigestion
- Terumo Corp (4543 JP): H1FY23 Results Reflect Continued Recovery from the Pandemic
Toyo Construction (1890 JP): Pot Shots and Warning Shots
- YFO’s press release alleges the Toyo Construction (1890 JP) Board will not recommend the tender as YFO is not a suitable owner rather than the JPY,1000 price being too low.
- The Board responded that YFO violated the NDA by disclosing the reasons for the Board’s disapproval. This damages the understanding between the parties, an essential precondition to recommending the offer.
- The start of the tender has been pushed back to late January 2023. YFO is committed and will not withdraw the offer for any reason that shareholders may consider unreasonable.
Companies that Buy Back Their Own Shares but Do Not Increase Their Share Price Should Consider Why
- Companies are presumably allocating cash to shareholder returns rather than investing in growth. Lack of investment in growth may lead to slower profit growth, which leads to lower valuations.
- There is concern that management may be hesitant to take risks. Since no shareholder hates shareholder returns, they may be easily diverted to share repurchases that don’t require risk-taking decision.
- Although the expected share repurchase will limit the risk of sharp decline in the stock prices, modest growth investments are likely to prevent the expansion of multiples.
Shizuoka – Indigestion
- Credit costs in September quarter are showing steep delta YoY and QoQ
- Accelerated credit growth in past six months may mean there is more to come
- Funding cost surge is keeping net interest income growth near zero despite swelling loans
Terumo Corp (4543 JP): H1FY23 Results Reflect Continued Recovery from the Pandemic
- Terumo Corp (4543 JP) recorded double-digit revenue growth in H1FY23, with record-high Q2 revenue exceeding ¥200 billion. All three businesses of Terumo reported growth during H1FY23.
- Cardiac and vascular segment remained the key growth driver and grew 21%, driven by a 24% y/y growth in overseas revenue amid the recovery and growth of medical demand.
- Inflation and normalization of sales and marketing activities impacted the profitability of the company. To improve profitability Terumo has taken further price increase in second half.
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