In today’s briefing:
- Yamada Denki (9831) – GINORMOUS Buyback 2/3 Done. Stock Price Reaction Limited.
- Nidec (6594 JP): New Valuation Benchmark
- Sun* (Sun Asterisk – 4053 JP) TOPIX Inclusion Event
- Keyence (6861) | Better Risk/Reward at Peers
- Asia Long Bets
Yamada Denki (9831) – GINORMOUS Buyback 2/3 Done. Stock Price Reaction Limited.
- Yamada Denki (9831 JP) has bought back nearly 16% of shares out ex-Treasury in the 7.5 months since last fiscal year earnings were announced. It went limit up on Day1.
- Then it stopped – despite the buyback being 15% of expected volume every day for a year and a HUGE piece of Real World Float.
- There is 8% left to buy at current prices – 16-18% of volume the next 4.5mos. And it is still a dirt cheap capital structure and somewhat sticky shareholder structure.
Nidec (6594 JP): New Valuation Benchmark
- Nidec has become an auto parts and factory automation company and should be valued as such. At 24x EPS guidance for FY Mar-23, the shares do not look particularly cheap.
- 1H results were good, but heavy up-front investment in e-axle traction motor systems for electric vehicles points to deferred gratification for shareholders.
- Recession is starting to bite, the Yen is up and Japanese interest rates have only started to rise. Be careful when buying for long-term growth.
Sun* (Sun Asterisk – 4053 JP) TOPIX Inclusion Event
- In mid-December, digital UX creation agency (90% of revenues) and “talent agency” (10%) announced it would move from TSE Growth to TSE Prime mid-December 2022.
- This was in Janaghan’s “Not Ready” list in TOPIX Inclusions: Who Is Ready (Dec 2022) because it did not meet two of the requirements. But it turns out it did.
- This is therefore a TOPIX inclusion event at end-January 2023.
Keyence (6861) | Better Risk/Reward at Peers
- Keyence is a structural growth stock that has fallen by 31% over the past year reflecting near term risks to growth
- Although Keyence is a major beneficiary of continued investment in industrial automation, the company would need to grow significantly quicker than the industry to justify the current valuation
- We analyse Keyence’s core value drivers – revenue, margins, risk and reinvestment – but see better risk/reward in other growth stocks
Asia Long Bets
- Our biggest shift in Asia stems from reversing from short to long Japan and Taiwan. We have held a positive view in Australia and Thailand.
- SPX bounce call from 3,800 to 3,950, is lacking needed energy. Flat pattern wants to press lower post bounce and represents pullback risk in Asia as does an oversold USD.
- Asia longs are tactical in nature but have the ability to run into late January within the context of a larger degree Q1 equity bear cycle.
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