In today’s briefing:
- Toshiba – Underwhelming MTP With Execution Risk
- Toa Corp (1885 JP) – Another Big Buyback for a Murakami Company
- Murata Mfg. (6981 JP): FY Guidance Raised but Quarterly OP Trend Is Down
- Harmonic Drive – Good 3Q But No Guidance Revision
- JWD: Solid Earnings Growth Profile in 4Q21 and Onward to 2022E
- Allianz’s 3.875% Perp Drops 5 Points After Skipped Call
- Macro; Rating Changes; New Issues; Talking Heads; Top Gainers and Losers
Toshiba – Underwhelming MTP With Execution Risk
- Toshiba’s second IR day produced little of extra value as details on its new MTP did not add anything particularly new.
- The company did a reasonable job of breaking down sources of growth and technological strengths but there were few immediate growth drivers.
- As prospects for strong growth look to be shifting further out an SOTP analysis does not favour Toshiba.
Toa Corp (1885 JP) – Another Big Buyback for a Murakami Company
- Toa Corp (1885) is a niche infrastructure construction play with a decent growing business and a recent change in shareholder return policy.
- They bought back back 6% of shares in 2019. Then launched another 6% buyback in 2021. And now have announced another 6% buyback for 2022.
- The shareholder structure and the return profile bear closer investigation.
Murata Mfg. (6981 JP): FY Guidance Raised but Quarterly OP Trend Is Down
- FY Mar-22 guidance was raised, but new orders were down in 3Q and both sales & operating are headed down in 4Q.
- 4Q is seasonally weak and long-term demand drivers such as 5G, IoT and auto electrification remain in place, but the timing of recovery is uncertain.
- The shares have dropped 21% since last September, to the low side but not the bottom of their 5-year P/E range. Look for an opportunity to buy for the long-term.
Harmonic Drive – Good 3Q But No Guidance Revision
- Harmonic Drive posted relatively good numbers in 3Q on account of strong SG&A controls but neglected to raise guidance.
- That looks conservative and backlog hit a new high, but valuations remain stretched.
- Ultimately we still see significant risk for next FY and expect guidance to be significantly weaker than consensus expects.
JWD: Solid Earnings Growth Profile in 4Q21 and Onward to 2022E
- We expect the company to report 4Q21 net profit at Bt159m.(+110%YoY +14%QoQ), an all-time high level. YoY and QoQ expansion will be driven by a spike in equity income Bt102m
- Anticipate revenue to hit all-time high at Bt1.4bn in 4Q21, mainly driven by high season for logistics segment and consolidation of overseas business.
- Solid outlook for warehouse & yard management in 2022, Potential upside from business expansion via multi-model strategy with JVs
Allianz’s 3.875% Perp Drops 5 Points After Skipped Call
German insurer Allianz saw its dollar-denominated 3.875% perpetuals fall about 5 points late on Monday after the 30-day call announcement window closed, indicating that the issuer will not be redeeming the bonds on the first call date of March 7. The fixed-for-life perpetuals (Term of the Day, explained below) fell 4.7 points this week thus far to currently trade at 93.85 cents on the dollar, yielding 4.13%. A senior syndicate banker told IFR, “There is a long, long track record of issuers making a call based on economics in the US dollar fixed-for-life market. This is not the first time this has happened. I’m quite amused, I can only infer from the price move that some people investing in the bond thought it was going to get called at the first call date, but I’m not sure why.” The bonds are now callable at any time and bankers expect the bond to move close to par once the dust settles, IFR reported.
Macro; Rating Changes; New Issues; Talking Heads; Top Gainers and Losers
US equity markets fell with the S&P and Nasdaq ending 0.4% and 0.6% lower. Sectoral gains were led by Energy, up 1.3% while losses were led by Communication Services, down 2.2%. US 10Y Treasury yields rose 3bp to 1.94%. European markets were higher with the DAX, CAC and FT SE up 0.7%, 0.8% and 0.8%. Brazil’s Bovespa closed 0.2% lower. In the Middle East, UAE’s ADX was up 0.1% and Saudi TASI closed 0.4% higher. Asian markets have opened mixed with HSI and Shanghai down 1.54% and 0.90% while STI and Nikkei are up 0.57% and 0.24% respectively. US IG CDS spreads were 0.4bp wider and HY CDS spreads were 3.1bp wider. EU Main CDS spreads were 1bp wider and Crossover CDS spreads were 7bp wider. Asia ex-Japan CDS spreads were 3.9bp wider also.
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