In today’s briefing:
- Allied Telesis (6835) – Small Cap Windfall
- Keyence – Strong as We Suggested
- Seven & I to Sell The Loss Making Department Store Business Amidst Pressure From Investors
- Nikkei Tactical Rally but Still on Our MT Short List
- Sony Tactical Long with Sell Overhang to Re Set at High Conviction Support
- Hoya: Life Care Exceeds Pre-Covid Levels; Slight Upgrade to Forecasts with a Small Buyback
- KDDI (Buy) – Follow-Up After Q3 21 Results
- Mitsubishi Motors – Further Recovery
- Sawada/HS (8699) – A NON-Salutary Development
- JALUX (2729 JP) Tender Offer Commences – Open & Shut Case With Weirdness
Allied Telesis (6835) – Small Cap Windfall
- Allied Telesis is a Japan-listed business with a long US history making networking equipment and solutions for corporate customers.
- The company received a legal settlement today which is worth a fair bit to them.
- The company had already had the best 12 months earnings history in years, while the stock is trading at long-time lows. This could get exciting.
Keyence – Strong as We Suggested
- Keyence’s 3Q numbers were noticeably stronger than consensus with revenue at ¥190bn (just below our estimate of ¥192bn+) vs. consensus at ¥182bn.
- OP also beat by 4.2% but was held back slightly by high SG&A.
- Nevertheless, this should move the outlook for 4Q up significantly setting up a reasonable full year beat and better prospects for next year.
Seven & I to Sell The Loss Making Department Store Business Amidst Pressure From Investors
- Nikkei reported yesterday that Seven & I Holdings (3382 JP) is in final negotiations to sell its underperforming department store business Sogo Seibu, amidst pressure from several of its investors.
- The company has indirectly confirmed the news by saying that they are considering changes to Seven & I’s business portfolio including the sale of the Sogo & Seibu business.
- The disposal of underperforming department stores could increase the efficiency of capital usage and generate upside to shareholders returns and enable the company to focus on growth through geographic expansion.
Nikkei Tactical Rally but Still on Our MT Short List
- Nikkei met out C wave washout low target at 26,200-300 that sets up would licking recovery trade after downside re test in early February (February bullish global recovery cycle).
- Bear pressure on the 27k key range lows does warn of an eventual breakdown after tactical recovery attempt.
- 26,300/500 offers near support for any bulls who want to trade a counter trend bounce. Our February upside target and fresh short zone remains at 28,300/700.
Sony Tactical Long with Sell Overhang to Re Set at High Conviction Support
- Sony is due for a tactical rise, stall and minor new low after completing a full count rise at 15,700. Trendline support break and gap resistance will attract sellers.
- RSI bear divergence stands out. 12k tactical buy zone with 14k sell area. Ideal C wave buy zone lies at 10,500 support or within this range.
- Sony remains an attractive macro bull play but has some backfill risk to iron out toward higher conviction long support.
Hoya: Life Care Exceeds Pre-Covid Levels; Slight Upgrade to Forecasts with a Small Buyback
- Hoya Corp (7741 JP) reported 3QFY03/2022 results today. Revenue grew 16.6% YoY to JPY171.3bn (vs. consensus JPY162.1bn) and OP grew 17.0% YoY to JPY53.5bn (vs. consensus JPY51bn).
- Life Care revenue which was severely impacted due to Covid-19, exceeded pre-Covid levels with a 11.7% YoY increase. IT revenue continued to maintain its momentum during the quarter.
- Hoya has slightly upgraded its full-year forecasts and also has announced a share buyback program for JPY60bn.
KDDI (Buy) – Follow-Up After Q3 21 Results
- We had a chat with KDDI after results last week including clarification on issues that came up on the analyst call (3G network shutdown, Q4 impacts on operating profit)
- The competitive environment in mobile looks similar to Q2 but wider distribution for sub-brands UQ (retail store presence) and Povo (first full quarter of availability) helped drive user growth
- We have updated our forecasts for Q3 results and remain at Buy
Mitsubishi Motors – Further Recovery
- MMC reported its 3QFY22 results on 31st January which saw revenues of ¥526bn (+14.6% QoQ, +39.1% YoY) and OP of ¥30.8bn.
- Revenue was in-line, only 0.3% higher than consensus estimates while OP beat consensus estimates by ¥15bn thanks to the 5.9% OPM.
- The result bodes well for the auto sector overall but weak top line and a dependence on forex have us going… meh.
Sawada/HS (8699) – A NON-Salutary Development
- Sawada/HS Holdings (8699 JP) gets the bulk of its earnings from Khan Bank (even more so post-exit from gaitame).
- Khan Bank just had a fantastic year with earnings up 77%.
- But Sawada has just done a deal with should give one pause.
JALUX (2729 JP) Tender Offer Commences – Open & Shut Case With Weirdness
- Sojitz and JAL have announced the start of their tender offer for Jalux Inc (2729 JP). There was no surprise in November. And no change in the interim.
- While not outrageously generous, it is not particularly egregious to minority shareholders and the shareholder structure suggests it gets done easily.
- The lack of Japan FTC approval prior to launch is a little odd, but there should be minimal risk, and practically speaking, zero incremental risk vs waiting to start.
Before it’s here, it’s on Smartkarma
