In today’s briefing:
- Hitachi Transport (9086 JP) – Deciphering Takeover Price by Newspaper Article Language
- Koei Tecmo – Potential For a Breakdown
- Fanuc (6954 JP) | Orders Slide as Automation Slows
- Disco (6146 JP): Orders Peaking, Blade Dicer Shipments Forecast to Decline
- Omron – Better IAS Results Conceal Healthcare Segment Underperformance
- Z Holdings (Buy) – FY22 Should Be Brighter
- Fanuc – Frothy Current Conditions Set Up Big Potential Disappointment
- Workman to Disrupt Footwear Market with ¥60 Billion Sales Target
- Fast Fitness Japan (7092): Announced Upward Revision of Full-Year Guidance
- Shimano (7309) | Time for the GCs
Hitachi Transport (9086 JP) – Deciphering Takeover Price by Newspaper Article Language
- Hitachi has been in the process of selling Hitachi Transport System (9086 JP). An article in the Nikkei Thursday last suggested a deal was imminent (both companies report 28 April).
- Bloomberg carried an article this morning with more numbers and implied arithmetic. Then they revised the language in the article.
- There is STILL room for different interpretations of likely deal price if one tries to parse all the info provided and match it with history. But we may be there.
Koei Tecmo – Potential For a Breakdown
- Koei Tecmo’s earnings yesterday were on the strong side with 4Q OP beating by 28.7% despite a 1.79% miss at the top line.
- Thus, the typical pattern of heavy expensing of development costs in 4Q was missing and combined with some one offs could make hurdles for next year high.
- With the stock struggling to gain positive momentum and few clear positive catalysts on the horizon we remain negative.
Fanuc (6954 JP) | Orders Slide as Automation Slows
- Machine tool orders are losing momentum given the geopolitical risks and shortage of materials
- Margins are also order pressure given soaring materials and transportation costs
- FY3/23 OP guidance misses consensus, but it is not conservative. We expect the share price to head lower
Disco (6146 JP): Orders Peaking, Blade Dicer Shipments Forecast to Decline
- FY Mar-22 sales and profits exceeded guidance, as expected. New orders declined slightly in 4Q but remained above sales.
- Unfortunately, Disco has decided to stop disclosing orders and the order backlog. A cynic would say this signals the peak of the cycle.
- 1Q guidance looks conservative. That should be no surprise and no catalyst for the stock price. Shipments of blade dicers are forecast to decline by 10%. Beware.
Omron – Better IAS Results Conceal Healthcare Segment Underperformance
- Omron’s 4Q results continued the trend of weakness in the FA sector and guidance was tepid unlike Yaskawa.
- In particular, the Healthcare Segment’s margins appear to be normalising and poses a downside risk along with typical cyclicality.
- At 14x EV/OP on guidance vs. a 10x multiple that we would consider fair, there is downside risk here.
Z Holdings (Buy) – FY22 Should Be Brighter
- The company reports Thursday and markets have priced in bad news (shares down 22% YTD and 38% from November highs) but that pattern of weakness in year-end results isn’t new
- It has happened the last four years as management’s penchant for investment dampens hopes for profitability growth but LINE synergies and digitization should enable double-digit EBITDA growth anyway
- We are posting updated company forecasts/estimates including a separate table for PayPay
Fanuc – Frothy Current Conditions Set Up Big Potential Disappointment
- Despite a dead cat bounce in Robomachine coming through as we suggested Fanuc’s 4Q OP missed consensus estimates by 14%.
- Guidance was strong however with revenue guidance of ¥825.5bn materially above consensus’ ¥797.7bn.
- This continues a pattern of weak results and strong guidance in the FA sector going into a tightening cycle which is concerning.
Workman to Disrupt Footwear Market with ¥60 Billion Sales Target
- Workman sees an opportunity to disrupt the footwear market by creating Japan’s first national low price chain, with a strong focus on women’s shoes.
- It launched the first store this month with prices as low as ¥680 and expects to have 200 stores in the near future.
- The Japanese footwear market is ripe for disruption as Abc Mart Inc (2670 JP) diversifies and Chiyoda Co Ltd (8185 JP) and Gfoot Co Ltd (2686 JP) struggle to maintain momentum.
Fast Fitness Japan (7092): Announced Upward Revision of Full-Year Guidance
On April 26, Fast Fitness Japan (7092, the company) announced an upward revision of its full year FY3/22 guidance.
The company revised OP forecast from 2.6bn yen to 2.95bn yen (+28.7% YoY), and NP forecast from 1.1bn yen to 1.705bn yen (+85.3% YoY).
The revision was due to the progress of cost optimization and less than expected extraordinary losses, such as impairment losses.
Shimano (7309) | Time for the GCs
- Normalization of inventories is not the end of the super cycle
- Record high sales, operating profit and margins for a March quarter
- The share price has already returned to attractive valuations. The short-term “sprinteurs” are out; time for the GCs to step up
Before it’s here, it’s on Smartkarma
