In today’s briefing:
- Japan Post Bank – A Double on Spread Expansion and More on a Buyback?
- Sony – Uncharted and Horizon Forbidden West Start Well
- Rakuten: At a New Forward EV/EBITDA Bottom
- Welcia’s Purchase of Kokumin: Watch Out Matsukiyo Cocokara
- Familymart, the Lifestyle Store
- Toyota – Quick Wage Negotiation Agreement Means Something
- Harmonic Drive Systems (6324 JP): Consider the Competition
- Japan’s Governance: Articles About Torii Pharmaceutical’s Annual General Meeting of Shareholders
Japan Post Bank – A Double on Spread Expansion and More on a Buyback?
- Japan Post Bank is down 15.2% since its earnings results as quarterly profit declined noticeably.
- This was driven by falls in income from PE investments and a reduction in gains on forex from maturing investments.
- While that is a sharp fall for the name, its overall risk profile, exposure to rising rates and cheap valuations make it extremely attractive in our view.
Sony – Uncharted and Horizon Forbidden West Start Well
- Sony had a busy 18th Feb as both the Uncharted movie and Horizon Forbidden West launched.
- Uncharted has done reasonably well though not to the extent we believed likely while the Horizon franchise could be on the way to truly elite status.
- We look for both releases to contribute to a strong 4Q along with Gran Turismo 7.
Rakuten: At a New Forward EV/EBITDA Bottom
- Rakuten Inc (4755 JP) is currently trading 20% below the bottom end of the long term trend channel.
- With consensus FY+2 EBITDA at ¥309.8bn, Rakuten’s current EV/EBITDA is at an all-time low of 1.7x compared to the historical median and peak of 9.0x and 16.1x respectively.
- Based on the consensus FY+2 EBITDA and EV trend, we feel the fair valuation of Rakuten could be somewhere around ¥3,000bn EV.
Welcia’s Purchase of Kokumin: Watch Out Matsukiyo Cocokara
- Last month, Welcia announced the acquisition of Kokumin, the 30th ranked drugstore that runs a well-respected chain stretching across the country.
- As the newly formed Matsukiyo Cocokara group continues to struggle, another year of high growth means Welcia will be only just behind when FY2021 results come in.
- Overall growth in the drugstore sector remains strong and could even overtake convenience stores in the near future.
Familymart, the Lifestyle Store
- Thanks to the huge supply chain capabilities of its parent Itochu Corp (8001 JP), FamilyMart Co Ltd (8028 JP) is moving into new categories of private label product.
- These are not the traditional staples of the convenience store but new types of more fashionable lifestyle products in clothing and cosmetics.
- Recent results show successful collaboration with Noin for cosmetics and with Hiromichi Ochiai from Facetasm for clothing basics, selling more than 1 million items each.
Toyota – Quick Wage Negotiation Agreement Means Something
- The Nikkei reported today that Toyota had already agreed to accept its unions wage hike demands and in full.
- This is unusual given typically fair but tough negotiations and Toyota’s penchant for very strict cost control.
- Although the news does not appear to be attracting any great attention we believe it is actually quite significant.
Harmonic Drive Systems (6324 JP): Consider the Competition
- Demand for speed reduction gears is rebounding from the COVID downturn, but sales and profits are likely to be restrained by an increasingly difficult operating environment.
- HDS faces growing competition from Nidec in Japan and Leaderdrive in China, both of which want to lead the market. For HDS, a return to peak margins is unlikely.
- The shares have dropped 31% since last September, but at 81x EPS guidance are still quite expensive. Consider alternative factory automation investments.
Japan’s Governance: Articles About Torii Pharmaceutical’s Annual General Meeting of Shareholders
- This article will discuss about Nikkei’s article about “Torii Pharmaceutical opposes Hong Kong investment firm’s proposal to ban revolving door” which includes several points of discussion.
- If the stock price is undervalued because investors are reluctant to invest on concerns about shareholder structure that doesn’t allow minority shareholders’ opinions to be heard, that is serious problem.
- Many subsidiaries have no incentive to listen to opinions of minority shareholders and enhance governance practices. Lack of growth strategies and communication to investors is also a problem for Torii.
Before it’s here, it’s on Smartkarma
