In today’s briefing:
- Kito (6409) Goes Private. Again. This Time With KKR, But Watch the Register
- Dowa – Dear Market, You’re Kinda Going The Wrong Way
- Mazda – Guidance Is Actually MORE Conservative Than Peers
- MUFG (8306 JP) – BigBank BigBuyback But A Bit Pricey Vs SMFG
- Conviction Call Recruit: All Good Things Must Come to an End
- Freee: Strong User Growth and Improvement in Profitability; Shares Are a Lot Cheaper
- Recruit (6098 JP) | Too Conservative on Labour Outlook
- Honda – Unnecessarily Conservative But…
- Yamaha Motors (7272 JP) | Back on Track
- Monogatari Corporation (3097): Consumers Cannot Resist Japanese BBQ
Kito (6409) Goes Private. Again. This Time With KKR, But Watch the Register
- Kito Corporation (6409 JP) was taken private in 2003. It was re-IPOed by Carlyle in 2007 but Konecranes stayed an investor until 2016. Then it unwound.
- Today, Kito announced the best results since pre-covid and forecasts for growth. They also announced KKR unit Crosby would launch a Tender to buy them out at a 62% premium.
- Shareholder structure is highly unusual, and interesting to boot, especially looking at the most recent arrival in the top two. The fact there is a break fee is… telling.
Dowa – Dear Market, You’re Kinda Going The Wrong Way
- Dowa missed at the PTP line by 4.5% and guided for just ¥55bn in ordinary profit for FY23 vs. consensus at ¥68bn.
- That drove the stock down 13% today making it give up all the gains it had made since early December.
- While the reaction might be understandable on the misses if this were trading expensively, it is 0.74x book.
Mazda – Guidance Is Actually MORE Conservative Than Peers
- Despite supply chain and material cost headwinds Mazda beat consensus FY OP estimates by 15% despite being in-line on revenue.
- Guidance was also 17% above consensus but we think both should be ignored because guidance is being sandbagged and consensus remains clueless.
- We expect sales volumes to beat Mazda’s guidance slightly and for OP generation to be ¥240-300bn rather than ¥120bn.
MUFG (8306 JP) – BigBank BigBuyback But A Bit Pricey Vs SMFG
- Mitsubishi UFJ Financial (MUFG) (8306 JP) announced results today. Operating Income +0.8%, Operating Earnings +45.9%, Net Profit +45.5% to ¥1.13trln.
- The forecast for Mar23 is for a “target” of Net Income of >¥1trln. The DPS for Mar23 is set at ¥32 vs ¥28 last year and ¥25 the year before.
- And MUFG announced both the delay of the closing of Union Bancorp sale to calendar H2, and a big buyback of ¥300bn.
Conviction Call Recruit: All Good Things Must Come to an End
- Recruit Holdings (6098 JP) reported 4Q and full-year FY03/2022 results today. Revenue grew 23.9% YoY to JPY759.9bn while OP more than doubled to JPY45.4bn during 4QFY03/2022.
- Full-Year revenues grew 26.5% YoY to JPY2,871.7bn which was about 3.0% above the upper range of guidance (JPY2,700-2,800bn) while OP of JPY378.9bn was within the guidance of JPY350-380bn.
- Though full-year results were strong, 4QFY03/2022 results show that the company’s earnings have begun to weaken with normalisation of recruitment and staffing markets with Covid conditions easing off.
Freee: Strong User Growth and Improvement in Profitability; Shares Are a Lot Cheaper
- freee (4478 JP) reported 3QFY06/2022 results on Friday. Revenue grew 35.7% YoY to JPY3.65bn (vs consensus JPY3.63bn) driven by strong growth in paying users.
- Operating losses declined to 18.5% of revenues during the quarter from 24.0% in the same period a year ago.
- The company’s shares moved up by about 9% at the end of Friday’s close following its earnings announcement.
Recruit (6098 JP) | Too Conservative on Labour Outlook
- FY3/22 EBITDA rose 96% driven by the recovery in the global labour market. Macro conditions suggest the coming year will be less exciting
- EBITDA is expected to rise just 2% this year, adjusting for changes in stock-based comp
- However, the 32% decline in the stock price YTD suggests the market is on top of the weaker outlook. We see 40% upside to the stock price
Honda – Unnecessarily Conservative But…
- Honda 4QFY22 was mixed with revenue of ¥3,876bn (-0.7% vs. consensus) and OP of ¥200bn (+33.1% vs. consensus).
- The company’s FY23 guidance was weak projecting just ¥16,250bn (-2.2% vs. consensus) in revenue and OP of ¥810bn (-15.1% vs. consensus).
- Those numbers are laden with Honda conservatism, but we nevertheless foresee smaller potential beats by Honda than for peers.
Yamaha Motors (7272 JP) | Back on Track
- Yamaha Motors’ stock crashed 9% after a poor quarterly report
- However, there were a number of temporary issues impacting costs in the quarter. Management reiterated its guidance for the full year
- Given that demand for its marine engines and motorbikes remains on track, we think the stock is too cheap, trading below book value
Monogatari Corporation (3097): Consumers Cannot Resist Japanese BBQ
- Same-store sales for company-owned stores were 123.9% vs. April 2021 (108.1% for March), 743.9% vs. April 2020 (93.9% for March), and 102.7% vs. April 2019 (91.3% for March)
- Sales have been strong, as operating restrictions were lifted in late March. In particular, the Yakiniku division (Japanese BBQ) performed much better than in the pre-pandemic period
- The number of domestic company-owned stores at end of April was 365 (+5 MoM, +25 vs. end FY6/21).
Before it’s here, it’s on Smartkarma
