In today’s briefing:
- Kyokuto Kaihatsu (7226 JP) Buyback – It’s Kinda Big, But There May Be More Behind
- Toshiba – Surprise, Surprise, More Drama
- Yonex: Rising Through the Ranks in New Markets
- A Modest Proposal to the Nikkei Index Committee for Nikkei 225 Methodology Change
- Shimamura Back on Track, Targeting Urban Centres
- Japan Retail | 3 Stocks to Buy for Revenge Shopping
- Subaru (7270 JP) | Production Problems in the Rear View Mirror
Kyokuto Kaihatsu (7226 JP) Buyback – It’s Kinda Big, But There May Be More Behind
- Kyokuto Kaihatsu Kogyo Co (7226 JP) has always been cash-rich. Recently there are better noises. Sold real estate. New Mid-Term Plan. Raised the payout ratio to 50%. Slowly selling crossholdings.
- But it isn’t fast enough, and activist Strategic Capital this spring announced a flurry of AGM agenda items to extract value for shareholders.
- The company today announced a buyback – additive, but there is a lot to look at here. Shareholder structure is key. And forward cash-flows tell you more buybacks could come.
Toshiba – Surprise, Surprise, More Drama
- The days since Toshiba’s last briefing session have been eventful with METI expressing concern about foreign investor control and a split emerging in the board over director nominations.
- These developments create significant risk of activist-friendly director candidates being vetoed in our view.
- Toshiba stock has been trading in line with Hitachi’s strong performance of late despite being more expensive and thus risk has increased.
Yonex: Rising Through the Ranks in New Markets
- Driven by a sharp rise in revenue and profitability over the last three quarters, Yonex Co Ltd (7906 JP) shares continue to go up in relatively choppy overall market conditions.
- We expect this strong growth momentum to continue over the medium term while Yonex builds popularity in new markets and new sports categories.
- We think there could be around 100% upside to Yonex alongside improving confidence about sustainability of Yonex’s current performance.
A Modest Proposal to the Nikkei Index Committee for Nikkei 225 Methodology Change
- The Nikkei Index team proposed several changes to the Nikkei 225 Average methodology last week. They include capping, a semi-annual (vs annual) review, and a change in “liquidity” measure.
- It helps move membership away from the low price low weight names which populate the bottom of the index. Slowly. 6 names a year. That’s not enough.
- And it doesn’t fix the historical anomalies rendering the index unsuitable as benchmark (and BOJ tool). I propose more changes below. You can submit this or yours in the consultation.
Shimamura Back on Track, Targeting Urban Centres
- Shimamura (8227 JP) is on a roll at the moment, clawing back share after a troubled few years of mis-merchandising and confused targeting.
- After a record year, Shimamura now thinks its merchandise teams are strong enough to take on urban centre consumers – without raising operating costs. This could be a worry for Uniqlo.
- Shimamura has tried this before but back then its focus was on young women and had weaker merchandising skills. This time around too urban consumers want more discount apparel.
Japan Retail | 3 Stocks to Buy for Revenge Shopping
- Over the past 2 years, customers cut back drastically on shopping and travel. Many worked in home offices in sweatpants and t-shirts.
- But now, people are vaccinated, and lockdowns have lifted. Even Japan’s borders are starting to spring open.
- Consumers are looking for ways to make up for lost time – we highlight 3 beneficiaries of revenge shopping.
Subaru (7270 JP) | Production Problems in the Rear View Mirror
- Subaru’s profitability is set to improve dramatically, driven by a weaker yen
- After two painful years, production is starting to normalise post Covid
- At 1xPBR, we think Subaru is significantly undervalued and see at least 30% upside
Before it’s here, it’s on Smartkarma
