In today’s briefing:
- Mazda – Profitability Is Surging
- High Premium Hakuhodo DY TOB for SoldOut (6553 JP) – Could Be a Catalyst for Digital Holding (2389)
- Shiseido: China Is Still a Question Mark But The Rest of The Business Deserves Plaudits
- Sawada/HS Holdings (8699) – A Quite Salutary Development.. And We Wait…
- TEL – Great Results but Some Warning Signs
- World to Absorb Narumiya
- Yamaha Motor – Lowballing Guidance on Material Costs
- Japan’s Governance: Considerations Regarding the Percentage of Foreign Shareholders
- MonotaRO (3064): January Sales Achieved the Target.
- Monogatari Corporation (3097): 2Q OP Exceeded the Company Target
Mazda – Profitability Is Surging
- We have been consistently saying that the sell side is utterly clueless about Mazda’s profit structure.
- The company just missed top line by 13.2% but beat on OP by 26% even excluding a reclassification of some costs to extraordinary losses.
- The thesis here is simple – consensus projects a 3% OPM next FY and we believe Mazda will double that.
High Premium Hakuhodo DY TOB for SoldOut (6553 JP) – Could Be a Catalyst for Digital Holding (2389)
- Japan-Based advertising/marketing services company Hakuhodo Dy Holdings (2433 JP) launched a Tender Offer to acquire all the shares in small-cap digital marketing company SoldOut (6553 JP) on 9th February 2022.
- The TOB Price is ¥1,809 per share in cash which translates to an implied market capitalization of ¥19.5bn (~US$170mn) for the Target company – a 101% premium to previous close.
- The Tender Offer has a minimum acceptance condition and is expected to be completed in March 2022. Below is a closer look at the Deal Details.
Shiseido: China Is Still a Question Mark But The Rest of The Business Deserves Plaudits
- Shiseido Company (4911 JP)’s share price is up more than 6% today following the yesterday’s strong Q4 results with 2021 EBITDA surpassing the November 2021 guidance by ¥17.6bn (11.3%).
- The China business is still not completely out of the woods, although the like for like growth rate accelerated from 2.0% YoY in 3Q21 to 7.0% by 4Q21.
- Nonetheless, strong performance across skin and beauty care in all regions suggests that the company is on track to become the world’s number 1 skin and beauty care brand.
Sawada/HS Holdings (8699) – A Quite Salutary Development.. And We Wait…
- Sawada/HS Holdings (8699 JP) yesterday announced it would receive a large dividend from its namesake brokerage business, and then announced it would sell it to its own 2nd largest shareholder.
- Then HS Holdings said it would buy back up to 23% of its shares out this morning in a ToSTNeT-3 transaction.
- The sale of what was its second most important remaining asset is good. Buying back shares below book is normally good.
TEL – Great Results but Some Warning Signs
- TEL’s 3Q results were strong as expected with revenue of ¥506bn beating consensus by 6% and OP of ¥156bn beating by 14%.
- Guidance was raised from ¥550bn to ¥570bn but could still prove about ¥20bn too light.
- While TEL expects 20% market growth in 2022, that may not justify current multiples and there are some other concerns.
World to Absorb Narumiya
- World Co Ltd (3612 JP) is desperate to diversify its portfolio and find new growth assets as it continues to slash the non-performing parts of its sprawling business.
- While childrenswear might not seem like a growth market, there are still opportunities, including at the premium end, explaining the rationale for buying Narumiya International Co Ltd (9275 JP).
- Narumiya expanded in the four years up to the pandemic and could provide a new growth division for World.
Yamaha Motor – Lowballing Guidance on Material Costs
- Yamaha Motor’s 4Q21 beat on margins with revenue of ¥450bn (+1.2% QoQ, +11.3% YoY) and OP of ¥27.7bn for an OPM of 6.2%.
- The reported OP was 8.6% higher than consensus estimates while revenue was relatively in-line.
- Yamaha’s FY OP generation was ¥182.3bn, right in the middle of our ¥180-185bn estimate and 2022 guidance was more or less in-line with consensus.
Japan’s Governance: Considerations Regarding the Percentage of Foreign Shareholders
- This article explored what kind of companies overseas investors are investing in in terms of Key Performance Indicators and Corporate Governance Practices by focusing on the percentage of foreign shareholders.
- The group of companies with the higher percentage of foreign shareholders tend to have higher ROE, ROA and Tobin’s q, as well as better values in many corporate governance criteria.
- The difference in Key Performance Indicators and corporate governance practices between the group with >30% and =< 30% in foreign shareholding suggests that there is a watershed around 30% shareholding.
MonotaRO (3064): January Sales Achieved the Target.
- Parent company sales in January 2022 were 16.356bn yen (+17.6% YoY), achieving the company’s monthly target
- Sales to large corporations increased by around 37% YoY, slightly below the company’s target.
Cost control may attract more attention than sales growth
Monogatari Corporation (3097): 2Q OP Exceeded the Company Target
- Monogatari Corporation (3097) announced 1H (Jul-Dec) FY6/22 consolidated results
- In 2Q (Oct-Dec), sales were 19.813bn yen (+11.0% YoY, +26.0% QoQ), OP was 1.542bn yen (+5.9% YoY, vs. -32m yen in 1Q)
- The number of stores at the end of 1H was 605 (+21 from end-FY6/21)
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