In today’s briefing:
- FTSE Japan: Potential Inclusions Following TSE Restructure
- SRE Holdings (2980 JP) Offering – New Higher Growth at New Lower Multiple
- Chugai Pharmaceutical (4519 JP): Key Drugs Are Facing Competition; 2022 Target Seems Aggressive
- Kura Sushi (2695): February Same-Store Sales Flat YoY Due to Omicron
- Japan’s Governance: Electronic Voting Platform
FTSE Japan: Potential Inclusions Following TSE Restructure
- Following the TSE restructure on 4 April, FTSE will include stocks that trade on the Prime Market and Standard Market as part of the eligible universe for index inclusion.
- We see 4 stocks meeting the requirements for inclusion in the FTSE All-World Index, and another 13 stocks meeting the requirements for inclusion in the FTSE All-Cap Index.
- There are stocks that have over 4 days of ADV to buy from passive trackers. Given the inclusions will take place in March 2023, its wait and watch for now.
SRE Holdings (2980 JP) Offering – New Higher Growth at New Lower Multiple
- SRE Holdings Corp (2980 JP) last week announced an offering of new shares and a secondary share sale by Z Holdings (4689 JP) of the bulk of its holdings.
- The Z Holdings sale coincides with a “new business alliance” between SRE and Yahoo. At first glance, it appears as if both sides have decided to rejig what they do.
- SRE has an interesting business model which is quite growthy. It is growthier than it planned and others expected, but the stock has fallen 70% in 3mos. It’s a buy.
Chugai Pharmaceutical (4519 JP): Key Drugs Are Facing Competition; 2022 Target Seems Aggressive
- Chugai Pharmaceutical (4519 JP) shares declined 2% since we published our bearish note on the company in December. We remain bearish on the name.
- Chugai is betting big on Actemra, Hemlibra, and Ronapreve for achieving 2022 revenue target. However, these have bleak outlook due to competition and uncertainty regarding COVID-19 prevalence globally.
- Chugai does not have any big launches expected this year. Pipeline has less visibility for compensating the revenue loss from the patent expired products.
Kura Sushi (2695): February Same-Store Sales Flat YoY Due to Omicron
February SSS: 99.1% vs. 2021, 95.8% vs. 2019 (pre-pandemic)
Revolving sushi continues to enjoy competitive advantage even in a difficult environment
Continuing store openings in Japan, the U.S., and Taiwan
Japan’s Governance: Electronic Voting Platform
- According to data disclosed by TSE, the number of companies participating in the electronic voting platform increased 530 companies from 1,010 in June 2021 to 1,540 as of March 4.
- Looking at the 1,540 companies by new market-segment, 92.8% of the companies chose the prime market, which is greatly influenced by “electronic voting platform” requirement in prime market listing criteria.
- Based on the selected market results published by TSE, 77.7% of the companies that chose prime market are participating in the electronic voting platform, while 22.3% are not yet participating.
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