In today’s briefing:
- Mercari – Margin Miss Not Beat
- TOPIX-Nikkei Skew Trade Starting to Work Nicely
- Nintendo – Solid Beat Should Confirm Early Nov Bottom
- Nikkei 225 Fails to Breach the Zone of Resistance
- Softbank Corp (Buy) – Q3 21 Results Reaction: Weak Consumer Mobile but FY Targets in Sight
- Takeda: Key Drugs Continue Growth and Upgrade to Guidance; Pipeline Progress Despite Recent Setbacks
- Japan’s Governance: TOPIX Reform Update (2) – Change in Calculation Method of Floating Share Ratio
- Mercari – Don’t Panic Sell
- Kura Sushi (2695): Relay from Demon Slayer to BTS. Winning with Entertainment Value
- Tosho (8920): Solid 3Q OP; Announced Upward Revision of Guidance on Property Sales
Mercari – Margin Miss Not Beat
- We got this wrong, expecting a beat on margins in spite of weak GMV, whereas Mercari actually fell into the red for the first time in six quarters.
- The culprit is extremely aggressive promotional spend which looks to have hit all time highs in both Japan and the US.
- The shift to an investment stance is not in and of itself a bad thing but the growth relative to the spend is disappointing so far.
TOPIX-Nikkei Skew Trade Starting to Work Nicely
- After initially grinding up slowly but underperforming the Nikkei our suggested skew trade gave up ground during the new year sell off.
- It did so slowly, however and was outperforming Nikkei when last we checked despite being down slightly.
- Thankfully, a lot of the idiosyncratic volatility hurting the skew trade has reversed now and it is positive and outperforming Nikkei consistently.
Nintendo – Solid Beat Should Confirm Early Nov Bottom
- Nintendo posted an impressive top line for 3Q at ¥696bn in revenue vs. consensus at ¥641bn for an 8.6% beat.
- OP of ¥253bn beat consensus by 16.9% suggesting that sell side analysts do not understand Nintendo’s new profit structure.
- The stock has been resilient since bottoming in early November and we expect strong performance to continue.
Nikkei 225 Fails to Breach the Zone of Resistance
- The nasty “squeeze” up in the Nikkei 225 has so far stalled within the zone of resistance at 27,293-27,629
- A move back below 26,954 would add to the bearish bias seen overall
- Medium to long term supports and target area comes in closer to 24,500
Softbank Corp (Buy) – Q3 21 Results Reaction: Weak Consumer Mobile but FY Targets in Sight
- Results were pretty much in line with expectations as growth from Z Holdings and Enterprise sales offset consumer mobile weakness.
- The company is slightly behind the pace needed to meet its full-year operating profit target but appears confident on meeting FY21 and FY22 commitments
- Management reports that cashless app PayPay generated ¥21bn in Q3 revenue as SME monetization kicked in
Takeda: Key Drugs Continue Growth and Upgrade to Guidance; Pipeline Progress Despite Recent Setbacks
- Takeda announced 3QFY03/2022 results today. Reported revenue grew 7.7% YoY to JPY901.3bn (vs consensus JPY850.5bn) and OP declined 18.6% YoY to JPY116.5bn (vs consensus JPY115.6bn) due to divestitures.
- Revenue from Top 14 key drugs grew 21.2% YoY, while revenue from top-seller Entyvio grew 24.2% YoY during the quarter.
- Takeda has upgraded its previous guidance for full-year FY03/2022. The company continues to progress with drug development. Two of its products were approved during the last 6-months.
Japan’s Governance: TOPIX Reform Update (2) – Change in Calculation Method of Floating Share Ratio
- This article will focus on TOPIX reform regarding policy shares. The biggest change in the way TOPIX’s float ratio is calculated is the exclusion of policy shares from TOPIX float.
- Companies with a large cross-shareholdings will see a downward impact on their stock prices. We expect to see a move to reduce policy holdings by the end of March.
- It is also expected that there will be a move to transfer policy-holding shares to deemed-holding shares, which are considered floating shares. We should keep close eyes on such moves.
Mercari – Don’t Panic Sell
- Mercari opened down 11.7% and has now recovered to be down “only” 8.5%.
- While our impression of results yesterday was negative the intensity of the move is overdone in our view.
- We still believe that momentum is likely to be muted for a while but the current price is not unattractive.
Kura Sushi (2695): Relay from Demon Slayer to BTS. Winning with Entertainment Value
- On February 3, Kura Sushi (2695, the company) disclosed monthly data for January (on a preliminary basis)
- The company ran a special fair using high-end ingredients in early January and has been running a “BT21” campaign from January to February.
- BT21 is a globally popular character brand created through a collaboration between LINE FRIENDS and BTS (Bangtan Sonyeondan)
Tosho (8920): Solid 3Q OP; Announced Upward Revision of Guidance on Property Sales
Tosho (8920, the company) announced 3Q FY3/22 results and an upward revision of its full- year guidance.
Recovery progressed in 3Q mainly in the hotel business
The company announced a revision to its FY3/22 full-year guidance, raising its OP guidance from 2.0bn yen to 4.4bn yen
Before it’s here, it’s on Smartkarma
