In today’s briefing:
- Recruit (6098) Buyback – Big, But Meh…
- JPX-Nikkei 400 Rebalance 2022: Leaderboard End-Jan 2022
- Monex – Downside Crypto Surprise
- HCM – Obvious Upgrade Is Obvious… Just Not to the Sell Side
- Komatsu – Strong but Mostly Priced In
- Sony – The Bungie Counterpunch
- Oriental Land: Price Reaction Unwarranted and There’s Significant Downside Risk in a Bear Market
- Koei Tecmo – Nice on the Surface But We Are Worried
- Japan Post Bank – As Good as It Gets?
- Japan’s Governance: From “Status of Compliance with the Corporate Governance Code” Disclosed by TSE
Recruit (6098) Buyback – Big, But Meh…
- Recruit announced a buyback of up to 34 million shares in an own share tender offer to take place at a price below the current market price.
- This kind of tender offer is almost always meant for Japanese corporate holders as it rarely makes sense for others to participate.
- This is mildly EPS accretive, BVPS decretive, quite ROE accretive, but Recruit can’t really use this method for the rest of its cross-holdings.
JPX-Nikkei 400 Rebalance 2022: Leaderboard End-Jan 2022
- JPX-Nikkei 400 is composed of common stocks listed in the Tokyo Stock Exchange. It is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents.
- A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year.
- Below is a look at potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to come in August 2022 based on trading data as of end-January 2022.
Monex – Downside Crypto Surprise
- Monex missed significantly at the PBT level with results of ¥1.01bn 73% below consensus of ¥3.77bn.
- This was a result of weak revenue and margins for the crypto business as advertising expense escalated into falling top line.
- The result is unlikely to do anything to reverse the recent downward trend of the stock and we recommend staying hedged.
HCM – Obvious Upgrade Is Obvious… Just Not to the Sell Side
- HCM posted a strong set of 3Q results with revenue of ¥246.7bn a touch below our ¥248.5bn estimate and blowing away clueless consensus’ ¥219.2bn.
- That the consensus high was just ¥231bn is an illustration of how poor the sell side understanding of HCM is compared to Komatsu.
- We expect more of the same going forward… strength from HCM and cluelessness from sell side analysts.
Komatsu – Strong but Mostly Priced In
- Komatsu’s 3Q results hit revenue of ¥723bn (+12.5% QoQ, +30.1% YoY) and OP of ¥87.5bn.
- They beat consensus by 9.8% and 19.0% at the revenue and OP levels respectively.
- That puts it on track to hit the high end of our ¥305-325bn OP estimate for the FY but upside is relatively moderate compared to HCM.
Sony – The Bungie Counterpunch
- Sony has not taken long to respond to Microsoft’s purchase of Activision Blizzard.
- It is being reported that Sony will acquire Bungie, original developer of the Halo franchise as well as Destiny for $3.6bn.
- The cost effectiveness of this move stands in stark contrast to Microsoft’s acquisition and is significantly more targeted in its apparent goals, as usual.
Oriental Land: Price Reaction Unwarranted and There’s Significant Downside Risk in a Bear Market
- Oriental Land (4661 JP) positively surprised the market with 3QFY22 revenue surpassing the consensus estimate by more than 13% through gradual easing of limits imposed on park attendance.
- FY22 revenue and OP guidance were raised by ¥22.9bn and ¥16.6bn respectively despite expecting Q4 attendance to fall short of the original forecast through the new state of emergency measures.
- Nonetheless, we think Oriental Land is too expensive at 33.6x FY24 OP, especially considering that attendance is expected to fall short of the original forecasts in the fourth quarter.
Koei Tecmo – Nice on the Surface But We Are Worried
- Koei Tecmo delivered strong results with revenue of ¥18.1bn and OP of ¥10.7bn comfortably beating consensus of ¥16.2bn and ¥5.7bn respectively.
- OP guidance was raised from an absurdly conservative ¥24.5bn to a still conservative ¥31.5bn, below consensus at ¥33.6bn.
- While these results look broadly positive we are concerned that the recent sell off may continue.
Japan Post Bank – As Good as It Gets?
- Japan Post Bank can see gains from rising yields on its US CLO investments
- Divergence of rising asset yields and flat funding costs may now be finishing
- There is further operational risk, possibly poor ALM, limited write-back potential
Japan’s Governance: From “Status of Compliance with the Corporate Governance Code” Disclosed by TSE
- On January 26, TSE disclosed the “Status of Compliance with the Corporate Governance Code (as of December 31, 2021)”. This article would like to discuss this disclosure document.
- TSE’s latest disclosure covers 3,311 companies listed on the TSE 1st Section, 2nd Section, and JASDAQ Standard and reports on the status of compliance with the revised Corporate Governance Code.
- How the principles of Corporate Governance Code required of companies listed on prime market are articulated in the future will have significant impact on the corporate governance practices of companies.
Before it’s here, it’s on Smartkarma
