In today’s briefing:
- Softbank – Masayoshi Son’s Got Nothin’
- Huge Hogy Medical (3593) Buyback from the Founding Family
- Softbank Group – Q3 21 Results Reaction: ARM IPO Pivot Is the Big Reveal
- Toshiba – Underwhelming MTP With Execution Risk
- Mitsubishi Estate Logistics Placement – Annual Routine
- Toa Corp (1885 JP) – Another Big Buyback for a Murakami Company
- Nissan – Limited Upside Till Next FY Starts to Be Priced In
- Murata Mfg. (6981 JP): FY Guidance Raised but Quarterly OP Trend Is Down
- SMM – Bump to Guidance Supports Recent Share Price Rise
- Harmonic Drive – Good 3Q But No Guidance Revision
Softbank – Masayoshi Son’s Got Nothin’
- It’s hard to believe but Softbank’s earnings briefing had even less of substance this time than usual, essentially amounting to an “innovative” unofficial roadshow for an Arm IPO.
- The termination of the Arm-Nvidia deal was made official and there was the usual TED talk for retail investors on LTV, NAV and the brand-new concept of computer chips.
- With portfolio performance since the start of this year as grim as expected there was little to cheer.
Huge Hogy Medical (3593) Buyback from the Founding Family
- Hogy Medical’s founder passed and there was a re-arranging of deckchairs among the Hoki family ownership in 2021.
- Earnings are not growing yet, but the mix is improving on a forward basis and consensus is decidedly more bullish than trend would suggest.
- Now the company is buying back a LOT of stock from the Hoki family. This changes things.
Softbank Group – Q3 21 Results Reaction: ARM IPO Pivot Is the Big Reveal
- The ARM sale to Nvidia has been cancelled but Softbank is charging full speed ahead on an IPO
- That is unlikely to surface the value of a straight sale whilst the monetization rate at 15-20% would also be much lower
- We remain cautious even with a 50% discount as NAV depends on volatile tech valuations but today’s report provides some reassurance on ARM at least
Toshiba – Underwhelming MTP With Execution Risk
- Toshiba’s second IR day produced little of extra value as details on its new MTP did not add anything particularly new.
- The company did a reasonable job of breaking down sources of growth and technological strengths but there were few immediate growth drivers.
- As prospects for strong growth look to be shifting further out an SOTP analysis does not favour Toshiba.
Mitsubishi Estate Logistics Placement – Annual Routine
- Mitsubishi Estate Logistics (3481 JP) (MEL) is looking to raise US$203m to acquire two new properties.
- The properties are expected to be more accretive to DPU than its last year’s placement, the deal has also been well-flagged and MEL has made capital raise an annual routine.
- In this note, we will look at the assets to be acquired, impact on forecast and portfolio, and run the deal through our framework.
Toa Corp (1885 JP) – Another Big Buyback for a Murakami Company
- Toa Corp (1885) is a niche infrastructure construction play with a decent growing business and a recent change in shareholder return policy.
- They bought back back 6% of shares in 2019. Then launched another 6% buyback in 2021. And now have announced another 6% buyback for 2022.
- The shareholder structure and the return profile bear closer investigation.
Nissan – Limited Upside Till Next FY Starts to Be Priced In
- Nissan generated total revenue of ¥2,207bn (+13.8% QoQ, -0.8% YoY) and OP of ¥52.2bn in 3QFY22.
- The reported revenue was 0.9% lower than consensus estimates, while operating profit was ¥15bn higher.
- The company revised revenue guidance to ¥8,710bn (-1.0%) while OP was increased by ¥30bn to ¥210bn (+16.7%) but our start of year estimate of ¥250bn OP is on the cards.
Murata Mfg. (6981 JP): FY Guidance Raised but Quarterly OP Trend Is Down
- FY Mar-22 guidance was raised, but new orders were down in 3Q and both sales & operating are headed down in 4Q.
- 4Q is seasonally weak and long-term demand drivers such as 5G, IoT and auto electrification remain in place, but the timing of recovery is uncertain.
- The shares have dropped 21% since last September, to the low side but not the bottom of their 5-year P/E range. Look for an opportunity to buy for the long-term.
SMM – Bump to Guidance Supports Recent Share Price Rise
- Sumitomo Metal Mining delivered a strong 3Q with ¥73.7bn in current profit vs. consensus at ¥57.1bn.
- Guidance was raised from ¥266bn in current profit to ¥314bn although this is inflated by about a ¥74bn gain on Sierra Gorda.
- Nevertheless, valuations look cheap relative to earnings and imply a sharp commodity price correction which may not happen very quickly.
Harmonic Drive – Good 3Q But No Guidance Revision
- Harmonic Drive posted relatively good numbers in 3Q on account of strong SG&A controls but neglected to raise guidance.
- That looks conservative and backlog hit a new high, but valuations remain stretched.
- Ultimately we still see significant risk for next FY and expect guidance to be significantly weaker than consensus expects.
Before it’s here, it’s on Smartkarma
