In today’s briefing:
- Softbank Group – Strong Dollar Impact Boosts Buyback Math Although Debt May Rise Too
- Nidec – Small Precision Motors and Automotive Concerning
- Hitachi Transport (9086) Takeover Deal Imminent
- HS/Sawada: Khan Bank IPO Decided, and Earnings in A Week To Show Sharp Gain in BVPS/Liquidity
- Shiseido: Shanghai Lockdown Adds Pressure to Faltering Japanese Cosmetics
- Nidec (6594 JP) | The Second Coming of Nagamori
- Japan’s Governance: About an Article on Prime Market Listed Companies
Softbank Group – Strong Dollar Impact Boosts Buyback Math Although Debt May Rise Too
- The strong dollar has boosted Softbank’s predominantly dollar-linked asset value by 9% in yen terms (although reported net debt will also increase)
- Also relevant is a decrease in the dollar cost of its ¥1,000bn share repurchase which was $8.8bn when announced but costs less than $8bn at the current exchange rate.
- This has kept the share price up YTD and QTD despite weakness in the investment portfolio but tech weakness probably has more legs than dollar appreciation
Nidec – Small Precision Motors and Automotive Concerning
- Nidec earnings were worse than we feared as 4Q OP was just ¥36.9bn below even our ¥40bn estimate and far below consensus at ¥48.5bn.
- This was despite a 4.9% top line beat and there were some signs of kitchen sinking in our view.
- Nevertheless, guidance for ¥210bn in OP next year, while below consensus, still feels aggressive in our view.
Hitachi Transport (9086) Takeover Deal Imminent
- The Nikkei Leak Article of the Hitachi Transport takeover price is out. That suggests board meetings and deal announcement are imminent
- The price suggested in the article comes out to be just under ¥8,000.
- Past deals between KKR and Hitachi for Hitachi subs (and the language of the article on deal structure) suggest the minority Tender Offer Price could be different.
HS/Sawada: Khan Bank IPO Decided, and Earnings in A Week To Show Sharp Gain in BVPS/Liquidity
- It looks like the Khan Bank IPO in Mongolia is on.
- HS Holdings (former Sawada) will own <50% shortly. That will trigger de-consolidation of Khan Bank in Q2.
- That could be meaningful. Right now, the entire capital structure is in flux because of recently announced/booked/closed asset sales and now this. Earnings are out 28 April.
Shiseido: Shanghai Lockdown Adds Pressure to Faltering Japanese Cosmetics
- The market position of Japanese cosmetics in China is weakening with Japanese exports declining around 5.0% YoY in January and February 2022.
- With Shanghai under a strict lockdown and the recovery of inbound demand taking more time than expected, it is possible that Shiseido Company (4911 JP) could downgrade its 2022 guidance.
- These forces could take Shiseido’s valuation multiples to the pre-2013 level, resulting in a downside of close to 30%.
Nidec (6594 JP) | The Second Coming of Nagamori
- Nidec is the best stock in Japan to play the rising adoption of EVs
- The company is already dominating the largest E-Axle market in the world and will benefit from growing economies of scale
- We think the company can hit its mid-term targets and see over 30% upside for the stock
Japan’s Governance: About an Article on Prime Market Listed Companies
- Nikkei article of March 18 titled “Prime Market Listed Companies Reel in ESG, Increase Value with ‘Non-Financial.'” I considered the issues in the article in reference to my previous article.
- The prime market has limited investment targets because their market caps are mostly smaller for institutions, and their profitability needs further improvement, and valuations remain low in line with this.
- It’s reasonable to consider the portion of market-cap exceeding net assets as “goodwill,” source of earning power and growth potential that has a more direct impact on future cash flows.
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