In today’s briefing:
- Softbank – Transfer of Arm China Shares Does Nothing But Raise Red Flags
- BIG Nikon (7731) Buyback – OK But Should Do Better
- Seven & I: A Lot Left in Speedway Synergies
- Softbank Corp (Buy) – Growth/Value Hybrid Has Been Left Behind by Telco Peers
- Nikon (7731) | Focusing on the 4 Year View
- Yaskawa – We Expect a Slight Miss and Tepid Guidance
- Japan’s Governance: Article on the Composition of the Board of Directors of JTEKT Corporation (6473)
- Torikizoku Holdings (3193): Healthy Performance in March Despite Difficult Environment
Softbank – Transfer of Arm China Shares Does Nothing But Raise Red Flags
- Caixin confirmed today that Arm had transferred its shares in its China JV to a special purpose vehicle which it owns together with Softbank, as the FT had initially flagged.
- This could technically eliminate the obstacles to an audit for an IPO but we believe regulators would be remiss in allowing such a flimsy change to pass muster.
- In addition, the move reeks of desperation for cash and Softbank’s typical disregard for prudence and the importance of due diligence to investors.
BIG Nikon (7731) Buyback – OK But Should Do Better
- Nikon Corp (7731 JP) today announced a Very Large Buyback. This is the third buyback it has announced since spring 2019. The first was short. The next two big.
- The company also announced a new Medium-Term Management Plan for FY2022-2025 today in which they reiterated their existing Shareholder Return Policy of 40+% payout of stable dividends and opportunistic buybacks.
- It’s a decent div, and the buyback is for 6-7% of shares out, but it could do better. The company is hugely cash- and securities holdings-rich. It should do better.
Seven & I: A Lot Left in Speedway Synergies
- Even though the results weren’t a blowout as we expected, today’s price performance suggests that Seven & I Holdings (3382 JP) has not disappointed the market.
- We think Seven & I could be playing safe by holding back Speedway synergies.
- After a short breather, share price momentum has shifted positive and we expect this to continue alongside upgrades to Speedway synergy estimates.
Softbank Corp (Buy) – Growth/Value Hybrid Has Been Left Behind by Telco Peers
- Softbank Corp (9434 JP) shares have underperformed telco peers that benefit from a risk-off environment despite a sector-high dividend payout as 38% of value comes from Internet and fintech
- That dividend payout looks safe across our forecast period though as the telco business provides sufficient free cash and parent Softbank Group (9984 JP) can always use more cash
- At Q3, management reiterated confidence in financial guidance through FY22 and a positive Z Holdings (4689 JP) Q4 report could help shares make up lost ground
Nikon (7731) | Focusing on the 4 Year View
- The new four-year medium-term strategy that lays out a realistic route to greater profitability and growth.
- The stock has been trading below book value for years
- Buying back 10% of outstanding shares will give investors confidence
Yaskawa – We Expect a Slight Miss and Tepid Guidance
- Yaskawa reports today and we expect earnings and guidance to both be on the weak side.
- The stock has been weak of late but we still lean towards the idea that there is a little downside risk remaining.
- The key question is whether the market attaches any credibility to consensus projections of 15% YoY OP growth next FY.
Japan’s Governance: Article on the Composition of the Board of Directors of JTEKT Corporation (6473)
- I considered the article reported by Nikkei, “Halving the Number of In-House Directors to Three, Equal to Outside Directors. It was misleading because it didn’t consider the board composition.
- This change in the board composition is merely a measure to meet the listing criteria of prime market means and will not immediately lead to improved transparency of the board.
- It must be said that there are numerous issues to be improved for the Company, looking into the corporate practices in detail of the company.
Torikizoku Holdings (3193): Healthy Performance in March Despite Difficult Environment
- Same-store sales were 126.7% vs. March 2021 (112.8% for February), 70.2% vs. March 2020 (36.9% for February), and 58.9% vs. March 2019 (39.1% for February)
- The number of stores at the end of March was 615 (unchanged MoM). The number of directly owned stores was 384 (unchanged MoM).
- The company plans to open Torikizoku Hibiya Store in Yurakucho, Chiyoda-ku, Tokyo, on April 11.
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