In today’s briefing:
- Toyo Construction (1890) Tender Situation Indeed Getting Funky
- Japan Tobacco 2022 High Conviction Update: Time to Double Down
- Sony – New PlayStation Plus Plans Illustrate Overwhelming Superiority Vs. XBox
- Nintendo – Take Profit
- Hazama Ando (1719 JP) – Big Buyback Is Set & Forget
- Toyota – Feb Production Numbers Suggest The Corner Has Been Turned
- JPX-Nikkei 400 Rebalance 2022: Leaderboard End-Mar 2022
- Onward: Moving to Showroom Stores and Click & Collect by 2024
- Poplar Launches Unmanned Stores but Independence Still Under Threat
- Japan’s Governance: Transitional Companies in the Prime Market: To Increase Valuations
Toyo Construction (1890) Tender Situation Indeed Getting Funky
- Toyo Construction (1890 JP)‘s Independent Committee thought this deal was being done too cheaply, but they signed off on it. I thought it was cheap too.
- I thought that a leading activist in the name would think so too, and try his hand because of his running start of 7+%. Huge volume Day1 sparked wider interest.
- It has traded every day so far above terms so far but on the first full day of trading, the activist Murakami-san bailed. That changes things, but… it’s still funky.
Japan Tobacco 2022 High Conviction Update: Time to Double Down
- It seems investors are starting to move past the fears of Japan Tobacco’s exposure to Russia and Ukraine with shares rising 6% following a steep decline alongside Russia’s Ukraine invasion.
- Meanwhile, we expect the company’s OP to continue trending upwards with the weakening yen helping the International Tobacco segment and price hikes benefiting the Domestic business.
- If OP reaches the 2014 level, we think Japan Tobacco (2914 JP) shares could go up around 90% to ¥4,000 per share over the next 12 months.
Sony – New PlayStation Plus Plans Illustrate Overwhelming Superiority Vs. XBox
- Yesterday Sony officially announced the new structure for its popular PlayStation Plus service with three tiers including some streaming options.
- The details had been mostly leaked already and there were no major surprises but pricing looked extremely reasonable.
- Below we compare the plans against Xbox Game Pass and explain why this demonstrates a far better understanding of the industry on Sony’s part.
Nintendo – Take Profit
- Nintendo is up 25.2% since we turned genuinely bullish on the name at the end of Nov.
- The weakening yen has helped significantly and should lead to a small overshoot on the dividend as well.
- However, they just announced a delay of the Breath of the Wild sequel and we think this is a good time to take profit.
Hazama Ando (1719 JP) – Big Buyback Is Set & Forget
- Hazama Ando spent a long time coming out of its doldrums. In February 2020, it started to improve. It started a buyback, scarfing up 22% of volume in 6 weeks.
- Later in 2020, another, and in 2021, another still, now with the last one finished in a hurry, they announced another. They’ve bought back stock 17 months in a row.
- It’s not clear the master rules of the buyback, but historically they have been reasonably aggressive. I expect that continues.
Toyota – Feb Production Numbers Suggest The Corner Has Been Turned
- Toyota announced record overseas production in February putting up a data point to suggest supply chain issues are genuinely easing.
- March is likely to prove more challenging due to some production stoppages but the trend looks clear.
- That it comes at a time when the yen is weak and oil prices encourage hybrid demand is an additional boon for Toyota.
JPX-Nikkei 400 Rebalance 2022: Leaderboard End-Mar 2022
- JPX-Nikkei 400 is composed of common stocks listed on 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. We look at the potential forward inclusions and removals every month.
- 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-March 2022.
Onward: Moving to Showroom Stores and Click & Collect by 2024
- Onward is proving adept at moving sales online even as its turnover drops dramatically as it restructures and slashes old stores – some 1,700 stores in two years.
- It now wants to integrate the remaining stores better with online and targets 50% of sales from e-commerce within three years.
- This won’t be enough to offset lost sales at department stores but should mean improving returns for long-term investors.
Poplar Launches Unmanned Stores but Independence Still Under Threat
- Poplar is one of the few remaining small CVS chains in Japan and is struggling.
- It is now trying a new format of mini stores to take merchandise to the customer.
- This may not be enough and it will likely cede more of its stores to Lawson.
Japan’s Governance: Transitional Companies in the Prime Market: To Increase Valuations
- This article focuses on valuation as a factor in increasing market capitalization and examines what efforts were made by the companies whose Tobin’s q increased.
- Companies with large increases in Tobin’s q made notable improvements in ％ independent directors and independence of compensation committee . The elimination of anti-takeover also helped boost Tobin’s q.
- Regarding key actions, companies with large increase in valuation could clarify balance between investment in growth and shareholder returns in capital allocation and work on communication with investors in disclosure.
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