Report type: Weekly Strategy
”NTT Group Strengthens Its Character as a National Company”
The NTT (9432) Group is strengthening its character as a “Japan Union Platformer” undertaking national policy. Firstly, it was reported that, capitalizing on the Covid-19 infection, the government has begun to amend regulations to promote digitizing of the whole society in connection with the development of next-generation 5G communication structure. In this regard, it is planning to develop a nation-wide 5G communication infrastructure as it looks ahead to an “IoT” era where everything is connected to the internet. With the amendment of regulations, the Ministry of Internal Affairs and Communications is planning to support the laying of optical fiber circuits in unprofitable areas and the installation of 5G base stations in non-residential areas. As a result, we may expect stable demand for telecommunication works such as base station installation and network construction. We therefore need to pay attention to the telecommunication works industry which is evolving into an oligopoly of three groups, and of which NTT is a major customer.
Furthermore, essential to the digitizing of society as a whole will be the diffusion of cashless payments and digitizing of administrative procedures. The diffusion of cashless payments requires reduction of payment infrastructure usage fees paid by card companies and financial institutions, and opening of interbank payment systems (Zengin System) to fintech businesses. As for the digitizing of administrative procedures, there is an urgent need to improve the system related to My Number Card, as seen in the confusion of online applications for special fixed benefit. Both are viewed as sectors in which NTT’s system subsidiaries are involved.
Next, it is reported that NTT will make a full-scale entry into the renewable energy business by 2030 by establishing its own distribution network using the nationwide telephone network. Electric power companies have the right to preferentially send electric power from thermal power and nuclear power generation on existing power transmission and distribution networks, and this factor has hindered the diffusion of renewable energy. We therefore look forward to resolutions on these matters, which will render support to the government’s target of 22-24% renewable energy ratio in 2030.
By the way, the week of 6/7-10/7 will be the week after 30/6-2/7 during which announcements of important economic indicators by Japan, the US and China were completed without causing market turmoil. In terms of economic outlook, we can therefore look forward to a week without rampant selling. On the other hand, looking at the Ichimoku Kinko Hyo technical analysis chart for the Nikkei Average, the daily conversion line (the average price of the highest and lowest prices over the last nine days) with declining volatility of stock prices and the daily base line (the average price of the highest and lowest prices over the last 26 days) are converging at around 22,300 points. There were 17 days between 22/5, when the price was 20,334 points on a dip in the market, to 15/6, when the price was 21,529 points on another dip in the market after a rise. Considering a similar pattern of events, it should be noted that there could be changes again on 7/7, which is the seventeenth day from 15/6. It is also important to note that the closing date for Fast Retailing (9983), which has a high contribution to the Nikkei Average, is 9/7.
In the 6/7 issue, we will be covering MIRAIT Holdings (1417), The Pack Corp (3950), Renewable Japan Energy Infrastructure Fund (9283), and NTT DATA (9613).
・Established in 2010 as a joint holding company through the business integration of Daimei, Commuture and Todentsu. Also integrated with TKK in Sendai in 2018. The third largest telecommunications engineering company in Japan, mainly for NTT (9432).
・For FY2020/3 results announced on 8/5, net sales increased by 17.4% to 441.166 billion yen compared to the previous year, operating income increased by 6.3% to 21.993 billion yen, and current income decreased by 40.8% to 15.22 billion yen. Restoration of communication equipment related to natural disasters and constructions related to 4G new spectrum had contributed to higher sales. Current income declined due to the absence of extraordinary gains recorded in the previous year as a result of mergers.
・For FY2021/3 plan, net sales is expected to decrease by 1.4% to 435.0 billion yen compared to the previous year, with operating income remaining flat at 22.0 billion yen. There were successive mergers among telecommunications engineering companies in 2018, with the industry consolidating into three main companies, namely MIRAIT, Comsys Holdings (1721) and Kyowa Exeo (1951). The capital and business alliance between NTT and NEC (6701) announced on 25/6 will be a push factor for company, which is a member of the Denden Group, in terms of 5G base station installation work and network construction work.
・A packaging maker established in 1952. Handles all commercial packaging paper including paper bags. Main businesses include the processed paper products business, which deals with paper bags and cardboard, and the chemical products business, which deals with plastic bags and tailor bags.
・For 1Q (Jan-Mar) results of FY2020/12 announced on 8/5, net sales decreased by 7.1% to 19.565 billion yen compared to the same period the previous year, and operating income decreased by 12.1% to 955 million yen. Sales of paper bags, which accounted for 28% of sales, decreased 16.4% due to a decline in sales in domestic specialty stores and in both the US and China as people were asked to stay home as a result of the spread of Covid-19.
・For its full year plan, net sales is expected to increase by 1.4% to 96.8 billion yen compared to the previous year, and operating income to increase by 2.2% to 7.0 billion yen. However, due to Covid-19, for 1H (Jan-Jun), net sales were revised down to 34.8 billion yen (original plan: 44.3 billion yen) and operating income to 900 million yen (original plan: 2.6 billion yen). The use of plastic shopping bags was banned from 1/7 in Jakarta, Indonesia, while plastic bag charge was levied with effect from 1/7 in Japan. Company is constructing a paper bag production plant in Indonesia.
Important Information
This report is prepared and/or distributed by Phillip Securities Research Pte Ltd ("Phillip Securities Research"), which is a holder of a financial adviser’s licence under the Financial Advisers Act, Chapter 110 in Singapore.
By receiving or reading this report, you agree to be bound by the terms and limitations set out below. Any failure to comply with these terms and limitations may constitute a violation of law. This report has been provided to you for personal use only and shall not be reproduced, distributed or published by you in whole or in part, for any purpose. If you have received this report by mistake, please delete or destroy it, and notify the sender immediately.
The information and any analysis, forecasts, projections, expectations and opinions (collectively, the “Research”) contained in this report has been obtained from public sources which Phillip Securities Research believes to be reliable. However, Phillip Securities Research does not make any representation or warranty, express or implied that such information or Research is accurate, complete or appropriate or should be relied upon as such. Any such information or Research contained in this report is subject to change, and Phillip Securities Research shall not have any responsibility to maintain or update the information or Research made available or to supply any corrections, updates or releases in connection therewith.
Any opinions, forecasts, assumptions, estimates, valuations and prices contained in this report are as of the date indicated and are subject to change at any time without prior notice. Past performance of any product referred to in this report is not indicative of future results.
This report does not constitute, and should not be used as a substitute for, tax, legal or investment advice. This report should not be relied upon exclusively or as authoritative, without further being subject to the recipient’s own independent verification and exercise of judgment. The fact that this report has been made available constitutes neither a recommendation to enter into a particular transaction, nor a representation that any product described in this report is suitable or appropriate for the recipient. Recipients should be aware that many of the products, which may be described in this report involve significant risks and may not be suitable for all investors, and that any decision to enter into transactions involving such products should not be made, unless all such risks are understood and an independent determination has been made that such transactions would be appropriate. Any discussion of the risks contained herein with respect to any product should not be considered to be a disclosure of all risks or a complete discussion of such risks.
Nothing in this report shall be construed to be an offer or solicitation for the purchase or sale of any product. Any decision to purchase any product mentioned in this report should take into account existing public information, including any registered prospectus in respect of such product.
Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may provide an array of financial services to a large number of corporations in Singapore and worldwide, including but not limited to commercial / investment banking activities (including sponsorship, financial advisory or underwriting activities), brokerage or securities trading activities. Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may have participated in or invested in transactions with the issuer(s) of the securities mentioned in this report, and may have performed services for or solicited business from such issuers. Additionally, Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may have provided advice or investment services to such companies and investments or related investments, as may be mentioned in this report.
Phillip Securities Research or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report may, from time to time maintain a long or short position in securities referred to herein, or in related futures or options, purchase or sell, make a market in, or engage in any other transaction involving such securities, and earn brokerage or other compensation in respect of the foregoing. Investments will be denominated in various currencies including US dollars and Euro and thus will be subject to any fluctuation in exchange rates between US dollars and Euro or foreign currencies and the currency of your own jurisdiction. Such fluctuations may have an adverse effect on the value, price or income return of the investment.
To the extent permitted by law, Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may at any time engage in any of the above activities as set out above or otherwise hold an interest, whether material or not, in respect of companies and investments or related investments, which may be mentioned in this report. Accordingly, information may be available to Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, which is not reflected in this report, and Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may, to the extent permitted by law, have acted upon or used the information prior to or immediately following its publication. Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited its officers, directors, employees or persons involved in the issuance of this report, may have issued other material that is inconsistent with, or reach different conclusions from, the contents of this report.
The information, tools and material presented herein are not directed, intended for distribution to or use by, any person or entity in any jurisdiction or country where such distribution, publication, availability or use would be contrary to the applicable law or regulation or which would subject Phillip Securities Research to any registration or licensing or other requirement, or penalty for contravention of such requirements within such jurisdiction.
This report is intended for general circulation only and does not take into account the specific investment objectives, financial situation or particular needs of any particular person. The products mentioned in this report may not be suitable for all investors and a person receiving or reading this report should seek advice from a professional and financial adviser regarding the legal, business, financial, tax and other aspects including the suitability of such products, taking into account the specific investment objectives, financial situation or particular needs of that person, before making a commitment to invest in any of such products.
This report is not intended for distribution, publication to or use by any person in any jurisdiction outside of Singapore or any other jurisdiction as Phillip Securities Research may determine in its absolute discretion.
IMPORTANT DISCLOSURES FOR INCLUDED RESEARCH ANALYSES OR REPORTS OF FOREIGN RESEARCH HOUSE
Where the report contains research analyses or reports from a foreign research house, please note:
