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Report type: Weekly Strategy |
■F&B sector transformation, activist season, semiconductor review
A major holiday period is approaching, with up to 10 consecutive holidays from the 29/4 to 8/5. At a 20/4 meeting of the expert panel that advises the Ministry of Health, Labour and Welfare on measures against Covid-19, it was reported that the number of newly-infected persons nationwide during the past week had declined for the first time in four weeks. At the same time, there were signs of increasing interest in travel and leisure-related stocks, which have become more visible since the lifting of quasi-emergency measures to prevent the spread of the disease. In the US, major airlines like United Airlines and American Airlines are expecting to return to profitability in the April-June period according to their Jan-Mar 2022 earnings announcements. This may have implications for Japan’s travel and leisure trends in the near future.
In this regard, the F&B sector is drawing attention. As stores were forced to shorten their operating hours due to the pandemic, companies have found ways to survive by taking advantage of takeout and delivery services through the use of apps, and have also sought to improve operational efficiency by introducing food delivery robots and other means. If the flow of people returns and customer traffic recovers to pre-Covid levels, profits are expected to greatly exceed those during pre-Covid levels through significant improvements in profit margins.
Activists (shareholders who speak out) are increasingly investing in companies with fiscal years ending in March which are preparing for their annual shareholder meetings in June. This month, City Index Eleventh, a former Murakami Fund affiliate, increased its purchases of Daiho Corp (1822), Cosmo Energy Holdings (5021), and Central Glass (4044), companies which had already submitted large shareholding reports. City Index Eleventh also newly appeared as a major shareholder with more than 5% of holdings in Credit Saison (8253) and Sumitomo Osaka Cement (5232). Such activities are being watched as moves to demand shareholder returns from undervalued stocks with high cash holdings, or as a way to reorganize an industry such as the cement industry, which is expected to encounter a tighter profit environment due to the tight supply and demand of Russian coal. It is also worth considering an investment strategy of stocking up on unpopular undervalued stocks with high cash holding ratios and letting them remain inactive in the market for a long time.
There is also growing momentum for a review of semiconductor related stocks. The trigger may be the Jan-Mar 2022 earnings announcements of Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest semiconductor contract manufacturer, and ASML of the Netherlands, the world’s largest semiconductor lithography equipment manufacturer. TSMC expects to increase its capex for FY2022 to $40-$44 billion from $30 billion in the previous year, and ASM’s CEO said, “We are seeing unprecedented strong demands”. The fact that governments are attracting semiconductor factories to their own countries amid rising geopolitical risks is also a push factor. Demand for manufacturers of semiconductor production and inspection equipment is therefore secure for the time being. In particular, in the area of EUV (Extreme Ultraviolet) lithography systems, besides Lasertec (6920), JEOL (6951), a semiconductor electron beam lithography system manufacturer, and Nikon (7731), its partner and a long-established lithography system manufacturer, will be the next stocks to watch.
In the 25/4 issue, we will be covering Torikizoku Holdings (3193), Solxyz (4284), Serverworks (4434) and ROHM (6963).
Torikizoku Holdings (3193) 1,753 yen (22/4 closing price)
・Opened the first “Torikizoku” store in Higashiosaka City in 1985 as part of a chain of yakitori restaurants. Operates in the Kansai, Kanto, and Tokai regions, with 615 stores at the end of July 2021. Characterized by offering products at uniform prices for all items. Transitioned to a holding company in February 2021.
・For 1H (Aug-Jan) results of FY2022/7 announced on 11/3, net sales was 8.184 billion yen (10.831 billion yen in the previous year before the transition to a holding company), operating income was a loss of 1.856 billion yen (a loss of 1.217 billion yen in the previous year), and ordinary income was 808 million yen (a loss of 1.035 billion yen in the previous year). Sales declined and operating income was a loss due to government requests to shorten business hours and refrain from serving alcoholic beverages. However, managed to turn to a profit for ordinary income thanks to a subsidy income of 3.1 billion yen.
・The full-year company plan is as yet not finalised due to the uncertain impact of the Covid-19 pandemic on the company’s performance. Announced a 7% price increase for the first time in 4 years for “Torikizoku” products starting 28/4. All drinks and food items will be increased uniformly (including tax) from 327 yen to 350 yen. In addition, “TORIKI BURGER”, a chicken burger specialty restaurant, was opened in August last year as the second mainstay business of the company after its yakitori izakaya business. Expected to capture post-Covid demand changes such as take-out and home delivery demands.
SOLXYZ Co., Ltd (4284) 393 yen (22/4 closing price)
・Established in 1981. With SBI Holdings (8473) as its largest shareholder, company operates as an independent system integrator (SI), dealing with software development and digital signage businesses. Main customers are from the financial sector.
・For FY2021/12 results announced on 10/2, net sales increased by 5.6% to 13.922 billion yen compared to the previous year, and operating income increased by 30.3% to 1.105 billion yen. Growth in software development business for the financial and telecommunications industries and edge computing (embedded) consulting business had offset the decline in financial performance arising from the sale of the digital signage business. Improved profitability contributed to higher income.
・For its FY2022/12 plan, net sales is expected to increase by 11.3% to 15.5 billion yen compared to the previous year, and operating income to increase by 17.6% to 1.3 billion yen. While its tradable market cap as of the end of June last year was only 6.56 billion yen against the listing maintenance standard of 10 billion yen, the company announced its “Plan for Compliance with Listing Maintenance Standards” with the submission of its application for selection to the TSE Prime Market in November last year. Basic policy is to expand into the stock-type business with recurring billing and the ASEAN market.
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