Japan Weekly Strategy Report-Is the Nikkei Average’s 21,000 points and the announcement of Ichiro’s retirement coincidental? April 5, 2019

 

 

Is the Nikkei Average’s 21,000 points and the announcement of Ichiro’s retirement coincidental?

The retirement of the Seattle Mariners’ player, Ichiro, was announced on 21/3. Looking back, during the period when he was a member of the Orix, when he set a major record in 1994 for 210 hits (130 matches) with his “pendulum batting style”, the high price at the Nikkei average was 21,573 points in June, however, the fluctuating conditions around the high price range of 21,000 points, such as the high price of 21,048 points in May and 20,977 points in July, have given me the feeling that there is some sort of connection with Ichiro’s number of hits in a year, although that is a personal opinion.

Although the week of 25/3 began with a selling lead due to the “shock of (long and short-term) inverted yields” in the US bond market, on 26/3, it rose sharply from the movements of the March settlement of stocks with final day rights, and from 27/3 onwards, it fell under 21,000 points due to ex-rights and the worsening of US economic indicators, etc., which was a week with intense price fluctuations.

The level of “21,000 points” at the Nikkei average is also an important turning point for the market in the mid and long term. In 2015, it marked a high price of 20,952 points in June and 20,946 points in August as well. Last year, after the low of 20,950 points on 14/2 it rebounded to 22,502 points on 27/2, and after falling to 20,971 points on 26/10, it returned to 22,698 points on 3/12. Also, since entering this year, after marking a high price of 20,981 points on 5/2 it dropped until 8/2, and after the fall from the high price on 4/3, it also rebounded after the low of 20,993 points on 8/3, and after the push from the high price on 22/3, it similarly rebounded after marking the low of 20,911 points on 25/3. Last year’s market, which saw a high price of up to 24,448 points on 2/10, had a broad “market price of above and below the range of 2,000 points centring on 22,500 points”, and in particular, while showing strong indication of the resistance line at 23,000 points, with the breakthrough on top in September, it was pushed straight to a high price. Since falling to a low of 18,948 points on 26/12 after the high price in October last year, there may be a possibility of it falling to the middle level of a broad range of around 22,500 points to 21,000 points.

However, even if we expect the risk of a low price, the 27/3 closing price’s weighted average Nikkei average P/B ratio is 1.13x, and approximately half of the companies in the First Section of the Tokyo Stock Exchange have been left at a P/B ratio of below 1.0x. Although the weighted average P/B ratio can be affected by prices of stocks with a large market capitalisation, calculating based on the 27/3 closing price, the equivalent Nikkei average stock price of the weighted average P/B ratio of 1.0x is 18,918 points, which is at a level close to the low of 18,948 points on 26/12. Assuming even if the weighted average P/B ratio of 1.0x occurs again, contribution is high and the focus will be on the fall of stocks at a relatively high P/B ratio level, while stocks that have already been left below the P/B ratio of 1.0x are less likely to fall. 

In the 1/4 issue, we will be covering OpenDoor (3926), Capital Asset Planning (3965), Otsuka Holdings (4578), Strike (6196), SPRIX (7030) and Konami Holdings (9766)

  • OpenDoor, Inc. (3926)   3,360 yen (29/3 closing price)

・Established in 1997. Expands travel-related businesses such as the retail of travel products and the operation of the travel comparison site, “TRAVELKO”. “TRAVELKO” is a travel metasearch site that is able to search and compare each type of travel product in a consolidated manner, such as over 500 overseas and domestic package tours, hotels, and discounted airline tickets, etc. sold by booking sites.

・For 3Q (Apr-Dec) results of FY2019/3 announced on 8/2, net sales increased by 21.6% to 3.613 billion yen compared to the same period the previous year, operating income increased by 45.5% to 1.45 billion yen, and net income increased by 54.4% to 941 million yen. Awareness has been heightened from a commercial that was made to coincide with the timing in the demand. Cooperation with local and overseas travel sites and the expansion of products that are able to display available seats have contributed to an increase in the percentage of concluded transactions.

・Company revised its full year plan upwards on 28/3 after expenses for the commercial were confirmed. Net sales is expected to increase by 24.0% to 4.97 billion yen compared to the previous year, which is within the range of the original plan’s 4.8-5 billion yen, however, operating income is expected to increase by 44.6% to 1.67 billion yen (original plan 1.3-1.6 billion yen), and net income to increase by 36.9% to 1.035 billion yen (original plan 780-960 million yen), which has been raised to exceed the range.

  • Capital Asset Planning, Inc. (3965)   1,537 yen (29/3 closing price)

・Established in 1990. Offers a system to financial institutions, etc. which optimises work processes in the financial retail business. Main service content include retail flow and work management for life insurance companies, as well as asset advice functions for the wealthy.

・For 1Q (Oct-Dec) results for FY2019/9 announced on 8/2, net sales decreased by 9.5% to 1.159 billion yen compared to the same period the previous year, operating income ▲89 million yen (same period last year ▲71 million yen), and net income ▲70 million yen (same period last year ▲78 million yen). Due to budget contraints in financial institutions and the retail period of new products for life insurance companies occuring at the same time, sales and profit for the 2nd and 4th quarter are inclined to one side.

・For its full year plan, net sales is expected to increase by 2.3% to 6.7 billion yen compared to last year, operating income to increase by 11.7% to 560 million yen, and net income to increase by 20.8% to 340 million yen. Due to the increase in stockholders towards the First Section of the Tokyo Stock Exchange, a stock split was carried out based on 28/2. In addition to their introduction of RPA into retail processes for life insurance, with the release of the API of their integrated management system for personal financial assets (WMW), we can look forward to their strategy in aiming towards its wide popularisation throughout banks, brokerage firms, accounting firms and FPs, etc.   

 

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