Industrials
Kyocera is attracting investor attention, fuelled by hopes of unlocking value from its overcapitalised balance sheet and complex business structure, rather than faith in management. While the first steps on asset divestment and business restructuring have now been decided, Asymmetric Advisors suspects the external pressure from activist investors, backed by TSE reforms, will force a more rapid pace of change than the “not so drastic” change management are presently outlining. Trading at 0.88x PBR with ¥1.6trn net cash, recent announcements - a ¥200bn buyback and partial KDDI stake sale worth ~¥250bn - highlight the scale of latent value.
Edition: 220
- 19 September, 2025
Communications
Shares of NTT have slumped this year as concerns on mobile performance and local exchange profitability weigh on sentiment even as regulatory and political uncertainty lingers. At the company’s recent IR day, management was able to address the former, focusing attention on improvements in mobile and its regional businesses although we will have to wait for the politicians and regulators to address the latter. Large-cap telecom peers have performed much better than NTT, which has expanded the valuation gap with NTT looking much more attractive at 11x FY24e EPS vs. KDDI (14x) and Softbank (17x). NTT has also increased its dividend 12 years in a row and Kirk Boodry does not expect it to stop now. TP ¥207 (40% upside).
Edition: 196
- 04 October, 2024
Telecoms: Valuation upgrades
Communications
FY23 has so far been a goldilocks scenario for Japanese telcos. Incumbents are moving closer to a recovery in high-margin, mobile service revenue growth with little competitive trouble from Rakuten Mobile despite it managing to grow subs by tapping under-served corporate users. While Kirk Boodry expects competitive intensity to step up in FY24, there are limits to how aggressive Rakuten can be and his positive outlook on the sector has not changed. IIJ is his top overall pick. He also moves KDDI ahead of NTT as his preferred large-cap telco.
Edition: 183
- 05 April, 2024
Key stories from Japan's retail and consumer markets
The latest edition of JapanConsuming includes commentary on 1) the proposal to bring Welcia and Tsuruha together to form a new FMCG mega-retailer. Although both are designated drugstores, their expansion into food and general FMCG means the creation of what will be Japan’s single largest retail chain by sales, sending shockwaves across the entire industry. 2) KDDI acquiring 50% of Lawson, making it a partner to Mitsubishi Shoji in running the third largest convenience store chain. It’s a big deal, but no one really knows what KDDI’s aims are. Some more imaginative analysts suggest this could be just the first step towards KDDI merging with Rakuten in order to beat Amazon.
Edition: 181
- 08 March, 2024
Communications
Huge beat as ARPU inflects - KDDI reported a very strong set of Q2 figures with both KPIs and headline numbers inflecting / strong across all business lines. While these numbers can be volatile and Q1 was weaker, net profit growth was 18%, 11% ahead of consensus. New Street continues to argue that Japanese Telcos have entered a Golden Age. KDDI is in a clear uptrend; investors who do not have exposure are missing a strong story. KDDI remains their top pick with a TP of ¥6,500 (+30% upside).
Edition: 173
- 10 November, 2023
Consumer Discretionary
Rakuten expanded its Mobile segment disclosure at Q3 which is great for investors but the message is not very positive as roaming costs remain elevated and hopes for a recovery are now being pinned to the receipt of platinum band spectrum but that is years away even if the regulatory outlook is improving. With a continued reliance on KDDI for roaming and the associated costs that come with it which are higher than total service revenue, Rakuten is unlikely to step up its customer acquisition efforts and that is great news for incumbents but market expectations that mobile is value destructive are unlikely to change.
Edition: 150
- 09 December, 2022
NTT (9432), KDDI (9433), Rakuten (4755)
Communications
It is now clear that NTT and KDDI have entered a phase of faster growth, which New Street calls "The Golden Age". They expect SoftBank to enter it in 1-2 years. Stocks are not priced for this, nor for the likelihood that Rakuten scales back or exits its MNO business. New Street increases their TP to ¥5,250 for NTT (35% upside) and to ¥6,000 for KDDI (40% upside). For Rakuten, they remain bearish and cut their TP to ¥520 (20% downside).
Edition: 139
- 08 July, 2022