Wednesday, 30 July 2014

A couple of reports from Japan - Honda and Nomura

Yesterday I reviewed Nissan (and as implied Toyota) and today it is Honda.

Like Nissan, Honda managed to achieve a cost reduction which was greater than the increase in other costs ('SG&A') and then add on top of that revenue growth/model mix impacts etc.  A complex chart though, especially to the right with various 'other' and 'unrealized losses'.  My view would be overall the numbers are not quite as impressive as Nissan's yesterday.

By contrast the dividend guiding was positive (Honda currently yields 2.4%)
 Looking ahead they did nudge up income hopes although I note on the split that the net combination between cost reductions and SG&A changes moves to a negative position.  By contrast though the revenue/model mix split drove the numbers...and it would not surprise me if the currency impact turns out to be a lot more positive than guided (i.e. the yen falls).

Honda (7267 below) is a fine company and - to be fair - has not performed particularly differently from my preferred (and current position) Toyota (7203 below).  Let's see what the latter says on 5 August.  I still like the space from a weak yen (and reasonable internal efficiencies) perspective.

One other Japanese stock that reported in the last 24 hours was Nomura.  It is funny but I was reading what I wrote back in October last year and it still feels pertinent today:

'The trouble is though that at x1.1 price:book and a return on equity of under 9% in Q2, you need to be an Abenomics believer if you think that Nomura is currently cheap.  The psychology of Japanese investors still has not (positively) broken and hence Nomura shares cannot fly from current levels. 

A weaker Yen would make the company a potential geared play on the knock-on market boost, but a weaker Yen as a result of a perceived failure of the stimulatory efforts to date...well that might be something different'

Nomura shares are down since then and now trade around x1 book...but the problems noted above are still apparent...with their Q1 return on equity a mere 3.2%...

Profitability was down at the divisional level with only 'retail' standing out quarter-on-quarter BUT down sharply year-on-year:

By far and away the most interesting slide in their presentation deck was this one showing the evolution of the thoughts of the average Japanese investor: more investment trust and 'discretionary'/specific solutions but big picture 'investor risk appetite declined'.  As I have noted before the 'animal spirits' required for Abenomics just does not appear to be happening...

Nomura remains a stock for the experts.  I am going to stay on the sidelines.

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