Yahoo Finance Investment Opportunities in Japan’s Market
As the Nikkei 225 (TSE: ^N225) surges higher this year, it has emerged as the top performer among major global indices.
The index surpassed its previous all-time high set 34 years ago, and marked a robust recovery from its prolonged stagnation known as the “Lost Decade”.
This stellar performance is the result of higher corporate earnings, with over 70% of big Japanese listed companies experiencing an increase in profit over the last fiscal year, stemming from several factors such as the depreciating yen, a tourism rebound and successful price hikes.
This remarkable resurgence has captivated investors, prompting many to seek opportunities in the Japanese stock market.
How do I get started in the Japanese Market?
In the past, Singaporeans had limited access to international stock markets.
However, online brokers have changed the landscape, offering global investment opportunities and portfolio diversification.
Here are some brokers that are available for you
1. Moomoo SG
Moomoo SG, a broker under FUTU Holdings (NASDAQ: FUTU), is one of Singapore’s most popular online brokerages. It recently allowed its users to trade Japanese stocks.
2. Interactive Brokers (NASDAQ: IBKR)
Interactive Brokers, or IBKR, allows users to invest in the Japanese stock market.
Furthermore, IBKR grants users access to over 150+ markets on a single platform.
3. Saxo Bank
Saxo allows users to access over 50+ global markets, including the Tokyo Stock Exchange.
Selecting the right broker for you can be challenging! Read through our guide to simplify this decision.
Alternatively, you can also invest in the Japanese markets through ETFs, such as IShares MSCI Japan Index Fund (NYSEARCA: EWJ), which focuses on Japanese blue chips, or Lion-Nomura Japan Active ETF (SGX: JJJ).
After learning about how to get started in the Japanese markets, let’s delve into specific investment opportunities.
3 promising Japanese stocks to own
Here are three stocks that stand out due to their robust performance, strategic market positioning, and potential for future growth.
1. Sanrio (TSE: 8136)
Sanrio is a specialty retailer that designs, licenses and produces accessories and gifts. Known for their adorable and joy-bringing characters, such as Hello Kitty and Pom-Pom Purin, many of their commercial products have reached international recognition.
The company also has its own theme park business called Sanrio Puroland in Tokyo and Harmonyland in Hiji.
The company reported strong results in its latest earnings report for the third quarter of fiscal 2023 (3Q FY2023).
Net sales soared to 72.4 billion yen, up over 40.3% over the previous year, while operating profit doubled year on year to 21.4 billion yen.
Net profit leapt to 16.1 billion yen, 137.6% higher than the prior year.
The strong growth in revenue and profit was attributed to a sharp rise in sales in both domestic and overseas markets. Sanrio’s strategy of developing a wide range of products featuring popular characters proved successful.
Brand recognition is set to grow as the company continues to integrate social media and marketing into its long-term approach, targeting new markets in regions such as the Middle East and India.
Investors will be excited to await Sanrio’s next mid-term management plan.
2. Saizeriya (TSE: 7581)
Saizeriya, which many Singaporeans are familiar with, is a casual Italian-style restaurant from Japan. The company has opened up over 1,000 stores in Japan and over 400 across Asia.
In its most recent quarterly report, the second quarter of fiscal 2024 (2Q FY2024), consolidated net sales showed a significant 24.8% year on year increase, rising from 83.8 billion yen to 104.6 billion yen.
The eatery’s net income soared by nearly six-fold year on year to 6.4 billion yen.
The business also generated a positive free cash flow of 15.3 billion yen in fiscal 2023 (FY2023) ending 31 August 2023.
Its ongoing international expansion includes the opening of 15 net new overseas locations, bringing the total company’s store count to 1,555.
Saizeriya has thrived, particularly in China. Its affordably-priced food fits China’s slowing economy perfectly, with its branch in Beijing seeing a 200% increase in year on year sales.
Rising food prices coupled with a depreciating yen remain a key challenge for Saizeriya.
The company remains focused on streamlining its operations, pursuing self-checkout and tabletop ordering to improve profitability.
Over the past three fiscal years, Saizeriya’s operating margin has steadily risen from -1.8% to 3.9%, demonstrating its successful effort in reducing expenses.
3. Honda (TSE: 7267)
Honda is one of Japan’s largest automakers, with a market cap of 9.35 trillion yen.
Unlike its competitors, Honda commands a strong market in motorcycles, being the world’s largest motorcycle manufacturer, according to Statista
The company has just published its latest annual report, for the fiscal year of 2024 (FY2024) ending 31 March 2024.
The automaker’s year on year sales rose by 20.8% to 20.4 trillion yen.
Operating profit was a record-breaking 1.38 trillion yen, a 77% year on year increase, while net profit surged 70% year on year to 1.1 trillion yen.
Additionally, Honda generated a significant positive free cash flow of 1.46 trillion yen, more than doubling the previous year’s figure of 686 billion yen.
Honda’s stellar performance was fuelled by robust motorcycle demand in Brazil and India alongside steady automobile sales in the USA and Japan.
The company forecast its profit for FY2025 to be at 1.42 trillion yen, a 7% year on year growth.
In line with its goal of distributing its profits, Honda plans to increase its dividends, declaring a dividend of 29 yen per share at the end of FY2024, reaching a total of 68 yen per share as compared to 40 yen per share in the previous year.
The company also recently completed a share buyback programme, re-acquiring 50 billion yen worth of shares a month ago.
It remains committed to its transition into electric vehicles, pledging its responsibility to sustainability.
Honda has recently partnered with General Motors (NYSE: GM) to develop a new fuel cell system that improves the performance of electric vehicles while reducing manufacturing costs.
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Disclosure: Aw Kai Rui does not own any of the stocks mentioned in this article.
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