Category Investments

Stock Pick of the Week

23 September 2021 Momentum Securities


About: KDDI Corporation is a Japanese telecommunications operator formed on 1 October 2000 through the merger of DDI Corp., KDD Corp., and IDO Corp. It has its headquarters in the Garden Air Tower in Iidabashi, Chiyoda, and Tokyo. KDDI provides mobile cellular services using the "au by KDDI" brand.

Chris Napier, Momentum Securities Portfolio Manager for the KZN region, shares his insights.

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Good day. My Stock Pick this week is KDDI Corp. KDDI Corp. is a Japanese Utilities Company concentrating on the telecommunication sector. It has been in operation since October 2000 after the merger between DDI Corp., KDD Corp. and IDO Corporation.

The growing concerns of the raising of the US debt ceiling, US in global inflationary concerns, the Delta variant, as well as Chinese regulatory clamp downs, and potential systemic risks associated with the ever-grounded property group, I have opted for a company that should trade with less volatility in the near-term, as well as offer up a decent dividend yield in foreign currency, but yet still offers some good future growth potential.

Regardless of what lies in store for us this week, with a heavily anticipated set of macro data points, my interest lies in the R&D side of KDDI’s business. They were, and still are, involved in a handful fast internet data transmission speed, and were part of the team that set the first major speed record back in 2020, with an internet speed of a 178 terabytes per second. A new record was set a year later, 390 terabytes per second, by Japan's National Institute of Information Communications.

However, we witnessed the rise of tech in 2020 and the parts it played in keeping the global economy turning. Even if we had to adopt the work-from-home dynamic. But for the next leg and advancement what tech can achieve, these internet speeds will change the game even further. This will allow for the widespread adoption of augmented reality and virtual reality. Gaming will be immersive, but some use Zoom or Microsoft Teams meeting as an avatar is going to turn digital replicas of offices or meeting spaces.

Effectively, bringing to life an actual metaverse that could combine all digital elements in today's everyday life, as well as amalgamate the metaverse of companies such as Roblox, Unity Software, even Facebook or Microsoft, for that matter. This will result in the birth of entirely new economies.

KDDI Corp.’s share price has performed well of late, posting a gain around 15% since mid-August. It currently trades on a PE of 12.9 and has a dividend yield of 2.25%. Earnings are coming up on 30 October, and we are watching it closely, but the American depository receipt trades it on the ticket called KDDIY, and it does so over-the-counter in the US, but liquidity is good. Currently trading at 17.56, I'll be adding it in. Until next time, thank you for listening.

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