Japan Specialist

Mark Chadwick

Equity Bottom-Up

<ul>
<li>The sell-side analyst community seems anchored to the view that Mercari is a growth stock</li>
<li>Analysts seem reluctant to turn negative on the name despite taking a large knife to earnings estimates</li>
<li>We repeat our view that the company faces a challenging couple of years and that the stock is still significantly overvalued</li>
</ul>


The sell-side analyst community seems anchored to the view that Mercari is a growth stock
Analysts seem reluctant to turn negative on the name despite taking a large knife to earnings estimates
We repeat our view that the company faces a challenging couple of years and that the stock is still significantly overvalued


Mercari (4385) | Analysts Anchored to Outdated Views

<ul>
<li>
<a href="https://www.smartkarma.com/entities/shopify-inc-de74469e-4678-489b-9b50-a80a5790c5ef" target="_blank" data-smartkarma-citation="entities:25906:1" rel="noopener">Shopify Inc (SHOP US)</a> 's share price declined by -15% in after hours trade on weaker-than-expected US E-commerce trends</li>
<li>
<a href="https://www.smartkarma.com/entities/mercari-inc" target="_blank" data-smartkarma-citation="entities:27149:1" rel="noopener">Mercari Inc (4385 JP)</a> 's US business is highly correlated with its US peer, as is its stock price</li>
<li>A normalisation of e-commerce trends could also impact its much larger Japanese GMV as consumers shift spending patterns back to normal </li>
</ul>



Shopify Inc (SHOP US) 's share price declined by -15% in after hours trade on weaker-than-expected US E-commerce trends

Mercari Inc (4385 JP) 's US business is highly correlated with its US peer, as is its stock price
A normalisation of e-commerce trends could also impact its much larger Japanese GMV as consumers shift spending patterns back to normal 


Mercari (4385) | We Were Wrong…its Worse

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>Mercari was expected to announce at some point that it would attempt to transfer to TSE Prime. They have now announced. </li>
<li>This will end up being a BIG TOPIX inclusion in May or June. </li>
<li>And the changes to the TOPIX Free Float Weight Methodology will mean it is bigger than it would have been under the old regime (despite unchanged FFW).</li>
</ul>


Mercari was expected to announce at some point that it would attempt to transfer to TSE Prime. They have now announced. 
This will end up being a BIG TOPIX inclusion in May or June. 
And the changes to the TOPIX Free Float Weight Methodology will mean it is bigger than it would have been under the old regime (despite unchanged FFW).


Mercari (4385) Applying for TSE Prime Means TOPIX Inclusion in 4-5 Months

Pan-Asia Index Flows & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Pan-Asia Index Flows & Special Situations

<ul>
<li>The new market structure of the Tokyo Stock Exchange (TSE) consisting of Prime and Standard Sections is about to become functional in a few months.</li>
<li>Some companies have already announced their desired Market Sections under this new structure. However, some companies are yet to make such announcements.</li>
<li>In this insight, we take a look at those who are yet to make such announcements to identify attractive TOPIX Inclusion Pre-event candidates. </li>
</ul>


The new market structure of the Tokyo Stock Exchange (TSE) consisting of Prime and Standard Sections is about to become functional in a few months.
Some companies have already announced their desired Market Sections under this new structure. However, some companies are yet to make such announcements.
In this insight, we take a look at those who are yet to make such announcements to identify attractive TOPIX Inclusion Pre-event candidates. 


Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

<ul>
<li>
<a href="https://www.smartkarma.com/entities/mercari-inc" target="_blank" data-smartkarma-citation="entities:27149:1" rel="noopener">Mercari (4385 JP)</a>, <a href="https://www.smartkarma.com/entities/lasertec-corp" target="_blank" data-smartkarma-citation="entities:4126:1" rel="noopener">Lasertec (6920 JP)</a> and <a href="https://www.smartkarma.com/entities/nitori-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:20386:1" rel="noopener">Nitori (9843 JP)</a> will replace <a href="https://www.smartkarma.com/entities/nippon-sheet-glass-co-ltd" target="_blank" data-smartkarma-citation="entities:9013:1" rel="noopener">Nippon Sheet Glass (5202 JP)</a>, <a href="https://www.smartkarma.com/entities/mitsui-e-s-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:2402:1" rel="noopener">Mitsui E&amp;S (7003 JP)</a> and <a href="https://www.smartkarma.com/entities/matsui-securities-co-ltd" target="_blank" data-smartkarma-citation="entities:6553:1" rel="noopener">Matsui Securities (8628 JP)</a> in the <a href="https://www.smartkarma.com/entities/nikkei-225" target="_blank" data-smartkarma-citation="entities:22909:1" rel="noopener">Nikkei 225</a>.</li>
<li>As expected, <a href="https://www.smartkarma.com/entities/nitori-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:20386:1" rel="noopener">Nitori Holdings (9843 JP)</a> will be added at half the planned PAF since the trading value is low compared to the expected index weight.</li>
<li>Passive trackers need to buy between 1-17 days of ADV on the adds while selling between 1.2-16.5 days of ADV on the deletes. There is a big funding trade too.</li>
</ul>



Mercari (4385 JP), Lasertec (6920 JP) and Nitori (9843 JP) will replace Nippon Sheet Glass (5202 JP), Mitsui E&amp;S (7003 JP) and Matsui Securities (8628 JP) in the Nikkei 225.
As expected, Nitori Holdings (9843 JP) will be added at half the planned PAF since the trading value is low compared to the expected index weight.
Passive trackers need to buy between 1-17 days of ADV on the adds while selling between 1.2-16.5 days of ADV on the deletes. There is a big funding trade too.


Nikkei 225 Index Rebalance: Mercari, Lasertec, Nitori IN; Nippon Glass, Mitsui E&S, Matsui Sec OUT

Japan

Mercari, Inc. operates as an electronic commercial company. The Company offers electronic commercial software, operation management, marketing planning, and other marketplace services. Mercari serves customers worldwide.

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Mercari (4385 JP)

Mercari (4385) | Analysts Anchored to Outdated Views

The analyst community remains too bullish on Mercari. We have a consensus Bearish view and see up to 40% downside from the stock.

Mark Chadwick

Mercari (4385) | We Were Wrong…its Worse

We are Bearish on Mercari as we think GMV in the US will see a sharp pullback as early as the current quarter (4Q: April-June), with higher-than...

Mark Chadwick

Mercari (4385) Applying for TSE Prime Means TOPIX Inclusion in 4-5 Months

Mercari (4385 JP) announced Friday it applied for TSE Prime transfer. I expect a TOPIX inclusion end-May or end-June. The change in FFW method...

Travis Lundy

TOPIX Inclusions: Who Is READY? 4.0

In this insight, we take a look at potential pre-event candidates who could move to the First Section of the Tokyo Stock Exchange in the next few...

Janaghan Jeyakumar, CFA

Nikkei 225 Index Rebalance: Mercari, Lasertec, Nitori IN; Nippon Glass, Mitsui E&S, Matsui Sec OUT

The adds are broadly flat since announcement of the changes. The deletes are higher and short interest has continued to increase. The stocks with...

Brian Freitas

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