'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

ja research

ja research is an independent research platform focused exclusively on Japanese equities. Leveraging data and graphic analysis provided by Japan Analytics, we provide insights on small and medium-sized companies that have been ignored by the sell-side as well as challenging conventional wisdom on larger companies. We also offer analyst and corporate access, the latter with translation if required. 

Quantitative Analysis

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/121/977/original/2020-03-09_14-29-36.png?1583731808" class="editor-image img-responsive" data-smartkarma-image-id="121977"></figure><div class="content-caption">Source • Stoxx.com</div><p style="text-align: left;"><strong>ALTMAN'S Z-SCORE</strong> - Dr Edward Altman's Z-Score has been in use for over 50 years as a statistical model to calculate the probability of bankruptcy which built on the work of William Beaver and R.A. Fisher. Altman's original article (attached below) was published in the September 1968 issue of the Journal of Finance when he was an assistant professor of finance at NYU Stern.  The 'classic' Z-Score sampled publically-traded manufacturing companies. Later versions were formulated for private companies, non-manufacturing companies and emerging markets.  The model is between 80% and 90% accurate in predicting bankruptcy one year ahead of the event, while the rate of false positives has been between 15% and 20%.</p><p style="text-align: left;"><strong>APPLICATION TO JAPAN</strong> - We have been using Altman Z-Scores in Japan since the mid-1980s. We have found the Scores to be reasonably predictive, as has been confirmed by several academic papers, including  <a href="https://www.semanticscholar.org/paper/A-Model-of-Bankruptcy-Prediction%3A-Calibration-of/5565168f75b578ba28115ef314acbdd387f82483" target="_blank" rel="noopener">Gurau (2013)</a>. The persistence of a large number of 'zombie' companies supported by banks or keiretsu 'relatives' has, however, reduced the overall 'hit' rate for larger listed companies. The following charts show a timeline of the Altman Z-Score and Market Capitalisation for several memorable Japanese corporate bankruptcies. </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/122/005/original/2020-03-09_15-53-11.png?1583736804" class="editor-image img-responsive" data-smartkarma-image-id="122005"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/122/006/original/2020-03-09_15-54-52.png?1583736903" class="editor-image img-responsive" data-smartkarma-image-id="122006"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/122/007/original/2020-03-09_15-56-58.png?1583737032" class="editor-image img-responsive" data-smartkarma-image-id="122007"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/122/009/original/2020-03-09_15-59-08.png?1583737161" class="editor-image img-responsive" data-smartkarma-image-id="122009"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/122/011/original/2020-03-09_16-03-28.png?1583737425" class="editor-image img-responsive" data-smartkarma-image-id="122011"></figure><div class="content-caption">Source • Japan Analytics</div><div class="content-highlight"><p>This Insight is the second part of a three-part series attempting to highlight those Japanese companies that at the highest risk from the 2020 <em>Covid-19 recession</em>. The first focused on the<strong><a href="https://www.smartkarma.com/insights/japan-who-s-swimming-naked-part-1-audit-score" target="_blank" data-smartkarma-citation="insights:37265" rel="noopener">Audit Score</a></strong>, while a forthcoming Insight will look at <strong>Cumulative Cash Flows.</strong></p></div>

Source • Stoxx.comALTMAN'S Z-SCORE - Dr Edward Altman's Z-Score has been in use for over 50 years as a statistical model to calculate the probability of bankruptcy which built on the work of William Beaver and R.A. Fisher. Altman's original article (attached below) was published in the September 1968 issue of the Journal of Finance when he was an assistant professor of finance at NYU Stern.  The 'classic' Z-Score sampled publically-traded manufacturing companies. Later versions were formulated for private companies, non-manufacturing companies and emerging markets.  The model is between 80% and 90% accurate in predicting bankruptcy one year ahead of the event, while the rate of false positives has been between 15% and 20%.APPLICATION TO JAPAN - We have been using Altman Z-Scores in Japan since the mid-1980s. We have found the Scores to be reasonably predictive, as has been confirmed by several academic papers, including  Gurau (2013). The persistence of a large number of 'zombie' companies supported by banks or keiretsu 'relatives' has, however, reduced the overall 'hit' rate for larger listed companies. The following charts show a timeline of the Altman Z-Score and Market Capitalisation for several memorable Japanese corporate bankruptcies. Source • Japan AnalyticsThis Insight is the second part of a three-part series attempting to highlight those Japanese companies that at the highest risk from the 2020 Covid-19 recession. The first focused on theAudit Score, while a forthcoming Insight will look at Cumulative Cash Flows.

🇯🇵 JAPAN • Who’s Swimming Naked? > Part 2: Altman Z-Score

Expert on Japan Retail and Consumer Markets, JapanConsuming

Michael Causton

Expert on Japan Retail and Consumer Markets

Real Insight on Japanese Consumer Markets

JapanConsuming

JapanConsuming is a specialist research firm producing intelligence on Japanese retail and consumer markets. Founded in 2000, JapanConsuming has become the leading provider of insights on Japanese retailers and consumer trends to retailers, brands, government agencies and investors. As well as a highly regarded monthly report on the market, JapanConsuming produces in-depth reports on retail sectors, seminars on key trends and telephone consulting to investors on trends and retailers.

JapanConsuming was founded by Michael Causton and Roy Larke. 

Thematic (Sector/Industry)

<p>What statistics are available suggest that Japan lags behind China, USA and the UK in terms of e-commerce penetration but this position overlooks the single-minded shift of retailing to integrate e-commerce with traditional retailing.</p>
<p>Japan still has much to offer customers in the high street and these physical stores are now being heavily supplemented through online channels. Already we’re seeing the role of some stores shift towards showrooms making management more efficient and meaningful.</p>
<p>Japan is set to see the e-commerce sector as big as 20% of retail sales by 2024 and many of the operational problems holding online retail back globally, such as last mile fulfilment, could well be solved first in Japan.</p>
<p>Amazon, Rakuten and Softbank/Z/Zozo dominate the market and this dominance looks set to continue but other players are growing too with some retailers also finally working out how to make e-commerce work.</p>

What statistics are available suggest that Japan lags behind China, USA and the UK in terms of e-commerce penetration but this position overlooks the single-minded shift of retailing to integrate e-commerce with traditional retailing.
Japan still has much to offer customers in the high street and these physical stores are now being heavily supplemented through online channels. Already we’re seeing the role of some stores shift towards showrooms making management more efficient and meaningful.
Japan is set to see the e-commerce sector as big as 20% of retail sales by 2024 and many of the operational problems holding online retail back globally, such as last mile fulfilment, could well be solved first in Japan.
Amazon, Rakuten and Softbank/Z/Zozo dominate the market and this dominance looks set to continue but other players are growing too with some retailers also finally working out how to make e-commerce work.

Japanese E-Commerce Review 2020: Softbank/Z, Rakuten and Amazon to Dominate Further

<p>Shopping centre sales rose again in 2018-19 thanks to decent local support, investment in upgrading and expanding malls, inbound tourism growth and the growing enthusiasm to use dining and leisure options at station-based malls across the country.</p><p>Tourism boosted outlet malls once again and helped Narita Airport’s SC to widen its lead as the biggest mall by far, but it was the big station-based SCs that performed the best on average.</p><p>Despite this relative buoyancy, the number of new malls in 2018 collapsed to the lowest level in 20 years and 2019 was also a poor year. Shortages of labour and materials in the pre-Olympic infrastructure boom haven’t helped but nor has greater competition and falling interest in all but the best retailers’ new stores.</p><p>The following is an in-depth review of shopping centre development and performance in 2018-19 including a ranking of the top 50 shopping centres by sales.</p>

Shopping centre sales rose again in 2018-19 thanks to decent local support, investment in upgrading and expanding malls, inbound tourism growth and the growing enthusiasm to use dining and leisure options at station-based malls across the country.Tourism boosted outlet malls once again and helped Narita Airport’s SC to widen its lead as the biggest mall by far, but it was the big station-based SCs that performed the best on average.Despite this relative buoyancy, the number of new malls in 2018 collapsed to the lowest level in 20 years and 2019 was also a poor year. Shortages of labour and materials in the pre-Olympic infrastructure boom haven’t helped but nor has greater competition and falling interest in all but the best retailers’ new stores.The following is an in-depth review of shopping centre development and performance in 2018-19 including a ranking of the top 50 shopping centres by sales.

Japan Shopping Centres 2018-19: Sales Rise Again but Fewer New Malls

Equity Bottom-Up

<p><a href="https://www.smartkarma.com/entities/izumi-co-ltd" target="_blank" data-smartkarma-citation="entities:13173:1" rel="noopener">Izumi Co Ltd (8273 JP)</a> has taken a 20% share in <a href="https://www.smartkarma.com/entities/maruyoshi-center-inc" target="_blank" data-smartkarma-citation="entities:6892:1" rel="noopener">Maruyoshi Center (7515 JP)</a>, the last major independent supermarket chain in Shikoku.</p>
<p>Coupled with Izumi’s new partnership with Seven &amp; I, the move opens up the battle lines between Izumi and <a href="https://www.smartkarma.com/entities/aeon-co-ltd" target="_blank" data-smartkarma-citation="entities:3:1" rel="noopener">Aeon Co Ltd (8267 JP)</a> as the only two major FMCG retailers in southern Japan.</p>

Izumi Co Ltd (8273 JP) has taken a 20% share in Maruyoshi Center (7515 JP), the last major independent supermarket chain in Shikoku.
Coupled with Izumi’s new partnership with Seven &amp; I, the move opens up the battle lines between Izumi and Aeon Co Ltd (8267 JP) as the only two major FMCG retailers in southern Japan.

Izumi and Maruyoshi Center Become Affiliates, Furthers Proxy War with Aeon

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<p>In a long-awaited move, today <a href="https://www.smartkarma.com/entities/j-front-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:8947:1" rel="noopener">J Front Retailing (3086 JP)</a> announced that it would buy out minorities in subsidiary <a href="https://www.smartkarma.com/entities/parco-co-ltd" target="_blank" data-smartkarma-citation="entities:8431:1" rel="noopener">PARCO Co Ltd (8251 JP)</a>. </p><p>PARCO started in the late 1950s as the Ikebukuro Station Building Company and only in late 1969 did it shut down its existence as Tokyo Marubutsu and open the first Parco store atop Ikebukuro Station. From 1973 to the mid 1980s the company opened more than a dozen new stores, starting in Shibuya - where it is still most famous - and moving to other places in Tokyo and in regional cities around Japan. The company continued opening new stores at a reasonably steady pace of one every few years until 2016 when the company announced the temporary closure of the Shibuya Parco store for redevelopment, and followed that with a couple other store closures in Otsu (opened 1976), Chiba (opened 1996), and Utsunomiya (1997).</p><p>The Shibuya PARCO re-opened on 22 November 2019 and averaged close to $3mm of revenue/day for the first ten days.</p><h2>The New News</h2><p>PARCO announced earnings to 30 November 2019 on Christmas Day, and on the next day J Front Retailing announced its takeover of Parco at ¥1850/share, which is a 34.3% premium to last (after nine straight months of stock price gains) and an all-time high price as far as I can tell. </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/112/019/original/Screenshot%202019-12-26%20at%204.18.27%20PM.png?1577348338" class="editor-image img-responsive" data-smartkarma-image-id="112019"></figure><div class="content-caption">source: tradingview.com, Quiddity</div><div class="content-caption"></div><p>This is not a surprise, and the results of a successful tender offer and minority squeezeout are a foregone conclusion because the minimum threshold for success is that 1.7% of shares outstanding tender, but 17.6% of shares have agreed to tender. </p><p>This should trade tight. More below.</p>

In a long-awaited move, today J Front Retailing (3086 JP) announced that it would buy out minorities in subsidiary PARCO Co Ltd (8251 JP). PARCO started in the late 1950s as the Ikebukuro Station Building Company and only in late 1969 did it shut down its existence as Tokyo Marubutsu and open the first Parco store atop Ikebukuro Station. From 1973 to the mid 1980s the company opened more than a dozen new stores, starting in Shibuya - where it is still most famous - and moving to other places in Tokyo and in regional cities around Japan. The company continued opening new stores at a reasonably steady pace of one every few years until 2016 when the company announced the temporary closure of the Shibuya Parco store for redevelopment, and followed that with a couple other store closures in Otsu (opened 1976), Chiba (opened 1996), and Utsunomiya (1997).The Shibuya PARCO re-opened on 22 November 2019 and averaged close to $3mm of revenue/day for the first ten days.The New NewsPARCO announced earnings to 30 November 2019 on Christmas Day, and on the next day J Front Retailing announced its takeover of Parco at ¥1850/share, which is a 34.3% premium to last (after nine straight months of stock price gains) and an all-time high price as far as I can tell. source: tradingview.com, QuiddityThis is not a surprise, and the results of a successful tender offer and minority squeezeout are a foregone conclusion because the minimum threshold for success is that 1.7% of shares outstanding tender, but 17.6% of shares have agreed to tender. This should trade tight. More below.

J Front Retailing to Buy Out PARCO (8251)

Japan

AEON CO., LTD. operates general merchandise stores, supermarkets, and convenience stores throughout Japan. The Company is also engaged in women's and casual clothing store business, development business of commercial property, and financing service through the subsidiaries.

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Aeon Co Ltd (8267 JP)

🇯🇵 JAPAN • Who’s Swimming Naked? > Part 2: Altman Z-Score

ALTMAN'S Z-SCORE - Dr Edward Altman's Z-Score has been in use for over 50 years as a statistical model to calculate the probability of bankruptcy...

Campbell Gunn

Japanese E-Commerce Review 2020: Softbank/Z, Rakuten and Amazon to Dominate Further

What statistics are available suggest that Japan lags behind China, USA and the UK in terms of e-commerce penetration but this position overlooks...

Michael Causton

Japan Shopping Centres 2018-19: Sales Rise Again but Fewer New Malls

Shopping centre sales rose again in 2018-19 thanks to decent local support, investment in upgrading and expanding malls, inbound tourism growth and...

Michael Causton

Izumi and Maruyoshi Center Become Affiliates, Furthers Proxy War with Aeon

Izumi Co Ltd (8273 JP) has taken a 20% share in Maruyoshi Center (7515 JP), the last major independent supermarket chain in Shikoku. Coupled with...

Michael Causton

J Front Retailing to Buy Out PARCO (8251)

In a long-awaited move, today J Front Retailing (3086 JP) announced that it would buy out minorities in subsidiary PARCO Co Ltd (8251 JP). PARCO...

Travis Lundy

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