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New Street Research

Research is provided by our team of experienced analysts. Our work is idea driven, based on independence of thought, sector expertise, and firmly focused on fundamentals and valuation of telecoms and internet names globally. New Street is headquartered in London with offices in New York, Singapore and Australia. 

New Street Research is an independent, partner-owned, research firm specialising in equity and debt research. Our equity research embraces the following sectors:

Pan European Telecom Services and Cable
US Telecoms, Cable, Satellite and Towers
Global Emerging Market Telecoms
Japan Telecoms
Asian Internet
Pan European Healthcare
US Healthcare
Japanese Healthcare

We also provide debt research on:
Pan European Telecom Services and Cable

Equity Bottom-Up

The Japanese telecom market was more volatile in 2018 than anticipated. However, <a href="https://www.smartkarma.com/profiles/1917" target="_blank" data-smartkarma-citation="accounts:1917">Chris Hoare</a> remains broadly positive on the sector for 2019. While pressure on the revenue line is intensifying, we do do not expect a price war to break out. In fact, we look for volatility to ease as the year progresses. Operators point to opex reductions and handset subsidy reductions to offset revenue weakness. We think that earnings are likely to surprise on to the upside. Over time we also look for dividend payout ratios to gradually rise, with the <a href="https://www.smartkarma.com/entities/27445" target="_blank" data-smartkarma-citation="entities:27445:1">Softbank Corp (9434 JP)</a> (KK) listing the long term catalyst.  For <a href="https://www.smartkarma.com/entities/315" target="_blank" data-smartkarma-citation="entities:315:1">Softbank Group (9984 JP)</a> (SB) we look for market confidence to improve on the Vision Fund strategy, as profitable exits/up-valuations of assets such as Uber are announced.The sector is recovering from <a href="https://www.smartkarma.com/entities/1089" target="_blank" data-smartkarma-citation="entities:1089:1">NTT Docomo's (9437 JP)</a> price cut announcements but we don't think they will slash prices (cuts will be selective). Our top pick is now <a href="https://www.smartkarma.com/entities/639" target="_blank" data-smartkarma-citation="entities:639:1">KDDI (9433 JP)</a> which could actually benefit from <a href="https://www.smartkarma.com/entities/31" target="_blank" data-smartkarma-citation="entities:31:1">Rakuten's (4755 JP)</a> entry (as the roaming partner). DoCoMo is most affected but there are plenty of cost cutting opportunities. <a href="https://www.smartkarma.com/entities/623" target="_blank" data-smartkarma-citation="entities:623:1">NTT (Nippon Telegraph &amp; Telephone) (9432 JP)</a> has optimistic guidance with substantial opex and capex cost cuts planned. Our order of preference for the stocks is now: KDDI (Buy), followed in order by NTT (Buy), SB Group (Buy), DoCoMo (Buy) and SB Corp (Neutral). We do not currently cover Rakuten.

The Japanese telecom market was more volatile in 2018 than anticipated. However, Chris Hoare remains broadly positive on the sector for 2019. While pressure on the revenue line is intensifying, we do do not expect a price war to break out. In fact, we look for volatility to ease as the year progresses. Operators point to opex reductions and handset subsidy reductions to offset revenue weakness. We think that earnings are likely to surprise on to the upside. Over time we also look for dividend payout ratios to gradually rise, with the Softbank Corp (9434 JP) (KK) listing the long term catalyst.  For Softbank Group (9984 JP) (SB) we look for market confidence to improve on the Vision Fund strategy, as profitable exits/up-valuations of assets such as Uber are announced.The sector is recovering from NTT Docomo's (9437 JP) price cut announcements but we don't think they will slash prices (cuts will be selective). Our top pick is now KDDI (9433 JP) which could actually benefit from Rakuten's (4755 JP) entry (as the roaming partner). DoCoMo is most affected but there are plenty of cost cutting opportunities. NTT (Nippon Telegraph &amp; Telephone) (9432 JP) has optimistic guidance with substantial opex and capex cost cuts planned. Our order of preference for the stocks is now: KDDI (Buy), followed in order by NTT (Buy), SB Group (Buy), DoCoMo (Buy) and SB Corp (Neutral). We do not currently cover Rakuten. 

Japanese Telcos: What to Look for in 2019. Earnings May Surprise on the Upside.

'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/000/073/556/original/Update.png?1545212207" class="editor-image img-responsive" data-smartkarma-image-id="73556"></figure>
<div class="content-caption">Source: Japan Analytics</div>
JAPAN CORPORATE CASH FLOW UPDATE - This insight updates our previous Insight <a href="https://www.smartkarma.com/insights/japan-quarterly-cash-flow-update-yen-weakens-normal-service-resumed" target="_blank" data-smartkarma-citation="insights:23357">Yen Weakens &gt; Normal Service Resumed</a> with data from all of the most quarterly reports filed last month. Our aggregate cash flow model reformulated cash flows into eight categories which sum to Change in Cash - Free Cash Flow (Operating Cash Flow less Investing Cash Flow), Financing Cash Flow, Shareholder Cash Flow (Equity Cash Flow and Dividend Cash Flow) and Minorities. In the last three months, Japan's non-financial companies generated ¥12.1t in Operating Cash Flow while investing ¥9.2t - the largest quarterly amount of capex since 2016-Q4.  Of the total ¥2.9t in Free Cash Flow, 65% was returned to shareholders of which half was in the form of reductions in equity - an improving and welcome trend which we covered in an earlier <a href="https://www.smartkarma.com/insights/japan-share-buybacks-less-than-meets-the-eye" target="_blank" data-smartkarma-citation="insights:22599">Insight</a>. After a ¥0.8t increase in debt and a ¥0.3t increase in Minorities Cash Flow, aggregate cash rose by ¥2.2t for the quarter. Since 2011-Q4, 58% of the ¥102.7t in cumulative FCF has been allocated to shareholders and 40% to cash, leaving considerable room for improvement in the relative size of these ratios.
SECTORS &amp; STOCKS - In the DETAIL below, we also look at sector cash flow trends and provide brief comments on some of the most significant changes in individual cash flows over the last three months including <a href="https://www.smartkarma.com/entities/315" target="_blank" data-smartkarma-citation="entities:315:1">Softbank Group (9984 JP)</a>, <a href="https://www.smartkarma.com/entities/3548" target="_blank" data-smartkarma-citation="entities:3548:1">Kawasaki Kisen Kaisha (9107 JP)</a>, <a href="https://www.smartkarma.com/entities/2818" target="_blank" data-smartkarma-citation="entities:2818:1">Hanwa (8078 JP)</a>, <a href="https://www.smartkarma.com/entities/19550" target="_blank" data-smartkarma-citation="entities:19550:1">Open House (3288 JP)</a>, <a href="https://www.smartkarma.com/entities/26074" target="_blank" data-smartkarma-citation="entities:26074:1">Macnica Fuji Electronics (3132 JP)</a>, and <a href="https://www.smartkarma.com/entities/13747" target="_blank" data-smartkarma-citation="entities:13747:1">Digital Garage (4819 JP)</a>.


Source: Japan Analytics
JAPAN CORPORATE CASH FLOW UPDATE - This insight updates our previous Insight Yen Weakens &gt; Normal Service Resumed with data from all of the most quarterly reports filed last month. Our aggregate cash flow model reformulated cash flows into eight categories which sum to Change in Cash - Free Cash Flow (Operating Cash Flow less Investing Cash Flow), Financing Cash Flow, Shareholder Cash Flow (Equity Cash Flow and Dividend Cash Flow) and Minorities. In the last three months, Japan's non-financial companies generated ¥12.1t in Operating Cash Flow while investing ¥9.2t - the largest quarterly amount of capex since 2016-Q4.  Of the total ¥2.9t in Free Cash Flow, 65% was returned to shareholders of which half was in the form of reductions in equity - an improving and welcome trend which we covered in an earlier Insight. After a ¥0.8t increase in debt and a ¥0.3t increase in Minorities Cash Flow, aggregate cash rose by ¥2.2t for the quarter. Since 2011-Q4, 58% of the ¥102.7t in cumulative FCF has been allocated to shareholders and 40% to cash, leaving considerable room for improvement in the relative size of these ratios.
SECTORS &amp; STOCKS - In the DETAIL below, we also look at sector cash flow trends and provide brief comments on some of the most significant changes in individual cash flows over the last three months including Softbank Group (9984 JP), Kawasaki Kisen Kaisha (9107 JP), Hanwa (8078 JP), Open House (3288 JP), Macnica Fuji Electronics (3132 JP), and Digital Garage (4819 JP).

Japan: The 2018-Q3 Cash Flow Stakes - Runners, Riders & Red Flags

Thematic (Sector/Industry)

We recently met <a href="https://www.smartkarma.com/entities/1089" target="_blank" data-smartkarma-citation="entities:1089:1">NTT Docomo (9437 JP)</a>  <a href="https://www.smartkarma.com/entities/623" target="_blank" data-smartkarma-citation="entities:623:1">NTT (Nippon Telegraph &amp; Telephone) (9432 JP)</a>, <a href="https://www.smartkarma.com/entities/639" target="_blank" data-smartkarma-citation="entities:639:1">KDDI (9433 JP)</a>, and <a href="https://www.smartkarma.com/entities/31" target="_blank" data-smartkarma-citation="entities:31:1">Rakuten (4755 JP)</a> in Tokyo. <a href="https://www.smartkarma.com/entities/315" target="_blank" data-smartkarma-citation="entities:315:1">Softbank Group (9984 JP)</a> was unavailable as they were IPO'ing <a href="https://www.smartkarma.com/entities/27445" target="_blank" data-smartkarma-citation="entities:27445:1">Softbank Corp (KK)(9434 JP)</a> which lists tomorrow (Wed). While revenue headwinds seem to be strengthening, <a href="https://www.smartkarma.com/profiles/1917" target="_blank" data-smartkarma-citation="accounts:1917">Chris Hoare</a> thinks that neither DoCoMo's price cuts, nor Rakuten's entry, are sufficient to trigger a meaningful reduction in profitability in the next few years. The industry plans substantial cost cuts which will offset much of the damage, while falling handset subsidies create a further tailwind. Dividend payout ratios are set to rise gradually, boosting their attraction to yield starved investors. Chris believes that the attractive shareholder return environment over the past 4-5 years remains intact. Stocks have been recovering from the news of DoCoMo's planned price cuts with the <a href="https://www.smartkarma.com/entities/27445" target="_blank" data-smartkarma-citation="entities:27445:1">Softbank KK</a> IPO a catalyst for the perception of the other telcos. For KDDI in particular, the impact of DoCoMo's price cuts will be offset by the roaming agreement with Rakuten and a possible increase in shareholder remuneration (dividends and buyback).

We recently met NTT Docomo (9437 JP)  NTT (Nippon Telegraph &amp; Telephone) (9432 JP), KDDI (9433 JP), and Rakuten (4755 JP) in Tokyo. Softbank Group (9984 JP) was unavailable as they were IPO'ing Softbank Corp (KK)(9434 JP) which lists tomorrow (Wed). While revenue headwinds seem to be strengthening, Chris Hoare thinks that neither DoCoMo's price cuts, nor Rakuten's entry, are sufficient to trigger a meaningful reduction in profitability in the next few years. The industry plans substantial cost cuts which will offset much of the damage, while falling handset subsidies create a further tailwind. Dividend payout ratios are set to rise gradually, boosting their attraction to yield starved investors. Chris believes that the attractive shareholder return environment over the past 4-5 years remains intact. Stocks have been recovering from the news of DoCoMo's planned price cuts with the Softbank KK IPO a catalyst for the perception of the other telcos. For KDDI in particular, the impact of DoCoMo's price cuts will be offset by the roaming agreement with Rakuten and a possible increase in shareholder remuneration (dividends and buyback).

Japan Telcos: Generally Positive After Recent Meetings in Tokyo.

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Equity Capital Markets

<a href="https://www.smartkarma.com/entities/315" target="_blank" data-smartkarma-citation="entities:315:1">Softbank Group (9984 JP)</a> is set to raise JPY2.65 trillion ($23.5 billion) through the <a href="https://www.smartkarma.com/entities/27445" target="_blank" data-smartkarma-citation="entities:27445:1">Softbank Corp (9434 JP)</a> IPO, Japan's biggest-ever IPO. However, SoftBank Corp's IPO which is set for 19 December is oversubscribed by less than double, according to press reports. This level of oversubscription is well below blockbuster Japanese stock debuts such as <a href="https://www.smartkarma.com/entities/27149" target="_blank" data-smartkarma-citation="entities:27149:1">Mercari Inc (4385 JP)</a> and <a href="https://www.smartkarma.com/entities/15070" target="_blank" data-smartkarma-citation="entities:15070:1">Recruit Holdings (6098 JP)</a>.<div class="content-highlight">Based on client discussion on SoftBank Corp’s intrinsic value, we have put together a DCF-based valuation along with scenario analysis. Our conclusion remains the same that SoftBank Corp is overvalued at the proposed IPO price of JPY1,500 per share. </div>

Softbank Group (9984 JP) is set to raise JPY2.65 trillion ($23.5 billion) through the Softbank Corp (9434 JP) IPO, Japan's biggest-ever IPO. However, SoftBank Corp's IPO which is set for 19 December is oversubscribed by less than double, according to press reports. This level of oversubscription is well below blockbuster Japanese stock debuts such as Mercari Inc (4385 JP) and Recruit Holdings (6098 JP).Based on client discussion on SoftBank Corp’s intrinsic value, we have put together a DCF-based valuation along with scenario analysis. Our conclusion remains the same that SoftBank Corp is overvalued at the proposed IPO price of JPY1,500 per share. 

SoftBank Corp IPO Valuation: Bull/Bear Case DCF Scenarios

Specialist in Japanese equities, Kheiron Group

Nathan Ramler, CFA

Specialist in Japanese equities

Kheiron Group

Tokyo-based with experience in global equity markets and M&A. Striving to add value and insight. 

Specialists in Japan

The price has been set. The book building is done. Like watching a sleek race car aligned on the starting grid, the world eagerly awaits the start of trading for <a href="https://www.smartkarma.com/entities/27445" target="_blank" data-smartkarma-citation="entities:27445:1">Softbank Corp (9434 JP)</a> on Wednesday, 19 December. We are also eager to see the stock go live. It's not only nostalgia for the stock code "9434" to be brought back into the race, but it will be helpful to be able to compare the stock and to gain better insights into the domestic Japanese telecom industry.That said, the past few weeks have been full of drama, and some of the drama has longer-term implications. In this insight, we take a more detailed look at some of the challenges facing SoftBank Corp. and some of the concerns that may give investors pause, or at least some things to keep in mind, over the months ahead.Specifically, we look at issues related to:<ul>
<li>Network outages</li>
<li>Huawei network equipment</li>
<li>Corporate governance</li>
<li>Regulatory headwinds</li>
<li>Competitive threats</li>
</ul>

The price has been set. The book building is done. Like watching a sleek race car aligned on the starting grid, the world eagerly awaits the start of trading for Softbank Corp (9434 JP) on Wednesday, 19 December. We are also eager to see the stock go live. It's not only nostalgia for the stock code "9434" to be brought back into the race, but it will be helpful to be able to compare the stock and to gain better insights into the domestic Japanese telecom industry.That said, the past few weeks have been full of drama, and some of the drama has longer-term implications. In this insight, we take a more detailed look at some of the challenges facing SoftBank Corp. and some of the concerns that may give investors pause, or at least some things to keep in mind, over the months ahead.Specifically, we look at issues related to:
Network outages
Huawei network equipment
Corporate governance
Regulatory headwinds
Competitive threats


Start Your Engines: SoftBank Corp (9434 JP) Is Off to the Races

Japan

Rakuten Group, Inc. provides Internet services. The Company offers Internet finance services which including "Rakuten Card" and "Rakuten Bank". Rakuten Group also provides digital content services including electronic book services.

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Rakuten (4755 JP)

Japanese Telcos: What to Look for in 2019. Earnings May Surprise on the Upside.

The Japanese telecom market was more volatile in 2018 than anticipated. However, Chris Hoare remains broadly positive on the sector for 2019. While...

New Street Research

Japan: The 2018-Q3 Cash Flow Stakes - Runners, Riders & Red Flags

JAPAN CORPORATE CASH FLOW UPDATE - This insight updates our previous Insight Yen Weakens > Normal Service Resumed with data from all of the...

Campbell Gunn

Japan Telcos: Generally Positive After Recent Meetings in Tokyo.

We recently met NTT Docomo (9437 JP) NTT (Nippon Telegraph & Telephone) (9432 JP), KDDI (9433 JP), and Rakuten (4755 JP) in Tokyo. Softbank...

New Street Research

SoftBank Corp IPO Valuation: Bull/Bear Case DCF Scenarios

Softbank Group (9984 JP) is set to raise JPY2.65 trillion ($23.5 billion) through the Softbank Corp (9434 JP) IPO, Japan's biggest-ever IPO....

Arun George

Start Your Engines: SoftBank Corp (9434 JP) Is Off to the Races

The price has been set. The book building is done. Like watching a sleek race car aligned on the starting grid, the world eagerly awaits the start...

Nathan Ramler, CFA

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