Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Last Week in Event SPACE: Familymart, Takeda, Harbin Electric, Motherson, Young Poong, NTT

'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

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 Bottom-Up

<a href="https://www.smartkarma.com/entities/315" target="_blank" data-smartkarma-citation="entities:315:1">Softbank Group (9984 JP)</a>’s market cap has consistently traded below its NAV. A popular expectation was that the <a href="https://www.smartkarma.com/entities/27445" target="_blank" data-smartkarma-citation="entities:27445:1">Softbank Corp (9434 JP)</a> IPO should be a catalyst to narrow the conglomerate discount (holdco discount). On its trading debut today, SoftBank Corp's shares fell 14.5% from its IPO price of JPY1,500 to JPY1,282 per share - the worst first-day decline ever for a major IPO in Japan since the <a href="https://www.smartkarma.com/entities/8280" target="_blank" data-smartkarma-citation="entities:8280:1">Japan Display (6740 JP)</a> IPO in 2014. <div class="content-highlight">In our previous research, we stated that the SoftBank Corp IPO is unlikely to meaningfully narrow SoftBank’s holdco discount. Our updated SoftBank SoTP analysis which reflects SoftBank Corp's trading debut suggests that SoftBank's holdco discount has not meaningfully narrowed.</div>

Softbank Group (9984 JP)’s market cap has consistently traded below its NAV. A popular expectation was that the Softbank Corp (9434 JP) IPO should be a catalyst to narrow the conglomerate discount (holdco discount). On its trading debut today, SoftBank Corp's shares fell 14.5% from its IPO price of JPY1,500 to JPY1,282 per share - the worst first-day decline ever for a major IPO in Japan since the Japan Display (6740 JP) IPO in 2014. In our previous research, we stated that the SoftBank Corp IPO is unlikely to meaningfully narrow SoftBank’s holdco discount. Our updated SoftBank SoTP analysis which reflects SoftBank Corp's trading debut suggests that SoftBank's holdco discount has not meaningfully narrowed.

SoftBank Group (9984 JP): SoftBank Corp IPO Has Failed to Meaningfully Narrow the Holdco Discount

Differentiated global TMT & Internet Research

New Street Research Insights

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

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.

APAC IPOs & Placements

Zhen Zhou, Toh

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

Bloomberg reported <a href="https://www.smartkarma.com/entities/27445" target="_blank" data-smartkarma-citation="entities:27445:1">Softbank Corp (9434 JP)</a>'s international bookbuild was 2 - 3x covered while retail offering was at almost 2x. There were other reports of bookrunners struggling to sell shares to retail investors.
In this insight, we will look at how peers and market have performed since bookbuild and provide a sensitivity table with implied valuations for different price points and thoughts on the price range for near-term trading. 
<hr>
We have already covered most aspects of <a href="https://www.smartkarma.com/entities/27445" target="_blank" data-smartkarma-citation="entities:27445:1">Softbank Corp (9434 JP)</a> 's IPO in our previous insights:
<ul class="">
<li>Valuation from a retail investor POV -  <a href="https://www.smartkarma.com/insights/softbank-ipo-review-attractive-from-a-retail-perspective-could-provide-short-term-upside" target="_blank" data-smartkarma-citation="insights:26422">Softbank IPO Review - Attractive from a Retail Perspective, Could Provide Short-Term Upside</a>
</li>
<li>Valuation from an institutional investor POV - <a href="https://www.smartkarma.com/insights/softbank-corp-ipo-review-yield-ensured-demand-may-not-guarantee-performance" target="_blank" data-smartkarma-citation="insights:26280">Softbank Corp IPO Review - Yield Ensured Demand May Not Guarantee Performance</a>
</li>
<li>Updates from prospectus - <a href="https://www.smartkarma.com/insights/softbank-corp-ipo-review-updates-from-the-prospectus-segment-breakdown-capex-and-risks" target="_blank" data-smartkarma-citation="insights:25943">Softbank Corp IPO Review - Segment Breakdown, Capex, and Risks</a>
</li>
<li>Operating metric comparison - <a href="https://www.smartkarma.com/insights/softbank-telecom-pre-ipo-higher-yield-to-compensate-for-poorer-metrics" target="_blank" data-smartkarma-citation="insights:25842">Softbank Telecom Pre-IPO - Higher Yield to Compensate for Poorer Metrics</a>
</li>
<li>Impact of Rakuten entry and FCF and dividend sustainability analysis - <a href="https://www.smartkarma.com/insights/softbank-telecom-pre-ipo-all-about-the-yield" target="_blank" data-smartkarma-citation="insights:25756">Softbank Telecom Pre-IPO - All About the Yield</a>
</li>
<li>Company background and overview - <a href="https://www.smartkarma.com/insights/softbank-telecom-pre-ipo-review-vision-is-needed-to-arrive-at-us-90bn-valuation" target="_blank" data-smartkarma-citation="insights:25289">Softbank Telecom Pre-IPO Review - Vision Is Needed to Arrive at US$90bn Valuation</a>
</li>
</ul>

Bloomberg reported Softbank Corp (9434 JP)'s international bookbuild was 2 - 3x covered while retail offering was at almost 2x. There were other reports of bookrunners struggling to sell shares to retail investors.
In this insight, we will look at how peers and market have performed since bookbuild and provide a sensitivity table with implied valuations for different price points and thoughts on the price range for near-term trading. 

We have already covered most aspects of Softbank Corp (9434 JP) 's IPO in our previous insights:

Valuation from a retail investor POV -  Softbank IPO Review - Attractive from a Retail Perspective, Could Provide Short-Term Upside

Valuation from an institutional investor POV - Softbank Corp IPO Review - Yield Ensured Demand May Not Guarantee Performance

Updates from prospectus - Softbank Corp IPO Review - Segment Breakdown, Capex, and Risks

Operating metric comparison - Softbank Telecom Pre-IPO - Higher Yield to Compensate for Poorer Metrics

Impact of Rakuten entry and FCF and dividend sustainability analysis - Softbank Telecom Pre-IPO - All About the Yield

Company background and overview - Softbank Telecom Pre-IPO Review - Vision Is Needed to Arrive at US$90bn Valuation



Japan

SoftBank Group Corp. provides telecommunication services. The Company also operates ADSL (Asymmetric Digital Subscriber Line) and fiber optic high-speed Internet connection, e-Commerce businesses, and Internet based advertising and auction businesses.

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Softbank Group (9984 JP)

Last Week in Event SPACE: Familymart, Takeda, Harbin Electric, Motherson, Young Poong, NTT

Last Week in Event SPACE ... Bad banker analysis as Familymart Uny Holdings (8028 JP)'s tender for Don Quijote Holdings (7532 JP) doesn't even get...

David Blennerhassett

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