Focus on Smaller Cap Value Names, Altay Capital

Altay Capital

Focus on Smaller Cap Value Names

Long time value investor. Long/Short portfolio that’s always net long (between 30-80%). I have extensive experience in the video game industry as I founded a leading media company in the space, which I have since exited after an acquisition. Gaming companies only make up ~15% of my portfolio, but its a sector where I believe I have an edge. A newsletter about value investing! Mostly focus on smaller cap value names that aren't widely covered.

Equity Bottom-Up

<ul><li>Akatsuki Inc (TYO 3932) is a net-net Japanese video game developer with 10 years of profitability.</li><li>They’re undergoing a big transformation in an effort to better compete globally by investing enormous amounts into their core development capabilities and increasing their average budget per game 3-6x.</li><li>They recently formed a capital alliance with Sony (6758) and Koei Tecmo (TYO 3635) with each taking a 10% and 8% stake respectively.</li></ul>

Akatsuki Inc (TYO 3932) is a net-net Japanese video game developer with 10 years of profitability.They’re undergoing a big transformation in an effort to better compete globally by investing enormous amounts into their core development capabilities and increasing their average budget per game 3-6x.They recently formed a capital alliance with Sony (6758) and Koei Tecmo (TYO 3635) with each taking a 10% and 8% stake respectively.

Akatsuki Inc (TYO 3932): A $188M Net Net Japanese Game Developer

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>As designed, the JPX-Nikkei400 Index is something of a disaster. It aims to be slightly 'smart' vs other cap-weighted indices like TOPIX, but tracking error vs TOPIX is de minimus.</li>
<li>This year, in week 1, the ADD vs DELETE performance is positive. If we sector-hedge the ADDs vs DELETEs, it's doing even better.</li>
<li>This is probably due to relatively low pre-positioning, and cares. Momentum suggests one could be long ADDs vs DELETEs. And there is the perennial trade to watch out for.</li>
</ul>


As designed, the JPX-Nikkei400 Index is something of a disaster. It aims to be slightly 'smart' vs other cap-weighted indices like TOPIX, but tracking error vs TOPIX is de minimus.
This year, in week 1, the ADD vs DELETE performance is positive. If we sector-hedge the ADDs vs DELETEs, it's doing even better.
This is probably due to relatively low pre-positioning, and cares. Momentum suggests one could be long ADDs vs DELETEs. And there is the perennial trade to watch out for.


2022 JPX Nikkei 400 Rebal Update - Going the Right Way

Quality-first, Business-perspective Strategy, Urbem (HK) Limited

Steven Chen

Quality-first, Business-perspective Strategy

<ul>
<li>It is difficult to resist the temptation to buy a financially attractive business at an extraordinarily low price multiple;</li>
<li>But I think that investors should be disciplined to look for proven, sustainable business models only;</li>
<li>This is precisely what Akatsuki lacks at the moment, in my view;</li>
<li>Despite the depressed valuation, I would wait on the sidelines until the long-term growth trajectory becomes more visible.</li>
</ul>


It is difficult to resist the temptation to buy a financially attractive business at an extraordinarily low price multiple;
But I think that investors should be disciplined to look for proven, sustainable business models only;
This is precisely what Akatsuki lacks at the moment, in my view;
Despite the depressed valuation, I would wait on the sidelines until the long-term growth trajectory becomes more visible.


Akatsuki: Interesting Story, but I'll Watch on the Sidelines for Now

Global Special Situations & Strategy, SR Services Ltd

David Lepper

Global Special Situations & Strategy

SR Services Ltd

SR Services provides Strategic Knowledge and Solutions services for Family Offices and Corporate Business. 

We deliver this via advisory services, strategic planning, opportunity analysis/sourcing, as well as solution implementation. 

Whilst, we create intellectual discipline and operational leverage for your projects or daily activities, our ultimate objective is to empower whilst enhancing your decision making. 

Strategic Knowledge and Solutions

Cross Asset Strategy

Growth continues to dominate: In July 2019 (<a href="https://www.smartkarma.com/insights/screening-the-silk-road-q3-2019-small-mid-cap-garp-zulu-warrior-screening" target="_blank" rel="noopener">Screening the Silk Road: Q3-2019 Small-Mid Cap GARP (Zulu Warrior Screening)</a>, we re-examined the divide between value and growth stocks, citing expectation of growth remaining dominant in investment style. The pirouette in Central Bank policies continues to see a reversal being delayed. We expect the bias towards growth style stocks to remain as we enter 2020. However, our analysis suggests a reversal in 2020 is increasing in probabilities.Our GARP selection screening continued to work well in H2 2019: Our H2 2019 basket delivered an average return of +16.7% (similar to H1 2019’s 16.6%), versus the MSCI Asia Pacific’s (Inc. Japan) +8.6% over the same period.Our screen offers up 6 unique liquid names that offer good alpha generation opportunity. One stock remains in this list from our July review.Subscribe via Smartkarma (or utilise your subscription) to learn how this screening review identified value in one stock in January 2019, that returned shareholders +87% in 6-months and another in July that returned +70% and gain greater insight into which names hold strong potential to deliver returns.

Growth continues to dominate: In July 2019 (Screening the Silk Road: Q3-2019 Small-Mid Cap GARP (Zulu Warrior Screening), we re-examined the divide between value and growth stocks, citing expectation of growth remaining dominant in investment style. The pirouette in Central Bank policies continues to see a reversal being delayed. We expect the bias towards growth style stocks to remain as we enter 2020. However, our analysis suggests a reversal in 2020 is increasing in probabilities.Our GARP selection screening continued to work well in H2 2019: Our H2 2019 basket delivered an average return of +16.7% (similar to H1 2019’s 16.6%), versus the MSCI Asia Pacific’s (Inc. Japan) +8.6% over the same period.Our screen offers up 6 unique liquid names that offer good alpha generation opportunity. One stock remains in this list from our July review.Subscribe via Smartkarma (or utilise your subscription) to learn how this screening review identified value in one stock in January 2019, that returned shareholders +87% in 6-months and another in July that returned +70% and gain greater insight into which names hold strong potential to deliver returns.

Screening the Silk Road: Q1-2020 Small-Mid Cap GARP (Zulu Warrior Screening)

'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. 

Thematic (Sector/Industry)

<div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/083/132/original/2019-03-25_18-58-11.png?1553507902" class="editor-image img-responsive" data-smartkarma-image-id="83132"></figure>Source: Japan Analytics
</div>There are currently 241 listed Japanese companies that can be categorised as Internet businesses. Our classification overlaps with the TOPIX-33 Information &amp; Communication sub-Sector but is broader in that it encompasses all companies listed on all sections and exchanges but is also narrower in that we have excluded Telecommunications (including <a href="https://www.smartkarma.com/entities/315" target="_blank" data-smartkarma-citation="entities:315:1">S</a><a href="https://www.smartkarma.com/entities/315" target="_blank" data-smartkarma-citation="entities:315:1">oftbank Group (9984 JP)</a>) and Information Technology companies. We have adopted a 'quantamental' approach which covers the long-term and current trends for Japan's Internet Sector as a whole, as well as eight sub-Sectors or Peer Groups and the Sectors' leading companies by market capitalisation.  Our focus is exclusively on the locally-listed universe and is based on disclosed financial and market data. We do not provide any forecasts, other than the companies' own forecasts and we do not attempt to make any business model or strategic judgments. Our focus is purely on financial and market performance. We do not cover unlisted and defunct companies such as Livedoor and, therefore, there is implicit survivor bias in the data. The broad themes that are developed in DETAIL below are grouped into six topics as follows: - • SUMMARY •  • FUNDAMENTAL OVERVIEW •  • SCORING - RESULTS &amp; REVISIONS / RELATIVE PRICE •  • RESULTS TRENDS •  • VALUATION • • RECOMMENDATIONS •<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/083/206/original/2019-03-25_17-46-58.png?1553565764" class="editor-image img-responsive" data-smartkarma-image-id="83206"></figure><div class="content-caption">Source: Japan Analytics</div>OVERVIEW - As will be covered in greater DETAIL below, Japan has failed to evolve a substantial Internet Sector and, in many business models, has been passed by global competitors including in the home market. Although Internet Sector revenues have grown steadily and now account for close to 1% of the total for all listed companies, operating margins have declined by half in the last seven years and are now only four percentage points higher than the market average. Accordingly, as measured by our Results &amp; Revision Score, the Sector is close to a twelve-year low. The market's response is an unchanged Sector weight in the market composite despite the addition of 111 new companies in the last six years, and a Relative Price Score that has moved in a narrow range over that period. The Sector averages disguise the weak business and market performance of a handful of Sector leaders as well as the overvaluation of the Sector's more successful business models, which is partly a result of a lack of alternatives. Despite the world's most significant Internet investor - <a href="https://www.smartkarma.com/entities/315" target="_blank" data-smartkarma-citation="entities:315:1">Softbank Group (9984 JP)</a>'s Vision Fund - being based in Japan, this fund and other global investors in Internet business have been right to give Japan a 'pass'.


Source: Japan Analytics
There are currently 241 listed Japanese companies that can be categorised as Internet businesses. Our classification overlaps with the TOPIX-33 Information &amp; Communication sub-Sector but is broader in that it encompasses all companies listed on all sections and exchanges but is also narrower in that we have excluded Telecommunications (including Softbank Group (9984 JP)) and Information Technology companies. We have adopted a 'quantamental' approach which covers the long-term and current trends for Japan's Internet Sector as a whole, as well as eight sub-Sectors or Peer Groups and the Sectors' leading companies by market capitalisation.  Our focus is exclusively on the locally-listed universe and is based on disclosed financial and market data. We do not provide any forecasts, other than the companies' own forecasts and we do not attempt to make any business model or strategic judgments. Our focus is purely on financial and market performance. We do not cover unlisted and defunct companies such as Livedoor and, therefore, there is implicit survivor bias in the data. The broad themes that are developed in DETAIL below are grouped into six topics as follows: - • SUMMARY •  • FUNDAMENTAL OVERVIEW •  • SCORING - RESULTS &amp; REVISIONS / RELATIVE PRICE •  • RESULTS TRENDS •  • VALUATION • • RECOMMENDATIONS •Source: Japan AnalyticsOVERVIEW - As will be covered in greater DETAIL below, Japan has failed to evolve a substantial Internet Sector and, in many business models, has been passed by global competitors including in the home market. Although Internet Sector revenues have grown steadily and now account for close to 1% of the total for all listed companies, operating margins have declined by half in the last seven years and are now only four percentage points higher than the market average. Accordingly, as measured by our Results &amp; Revision Score, the Sector is close to a twelve-year low. The market's response is an unchanged Sector weight in the market composite despite the addition of 111 new companies in the last six years, and a Relative Price Score that has moved in a narrow range over that period. The Sector averages disguise the weak business and market performance of a handful of Sector leaders as well as the overvaluation of the Sector's more successful business models, which is partly a result of a lack of alternatives. Despite the world's most significant Internet investor - Softbank Group (9984 JP)'s Vision Fund - being based in Japan, this fund and other global investors in Internet business have been right to give Japan a 'pass'. 

🇯🇵 Japan • Internet Sector Review - 'Japan Passing'

Japan

Cybernet Systems Co., Ltd. provides CAE (Computer Aided Engineering) software for computation/visualization, structural analysis, optical design, electronic design automation, acoustic analysis, and fluid dynamics analysis.  The Company also provides network related software.  Cybernet Systems provides support, training, seminars, and consulting services.

OPTIM CORPORATION develops and licenses infrastructure and security software for electronic devices such as computers, smartphones and eBooks. The Company also provides services and solution in Cloud Device management, remote management support and consumer device management.

JASTEC Co., Ltd. is an independent computer software development company.  The Company mainly develops business application software for such industries as manufacturing, financial, retail, and service.  The Company also develops packaged software.

Marvelous Inc. plans, produces, and sells visual software such as music CDs and DVDs.  The Company also specializes in digital graphics for computer game.

TOHO SYSTEM SCIENCE CO., LTD. is a system software development company.  The Company designs, develops, and supports system integration software and also provides data processing and system operation services.

eBASE Co., Ltd. develops and sells packaged software which manages product information on digital contents.  The Company also provides maintenance and support services to users.

Computer Institute of Japan, Ltd. develops a variety of software for operating systems, applications, network, engineering, and development support tools.  The Company also develops packaged software.  Computer Institute of Japan also analyzes clients' systems and develops, manages, and maintains systems such as network, database, and Internet.

Alpha Systems Inc. is an independent software development Company.  The Company mainly develops software for various type of communication systems.  Alpha Systems also constructs and operates clients' communication network systems. The Company's customers include Fujitsu and the NTT Group.

PCA CORPORATION is an independent software developer.  The Company develops packaged business software for accounting, payroll calculation, and sales and inventory management.

CORE CORPORATION develops software for microcomputers with embedded systems, Internet related systems, and engineering systems.  The Company also provides information systems for Internet, financial, manufacturing, distribution companies as well as public services.

Softstar Entertainment Inc. develops and markets computer game software. The Company's games are available on home video game platforms and personal computers.

Galaxia Communications Co., Ltd. produces mobile multimedia solutions.  The company provides services such as, multimedia service platform solution, multimedia service terminal solution, photo platform, and UCC platform. Galaxia Communications develops and supplies the solution of SK Telecom June mobile multimedia service.

Selvas AI Inc. developes mobile software solutions for mobile phones and embedded devices.  The Company provides software solutions including handwriting recognition, mobile dictionary, OCR solutions, mobile panorama and mobile photo editing software.

X-Legend Entertainment Co Ltd provides and markets internet online games software.

ASM Technologies Ltd. offers computer software services.  The Company offers consulting, information technology and software testing services; develops enterprise, Internet and embedded systems applications; and offers networking and telecommunications services.

Subex Limited develops software products and provides software consulting services. The Company's products primarily focus on providing software solutions for clients in the telecommunications sector.

Virtualtek Corporation provides intranet system integration service.  The Company also develops and markets web-based intranet software packages that enable users to send and receive electronic mail and share documents over the intranet.  Virtualtek also markets personal computer peripherals and software.

Shenzhen Kingsun Science & Technology Co., Ltd. develops, designs and sells primary and secondary schools synchronous educational software.  The Company's products are students' learning supplimentary software, web-based live educational products and teacher books software packages.

INFRAWARE Inc. develops and markets embedded browser and Internet solutions for supporting wireless mobile internet service.  The Company also offers server solution to resolve print errors when printing web documents.  INFRAWARE provides the product for mobile service providers such as SK Telecom and LG Telecom.

Joymax Co., Ltd. provides game products for PC platforms.  The Company also produces contents for multimedia and game software applications.

Akatsuki Inc. develops entertainment game applications for mobile devices, some of which are jointly developed with other companies.

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Akatsuki Inc (3932 JP)

Akatsuki Inc (TYO 3932): A $188M Net Net Japanese Game Developer

hey recently formed a capital alliance with Sony (6758) and Koei Tecmo (TYO 3635) with each taking a 10% and 8% stake respectively.

Altay Capital

2022 JPX Nikkei 400 Rebal Update - Going the Right Way

JPX Nikkei 400 rebalance is going the right way in the 6 trading days so far, and it wasn't done on Day1 (which was lacklustre). It may be under...

Travis Lundy

Akatsuki: Interesting Story, but I'll Watch on the Sidelines for Now

High margin, superior return on capital, cash-rich, capital-light, founder-led/owned, and most interestingly, a price multiple of 2x - but here are...

Steven Chen

Screening the Silk Road: Q1-2020 Small-Mid Cap GARP (Zulu Warrior Screening)

Growth continues to dominate: In July 2019 (Screening the Silk Road: Q3-2019 Small-Mid Cap GARP (Zulu Warrior Screening), we re-examined the divide...

David Lepper

🇯🇵 Japan • Internet Sector Review - 'Japan Passing'

There are currently 241 listed Japanese companies that can be categorised as Internet businesses. Our classification overlaps with the TOPIX-33...

Campbell Gunn

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