'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. 

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/18379" target="_blank" data-smartkarma-citation="entities:18379:1">ZOZO (3092 JP)</a>
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<div style="text-align: center;" class="content-caption">Source: Japan Analytics</div>
ONWARD AND OUT - <a href="https://www.smartkarma.com/entities/18379" target="_blank" data-smartkarma-citation="entities:18379:1">ZOZO (3092 JP)</a>, formerly Start Today, has been the sixth-most-traded large capitalisation stock over the last ten trading days after <a href="https://www.smartkarma.com/entities/14502" target="_blank" data-smartkarma-citation="entities:14502:1">Benefit One (2412 JP)</a>, <a href="https://www.smartkarma.com/entities/14750" target="_blank" data-smartkarma-citation="entities:14750:1">Rizap (2928 JP)</a>, <a href="https://www.smartkarma.com/entities/11747" target="_blank" data-smartkarma-citation="entities:11747:1">Takeda Pharmaceutical (4502 JP)</a>, <a href="https://www.smartkarma.com/entities/7611" target="_blank" data-smartkarma-citation="entities:7611:1">Hoshizaki (6465 JP)</a>, and <a href="https://www.smartkarma.com/entities/8467" target="_blank" data-smartkarma-citation="entities:8467:1">Workman Co Ltd (7564 JP)</a>. According to Nikkei XTECH, on 25th December apparel maker <a href="https://www.smartkarma.com/entities/11370" target="_blank" data-smartkarma-citation="entities:11370:1">Onward (8016 JP)</a> suspended selling of its products on ZOZOTOWN and will leave the platform altogether. Although Onward products are estimated to account for less than 3% of total transactions on the site, there are concerns that other apparel makers will follow suit as a result of the emerging direct competition on the site from ZOZO's private label. Since reaching our 4.0 'Overbought' threshold on 9th July 2018, ZOZO shares have corrected by 57% - the worst performance of any large cap from that date - as concerns mounted over the private brand strategy and the behaviour of CEO Yusaku Maezawa.  Since bottoming on 4th January, the shares have risen by 18% following positive comments from the CEO about sales over the New Year holiday period.    
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PRIVATE-LABEL STRETCH GOALS- The 'teething problems' of ZOZO entering the private-label apparel business have been well-documented by <a href="https://www.smartkarma.com/profiles/2415" target="_blank" data-smartkarma-citation="accounts:2415">Michael Causton</a> in a recent <a href="https://www.smartkarma.com/insights/zozo-teething-problems-for-private-brand-and-signs-of-hubris" target="_blank" data-smartkarma-citation="insights:26266">Insight</a> on Smartkarma. Michael rightly questions the feasibility of the company scaling a ¥200b apparel business within the next three years while targeting an additional incremental ¥400b in e-commerce revenue, particularly as it has taken ZOZO twenty years to reach the first ¥100b in annual revenues. In the DETAIL section below, we shall examine ZOZO's current and possible future financial condition as it strives to become one of the top-ten global fashion retailers. 
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'ZOSO' &amp; THE STAIRWAY TO HEAVEN - In addition to some notable purchases of modern art at record-breaking prices, CEO Maezawa also last year booked himself on Space X's first flight to the moon. With apologies, the lyrics of the peerless song from Led Zeppelin's untitled fourth album - known by fans as 'Zoso' after the symbol designed by Jimmy Page for the inner sleeve - come to mind:- 
There's a lad(y) who's sure All that glitters is gold And (s)he's buying a stairway to heaven When(s)he gets there (s)he knows If the stores are all closed With a word (s)he can get what (s)he came for.

ZOZO (3092 JP)

Source: Japan Analytics
ONWARD AND OUT - ZOZO (3092 JP), formerly Start Today, has been the sixth-most-traded large capitalisation stock over the last ten trading days after Benefit One (2412 JP), Rizap (2928 JP), Takeda Pharmaceutical (4502 JP), Hoshizaki (6465 JP), and Workman Co Ltd (7564 JP). According to Nikkei XTECH, on 25th December apparel maker Onward (8016 JP) suspended selling of its products on ZOZOTOWN and will leave the platform altogether. Although Onward products are estimated to account for less than 3% of total transactions on the site, there are concerns that other apparel makers will follow suit as a result of the emerging direct competition on the site from ZOZO's private label. Since reaching our 4.0 'Overbought' threshold on 9th July 2018, ZOZO shares have corrected by 57% - the worst performance of any large cap from that date - as concerns mounted over the private brand strategy and the behaviour of CEO Yusaku Maezawa.  Since bottoming on 4th January, the shares have risen by 18% following positive comments from the CEO about sales over the New Year holiday period.    

PRIVATE-LABEL STRETCH GOALS- The 'teething problems' of ZOZO entering the private-label apparel business have been well-documented by Michael Causton in a recent Insight on Smartkarma. Michael rightly questions the feasibility of the company scaling a ¥200b apparel business within the next three years while targeting an additional incremental ¥400b in e-commerce revenue, particularly as it has taken ZOZO twenty years to reach the first ¥100b in annual revenues. In the DETAIL section below, we shall examine ZOZO's current and possible future financial condition as it strives to become one of the top-ten global fashion retailers. 

'ZOSO' &amp; THE STAIRWAY TO HEAVEN - In addition to some notable purchases of modern art at record-breaking prices, CEO Maezawa also last year booked himself on Space X's first flight to the moon. With apologies, the lyrics of the peerless song from Led Zeppelin's untitled fourth album - known by fans as 'Zoso' after the symbol designed by Jimmy Page for the inner sleeve - come to mind:- 
There's a lad(y) who's sure All that glitters is gold And (s)he's buying a stairway to heaven When(s)he gets there (s)he knows If the stores are all closed With a word (s)he can get what (s)he came for.

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

Today's report puts a spotlight on the Health Care Sector, which is assuming a global leadership role vs. other Sectors. We also focus on the Communications Sector as we are seeing steady relative strength ranking (RSR) improvements over the last couple of months. At the Group level, we highlight select smid-cap Casinos &amp; Gaming stocks. Finally, India’s S&amp;P BSE SENSEX is breaking out to new all-time highs as RS bullishly inflects, we highlight actionable stocks.

Today's report puts a spotlight on the Health Care Sector, which is assuming a global leadership role vs. other Sectors. We also focus on the Communications Sector as we are seeing steady relative strength ranking (RSR) improvements over the last couple of months. At the Group level, we highlight select smid-cap Casinos &amp; Gaming stocks. Finally, India’s S&amp;P BSE SENSEX is breaking out to new all-time highs as RS bullishly inflects, we highlight actionable stocks.

Global Strategy: Health Care Outperforming - Overweight; India Breaking Out -Add Exposure

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)

<ul><li>Our recent post on e-commerce (<a href="https://www.smartkarma.com/insights/e-commerce-in-japan-2017-2022-relentless-expansion-means-upheaval-in-consumer-goods-distribution" target="_blank" data-smartkarma-citation="insights:19667">E-Commerce in Japan 2017-2022: Relentless Expansion Means Upheaval in Consumer Goods Distribution</a>) showed just how rapidly the channel is growing in Japan. One of the main drivers of this growth has been fashion, with apparel the biggest category overall by value and one of the top two fastest growing categories for the last five years.</li><li>Even then e-commerce still only accounts for around 11% of the total value of the apparel market, compared to around 30% for consumer electronics.</li><li>In addition, fashion retailers and brands have a very mixed record when it comes to grasping the opportunities and threats of what is already Japan’s biggest distribution channel, meaning most apparel firms sell through the big malls that dominate the market – a factor that has driven the growth in the share price of companies like <a href="https://www.smartkarma.com/entities/18379" target="_blank" data-smartkarma-citation="entities:18379:1">Start Today Co Ltd (3092 JP)</a> and <a href="https://www.smartkarma.com/entities/31" target="_blank" data-smartkarma-citation="entities:31:1">Rakuten Inc (4755 JP)</a> over the last decade. </li><li>Some retailers, though, are trying to wrest back control and share from the big malls, giving rise to some speculation that the latter will soon see their 55% share of the market start to fall.</li><li>At the same time, expanding direct online sales should help to boost the operating margins of leading fashion retailers like <a href="https://www.smartkarma.com/entities/751" target="_blank" data-smartkarma-citation="entities:751:1">Fast Retailing Co Ltd (9983 JP)</a>, <a href="https://www.smartkarma.com/entities/4887" target="_blank" data-smartkarma-citation="entities:4887:1">United Arrows Ltd (7606 JP)</a>, <a href="https://www.smartkarma.com/entities/11895" target="_blank" data-smartkarma-citation="entities:11895:1">Adastria Co Ltd (2685 JP)</a> and <a href="https://www.smartkarma.com/entities/23991" target="_blank" data-smartkarma-citation="entities:23991:1">Tokyo Base Co Ltd (3415 JP)</a>.</li></ul>

Our recent post on e-commerce (E-Commerce in Japan 2017-2022: Relentless Expansion Means Upheaval in Consumer Goods Distribution) showed just how rapidly the channel is growing in Japan. One of the main drivers of this growth has been fashion, with apparel the biggest category overall by value and one of the top two fastest growing categories for the last five years.Even then e-commerce still only accounts for around 11% of the total value of the apparel market, compared to around 30% for consumer electronics.In addition, fashion retailers and brands have a very mixed record when it comes to grasping the opportunities and threats of what is already Japan’s biggest distribution channel, meaning most apparel firms sell through the big malls that dominate the market – a factor that has driven the growth in the share price of companies like Start Today Co Ltd (3092 JP) and Rakuten Inc (4755 JP) over the last decade. Some retailers, though, are trying to wrest back control and share from the big malls, giving rise to some speculation that the latter will soon see their 55% share of the market start to fall.At the same time, expanding direct online sales should help to boost the operating margins of leading fashion retailers like Fast Retailing Co Ltd (9983 JP), United Arrows Ltd (7606 JP), Adastria Co Ltd (2685 JP) and Tokyo Base Co Ltd (3415 JP).

Fashion: Still the Biggest Japanese E-Commerce Category – and Still Growing Fast

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

Smartkarma

Smartkarma unites the fragmented investment industry, connecting institutional investors, independent research providers, and corporates within a single network.

Research Reinvented

Equity Capital Markets

The CEO of Start Today (3092 JP), Yusaku Maezawa, plans to raise US$276m by selling around 13% of his shareholding (around 5.4% of the company) through an accelerated bookbuild.The deal scores well on our framework given its great track record of delivering growth. However, the shares don't appear as attractive on valuations, as they are trading above analysts target price and close to 52-week high. Moreover, the CEO has spent US$97m recently for buy art and this share sale might be to pay the…

The CEO of Start Today (3092 JP), Yusaku Maezawa, plans to raise US$276m by selling around 13% of his shareholding (around 5.4% of the company) through an accelerated bookbuild.The deal scores well on our framework given its great track record of delivering growth. However, the shares don't appear as attractive on valuations, as they are trading above analysts target price and close to 52-week high. Moreover, the CEO has spent US$97m recently for buy art and this share sale might be to pay the…

Start Today (3092 JP) - Selling Shares to Buy Art

Japan

Enigmo Inc operates "BUYMA", a consumer-to-consumer electronic commerce site specializing in fashion related items. The Company collects service fees for the  transactions made on its website. Enigmo also develops and manages a smartphone application "stulio" to share fashion related photos.

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Enigmo Inc (3665 JP)

ZOZO - Buying a Stairway to Heaven

ZOZO (3092 JP) ONWARD AND OUT - ZOZO (3092 JP), formerly Start Today, has been the sixth-most-traded large capitalisation stock over the last...

Campbell Gunn

Global Strategy: Health Care Outperforming - Overweight; India Breaking Out -Add Exposure

Today's report puts a spotlight on the Health Care Sector, which is assuming a global leadership role vs. other Sectors. We also focus on...

Vermilion Research

Fashion: Still the Biggest Japanese E-Commerce Category – and Still Growing Fast

Our recent post on e-commerce (E-Commerce in Japan 2017-2022: Relentless Expansion Means Upheaval in Consumer Goods Distribution) showed just how...

Michael Causton

Start Today (3092 JP) - Selling Shares to Buy Art

The CEO of Start Today (3092 JP), Yusaku Maezawa, plans to raise US$276m by selling around 13% of his shareholding (around 5.4% of the company)...

Sumeet Singh

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