Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Equity Bottom-Up

<p>In mid-February 2020, upon releasing full-year earnings, <a href="https://www.smartkarma.com/entities/gmo-internet-inc" target="_blank" data-smartkarma-citation="entities:13631:1" rel="noopener">GMO Internet (9449 JP)</a> announced a buyback programme which looked big but had some interesting and distinguishing characteristics given where the shares were and what the ownership structure was. This was discussed in <a href="https://www.smartkarma.com/insights/gmo-internet-9449-buyback-bigger-than-it-looks-smaller-than-it-looks" target="_blank" data-smartkarma-citation="insights:36580" rel="noopener">GMO Internet (9449) Buyback - Bigger Than It Looks, Smaller Than It Looks</a>. </p><p>The Investment/Trading Conclusion offered was Bullish (see the green line at the top) for some specific reasons hinted at in the title (you want to know why? Read the first piece or see below).</p><p>The stock closed at ¥2179 that day. The shares were up for two days. Then everything fell apart as COVID-19 caused the market to fall out of bed in Asia earlier than in the west. Since then, TOPIX is down 15.8% but GMO Internet is up 16.4% so it has seen decent outperformance in the 90 days since then. </p><h2>The NEW News</h2><p><a href="https://ir.gmo.jp/pdf/presen/GMO_FY20_Q1_Consolidated_Results_Statement_200512.pdf" target="_blank" rel="noopener">Q1 earnings</a> were out on the 12th. Revenues were up 14.6% yoy, OP is up 65%, and Net Profit is +11.4%. The stock gained more than 10% yesterday on the highest volume since Q1 earnings last year, and fell back a bit today.</p><p>TODAY after the close, after having <a href="https://ir.gmo.jp/pdf/irlibrary/gmo_disclose_info20200512_01.pdf" target="_blank" rel="noopener">announced</a> the progress programme-to-date of its buyback on 12 May (1.28mm shares for ¥2.48bn), the company <a href="https://ir.gmo.jp/pdf/irlibrary/gmo_disclose_info2020514.pdf" target="_blank" rel="noopener">announced</a> a ToSTNeT-3 buyback to be executed tomorrow morning, of up to 3.153mm shares and up to ¥8bn at today's close of ¥2,537/share. </p><p>Assuming the company buys back all 3.153mm shares they bid, that will mean 70% of the monies allocated for the buyback program lasting through next February will have been used, and at current price, that would mean the company could buy back another 1.78mm shares, maximum. That is about 1.6% of shares out and a bit under three days of volume. </p><p>It's worth looking at where we stand now.</p>

In mid-February 2020, upon releasing full-year earnings, GMO Internet (9449 JP) announced a buyback programme which looked big but had some interesting and distinguishing characteristics given where the shares were and what the ownership structure was. This was discussed in GMO Internet (9449) Buyback - Bigger Than It Looks, Smaller Than It Looks. The Investment/Trading Conclusion offered was Bullish (see the green line at the top) for some specific reasons hinted at in the title (you want to know why? Read the first piece or see below).The stock closed at ¥2179 that day. The shares were up for two days. Then everything fell apart as COVID-19 caused the market to fall out of bed in Asia earlier than in the west. Since then, TOPIX is down 15.8% but GMO Internet is up 16.4% so it has seen decent outperformance in the 90 days since then. The NEW NewsQ1 earnings were out on the 12th. Revenues were up 14.6% yoy, OP is up 65%, and Net Profit is +11.4%. The stock gained more than 10% yesterday on the highest volume since Q1 earnings last year, and fell back a bit today.TODAY after the close, after having announced the progress programme-to-date of its buyback on 12 May (1.28mm shares for ¥2.48bn), the company announced a ToSTNeT-3 buyback to be executed tomorrow morning, of up to 3.153mm shares and up to ¥8bn at today's close of ¥2,537/share. Assuming the company buys back all 3.153mm shares they bid, that will mean 70% of the monies allocated for the buyback program lasting through next February will have been used, and at current price, that would mean the company could buy back another 1.78mm shares, maximum. That is about 1.6% of shares out and a bit under three days of volume. It's worth looking at where we stand now.

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Thematic (Sector/Industry)

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/133/055/original/2020-05-13_05-37-45.png?1589315906" class="editor-image img-responsive" data-smartkarma-image-id="133055"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>CASCADE</strong> - As expected, with many more of the larger listed companies reporting, our three Scores are falling in unison and at the fastest rate since 2008/9. With still over two-thirds of companies yet to report, there is more 'pain' ahead in this elongated 'season' of announcements. </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/133/056/original/2020-05-13_06-21-24.png?1589318495" class="editor-image img-responsive" data-smartkarma-image-id="133056"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/133/057/original/2020-05-13_06-22-14.png?1589318598" class="editor-image img-responsive" data-smartkarma-image-id="133057"></figure><div class="content-caption">Source • Japan Analytics</div><p>In the <strong>DETAIL</strong> below, we shall review the results, revisions and initial forecast announcements made by larger-cap (¥75b+) companies yesterday:-</p><div><ul>
<li>The balance between positive/neutral/negative of the<strong> 269</strong> results announcements was <strong>117:23:129</strong>. The average change in Results Score was<strong> -0.8</strong>.</li>
<li>For the <strong>129</strong> revisions/initial forecasts, the split was <strong>39:7:83</strong>, and the average Revision Score was <strong>-4.6</strong>. Of the <strong>213</strong> companies declaring full-year results, <strong>46%</strong> made forecasts for the current year.</li>
<li>
<strong>313</strong> companies will announce on today, the largest of which by market capitalisation will be <a href="https://www.smartkarma.com/entities/sony-corp" target="_blank" data-smartkarma-citation="entities:563:1" rel="noopener">Sony (6758 JP)</a>, <a href="https://www.smartkarma.com/entities/takeda-pharmaceutical-co-ltd" target="_blank" data-smartkarma-citation="entities:11747:1" rel="noopener">Takeda Pharmaceutical (4502 JP)</a>,  and <a href="https://www.smartkarma.com/entities/eisai-co-ltd" target="_blank" data-smartkarma-citation="entities:21001:1" rel="noopener">Eisai (4523 JP)</a>. </li>
<li>Tuesday's 'best' and 'worst' scoring results were from  <a href="https://www.smartkarma.com/entities/gmo-internet-inc" target="_blank" data-smartkarma-citation="entities:13631:1" rel="noopener">GMO Internet (9449 JP)</a>  and <a href="https://www.smartkarma.com/entities/nissin-electric-co-ltd" target="_blank" data-smartkarma-citation="entities:18567:1" rel="noopener">Nissin Electric (6641 JP)</a>, respectively. </li>
</ul></div>

Source • Japan AnalyticsCASCADE - As expected, with many more of the larger listed companies reporting, our three Scores are falling in unison and at the fastest rate since 2008/9. With still over two-thirds of companies yet to report, there is more 'pain' ahead in this elongated 'season' of announcements. Source • Japan AnalyticsIn the DETAIL below, we shall review the results, revisions and initial forecast announcements made by larger-cap (¥75b+) companies yesterday:-
The balance between positive/neutral/negative of the 269 results announcements was 117:23:129. The average change in Results Score was -0.8.
For the 129 revisions/initial forecasts, the split was 39:7:83, and the average Revision Score was -4.6. Of the 213 companies declaring full-year results, 46% made forecasts for the current year.

313 companies will announce on today, the largest of which by market capitalisation will be Sony (6758 JP), Takeda Pharmaceutical (4502 JP),  and Eisai (4523 JP). 
Tuesday's 'best' and 'worst' scoring results were from  GMO Internet (9449 JP)  and Nissin Electric (6641 JP), respectively. 


🇯🇵 JAPAN • Results & Revisions 12th May - Secom, Shiseido, Toyota, Sysmex, Mitsui Fudosan

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

<p>The risk of a pullback remains very real, however at this point the weight of the evidence suggests a meaningful pullback is not imminent. We recap important technical levels across market as well as Actionable Themes within the Consumer Staples, Health Care, and Technology sectors.</p>

The risk of a pullback remains very real, however at this point the weight of the evidence suggests a meaningful pullback is not imminent. We recap important technical levels across market as well as Actionable Themes within the Consumer Staples, Health Care, and Technology sectors.

David Blennerhassett

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<p>This week in StubWorld ...</p>
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<p>A return to positive EBITDA for <a href="https://www.smartkarma.com/entities/pccw-ltd" target="_blank" data-smartkarma-citation="entities:873:1" rel="noopener">PCCW Ltd (8 HK)</a>'s media ops in the 2H19 is offset by a significant increase in elimination costs.</p>
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<p>Preceding my comments on PCCW and <a href="https://www.smartkarma.com/entities/gmo-internet-inc" target="_blank" data-smartkarma-citation="entities:13631:1" rel="noopener">GMO Internet (9449 JP)</a> are the weekly setup/unwind tables for Asia-Pacific Holdcos.</p>
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<p>These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.</p>
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This week in StubWorld ...



A return to positive EBITDA for PCCW Ltd (8 HK)'s media ops in the 2H19 is offset by a significant increase in elimination costs.



Preceding my comments on PCCW and GMO Internet (9449 JP) are the weekly setup/unwind tables for Asia-Pacific Holdcos.




These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.




<p><a href="https://www.smartkarma.com/profiles/david-blennerhassett" target="_blank" data-smartkarma-citation="accounts:840" rel="noopener">David Blennerhassett</a> has written about <a href="https://www.smartkarma.com/entities/gmo-internet-inc" target="_blank" data-smartkarma-citation="entities:13631:1" rel="noopener">GMO Internet (9449 JP)</a> over the years as an interesting holdco and most recently wrote about the situation as both a holdco and corporate governance situation in <a href="https://www.smartkarma.com/insights/gmo-internet-listed-holdings-preferred" target="_blank" data-smartkarma-citation="insights:29641" rel="noopener">GMO Internet: Listed Holdings Preferred</a>. Others including <a href="https://www.smartkarma.com/profiles/campbell-gunn" target="_blank" data-smartkarma-citation="accounts:2531" rel="noopener">Campbell Gunn</a> have written about it <a href="https://www.smartkarma.com/entities/gmo-internet-inc/insights?item=27803" target="_blank" rel="noopener">here</a>.</p>
<p>The stock has been the subject of activist interest in the past few years, and as such it has enjoyed a fair bit of press as well, though not always laudatory.</p>
<h2>The NEW News Yesterday</h2>
<p>The NEW News yesterday was that the company reported full-year earnings, with consolidated revenues climbing 5.9% to ¥196.2bn, OP climbing 16.0% to ¥25.3bn, and Net Income up sharply from last year's net loss to +¥8.3bn. </p>
<p>The company also announced a downward-facing dividend (i.e. a slight cut in the Q4 dividend for 2019 vs 2018), and most importantly, a <a href="https://ir.gmo.jp/en/pdf/irlibrary/gmo_disclose_info20200212_3_e.pdf" target="_blank" rel="noopener">stock buyback</a>. </p>
<p>It's a big one.</p>
<p>The company announced a buyback of up to ¥15bn or up to 9 million shares (7.95% of shares outstanding). This is an advancement on the company's Total Shareholder Returns Policy instituted in 2016, which stated that the company aimed to return 50% of parent profits to shareholders, with a dividend payout of 33% of total parent earnings, and the rest paid back in the form of share buybacks (but with flexible timing).</p>
<p>Given the share price of recent, assuming no change, it would be a buyback of only 6.9mm shares, which is 6.1% of shares outstanding, but it's a start. </p>

David Blennerhassett has written about GMO Internet (9449 JP) over the years as an interesting holdco and most recently wrote about the situation as both a holdco and corporate governance situation in GMO Internet: Listed Holdings Preferred. Others including Campbell Gunn have written about it here.
The stock has been the subject of activist interest in the past few years, and as such it has enjoyed a fair bit of press as well, though not always laudatory.
The NEW News Yesterday
The NEW News yesterday was that the company reported full-year earnings, with consolidated revenues climbing 5.9% to ¥196.2bn, OP climbing 16.0% to ¥25.3bn, and Net Income up sharply from last year's net loss to +¥8.3bn. 
The company also announced a downward-facing dividend (i.e. a slight cut in the Q4 dividend for 2019 vs 2018), and most importantly, a stock buyback. 
It's a big one.
The company announced a buyback of up to ¥15bn or up to 9 million shares (7.95% of shares outstanding). This is an advancement on the company's Total Shareholder Returns Policy instituted in 2016, which stated that the company aimed to return 50% of parent profits to shareholders, with a dividend payout of 33% of total parent earnings, and the rest paid back in the form of share buybacks (but with flexible timing).
Given the share price of recent, assuming no change, it would be a buyback of only 6.9mm shares, which is 6.1% of shares outstanding, but it's a start. 

GMO Internet (9449) Buyback - Bigger Than It Looks, Smaller Than It Looks

Japan

GMO Internet, Inc. provides internet related services to its corporate customers. The company offers domain, server, security and settlement services through its "WEB Infrastructure & EC" business, and assists companies in attracting web users through its "Internet Media" business.

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GMO Internet (9449 JP)

GMO Buyback - Approaching The End But...

In mid-February 2020, upon releasing full-year earnings, GMO Internet (9449 JP) announced a buyback programme which looked big but had some...

Travis Lundy

🇯🇵 JAPAN • Results & Revisions 12th May - Secom, Shiseido, Toyota, Sysmex, Mitsui Fudosan

CASCADE - As expected, with many more of the larger listed companies reporting, our three Scores are falling in unison and at the fastest rate...

Campbell Gunn

Battleground Spot For Global Equities

The risk of a pullback remains very real, however at this point the weight of the evidence suggests a meaningful pullback is not imminent. We recap...

Vermilion Research

StubWorld: PCCW - The Good, The Bad ...

This week in StubWorld ... A return to positive EBITDA for PCCW Ltd (8 HK)'s media ops in the 2H19 is offset by a significant increase in...

David Blennerhassett

GMO Internet (9449) Buyback - Bigger Than It Looks, Smaller Than It Looks

David Blennerhassett has written about GMO Internet (9449 JP) over the years as an interesting holdco and most recently wrote about the situation...

Travis Lundy

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