'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

<div class="content-caption">

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/078/315/original/2019-02-09_12-04-43.png?1549681495" class="editor-image img-responsive" data-smartkarma-image-id="78315"></figure>
Source: Japan Analytics
</div>
TUMBLING DICE - After <a href="https://www.smartkarma.com/entities/18379" target="_blank" data-smartkarma-citation="entities:18379:1">ZOZO (3092 JP)</a> (-52%) and <a href="https://www.smartkarma.com/entities/27149" target="_blank" data-smartkarma-citation="entities:27149:1">Mercari (4385 JP)</a> (-50%), <a href="https://www.smartkarma.com/entities/8197" target="_blank" data-smartkarma-citation="entities:8197:1">CyberAgent (4751 JP)</a> is the worst-performing large-cap Internet stock in Japan over the last seven months.  The company is the sector's leading foreigner-held stock with over 48% (60%+ of the float) held by institutional investors such as Baillie Gifford (11.9%), JP Morgan AM (6.9%), Tybourne Capital (5.1%) and Blackrock Japan (5.0%). Having outperformed the sector and the market annually over the last nine years by 38% and 25%, respectively, over the seven months since the stock peaked in terms of our Relative Price Score on 13th July, CyberAgent shares have declined by 56%, underperforming the market by 48% and the sector by 37%.
PASSIVE PERILS - We will discuss the 'perils ' of Passive TV in the DETAIL below. However, CyberAgent is yet another good example of the 'perils' of passive investing. On September 5th Nikkei Inc. announced that CyberAgent would replace <a href="https://www.smartkarma.com/entities/19521" target="_blank" data-smartkarma-citation="entities:19521:1">Furukawa (5715 JP)</a> in the Nikkei 225 index, with the inclusion occurring on October 1st. Since the ¥6050 intraday peak of the week before inclusion in the index, the shares have declined by 49% in 90 trading days.   
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/078/317/original/2019-02-09_12-52-50.png?1549684397" class="editor-image img-responsive" data-smartkarma-image-id="78317"></figure>
<div class="content-caption">Source: CyberAgent Way 2018</div>
SUMMARY - CyberAgent's business has three 'pillars', internet advertising, mobile gaming software, and media. The latter now includes the linear free-to-view AbemaTV business, which helped drive the share price to a post-listing high of ¥6930 in July 2018. Since then, business conditions for two of these 'pillars' have degraded significantly,  while the fledgeling TV business remains in 'up-front' investment mode. To cap what will be a turbulent year for CyberAgent, the company is moving into a new head office building in Shibuya called 'Abema Towers' in March. We shall refrain from making any analogies to the <a href="https://en.wikipedia.org/wiki/Skyscraper_Index" target="_blank">Skyscraper Index</a>. 
<div class="content-highlight">
This Insight will review: - 
<ul>
<li class="">CyberAgent's growth strategy</li>
<li class="">The company's track profitability track record from the perspective of Net Operating Profit After Tax (NOPAT), Comprehensive Income and Operating Profit margins </li>
<li class="">The three main business segments - Internet Advertising, Game Software, and Media</li>
<li class="">Cash Flow and Valuation</li>
</ul>
We will also attempt to value AbemaTV and will reverse-engineer some target metrics that would justify the market's current implied ¥41b valuation for this business, a valuation that reached ¥543b only seven months ago. 
</div>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/078/318/original/2019-02-09_13-06-39.png?1549685220" class="editor-image img-responsive" data-smartkarma-image-id="78318"></figure>
<div class="content-caption">Source: CyberAgent Way 2018</div>
VISION SHIFT? - In previous years, CyberAgent had a clear vision statement - 'To create the 21st century's leading company'. The company's recent performance has led to a change of tone, and CyberAgent is now rather more modestly just 'Aiming to be a company with medium to long-term supporters'.  In the vein of the lyrics from the best song on the best Rolling Stones album, Exile on Main Street, the business has recently been at 'all sixes and sevens and nines'. In the search for new 'supporters', we encourage CyberAgent to just 'keep on rolling', letting the dice fall where they may. 
<center><iframe src="https://www.youtube.com/embed/6U8JlcB_BzA" width="963" height="722" frameborder="0" allow="accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture" allowfullscreen="allowfullscreen"></iframe></center>
<div class="content-caption">Exile on Main Street/Tumbling Dice - Jagger/Richards 1972 </div>




Source: Japan Analytics

TUMBLING DICE - After ZOZO (3092 JP) (-52%) and Mercari (4385 JP) (-50%), CyberAgent (4751 JP) is the worst-performing large-cap Internet stock in Japan over the last seven months.  The company is the sector's leading foreigner-held stock with over 48% (60%+ of the float) held by institutional investors such as Baillie Gifford (11.9%), JP Morgan AM (6.9%), Tybourne Capital (5.1%) and Blackrock Japan (5.0%). Having outperformed the sector and the market annually over the last nine years by 38% and 25%, respectively, over the seven months since the stock peaked in terms of our Relative Price Score on 13th July, CyberAgent shares have declined by 56%, underperforming the market by 48% and the sector by 37%.
PASSIVE PERILS - We will discuss the 'perils ' of Passive TV in the DETAIL below. However, CyberAgent is yet another good example of the 'perils' of passive investing. On September 5th Nikkei Inc. announced that CyberAgent would replace Furukawa (5715 JP) in the Nikkei 225 index, with the inclusion occurring on October 1st. Since the ¥6050 intraday peak of the week before inclusion in the index, the shares have declined by 49% in 90 trading days.   

Source: CyberAgent Way 2018
SUMMARY - CyberAgent's business has three 'pillars', internet advertising, mobile gaming software, and media. The latter now includes the linear free-to-view AbemaTV business, which helped drive the share price to a post-listing high of ¥6930 in July 2018. Since then, business conditions for two of these 'pillars' have degraded significantly,  while the fledgeling TV business remains in 'up-front' investment mode. To cap what will be a turbulent year for CyberAgent, the company is moving into a new head office building in Shibuya called 'Abema Towers' in March. We shall refrain from making any analogies to the Skyscraper Index. 

This Insight will review: - 

CyberAgent's growth strategy
The company's track profitability track record from the perspective of Net Operating Profit After Tax (NOPAT), Comprehensive Income and Operating Profit margins 
The three main business segments - Internet Advertising, Game Software, and Media
Cash Flow and Valuation

We will also attempt to value AbemaTV and will reverse-engineer some target metrics that would justify the market's current implied ¥41b valuation for this business, a valuation that reached ¥543b only seven months ago. 


Source: CyberAgent Way 2018
VISION SHIFT? - In previous years, CyberAgent had a clear vision statement - 'To create the 21st century's leading company'. The company's recent performance has led to a change of tone, and CyberAgent is now rather more modestly just 'Aiming to be a company with medium to long-term supporters'.  In the vein of the lyrics from the best song on the best Rolling Stones album, Exile on Main Street, the business has recently been at 'all sixes and sevens and nines'. In the search for new 'supporters', we encourage CyberAgent to just 'keep on rolling', letting the dice fall where they may. 

Exile on Main Street/Tumbling Dice - Jagger/Richards 1972 

Japan TMT Analyst

Pelham Smithers

Market Intel on Asian Tech with a Japan focus

Pelham Smithers Associates

Founded in 2009, Pelham Smithers Associates (PSA) provides market intelligence on Asian technology, focusing in particular on Japan. The industries covered by our team of specialists are: consumer electronics, telecomms, pharmaceuticals, internet, electronic parts and materials, automotive technology, retail and capital goods. 

Research is provided by the following:
Pelham Smithers: Macro, consumer electronics, telecoms & pharma
Joel Scheiman: Electronics materials / components
Julie Boote: Autos
Will Nestuk: Capital goods, machinery & transportation equipment parts
Thao Nguyen: eCommerce, internet content, marketing & advertising

The market has assumed that Mixi not only can't replicate the success of Monster Strike but will continue to waste the proceeds trying. That no longer appears to be the case, with the result that Mixi looks to be one of the bigger bargains in the bargain-rich Japanese stock market right now.

The market has assumed that Mixi not only can't replicate the success of Monster Strike but will continue to waste the proceeds trying. That no longer appears to be the case, with the result that Mixi looks to be one of the bigger bargains in the bargain-rich Japanese stock market right now.

Mixi (2121 JP) - When You've Got a Golden Goose...

APAC IPOs & Placements

Zhen Zhou, Toh

Smartkarma

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

Research Reinvented

Equity Capital Markets

<a href="https://www.smartkarma.com/entities/8509" target="_blank" data-smartkarma-citation="entities:8509:1">Sea Ltd (SE US)</a> is raising approximately US$600m in its upcoming IPO.In our previous insight, <a href="https://www.smartkarma.com/insights/sea-ltd-ipo-review-a-pure-exposure-to-se-asia-s-e-commerce-gaming-despite-stiff-competition" target="_blank" data-smartkarma-citation="insights:13958">Sea Ltd IPO Review - A Pure Exposure to SE Asia’s E-Commerce &amp; Gaming Despite Stiff Competition</a>, we went into detail each of Sea's business and briefly compared it to their respective competitors.For this quick note, we will refine our analysis on each segment against its respective competitors and value them by parts. We will also compare the company with other listed peers to keep our valuation in…

Sea Ltd (SE US) is raising approximately US$600m in its upcoming IPO.In our previous insight, Sea Ltd IPO Review - A Pure Exposure to SE Asia’s E-Commerce &amp; Gaming Despite Stiff Competition, we went into detail each of Sea's business and briefly compared it to their respective competitors.For this quick note, we will refine our analysis on each segment against its respective competitors and value them by parts. We will also compare the company with other listed peers to keep our valuation in…

Sea Ltd IPO Review - E-Commerce Constitutes 64% of SOTP Valuation

Korea / Special Sits, Pairs, Index Rebalancing, Clepsydra Capital

Sanghyun Park

Korea / Special Sits, Pairs, Index Rebalancing

Well, apparently not many investors are questioning whether Netmarble's popularity is for real. That is, (surprisingly) they seem to be accepting Netmarble's suggested valuation. Of course, we had and still have some controversies related to the valuation peers. First and foremost, would Tencent and Netease (particularly Tencent) be a suitable valuation peer for Netmarble? These companies are not only MUCH bigger than Netmarble in terms of sales, but also (and more importantly), Tencent is a very diversified company whose online game sales account only for half of its total sales. Nonetheless, many investors do not seem to bother with this valuation peer controversy. They just appear to be quite excited about Netmarble's growth prospects especially after we have seen L2R's amazing achievements. So, perhaps it'd not be necessary for us to do a valuation assessment. I mean many investors already seem eager to buy Netmarble at the company's indicative price band. However, I decided to do some study on Netmarble's valuation anyway. I just thought it'd still be good to know the company's intrinsic value so that we can have a better understanding of how high it will likely soar after IPO. So, let's dig it out.<div class="content-highlight">Below is the link of the news article about how Netmarble has been received among institutional investors at home and abroad during this early phase.<a href="http://www.thebell.co.kr/front/free/contents/news/article_view.asp?key=201704050100006130000370&amp;svccode=00&amp;page=1" target="_blank">http://www.thebell.co.kr/front/free/contents/news/article_view.asp?key=201704050100006130000370&amp;amp;svccode=00&amp;amp;page=1</a> (Korean language)Following is a brief summary of this news article: Netmarble IPO is in really hot demand. The bookrunners have already reached the target (13.6M shares) even before the official bookbuilding starts. In particular, overseas institutional investors seem to be more excited about this IPO than local institutions. So, there is a good possibility that Netmarble and its bookrunners will allocate more than initially planned to overseas institutions.</div>

Well, apparently not many investors are questioning whether Netmarble's popularity is for real. That is, (surprisingly) they seem to be accepting Netmarble's suggested valuation. Of course, we had and still have some controversies related to the valuation peers. First and foremost, would Tencent and Netease (particularly Tencent) be a suitable valuation peer for Netmarble? These companies are not only MUCH bigger than Netmarble in terms of sales, but also (and more importantly), Tencent is a very diversified company whose online game sales account only for half of its total sales. Nonetheless, many investors do not seem to bother with this valuation peer controversy. They just appear to be quite excited about Netmarble's growth prospects especially after we have seen L2R's amazing achievements. So, perhaps it'd not be necessary for us to do a valuation assessment. I mean many investors already seem eager to buy Netmarble at the company's indicative price band. However, I decided to do some study on Netmarble's valuation anyway. I just thought it'd still be good to know the company's intrinsic value so that we can have a better understanding of how high it will likely soar after IPO. So, let's dig it out.Below is the link of the news article about how Netmarble has been received among institutional investors at home and abroad during this early phase.http://www.thebell.co.kr/front/free/contents/news/article_view.asp?key=201704050100006130000370&amp;amp;svccode=00&amp;amp;page=1 (Korean language)Following is a brief summary of this news article: Netmarble IPO is in really hot demand. The bookrunners have already reached the target (13.6M shares) even before the official bookbuilding starts. In particular, overseas institutional investors seem to be more excited about this IPO than local institutions. So, there is a good possibility that Netmarble and its bookrunners will allocate more than initially planned to overseas institutions.

Netmarble Games IPO Part 3 - Valuation Discussion

Making sense of the Global Market, Euromonitor International Ltd.

Yu Mitsuhashi

Making sense of the Global Market

Euromonitor International Ltd.

We are a global market research company focused on industries, countries, economies and consumers worldwide. Our cross-country comparable research helps your organisation identify opportunities and develop growth strategies in countries and regions across the globe. With offices around the world, 1,200 analysts in 100 countries and market research on every key trend and driver, we give you powerful access to the real story behind consumer change.

Thematic (Sector/Industry)

The analyst viewpoint series features interviews with analysts from several of the 46 markets covered in Euromonitor’s Consumer Finance research programme, discussing key payment trends or developments in their respective research markets.

The analyst viewpoint series features interviews with analysts from several of the 46 markets covered in Euromonitor’s Consumer Finance research programme, discussing key payment trends or developments in their respective research markets.

Analyst Viewpoint on Consumer Finance : Japan

Japan

GungHo Online Entertainment, Inc. develops and distributes Internet games. The Company also develops applications for smartphones.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Gungho Online Entertainment (3765 JP)

CyberAgent: Tumbling Dice

TUMBLING DICE - After ZOZO (3092 JP) (-52%) and Mercari (4385 JP) (-50%), CyberAgent (4751 JP) is the worst-performing large-cap Internet stock in...

Campbell Gunn

Mixi (2121 JP) - When You've Got a Golden Goose...

The market has assumed that Mixi not only can't replicate the success of Monster Strike but will continue to waste the proceeds trying. That no...

Pelham Smithers Associates

Sea Ltd IPO Review - E-Commerce Constitutes 64% of SOTP Valuation

Sea Ltd (SE US) is raising approximately US$600m in its upcoming IPO.In our previous insight, Sea Ltd IPO Review - A Pure Exposure to SE Asia’s...

Zhen Zhou, Toh

Netmarble Games IPO Part 3 - Valuation Discussion

Well, apparently not many investors are questioning whether Netmarble's popularity is for real. That is, (surprisingly) they seem to be accepting...

Sanghyun Park

Analyst Viewpoint on Consumer Finance : Japan

The analyst viewpoint series features interviews with analysts from several of the 46 markets covered in Euromonitor’s Consumer Finance research...

Euromonitor International Ltd.

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)