Equity Analyst, LightStream Research

Oshadhi Kumarasiri

Equity Analyst

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.

Equity Bottom-Up

<ul><li><ul>
<li>As youth vaping became a trend and the term “Juuling” became a part of American high school life, Juul became the most popular e-cigarette in the US with over 70% market share.</li>
<li>JUUL Labs, the producer of Juul, is an American e-cigarette company with over $2.0bn in revenue.</li>
<li>The success of Juul in the e-cigaratte market even attracted the interest of Altria, who sells Marlboro and many other cigarette brands in the US.</li>
<li>Altria acquired a 35% stake in Juul Labs for $12.8bn on December 20, 2018, giving Juul Labs a valuation of more than $36.0bn</li>
<li>Juul Labs and Altria’s honeymoon was over even before it started as adults, health and safety organisations and politicians became increasingly concerned about the “Juuling” epidemic within teenagers in the US.</li>
<li>According to the company, Juul is about giving adult smokers a less harmful alternative to cigarettes. It also insists that it never marketed or knowingly sold its trendy e-cigarettes and flavoured nicotine pods to teenagers. But in reality, Juul was never about helping the adult smokers as it turned a blind eye as to who is purchasing its e-cigarettes and nicotine pods.</li>
<li>Since Juul Labs ignored the fact that Juul and teenage vaping has become an epidemic, its success was short lived. The company is now buried under a mountain of investigations, subpoenas and lawsuits.</li>
<li>Towards the end of last year, Juul announced that it will cut 650 jobs, freeze hiring and stop broadcast, print and digital advertising for its products. These initiatives are expected to save around $1.0bn of costs in 2020.</li>
<li>Under these circumstances, Juul’s valuation was cut 35% by Altria and certain unidentified sources suggest that Juul itself has decreased the valuation to $24.0bn. The initial investors such as Tiger Global and Fidelity Investments have also decreased their valuations of the company by more than 50%. ($19.0bn and $16.4bn respectively).</li>
<li>Now, Juul is kept on a short leash by the US regulatory bodies and as a result it had to suspend sales of its non-tobacco, non-menthol-based flavours in the US.</li>
<li>Amidst these bans, Juul was pushing to enter new markets in Europe, the Middle East, Africa, South America and Asia.</li>
<li>However, it was reported last week that Juul was pulling back from overseas expansion and we believe Juul’s troubles in the US market plays into the hands of other vaping brands such as Japan Tobacco’s Logic and Ploom.</li>
</ul></li></ul>


As youth vaping became a trend and the term “Juuling” became a part of American high school life, Juul became the most popular e-cigarette in the US with over 70% market share.
JUUL Labs, the producer of Juul, is an American e-cigarette company with over $2.0bn in revenue.
The success of Juul in the e-cigaratte market even attracted the interest of Altria, who sells Marlboro and many other cigarette brands in the US.
Altria acquired a 35% stake in Juul Labs for $12.8bn on December 20, 2018, giving Juul Labs a valuation of more than $36.0bn
Juul Labs and Altria’s honeymoon was over even before it started as adults, health and safety organisations and politicians became increasingly concerned about the “Juuling” epidemic within teenagers in the US.
According to the company, Juul is about giving adult smokers a less harmful alternative to cigarettes. It also insists that it never marketed or knowingly sold its trendy e-cigarettes and flavoured nicotine pods to teenagers. But in reality, Juul was never about helping the adult smokers as it turned a blind eye as to who is purchasing its e-cigarettes and nicotine pods.
Since Juul Labs ignored the fact that Juul and teenage vaping has become an epidemic, its success was short lived. The company is now buried under a mountain of investigations, subpoenas and lawsuits.
Towards the end of last year, Juul announced that it will cut 650 jobs, freeze hiring and stop broadcast, print and digital advertising for its products. These initiatives are expected to save around $1.0bn of costs in 2020.
Under these circumstances, Juul’s valuation was cut 35% by Altria and certain unidentified sources suggest that Juul itself has decreased the valuation to $24.0bn. The initial investors such as Tiger Global and Fidelity Investments have also decreased their valuations of the company by more than 50%. ($19.0bn and $16.4bn respectively).
Now, Juul is kept on a short leash by the US regulatory bodies and as a result it had to suspend sales of its non-tobacco, non-menthol-based flavours in the US.
Amidst these bans, Juul was pushing to enter new markets in Europe, the Middle East, Africa, South America and Asia.
However, it was reported last week that Juul was pulling back from overseas expansion and we believe Juul’s troubles in the US market plays into the hands of other vaping brands such as Japan Tobacco’s Logic and Ploom.


JUUL’s Demise to Drive Japan Tobacco’s E-Vapor & T-Vapor Growth & Ensures Long Term Survival

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 Capital Markets

Smoore International Holdings / Equity Capital Markets

<p><a href="https://www.smartkarma.com/entities/shenzhen-smoore-technology" target="_blank" data-smartkarma-citation="entities:28241:1" rel="noopener">Shenzhen Smoore Technology (0959165D CH)</a> is the world’s largest vaping device manufacturer as measured by revenue, accounting for 10.1% of the total market share, in 2018, according to Frost &amp; Sullivan. It is seeking is raise $500 million through a Hong Kong in 1Q20.</p><div class="content-highlight"><p>The industry is currently mired in regulatory uncertainty, but clarity is slowly emerging. While harsher regulations remain an overhang, we think that recent events have lowered the incremental regulatory risk, which could make Smoore an attractive opportunity for investors with higher risk appetite. Setting aside the ongoing regulatory uncertainty, Smoore has the hallmarks of a well-run business.</p></div>

Shenzhen Smoore Technology (0959165D CH) is the world’s largest vaping device manufacturer as measured by revenue, accounting for 10.1% of the total market share, in 2018, according to Frost &amp; Sullivan. It is seeking is raise $500 million through a Hong Kong in 1Q20.The industry is currently mired in regulatory uncertainty, but clarity is slowly emerging. While harsher regulations remain an overhang, we think that recent events have lowered the incremental regulatory risk, which could make Smoore an attractive opportunity for investors with higher risk appetite. Setting aside the ongoing regulatory uncertainty, Smoore has the hallmarks of a well-run business.

Smoore IPO Initiation: Into the Vaping Zone

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

KT&G Corporation / Equity Capital Markets

<p>It was announced after the market close today that Japan Tobacco plans to sell its 2.1% stake in <a href="https://www.smartkarma.com/entities/kt-g-corp" target="_blank" data-smartkarma-citation="entities:9320:1" rel="noopener">KT&amp;G Corporation (033780 KS)</a> (2.86 million shares). The block deal discount is 2.0% to 3.5% discount to the closing price today (97,200 won), which would range from 93,800 won to 95,250 won. KT&amp;G's DPS is 4,000 won right now so the dividend yield is 4.1%.</p><p>We believe that this block deal is a good one for investors seeking 6-8% returns over the next 3-6 months. However, we would not recommend this block deal for investors that are seeking at least double digit returns.</p><p><strong>One of the key reasons why Japan Tobacco is selling its stake in KT&amp;G is to improve its balance sheet.</strong></p><p><strong>Another reason why Japan Tobacco may be selling its stake in KT&amp;G is because of the terrible political relationship between Japan and South Korea in the past five months. </strong></p>

It was announced after the market close today that Japan Tobacco plans to sell its 2.1% stake in KT&amp;G Corporation (033780 KS) (2.86 million shares). The block deal discount is 2.0% to 3.5% discount to the closing price today (97,200 won), which would range from 93,800 won to 95,250 won. KT&amp;G's DPS is 4,000 won right now so the dividend yield is 4.1%.We believe that this block deal is a good one for investors seeking 6-8% returns over the next 3-6 months. However, we would not recommend this block deal for investors that are seeking at least double digit returns.One of the key reasons why Japan Tobacco is selling its stake in KT&amp;G is to improve its balance sheet.Another reason why Japan Tobacco may be selling its stake in KT&amp;G is because of the terrible political relationship between Japan and South Korea in the past five months. 

Japan Tobacco Selling 2.1% Stake of KT&G in a Block Deal

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

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.

<p><a href="https://www.smartkarma.com/entities/japan-tobacco-inc" target="_blank" data-smartkarma-citation="entities:13498:1" rel="noopener">Japan Tobacco (2914 JP)</a> plans to raise around US$230m via selling down its 2.0% stake in <a href="https://www.smartkarma.com/entities/kt-g-corp" target="_blank" data-smartkarma-citation="entities:9320:1" rel="noopener">KT&amp;G Corporation (033780 KS)</a>.</p><p>From what I can gather, JT has been a long term shareholder for KT&amp;G but it doesn't seem to have any strategic say in the company. Thus, the selldown might not carry a lot of negative connotations.</p><p>At the same time, the stock price performance of KT&amp;G hasn't exactly been very exciting and the discount as well isn't highly appealing either.</p>

Japan Tobacco (2914 JP) plans to raise around US$230m via selling down its 2.0% stake in KT&amp;G Corporation (033780 KS).From what I can gather, JT has been a long term shareholder for KT&amp;G but it doesn't seem to have any strategic say in the company. Thus, the selldown might not carry a lot of negative connotations.At the same time, the stock price performance of KT&amp;G hasn't exactly been very exciting and the discount as well isn't highly appealing either.

KT&G Corp Placement - Unlike to Make or Lose Much

'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)

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/106/452/original/2019-11-17_11-54-09.png?1573959284" class="editor-image img-responsive" data-smartkarma-image-id="106452"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>4TH DOWN AND A FEW MORE TO GO</strong> - The latest quarterly results are now, with the exception of three large insurance companies are currently in the market and, to loosely paraphrase the under-rated Jesse Winchester's second album title, this is the fourth straight 'down' quarter with the prospect a few more to come. Operating Income has declined by 7.8% and Net Income by 18.8%, taking margins to 6.9% and 4.6%, respectively - declines of 84bps and 122bps. The market has celebrated these new two-year lows by rising to new two-year highs, leaving some to wonder what they are missing, other than yet more central bank liquidity. The trailing-twelve-month (TTM) price-earnings ratio is now 17 times, the highest since 5th February 2018, ten trading days after the long-term market peak.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/106/458/original/2019-11-17_12-49-55.png?1573962614" class="editor-image img-responsive" data-smartkarma-image-id="106458"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/106/459/original/2019-11-17_13-10-47.png?1573963867" class="editor-image img-responsive" data-smartkarma-image-id="106459"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>THE EARNINGS CYCLE HAS YET TO BOTTOM</strong> -  Our Results &amp; Forecast/Revision Score data series cover the last sixteen years of quarterly earnings and eleven years of forecasts and revisions and measure both results and forecasts but also their momentum, providing a better correlation with the market direction than past earnings.   The Forecast/Revision Score leads the Results Score by several months, and the market leads or lags depending on monetary and liquidity conditions. Although both Scores recovered in the last five days of results announcements, the Forecast/Revision Score of 0.45 reached on 8th November is the lowest such score in ten years and is suggesting that earnings have yet to bottom.</p><div class="content-highlight"><p><strong>WISHFUL THINKING? - The 'gap' between market expectations and actual and forecast earnings momentum is now wider than at any time since late 2014, shortly before the market peak of May 2015. Is this foresight or just wishful thinking? We tend to the latter interpretation.</strong></p></div><p><strong>In the DETAIL section below, we shall provide a full breakdown of the results and revisions announcements by Sector, Peer Group and company and offer brief comments on several recommended buys and sells.</strong></p>

Source: Japan Analytics4TH DOWN AND A FEW MORE TO GO - The latest quarterly results are now, with the exception of three large insurance companies are currently in the market and, to loosely paraphrase the under-rated Jesse Winchester's second album title, this is the fourth straight 'down' quarter with the prospect a few more to come. Operating Income has declined by 7.8% and Net Income by 18.8%, taking margins to 6.9% and 4.6%, respectively - declines of 84bps and 122bps. The market has celebrated these new two-year lows by rising to new two-year highs, leaving some to wonder what they are missing, other than yet more central bank liquidity. The trailing-twelve-month (TTM) price-earnings ratio is now 17 times, the highest since 5th February 2018, ten trading days after the long-term market peak.Source: Japan AnalyticsTHE EARNINGS CYCLE HAS YET TO BOTTOM -  Our Results &amp; Forecast/Revision Score data series cover the last sixteen years of quarterly earnings and eleven years of forecasts and revisions and measure both results and forecasts but also their momentum, providing a better correlation with the market direction than past earnings.   The Forecast/Revision Score leads the Results Score by several months, and the market leads or lags depending on monetary and liquidity conditions. Although both Scores recovered in the last five days of results announcements, the Forecast/Revision Score of 0.45 reached on 8th November is the lowest such score in ten years and is suggesting that earnings have yet to bottom.WISHFUL THINKING? - The 'gap' between market expectations and actual and forecast earnings momentum is now wider than at any time since late 2014, shortly before the market peak of May 2015. Is this foresight or just wishful thinking? We tend to the latter interpretation.In the DETAIL section below, we shall provide a full breakdown of the results and revisions announcements by Sector, Peer Group and company and offer brief comments on several recommended buys and sells.

🇯🇵 Japan • Results & Revisions Review - Wishful Thinking

Japan

Japan Tobacco, Inc. operates as an tobacco product company. The Company manufactures, markets and sells cigarettes and other tobacco products internationally. Japan Tobacco is also engaged in pharmaceutical and food businesses.

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Japan Tobacco (2914 JP)

JUUL’s Demise to Drive Japan Tobacco’s E-Vapor & T-Vapor Growth & Ensures Long Term Survival

As youth vaping became a trend and the term “Juuling” became a part of American high school life, Juul became the most popular e-cigarette in the...

Oshadhi Kumarasiri

Smoore IPO Initiation: Into the Vaping Zone

Shenzhen Smoore Technology (0959165D CH) is the world’s largest vaping device manufacturer as measured by revenue, accounting for 10.1% of the...

Arun George

Japan Tobacco Selling 2.1% Stake of KT&G in a Block Deal

It was announced after the market close today that Japan Tobacco plans to sell its 2.1% stake in KT&G Corporation (033780 KS) (2.86 million...

Douglas Kim

KT&G Corp Placement - Unlike to Make or Lose Much

Japan Tobacco (2914 JP) plans to raise around US$230m via selling down its 2.0% stake in KT&G Corporation (033780 KS).From what I can gather,...

Sumeet Singh

🇯🇵 Japan • Results & Revisions Review - Wishful Thinking

4TH DOWN AND A FEW MORE TO GO - The latest quarterly results are now, with the exception of three large insurance companies are currently in the...

Campbell Gunn

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