Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Equity Bottom-Up

<ul>
<li>Kazuo Inamori (稲盛和夫), founder of <a href="https://www.smartkarma.com/entities/kyocera-corp" target="_blank" data-smartkarma-citation="entities:753:1" rel="noopener">Kyocera Corp (6971 JP)</a> and <a href="https://www.smartkarma.com/entities/kddi-corp" target="_blank" data-smartkarma-citation="entities:639:1" rel="noopener">KDDI Corp (9433 JP)</a> precursor company DDI (Dai Ni Den Den), and former chairman of JAL overseeing restructuring, has passed.</li>
<li>In his own name, he owns 10.212mm shares of Kyocera, and likely other assets. Inheritance tax would be due 10 months from now. </li>
<li>Kyocera is not blowing out the lights compared to peers, but it is relatively inexpensive to its history and peers. If the shares are sold, Kyocera can buy them.</li>
</ul>


Kazuo Inamori (稲盛和夫), founder of Kyocera Corp (6971 JP) and KDDI Corp (9433 JP) precursor company DDI (Dai Ni Den Den), and former chairman of JAL overseeing restructuring, has passed.
In his own name, he owns 10.212mm shares of Kyocera, and likely other assets. Inheritance tax would be due 10 months from now. 
Kyocera is not blowing out the lights compared to peers, but it is relatively inexpensive to its history and peers. If the shares are sold, Kyocera can buy them.


Kyocera (6971 JP) Founder Kazuo Inamori Passes - Implications for Holdings

Telco/Internet specialist

Kirk Boodry

Redex Research

NTT (Nippon Telegraph & Telephone) / Equity Bottom-Up

<ul>
<li>Q1 revenue growth was the highest since Q3 17, helped by forex tailwinds and stability in the mobile segment</li>
<li>Core telecom results were also positive as mobile erosion was less intensive than peers on better subscriber growth whilst DX demand has kept enterprise sales healthy</li>
<li>Management did not change full-year guidance but this almost never happens with a Q1 report and we expect this report is enough to nudge consensus higher</li>
</ul>


Q1 revenue growth was the highest since Q3 17, helped by forex tailwinds and stability in the mobile segment
Core telecom results were also positive as mobile erosion was less intensive than peers on better subscriber growth whilst DX demand has kept enterprise sales healthy
Management did not change full-year guidance but this almost never happens with a Q1 report and we expect this report is enough to nudge consensus higher


NTT (Buy) - Q1 22 Results Reaction: Forex Gains Flatter Top-Line; Signs of Mobile Stability

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Event-Driven

<ul>
<li>There are 36 adds and 34 deletes for the JPX Nikkei 400 Index to bring the number of index constituents back to 400. Some of the changes are interesting.</li>
<li>Based on the adds, deletes and capping changes, we estimate one way turnover of 4.75% and a two-way trade of JPY 444.45bn (US$3.3bn).</li>
<li>
<a href="https://www.smartkarma.com/entities/oriental-land-co-ltd" target="_blank" data-smartkarma-citation="entities:13517:1" rel="noopener">Oriental Land (4661 JP)</a> is a delete from the JPX Nikkei 400 Index but a high probability inclusion to the <a href="https://www.smartkarma.com/entities/nikkei-225" target="_blank" data-smartkarma-citation="entities:22909:1" rel="noopener">Nikkei 225 (NKY INDEX)</a> at the September rebalance.</li>
</ul>


There are 36 adds and 34 deletes for the JPX Nikkei 400 Index to bring the number of index constituents back to 400. Some of the changes are interesting.
Based on the adds, deletes and capping changes, we estimate one way turnover of 4.75% and a two-way trade of JPY 444.45bn (US$3.3bn).

Oriental Land (4661 JP) is a delete from the JPX Nikkei 400 Index but a high probability inclusion to the Nikkei 225 (NKY INDEX) at the September rebalance.


JPX Nikkei 400 Index Rebalance: Some Biggish Impact Stocks

<ul>
<li>Results for the quarter were mixed with a slight miss for profitability despite one-time gains for financial services taken in the quarter</li>
<li>Revenue erosion from a reduction in the Rakuten roaming service area was relatively modest whilst there are signs of improvement in erosion from mobile price cuts</li>
<li>KDDI will reimburse users ¥7bn (v Redex forecast of ¥10bn) for its network outage earlier this month; the operational impact won't be clear until Q2 churn is reported</li>
</ul>


Results for the quarter were mixed with a slight miss for profitability despite one-time gains for financial services taken in the quarter
Revenue erosion from a reduction in the Rakuten roaming service area was relatively modest whilst there are signs of improvement in erosion from mobile price cuts
KDDI will reimburse users ¥7bn (v Redex forecast of ¥10bn) for its network outage earlier this month; the operational impact won't be clear until Q2 churn is reported


KDDI (Buy) - Q1 22 Results Reaction: Mixed Quarter as Consumer Predictably Weak

Thematic (Sector/Industry)

<ul>
<li>MIC data provides further support that regulatory pressure was successful in driving down industry prices with 40mn users on discount plans that are among the cheapest globally</li>
<li>That has led to ¥230-250bn in service revenue erosion for both FY21 and FY22e but evidence of a solid win for regulators reassures that further action isn't needed</li>
<li>Handset pricing is on the rise as 5G proliferates, which is good news for incumbents that can lock users in through instalment payment plans</li>
</ul>


MIC data provides further support that regulatory pressure was successful in driving down industry prices with 40mn users on discount plans that are among the cheapest globally
That has led to ¥230-250bn in service revenue erosion for both FY21 and FY22e but evidence of a solid win for regulators reassures that further action isn't needed
Handset pricing is on the rise as 5G proliferates, which is good news for incumbents that can lock users in through instalment payment plans


Japan Telecoms - Update from Regulators’ Competition Working Group

Japan

KDDI CORPORATION provides mobile communication services and sells mobile devices.  The Company also is a broadband provider.

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KDDI Corp (9433 JP)

Kyocera (6971 JP) Founder Kazuo Inamori Passes - Implications for Holdings

Kyocera founder and KDDI "co-founder" Kazuo Inamori has passed away. He has a ¥80bn stake in Kyocera, and Kyocera owns 15% of KDDI. But overhang is...

Travis Lundy

NTT (Buy) - Q1 22 Results Reaction: Forex Gains Flatter Top-Line; Signs of Mobile Stability

This was a solid report with forex-boosted revenue growth and positive signs for consumer mobile (relative outperformance v peers) and DX-related...

Kirk Boodry

JPX Nikkei 400 Index Rebalance: Some Biggish Impact Stocks

There are 36 adds & 34 deletes for the JPX Nikkei 400 Index at the August rebalance leading to an estimated one way turnover of 4.75% and a two-way...

Brian Freitas

KDDI (Buy) - Q1 22 Results Reaction: Mixed Quarter as Consumer Predictably Weak

KDDI missed on profits despite one-time financial services gains but trends in mobile revenue and corporate sales were encouraging.

Kirk Boodry

Japan Telecoms - Update from Regulators’ Competition Working Group

Further evidence that price reductions have met expectations as regulator working group prepares its final report on the competition. NTT remains...

Kirk Boodry

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