Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

18 months ago, <a href="https://www.smartkarma.com/entities/yahoo-inc" target="_blank" data-smartkarma-citation="entities:786:1" rel="noopener">Altaba Inc (AABA US)</a> announced it would start selling down its 2bn shares-plus of Yahoo Japan - as of two days ago renamed <a href="https://www.smartkarma.com/entities/z-holdings-corp" target="_blank" data-smartkarma-citation="entities:19603:1" rel="noopener">Z Holdings (4689 JP)</a>. Partway through the summer of 2018 Altaba did a giant tender for its own shares in return for <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba Group Holding (BABA US)</a> ADS and cash, and then in July announced it would sell 613,888,888 shares of Yahoo Japan to <a href="https://www.smartkarma.com/entities/softbank-corp" target="_blank" data-smartkarma-citation="entities:27445:1" rel="noopener">Softbank Corp (9434 JP)</a> which was in the home stretch of preparing for its IPO. That sale was completed as <a href="https://www.smartkarma.com/entities/softbank-group-corp" target="_blank" data-smartkarma-citation="entities:315:1" rel="noopener">Softbank Group (9984 JP)</a> sold shares in Yahoo Japan back to the company in the form of a Tender Offer buyback by YJ. YJ cancelled shares.The effect was a buyback of shares by YJ and a transfer of ownership of YJ from Softbank Group to Softbank Corp, done in a manner to take advantage of the difference in treatment between onshore and offshore corporate sellers into an own-share tender offer by a Japanese company. Once the tender was done, on 10 September 2018 Altaba<a href="https://www.altaba.com/news-releases/news-release-details/altaba-announces-offering-shares-yahoo-japan-corporation" target="_blank" rel="noopener">announced</a> an offering of its Yahoo Japan shares, size depending on investor demand. They held 1.36353bn shares of Yahoo Japan at the time. By day end, YJ had determined they could sell the whole swath of shares and <a href="https://www.altaba.com/news-releases/news-release-details/altaba-announces-determination-number-shares-and-sale-price" target="_blank" rel="noopener">announced</a> a sale of their entire position at ¥354/share.This lifted the float dramatically - from about 1.2bn shares to close to 2.6bn shares. Softbank Corp later IPOed, and this past summer, Softbank Group moved control of Yahoo Japan to Softbank Corp through yet another Yahoo Japan tender buyback from Group and offering to Corp. <div class="content-highlight">
The final impact of that entire series of transactions from last year reaches its denouement this month. 
It is not small.
</div>More detail below.

18 months ago, Altaba Inc (AABA US) announced it would start selling down its 2bn shares-plus of Yahoo Japan - as of two days ago renamed Z Holdings (4689 JP). Partway through the summer of 2018 Altaba did a giant tender for its own shares in return for Alibaba Group Holding (BABA US) ADS and cash, and then in July announced it would sell 613,888,888 shares of Yahoo Japan to Softbank Corp (9434 JP) which was in the home stretch of preparing for its IPO. That sale was completed as Softbank Group (9984 JP) sold shares in Yahoo Japan back to the company in the form of a Tender Offer buyback by YJ. YJ cancelled shares.The effect was a buyback of shares by YJ and a transfer of ownership of YJ from Softbank Group to Softbank Corp, done in a manner to take advantage of the difference in treatment between onshore and offshore corporate sellers into an own-share tender offer by a Japanese company. Once the tender was done, on 10 September 2018 Altabaannounced an offering of its Yahoo Japan shares, size depending on investor demand. They held 1.36353bn shares of Yahoo Japan at the time. By day end, YJ had determined they could sell the whole swath of shares and announced a sale of their entire position at ¥354/share.This lifted the float dramatically - from about 1.2bn shares to close to 2.6bn shares. Softbank Corp later IPOed, and this past summer, Softbank Group moved control of Yahoo Japan to Softbank Corp through yet another Yahoo Japan tender buyback from Group and offering to Corp. 
The final impact of that entire series of transactions from last year reaches its denouement this month. 
It is not small.
More detail below.

I often label these insights "Tuesday and Wednesday" because it has often been a Tuesday and Wednesday. This autumn's version is called "Thursday and Friday."
Friday is, by my calculation, worth ¥3,548,118,271,100 or US$33 billion. 
Impact is theoretically about ¥1.1 trillion.
Historically, the impact on September is not as big as March, but it is worth knowing about. And if you have portfolios to adjust, there will be opportunities to take advantage of style bias seasonality.

I often label these insights "Tuesday and Wednesday" because it has often been a Tuesday and Wednesday. This autumn's version is called "Thursday and Friday."
Friday is, by my calculation, worth ¥3,548,118,271,100 or US$33 billion. 
Impact is theoretically about ¥1.1 trillion.
Historically, the impact on September is not as big as March, but it is worth knowing about. And if you have portfolios to adjust, there will be opportunities to take advantage of style bias seasonality.

Sep Div Date in Japan - Still Interesting, Still Significant

'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. 

Quantitative Analysis

• RELATIVE PRICE SCORE •<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/098/178/original/2019-09-06_09-42-35.png?1567730614" class="editor-image img-responsive" data-smartkarma-image-id="98178"></figure><div class="content-caption">Source: Japan Analytics</div>INTRODUCTION - The Relative Price Score (RPS) is a measure of stock price performance relative to TOPIX calculated by comparing the current deviation with the mean absolute deviation of monthly and daily relative share prices. As all companies are thus on a comparable scale, 'Overbought' and 'Oversold' outliers and changes in scoring can reveal short-term and longer-term trading opportunities. Company outlier thresholds are set at +4 &amp; -2 and equate to the top and bottom first-to-second percentiles of historical observations from which mean reversion takes a matter of months. RPS outliers with a Score of greater than 10.0 are rare outside of the 2000 tech 'bubble'. <a href="https://www.smartkarma.com/entities/lasertec-corp" target="_blank" data-smartkarma-citation="entities:4126:1" rel="noopener">Lasertec (6920 JP)</a> has just joined <a href="https://www.smartkarma.com/entities/goldwin-inc" target="_blank" data-smartkarma-citation="entities:410:1" rel="noopener">Goldwin (8111 JP)</a> in being only the second large-cap RPS 'ten-baggers' in the last twenty years. <div class="content-highlight">This insight updates our list of Overbought and Oversold companies, reviews the best and worst-performing companies in terms of RPS over the last three months and adds some specific comments on stocks on each category.</div><div></div><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/098/046/original/2019-09-05_12-46-46.png?1567655232" class="editor-image img-responsive" data-smartkarma-image-id="98046"></figure><div class="content-caption">Source: Japan Analytics</div>STATISTICS - Currently, of the 3,706 listed companies for which monthly RPS data is available, 81 companies are 'Overbought', and 133 are 'Oversold' - 2.45% and 3.8%, respectively of the total. For the 737 companies with a market capitalisation of over ¥100b, there are 44 'Overbought' and 37 'Oversold' companies, 6% and 5%, respectively.<hr>• RELATIVE PRICE SCORE 'TOPS' •<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/098/055/original/2019-09-05_13-06-30.png?1567656423" class="editor-image img-responsive" data-smartkarma-image-id="98055"></figure><div class="content-caption">Source: Japan Analytics</div>RPS 'TOPS' - In the last two years, 388 companies have achieved an RPS of '4' or more and the average Overbought 'persistence' is 42 days. 1.26% of the total of 1.94 million traded stock days were by companies with an RPS of over 4. For companies with a market capitalisation higher than ¥100b, the numbers are 95 companies and 74 days - demonstrating the superior persistence of large capitalisation companies in this regard. The chart above highlights the track record of all 95 large caps which are some point were Overbought in the last twenty-four months and illustrates the extreme outlier status of Goldwin and Lasertec.RPS NEGATIVE MEAN REVERSION - Some examples of RPS mean reversion in the last three months have been <a href="https://www.smartkarma.com/entities/suzuken-co-ltd" target="_blank" data-smartkarma-citation="entities:14996:1" rel="noopener">Suzuken (9987 JP)</a>, <a href="https://www.smartkarma.com/entities/infomart-corp" target="_blank" data-smartkarma-citation="entities:1301:1" rel="noopener">Infomart (2492 JP)</a>, <a href="https://www.smartkarma.com/entities/nichirei-corp" target="_blank" data-smartkarma-citation="entities:7168:1" rel="noopener">Nichirei (2871 JP)</a>, and <a href="https://www.smartkarma.com/entities/fancl-corp" target="_blank" data-smartkarma-citation="entities:15862:1" rel="noopener">Fancl (4921 JP)</a>. <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/098/096/original/2019-09-05_16-25-39.png?1567668352" class="editor-image img-responsive" data-smartkarma-image-id="98096"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/098/097/original/2019-09-05_16-27-09.png?1567668441" class="editor-image img-responsive" data-smartkarma-image-id="98097"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/098/098/original/2019-09-05_16-28-42.png?1567668548" class="editor-image img-responsive" data-smartkarma-image-id="98098"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/098/099/original/2019-09-05_16-30-29.png?1567668640" class="editor-image img-responsive" data-smartkarma-image-id="98099"></figure><div class="content-caption">Source: Japan Analytics</div><hr>• RELATIVE PRICE SCORE 'BOTTOMS' •<div>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/098/056/original/2019-09-05_13-12-52.png?1567656806" class="editor-image img-responsive" data-smartkarma-image-id="98056"></figure><div class="content-caption">Source: Japan Analytics</div>
</div>RPS 'BOTTOMS' - 259 companies have seen their RPS fall to '-2' or below in the last two years, and the average Oversold 'persistence' is 83 days. 1.46% of the total of 1.94 million traded stock days were by companies with an RPS of less than -2.  For larger capitalisation companies, the numbers are 79 companies and 94 days. The chart above highlights the track record of the 79 large caps which are some point were Oversold in the last twenty-four months and illustrates the strong recovery in the REITs Sector and the continuing demise of Regional Banks.RPS POSITIVE MEAN REVERSION - Some recent examples of positive RPS mean reversions are <a href="https://www.smartkarma.com/entities/otsuka-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:12292:1" rel="noopener">Otsuka Holdings (4578 JP) </a>and <a href="https://www.smartkarma.com/entities/line-corp" target="_blank" data-smartkarma-citation="entities:22772:1" rel="noopener">LINE (3938 JP)</a>.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/098/100/original/2019-09-05_16-35-47.png?1567668972" class="editor-image img-responsive" data-smartkarma-image-id="98100"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/098/102/original/2019-09-05_16-36-50.png?1567669047" class="editor-image img-responsive" data-smartkarma-image-id="98102"></figure><div class="content-caption">Source: Japan Analytics</div>As we noted in our June <a href="https://www.smartkarma.com/insights/japan-relative-price-scores-overbought-oversold-companies-june-2019" target="_blank" data-smartkarma-citation="insights:30393" rel="noopener">Insight: -</a><blockquote><a href="https://www.smartkarma.com/entities/line-corp" target="_blank" data-smartkarma-citation="entities:22772:1" rel="noopener">LINE (3938 JP)</a>- Line has performed poorly since being featured in last year's Sohn Conference and has had negative and worsening Operating Income for each of the previous five quarters. Although there is a possibility of a double-bottom RPS 'bounce' and the company is now the most-Oversold non-financial large-cap over one year, there are no fundamental reasons to own the shares.   </blockquote>In the DETAIL section below, we list the current Very Overbought (RPS&gt;5), Too-Late-To-Buy (RPS &gt;4&lt;5) and Oversold (RPS &lt;-2) stocks as well as the most substantial three-month positive and negative changes in RPS.

• RELATIVE PRICE SCORE •Source: Japan AnalyticsINTRODUCTION - The Relative Price Score (RPS) is a measure of stock price performance relative to TOPIX calculated by comparing the current deviation with the mean absolute deviation of monthly and daily relative share prices. As all companies are thus on a comparable scale, 'Overbought' and 'Oversold' outliers and changes in scoring can reveal short-term and longer-term trading opportunities. Company outlier thresholds are set at +4 &amp; -2 and equate to the top and bottom first-to-second percentiles of historical observations from which mean reversion takes a matter of months. RPS outliers with a Score of greater than 10.0 are rare outside of the 2000 tech 'bubble'. Lasertec (6920 JP) has just joined Goldwin (8111 JP) in being only the second large-cap RPS 'ten-baggers' in the last twenty years. This insight updates our list of Overbought and Oversold companies, reviews the best and worst-performing companies in terms of RPS over the last three months and adds some specific comments on stocks on each category.Source: Japan AnalyticsSTATISTICS - Currently, of the 3,706 listed companies for which monthly RPS data is available, 81 companies are 'Overbought', and 133 are 'Oversold' - 2.45% and 3.8%, respectively of the total. For the 737 companies with a market capitalisation of over ¥100b, there are 44 'Overbought' and 37 'Oversold' companies, 6% and 5%, respectively.• RELATIVE PRICE SCORE 'TOPS' •Source: Japan AnalyticsRPS 'TOPS' - In the last two years, 388 companies have achieved an RPS of '4' or more and the average Overbought 'persistence' is 42 days. 1.26% of the total of 1.94 million traded stock days were by companies with an RPS of over 4. For companies with a market capitalisation higher than ¥100b, the numbers are 95 companies and 74 days - demonstrating the superior persistence of large capitalisation companies in this regard. The chart above highlights the track record of all 95 large caps which are some point were Overbought in the last twenty-four months and illustrates the extreme outlier status of Goldwin and Lasertec.RPS NEGATIVE MEAN REVERSION - Some examples of RPS mean reversion in the last three months have been Suzuken (9987 JP), Infomart (2492 JP), Nichirei (2871 JP), and Fancl (4921 JP). Source: Japan Analytics• RELATIVE PRICE SCORE 'BOTTOMS' •
Source: Japan Analytics
RPS 'BOTTOMS' - 259 companies have seen their RPS fall to '-2' or below in the last two years, and the average Oversold 'persistence' is 83 days. 1.46% of the total of 1.94 million traded stock days were by companies with an RPS of less than -2.  For larger capitalisation companies, the numbers are 79 companies and 94 days. The chart above highlights the track record of the 79 large caps which are some point were Oversold in the last twenty-four months and illustrates the strong recovery in the REITs Sector and the continuing demise of Regional Banks.RPS POSITIVE MEAN REVERSION - Some recent examples of positive RPS mean reversions are Otsuka Holdings (4578 JP) and LINE (3938 JP).Source: Japan AnalyticsAs we noted in our June Insight: -LINE (3938 JP)- Line has performed poorly since being featured in last year's Sohn Conference and has had negative and worsening Operating Income for each of the previous five quarters. Although there is a possibility of a double-bottom RPS 'bounce' and the company is now the most-Oversold non-financial large-cap over one year, there are no fundamental reasons to own the shares.   In the DETAIL section below, we list the current Very Overbought (RPS&gt;5), Too-Late-To-Buy (RPS &gt;4&lt;5) and Oversold (RPS &lt;-2) stocks as well as the most substantial three-month positive and negative changes in RPS.

🇯🇵 Japan • September Relative Price Scores - Life at the Poles Part 2: Companies

Independent Insight Provider, Japanese equities, LightStream Research

Scott Foster

Independent Insight Provider, Japanese equities

Equity Bottom-Up

1Q results confirmed the first decline in Keyence's sales and profits in a decade. Caused by cyclical weakness in major user industries followed by the U.S.-China trade war, the resulting pall of uncertainty cast over corporate investment plans, and the appreciation of the yen, it has brought a long period of high growth and rising margins to an end.The duration and severity of the downturn remain unclear, but demand for factory automation products from the electronics, auto, and metal &amp; machine tool industries, which together account for more than 60% of the company's sales, is unlikely to rebound quickly. There is no sign of recovery in demand for semiconductors, cell phones, autos or the equipment used to make them. Weakening regional economies and the quarterly data point to difficult year-on-year comparisons for the rest of this fiscal year and the possibility of further sales and profit declines in FY Mar-21. Nevertheless, valuations remain high. At ¥61,400 (Wednesday, August 28 closing price), the shares are selling at 39x our EPS estimate for FY Mar-20, 40x our estimate for FY Mar-21 and 37x our estimate for FY Mar-22. We expect successively weak quarterly results to undermine expectations of a quick return to double-digit growth, with potential downside risk on the order of 20%.

1Q results confirmed the first decline in Keyence's sales and profits in a decade. Caused by cyclical weakness in major user industries followed by the U.S.-China trade war, the resulting pall of uncertainty cast over corporate investment plans, and the appreciation of the yen, it has brought a long period of high growth and rising margins to an end.The duration and severity of the downturn remain unclear, but demand for factory automation products from the electronics, auto, and metal &amp; machine tool industries, which together account for more than 60% of the company's sales, is unlikely to rebound quickly. There is no sign of recovery in demand for semiconductors, cell phones, autos or the equipment used to make them. Weakening regional economies and the quarterly data point to difficult year-on-year comparisons for the rest of this fiscal year and the possibility of further sales and profit declines in FY Mar-21. Nevertheless, valuations remain high. At ¥61,400 (Wednesday, August 28 closing price), the shares are selling at 39x our EPS estimate for FY Mar-20, 40x our estimate for FY Mar-21 and 37x our estimate for FY Mar-22. We expect successively weak quarterly results to undermine expectations of a quick return to double-digit growth, with potential downside risk on the order of 20%.

Keyence (6861 JP): Undermined by Weak Demand and Uncertainty

Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

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.

<a href="https://www.smartkarma.com/entities/keyence-corp" target="_blank" data-smartkarma-citation="entities:3077:1" rel="noopener">Keyence Corp (6861 JP)</a> continues to trade sideways following weak 1Q results that caused the stock to drop 4% the following trading day. We remain relatively positive on the name as we consider it to be (in relative terms) a defensive name within the sector with less earnings volatility than peers. We examine the underlying metrics below.

Keyence Corp (6861 JP) continues to trade sideways following weak 1Q results that caused the stock to drop 4% the following trading day. We remain relatively positive on the name as we consider it to be (in relative terms) a defensive name within the sector with less earnings volatility than peers. We examine the underlying metrics below.

Keyence: Waiting for a Bottom - SG&A Trend Is the Key Underlying Metric

Japan

KEYENCE CORPORATION develops, manufactures, and sells sensors and measuring instruments used for factory automation (FA) and high technology hobby products. The Company's products include fiber optic sensors, photoelectric sensors, programmable logic controllers (PLC), laser scan micrometers, bar code readers, and radio-controlled model cars.

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Keyence Corp (6861 JP)

The BIG BUY of Z

18 months ago, Altaba Inc (AABA US) announced it would start selling down its 2bn shares-plus of Yahoo Japan - as of two days ago renamed Z...

Travis Lundy

Sep Div Date in Japan - Still Interesting, Still Significant

I often label these insights "Tuesday and Wednesday" because it has often been a Tuesday and Wednesday. This autumn's version is called "Thursday...

Travis Lundy

🇯🇵 Japan • September Relative Price Scores - Life at the Poles Part 2: Companies

• RELATIVE PRICE SCORE •INTRODUCTION - The Relative Price Score (RPS) is a measure of stock price performance relative to TOPIX calculated by...

Campbell Gunn

Keyence (6861 JP): Undermined by Weak Demand and Uncertainty

1Q results confirmed the first decline in Keyence's sales and profits in a decade. Caused by cyclical weakness in major user industries followed by...

Scott Foster

Keyence: Waiting for a Bottom - SG&A Trend Is the Key Underlying Metric

Keyence Corp (6861 JP) continues to trade sideways following weak 1Q results that caused the stock to drop 4% the following trading day. We remain...

Mio Kato

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