Japanese Turnaround Situations, Short-Ideas, Azabu Research

Michael Allen

Japanese Turnaround Situations, Short-Ideas

Azabu Research

Azabu Research is a publishing and consulting firm focused on distressed equities in the Japanese market. We specialize in turnaround strategies, corporate combinations, divestitures, and restructuring.

Publisher of the Tokyo Turnaround Letter, which conducts the most thorough research possible of publicly available information, including forensic tests for fraudulent overstatement of assets and understatement of liabilities, as well as rigorous market and industry analysis to assess the underlying strengths of the company’s products or services, the appropriateness of the company’s turnaround strategy, and the skill of its current management team. The average length of a report exceeds 25 pages of text and tables, excluding any disclosures or executive summaries.

We have more than 30 years of experience in applying this process to distressed equities in Japan. Additionally, subscribers have free access to detailed, yet easily navigated earnings models for the target company as well as the top five comparable companies, and unlimited access to the analyst for follow-up questions.

Azabu Research also conducts be-spoke research on a project basis, and provides consulting services to companies looking to restructure, divest, make acquisitions, go public, or improve investor sentiment toward their stock.

Independent Research and Consulting Firm

Equity Bottom-Up

<ul>
<li>Adding a new strategy I call TARP – Tariff-Proof at a Reasonable Price. Stocks need to have little or no direct or indirect exposure to the US unless locally procured.</li>
<li>Kotobuki (2222), Kikkoman (2801), and Orix JREIT (8954) are all close to bullet-proof.</li>
<li>Yamada (9831) proves that what the market is looking for is a concept of a plan, not necessarily results.</li>
</ul>


Adding a new strategy I call TARP – Tariff-Proof at a Reasonable Price. Stocks need to have little or no direct or indirect exposure to the US unless locally procured.
Kotobuki (2222), Kikkoman (2801), and Orix JREIT (8954) are all close to bullet-proof.
Yamada (9831) proves that what the market is looking for is a concept of a plan, not necessarily results.


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>
<a href="https://www.smartkarma.com/entities/nomura-research-institute-ltd" target="_blank" data-smartkarma-citation="entities:18129:1" rel="noopener">Nomura Research Institute (4307 JP)</a> and <a href="https://www.smartkarma.com/entities/ryohin-keikaku-co-ltd" target="_blank" data-smartkarma-citation="entities:2765:1" rel="noopener">Ryohin Keikaku (7453 JP)</a> will replace <a href="https://www.smartkarma.com/entities/nippon-paper-industries-co-l" target="_blank" data-smartkarma-citation="entities:557:1" rel="noopener">Nippon Paper Industries Co L (3863 JP)</a> and <a href="https://www.smartkarma.com/entities/dic-corp" target="_blank" data-smartkarma-citation="entities:7343:1" rel="noopener">Dic Corp (4631 JP)</a> in 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>. </li>
<li>
<a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:751:1" rel="noopener">Fast Retailing (9983 JP)</a>'s CPAF will drop from 3 to 2.7 and there will be further selling in March 2025 as the CPAF drops to 2.4 (or possibly even 2.1!) </li>
<li>Passives will need to buy 7-15x ADV (13-14% of real float) in the adds and sell 2.7-6.5x ADV in the deletes. There is a big reverse funding trade too.</li>
</ul>



Nomura Research Institute (4307 JP) and Ryohin Keikaku (7453 JP) will replace Nippon Paper Industries Co L (3863 JP) and Dic Corp (4631 JP) in the Nikkei 225 (NKY INDEX). 

Fast Retailing (9983 JP)'s CPAF will drop from 3 to 2.7 and there will be further selling in March 2025 as the CPAF drops to 2.4 (or possibly even 2.1!) 
Passives will need to buy 7-15x ADV (13-14% of real float) in the adds and sell 2.7-6.5x ADV in the deletes. There is a big reverse funding trade too.


Nikkei 225 Index Rebalance: NRI, Ryohin Keikaku IN; Nippon Paper, DIC OUT; Fast Retailing Capped

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

<ul>
<li>The 2023 Version of <strong>JAPAN PASSIVE: Who Owns What?</strong> where we break down the major (and minor) passive tracking indices and which category of investor owns how much of each. </li>
<li>Even if you do not "play" index changes, understanding impact is important. Advantest is up 100% in 3mos. Existing passive ownership and new passive buying were crucial to that performance.</li>
<li>Understanding the nature of the ownership and flows is crucial to understanding how to trade certain stocks in Japan. </li>
</ul>


The 2023 Version of JAPAN PASSIVE: Who Owns What? where we break down the major (and minor) passive tracking indices and which category of investor owns how much of each. 
Even if you do not "play" index changes, understanding impact is important. Advantest is up 100% in 3mos. Existing passive ownership and new passive buying were crucial to that performance.
Understanding the nature of the ownership and flows is crucial to understanding how to trade certain stocks in Japan. 


<ul>
<li>The review period for the <a href="https://www.smartkarma.com/entities/nikkei-225" target="_blank" data-smartkarma-citation="entities:22909:1" rel="noopener">Nikkei 225 Index</a> March rebalance ends in January. There could be one outright change and one or two others driven by sector balance.</li>
<li>Depending on the changes, passive trackers will need to buy between 8.2-20.5x ADV (8.75%-24.5% of real float) and sell between 9-38x ADV on the deletions.</li>
<li>
<a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:751:1" rel="noopener">Fast Retailing</a>'s PAF could see a double reduction to keep the stock weight capped at 10%. There will be huge passive selling leading to funding inflows for other index constituents.</li>
</ul>


The review period for the Nikkei 225 Index March rebalance ends in January. There could be one outright change and one or two others driven by sector balance.
Depending on the changes, passive trackers will need to buy between 8.2-20.5x ADV (8.75%-24.5% of real float) and sell between 9-38x ADV on the deletions.

Fast Retailing's PAF could see a double reduction to keep the stock weight capped at 10%. There will be huge passive selling leading to funding inflows for other index constituents.


Nikkei 225 Index Rebalance Preview (Mar 2025): Ranking, Capping, Funding & Other Changes

<ul>
<li>The review period for 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> September rebalance ended yesterday. There could be three changes at the rebalance with sector balance in focus for the additions.</li>
<li>
<a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:751:1" rel="noopener">Fast Retailing (9983 JP)</a>'s capping in the index has been confirmed and its index weight will drop by around 0.9% resulting in big selling at the close on 30 September. </li>
<li>Passive trackers will need to buy between 3.5-35x ADV (2.4%-24% of real float) on the inclusions and sell between 3.7-42.5x ADV on the deletions.</li>
</ul>


The review period for the Nikkei 225 (NKY INDEX) September rebalance ended yesterday. There could be three changes at the rebalance with sector balance in focus for the additions.

Fast Retailing (9983 JP)'s capping in the index has been confirmed and its index weight will drop by around 0.9% resulting in big selling at the close on 30 September. 
Passive trackers will need to buy between 3.5-35x ADV (2.4%-24% of real float) on the inclusions and sell between 3.7-42.5x ADV on the deletions.


Nikkei 225 Index Rebalance Preview (Sep 2024): Review Period Done; Fast Retailing Capping Confirmed

Japan

KIKKOMAN CORPORATION produces and markets soy sauce, alcoholic beverages, and other food products.  The Company has marketing rights for Del Monte brand products outside of the United States.  Kikkoman also operates restaurants in Japan and other countries.

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Kikkoman Corp (2801 JP)

Unloved Japan: Cheap & Tariff-Proof

New strategy TARP focuses on investing in stocks with little to no exposure to the US, highlighting companies like Kotobuki, Kikkoman, and Orix...

Michael Allen

Nikkei 225 Index Rebalance: NRI, Ryohin Keikaku IN; Nippon Paper, DIC OUT; Fast Retailing Capped

Nomura Research Institute and Ryohin Keikaku replace Nippon Paper and DIC in the Nikkei 225. Fast Retailing will be capped (and probably again in...

Brian Freitas

JAPAN PASSIVE: Who Owns What 2023?

This is the annual JAPAN PASSIVE: Who Owns What report for 2023. It is a comprehensive of the major index exposures in Japan by index tracker type,...

Travis Lundy

Nikkei 225 Index Rebalance Preview (Mar 2025): Ranking, Capping, Funding & Other Changes

There should be 1 change, could be 3 due to sector balance. The impact on the potential changes varies from 8-38x ADV. Fast Retailing could see a...

Brian Freitas

Nikkei 225 Index Rebalance Preview (Sep 2024): Review Period Done; Fast Retailing Capping Confirmed

Review period ended yesterday. Fast Retailing's capping will result in a 0.9% drop in index weight. There could be 3 index changes with sector...

Brian Freitas

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Unloved Japan: Cheap & Tariff-Proof

​New strategy TARP focuses on investing in stocks with little to no exposure to the US, highlighting companies like Kotobuki, Kikkoman, and Orix...

Michael Allen

Nikkei 225 Index Rebalance: NRI, Ryohin Keikaku IN; Nippon Paper, DIC OUT; Fast Retailing Capped

Nomura Research Institute and Ryohin Keikaku replace Nippon Paper and DIC in the Nikkei 225. Fast Retailing will be capped (and probably again in...

Brian Freitas

JAPAN PASSIVE: Who Owns What 2023?

This is the annual JAPAN PASSIVE: Who Owns What report for 2023. It is a comprehensive of the major index exposures in Japan by index tracker type,...

Travis Lundy

Nikkei 225 Index Rebalance Preview (Mar 2025): Ranking, Capping, Funding & Other Changes

There should be 1 change, could be 3 due to sector balance. The impact on the potential changes varies from 8-38x ADV. Fast Retailing could see a...

Brian Freitas

Nikkei 225 Index Rebalance Preview (Sep 2024): Review Period Done; Fast Retailing Capping Confirmed

Review period ended yesterday. Fast Retailing's capping will result in a 0.9% drop in index weight. There could be 3 index changes with sector...

Brian Freitas

New strategy TARP focuses on investing in stocks with little to no exposure to the US, highlighting companies like Kotobuki, Kikkoman, and Orix...