Pan-Asia Index Flows & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Pan-Asia Index Flows & Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Event-Driven

<ul>
<li>The TOPIX liquidity factor removal names (upweights) for April 2023 were announced after the close on Friday 7th April 2023 as expected.</li>
<li>According to the announcement, 22 names will see their Liquidity Factors removed and experience index inflows later this month. </li>
<li>Today was the first day of trading post-announcement and the 22 names gained +1.1% (+0.47% vs the TOPIX Index). I feel there could be more upside for some names.</li>
</ul>


The TOPIX liquidity factor removal names (upweights) for April 2023 were announced after the close on Friday 7th April 2023 as expected.
According to the announcement, 22 names will see their Liquidity Factors removed and experience index inflows later this month. 
Today was the first day of trading post-announcement and the 22 names gained +1.1% (+0.47% vs the TOPIX Index). I feel there could be more upside for some names.


TOPIX Big April Basket 23: 100% Hit Rate for High Conviction Basket; Focus on Surprises Next

Expert on Japan Retail and Consumer Markets, JapanConsuming

Michael Causton

Expert on Japan Retail and Consumer Markets

Real Insight on Japanese Consumer Markets

JapanConsuming

JapanConsuming is a specialist research firm producing intelligence on Japanese retail and consumer markets. Founded in 2000, JapanConsuming has become the leading provider of insights on Japanese retailers and consumer trends to retailers, brands, government agencies and investors. As well as a highly regarded monthly report on the market, JapanConsuming produces in-depth reports on retail sectors, seminars on key trends and telephone consulting to investors on trends and retailers.

JapanConsuming was founded by Michael Causton and Roy Larke. 

Private Capital Markets

<ul>
<li>Although there are some points to iron out, Fortress Investment is in the final stages of negotiation to purchase Sogo Seibu from Seven &amp; I, with Yodobashi Camera as partner. </li>
<li>This is an exciting move for Yodobashi as it should be an excellent choice to leverage Sogo Seibu’s better locations and create more competition for rivals like Bic Camera.</li>
<li>Even so, some stores will no longer have a future under their existing banners and the acquisition will mark the final demise of a 170 year old brand and company.</li>
</ul>


Although there are some points to iron out, Fortress Investment is in the final stages of negotiation to purchase Sogo Seibu from Seven &amp; I, with Yodobashi Camera as partner. 
This is an exciting move for Yodobashi as it should be an excellent choice to leverage Sogo Seibu’s better locations and create more competition for rivals like Bic Camera.
Even so, some stores will no longer have a future under their existing banners and the acquisition will mark the final demise of a 170 year old brand and company.


Yodobashi to Become Top 10 Retailer in Sogo Seibu Deal with Fortress

Japan Specialist

Mark Chadwick

Equity Bottom-Up

<ul>
<li>J-Front Retailing, a Japanese department store operator, will announce full-year results on April 11.</li>
<li>We expect FY2/23 guidance to be more optimistic as Japan normalises post COVID. </li>
<li>Pent up demand for luxury goods to drive recovery of department stores. J-Front is still trading below book value.</li>
</ul>


J-Front Retailing, a Japanese department store operator, will announce full-year results on April 11.
We expect FY2/23 guidance to be more optimistic as Japan normalises post COVID. 
Pent up demand for luxury goods to drive recovery of department stores. J-Front is still trading below book value.


J-Front (3086) | Recent Datapoints Point to High-End Shoppers Loosening the Purse Strings

Thematic (Sector/Industry)

<p>FY2020 was clearly a year when department store executives would have been better to live in an induced coma. Big city stores suffered especially because inbound tourists, their main growth driver of the past few years, disappeared and local shoppers stayed away, although some stores did manage to harness support from Japan’s expanding wealth market to offset the rout a little bit. The good news is that executives pushing for change in the last five years in the face of perennial intransigence are increasingly taking charge and the result should be a leaner, smaller and more clearly defined format that is more overtly upscale.</p>

FY2020 was clearly a year when department store executives would have been better to live in an induced coma. Big city stores suffered especially because inbound tourists, their main growth driver of the past few years, disappeared and local shoppers stayed away, although some stores did manage to harness support from Japan’s expanding wealth market to offset the rout a little bit. The good news is that executives pushing for change in the last five years in the face of perennial intransigence are increasingly taking charge and the result should be a leaner, smaller and more clearly defined format that is more overtly upscale.

Japan's Department Stores: Radical Contraction Still to Come if Sector Is to Survive

Kintetsu Department Store / Equity Bottom-Up

<p><a href="https://www.smartkarma.com/entities/kintetsu-department-store-co-ltd" target="_blank" data-smartkarma-citation="entities:9040:1" rel="noopener">Kintetsu Department Store (8244 JP)</a> watched as a seemingly inevitable decline hit its business in the five years to 2018. The railway-backed retailer has realised that there is still plenty of traffic going through its stations and that the problem was the wrong kind of retail offer. To fix this, rather than just call in tenants, Kintetsu became an active franchisee in an experiment that is clearly working. While Kintetsu's share price reflects the weak department store sector, within three years it won't be a department store at all.</p>

Kintetsu Department Store (8244 JP) watched as a seemingly inevitable decline hit its business in the five years to 2018. The railway-backed retailer has realised that there is still plenty of traffic going through its stations and that the problem was the wrong kind of retail offer. To fix this, rather than just call in tenants, Kintetsu became an active franchisee in an experiment that is clearly working. While Kintetsu's share price reflects the weak department store sector, within three years it won't be a department store at all.

Japan

Kintetsu Department Store Co., Ltd. operates department stores mainly in Osaka, Nara, Kyoto, and other Kansai prefectures. The Company sells clothing, foods, as well as other household items. Kintetsu Department Store also operates restaurants.

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Kintetsu Department Store (8244 JP)

TOPIX Big April Basket 23: 100% Hit Rate for High Conviction Basket; Focus on Surprises Next

There could be around US$450mn of flows and an average of 12 days of ADV to buy for the 13 names which I identify as "surprise" names. I expect...

Janaghan Jeyakumar, CFA

Yodobashi to Become Top 10 Retailer in Sogo Seibu Deal with Fortress

The sale of Sogo Seibu won't make much difference to Seven & I but if the sale to Fortress goes ahead will make Yodobashi Camera into one of...

Michael Causton

J-Front (3086) | Recent Datapoints Point to High-End Shoppers Loosening the Purse Strings

J-Front Retailing is a beneficiary of COVID normalisation and eventual resumption of inbound tourism. The restructuring and cost cuts bode well for...

Mark Chadwick

Japan's Department Stores: Radical Contraction Still to Come if Sector Is to Survive

Japan's department stores are in trouble and were well before the pandemic but their outlook is much worse now. Major changes are required, not...

Michael Causton

Kintetsu the Franchisee

Kintetsu looks like another retailer in a failing sector but it is owned by one of the busiest railway operators in the country with great retail...

Michael Causton

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