Smartkarma Research Team, Smartkarma

Smartkarma Research

Smartkarma Research Team

Smartkarma

Smartkarma unites the fragmented investment industry, connecting institutional investors, independent research providers, and corporates within a single network.

Research Reinvented

Equity Bottom-Up

Galaxy Entertainment Group / Equity Bottom-Up

<p>For our next Webinar, we are thrilled to welcome Insight Provider <a href="https://www.smartkarma.com/profiles/howard-j-klein" target="_blank" data-smartkarma-citation="accounts:1005" rel="noopener">Howard J Klein</a>. Howard will go over his outlook on the casino and gaming sector in Asia for 2022 and present opportunities for investors in this space.</p>
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<h3>The webinar will be hosted on Wednesday, 6 October 2021, 11:00 SGT/HKT.</h3>
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<h2><a href="https://share.hsforms.com/1H9pFZOB-RF2J00kbvMmxcw2c5gj?zoom_webinar_id=86290932330" target="_blank" rel="noopener">Register for the Webinar here</a></h2>
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<p>Howard J Klein has 25+ years of experience as a C-level executive of the casino industry in operations, marketing, international development, and strategic planning. He is currently a consultant specialising in the casino space, an industry expert contributor, and publisher of a subscription letter called "The House Edge". He gained extensive experience in marketing and development in the Asian gaming market while a senior executive at Caesars, Ballys Grand, and Trump Taj Mahal, and he was part of senior executive teams that valued acquisitions and mergers with companies in the casino, hotel, entertainment, and restaurant space.</p>
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For our next Webinar, we are thrilled to welcome Insight Provider Howard J Klein. Howard will go over his outlook on the casino and gaming sector in Asia for 2022 and present opportunities for investors in this space.

The webinar will be hosted on Wednesday, 6 October 2021, 11:00 SGT/HKT.




Register for the Webinar here

Howard J Klein has 25+ years of experience as a C-level executive of the casino industry in operations, marketing, international development, and strategic planning. He is currently a consultant specialising in the casino space, an industry expert contributor, and publisher of a subscription letter called "The House Edge". He gained extensive experience in marketing and development in the Asian gaming market while a senior executive at Caesars, Ballys Grand, and Trump Taj Mahal, and he was part of senior executive teams that valued acquisitions and mergers with companies in the casino, hotel, entertainment, and restaurant space.



Smartkarma Webinar | Asian Casino Outlook 2022: Challenges and Opportunities

Global Gaming and Casinos Industry Specialist, Casino Business Review LLC

Howard J Klein

Global Gaming and Casinos Industry Specialist

<ul>
<li>Pandemic related postponements of new gaming equipment and systems purchases held Konami sales gains in check. Until now.</li>
<li>Konami stock sits near recent low against YTD high on June 9th of 7,150jpy and is in our view, ripe for an upside move.</li>
<li>This innovative, diverse entertainment, digital and gaming equipment and systems maker has significant upside as pandemic easing can spark postponed corporate purchasing of new games.</li>
</ul>


Pandemic related postponements of new gaming equipment and systems purchases held Konami sales gains in check. Until now.
Konami stock sits near recent low against YTD high on June 9th of 7,150jpy and is in our view, ripe for an upside move.
This innovative, diverse entertainment, digital and gaming equipment and systems maker has significant upside as pandemic easing can spark postponed corporate purchasing of new games.


Konami Holdings Ltd: Gaming Equipment and Systems Sales Lead Segments in 2Q21 Earnings

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<p>A few years ago I started this series, and I updated it last year. Since last year, it has been a top 10 insight in terms of views. </p><p>I personally think it is important for investors of all types to understand WHO OWNS WHAT. </p><p>Many fundamental investors are reticent to spend any time on this but there are many reasons why active investors in Japan should be interested in understanding the ownership and shareholder dynamics of passive investors in Japan.</p><div><p>Some of the places active investors will see their influence are:</p></div><div>
<ul style="list-style-type: disc;">
<li>Stories intermittently published about the BOJ's presence in Japanese ETFs (especially the fact that it owns 85+% of the outstanding ETF market),</li>
<li>Relatively constant interest in Nikkei 225 rebalances like the one we saw in July 2020, which helped push up <a href="https://www.smartkarma.com/entities/japan-exchange-group-inc" target="_blank" data-smartkarma-citation="entities:11266:1" rel="noopener">Japan Exchange Group (8697 JP)</a> by 30+% from May to July, then helped it slide 13% in a week, or the changes in the Nikkei 225 review rules published earlier this year which may change what happens this September to a few large caps, and the announcement of the BOJ that it would no longer buy Nikkei 225 ETFs which started a long slide in <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> shares against comps and the Nikkei itself. Long "held up" by 'market inventory' and Nikkei 225 ETF buying, when the BOJ stopped, it removed the cushion and existing inventory holders had to sell out. </li>
<li>Then if you look at the shareholder structure of Fast Retailing today, you will see that it is STILL fundamentally a serious problem for large foreign active investors who would actually wish to take an <em>active</em> (but not activist) position. <em>Real World Float</em> on the stock is, by my calculation, less than 15% of shares outstanding. </li>
<li>The relatively recent policy of increased stewardship regarding the passive management portion of the GPIF (the Government Pension Investment Fund) - an investing heavyweight in Japan.</li>
<li>The timing and quantum of after-event support or overhang on corporate actions such as buybacks, secondary offerings, primary offerings, mergers, etc. </li>
<li>Index inclusions mean big flows. If you follow the insights on <strong><a href="https://www.smartkarma.com/collections/topix-inclusion/insights?item=54585" target="_blank" rel="noopener">TOPIX Inclusions</a></strong> by <a href="https://www.smartkarma.com/profiles/janaghan-jeyakumar-cfa" target="_blank" data-smartkarma-citation="accounts:3173" rel="noopener">Janaghan Jeyakumar, CFA</a> and myself, you will often see big moves. Sometimes these stocks move 50% between when we write about them and when they go into the index. If you own them and are considering an exit, you need to know when to take profits, and the dynamic of the liquidity. If you are thinking about getting in for fundamental reasons, it pays to know early so you can get ahead of the major flow.</li>
<li>The return of <a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1" rel="noopener">Toshiba Corp (6502 JP)</a> to the TSE First Section in Q1 this year changed the foreign shareholder percentage ownership, lowering it by 10%. Smartkarma readers knew this last year and in January, which prepared them for the June AGM when the shareholder category ownership was released.</li>
<li>The changes to the TSE's market structure, which will affect TOPIX membership, which will affect many companies' issuance, buyback, share cancellation, etc decisions over the next several months. They are doing this because of the TSE Prime listing rules which will effectively also determine whether or not they will be included in TOPIX in future, or whether they will fall out of TSE Prime and will see constant selling over late 2022 to early 2025. </li>
</ul>
<p>Of course, TOPIX is just over half of the passive tracking AUM in Japan. There's more. </p>
<p>Find out WHO OWNS WHAT in Japan Passive below the fold. </p>
</div>

A few years ago I started this series, and I updated it last year. Since last year, it has been a top 10 insight in terms of views. I personally think it is important for investors of all types to understand WHO OWNS WHAT. Many fundamental investors are reticent to spend any time on this but there are many reasons why active investors in Japan should be interested in understanding the ownership and shareholder dynamics of passive investors in Japan.Some of the places active investors will see their influence are:

Stories intermittently published about the BOJ's presence in Japanese ETFs (especially the fact that it owns 85+% of the outstanding ETF market),
Relatively constant interest in Nikkei 225 rebalances like the one we saw in July 2020, which helped push up Japan Exchange Group (8697 JP) by 30+% from May to July, then helped it slide 13% in a week, or the changes in the Nikkei 225 review rules published earlier this year which may change what happens this September to a few large caps, and the announcement of the BOJ that it would no longer buy Nikkei 225 ETFs which started a long slide in Fast Retailing (9983 JP) shares against comps and the Nikkei itself. Long "held up" by 'market inventory' and Nikkei 225 ETF buying, when the BOJ stopped, it removed the cushion and existing inventory holders had to sell out. 
Then if you look at the shareholder structure of Fast Retailing today, you will see that it is STILL fundamentally a serious problem for large foreign active investors who would actually wish to take an active (but not activist) position. Real World Float on the stock is, by my calculation, less than 15% of shares outstanding. 
The relatively recent policy of increased stewardship regarding the passive management portion of the GPIF (the Government Pension Investment Fund) - an investing heavyweight in Japan.
The timing and quantum of after-event support or overhang on corporate actions such as buybacks, secondary offerings, primary offerings, mergers, etc. 
Index inclusions mean big flows. If you follow the insights on TOPIX Inclusions by Janaghan Jeyakumar, CFA and myself, you will often see big moves. Sometimes these stocks move 50% between when we write about them and when they go into the index. If you own them and are considering an exit, you need to know when to take profits, and the dynamic of the liquidity. If you are thinking about getting in for fundamental reasons, it pays to know early so you can get ahead of the major flow.
The return of Toshiba Corp (6502 JP) to the TSE First Section in Q1 this year changed the foreign shareholder percentage ownership, lowering it by 10%. Smartkarma readers knew this last year and in January, which prepared them for the June AGM when the shareholder category ownership was released.
The changes to the TSE's market structure, which will affect TOPIX membership, which will affect many companies' issuance, buyback, share cancellation, etc decisions over the next several months. They are doing this because of the TSE Prime listing rules which will effectively also determine whether or not they will be included in TOPIX in future, or whether they will fall out of TSE Prime and will see constant selling over late 2022 to early 2025. 

Of course, TOPIX is just over half of the passive tracking AUM in Japan. There's more. 
Find out WHO OWNS WHAT in Japan Passive below the fold. 


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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

<p>At its Monetary Policy Meeting that concluded on 19 March, the Bank of Japan (BOJ) announced that they would purchase ETFs and J-REIT as necessary with upper limits of about 12 trillion yen and about 180 billion yen respectively. While the upper limits were originally set as a temporary measure in response to the impact of COVID-19, the Bank will maintain them even after COVID-19 subsides.</p><p>The big change was the announcement that the BOJ would only purchase ETFs tracking the <a href="https://www.smartkarma.com/entities/tokyo-stock-exchange-tokyo-price-index-topix" target="_blank" data-smartkarma-citation="entities:22910:1" rel="noopener">Tokyo Stock Exchange Tokyo Price Index Topix (TPX INDEX)</a>. This means no more flows 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> and JPX Nikkei 400 ETFs.</p><p>From the increase in ETF AUM over calendar year 2020, we estimate that around 88% of the BOJ buying went into <a href="https://www.smartkarma.com/entities/tokyo-stock-exchange-tokyo-price-index-topix" target="_blank" data-smartkarma-citation="entities:22910:1" rel="noopener">Tokyo Stock Exchange Tokyo Price Index Topix (TPX INDEX)</a> ETFs, with smaller amounts going into 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> and JPX Nikkei 400 ETFs.</p><p>While the impact of BOJ only buying <a href="https://www.smartkarma.com/entities/tokyo-stock-exchange-tokyo-price-index-topix" target="_blank" data-smartkarma-citation="entities:22910:1" rel="noopener">Tokyo Stock Exchange Tokyo Price Index Topix (TPX INDEX)</a> linked ETFs is not material for single stocks in ADV terms, there could be a bigger impact on 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> constituents if other NKY ETF holders redeem their units and sell the underlying shares.</p><p>The NT ratio (NKY/TPX) had started to move lower over the last 15 trading days due to the shift from growth to value stocks. The BOJ announcement could take the ratio lower in the short term on a change in sentiment and short term flows due to repositioning of portfolios.</p><p><a href="https://www.smartkarma.com/entities/nissan-chemical-industries" target="_blank" data-smartkarma-citation="entities:4102:1" rel="noopener">Nissan Chemical Industries (4021 JP)</a>, <a href="https://www.smartkarma.com/entities/comsys-holdings-corp" target="_blank" data-smartkarma-citation="entities:20548:1" rel="noopener">Comsys Holdings (1721 JP)</a>, <a href="https://www.smartkarma.com/entities/konami-holdings-corp" target="_blank" data-smartkarma-citation="entities:13236:1" rel="noopener">Konami Holdings (9766 JP)</a>, <a href="https://www.smartkarma.com/entities/kikkoman-corp" target="_blank" data-smartkarma-citation="entities:11720:1" rel="noopener">Kikkoman Corp (2801 JP)</a> and <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> will be among the most negatively affected stocks, but the impact is quite small.</p><p><a href="https://www.smartkarma.com/entities/tokyo-stock-exchange-tokyo-price-index-topix" target="_blank" data-smartkarma-citation="entities:22910:1" rel="noopener">Tokyo Stock Exchange Tokyo Price Index Topix (TPX INDEX)</a> stocks (that will have passive BOJ inflows of at least US$5m) that will have the largest impact in terms of ADV to trade are <a href="https://www.smartkarma.com/entities/hankyu-hanshin-holdings-inc" target="_blank" data-smartkarma-citation="entities:13058:1" rel="noopener">Hankyu Hanshin Holdings (9042 JP)</a>, <a href="https://www.smartkarma.com/entities/kintetsu-group-holdings-co-l" target="_blank" data-smartkarma-citation="entities:18507:1" rel="noopener">Kintetsu Group Holdings Co L (9041 JP)</a>, <a href="https://www.smartkarma.com/entities/hisamitsu-pharmaceutical-co" target="_blank" data-smartkarma-citation="entities:17008:1" rel="noopener">Hisamitsu Pharmaceutical Co (4530 JP)</a>, <a href="https://www.smartkarma.com/entities/bank-of-kyoto-ltd" target="_blank" data-smartkarma-citation="entities:5248:1" rel="noopener">Bank Of Kyoto (8369 JP)</a> and <a href="https://www.smartkarma.com/entities/hakuhodo-dy-holdings-inc" target="_blank" data-smartkarma-citation="entities:8736:1" rel="noopener">Hakuhodo Dy Holdings (2433 JP)</a>. </p>

At its Monetary Policy Meeting that concluded on 19 March, the Bank of Japan (BOJ) announced that they would purchase ETFs and J-REIT as necessary with upper limits of about 12 trillion yen and about 180 billion yen respectively. While the upper limits were originally set as a temporary measure in response to the impact of COVID-19, the Bank will maintain them even after COVID-19 subsides.The big change was the announcement that the BOJ would only purchase ETFs tracking the Tokyo Stock Exchange Tokyo Price Index Topix (TPX INDEX). This means no more flows to the Nikkei 225 (NKY INDEX) and JPX Nikkei 400 ETFs.From the increase in ETF AUM over calendar year 2020, we estimate that around 88% of the BOJ buying went into Tokyo Stock Exchange Tokyo Price Index Topix (TPX INDEX) ETFs, with smaller amounts going into the Nikkei 225 (NKY INDEX) and JPX Nikkei 400 ETFs.While the impact of BOJ only buying Tokyo Stock Exchange Tokyo Price Index Topix (TPX INDEX) linked ETFs is not material for single stocks in ADV terms, there could be a bigger impact on the Nikkei 225 (NKY INDEX) constituents if other NKY ETF holders redeem their units and sell the underlying shares.The NT ratio (NKY/TPX) had started to move lower over the last 15 trading days due to the shift from growth to value stocks. The BOJ announcement could take the ratio lower in the short term on a change in sentiment and short term flows due to repositioning of portfolios.Nissan Chemical Industries (4021 JP), Comsys Holdings (1721 JP), Konami Holdings (9766 JP), Kikkoman Corp (2801 JP) and Fast Retailing (9983 JP) will be among the most negatively affected stocks, but the impact is quite small.Tokyo Stock Exchange Tokyo Price Index Topix (TPX INDEX) stocks (that will have passive BOJ inflows of at least US$5m) that will have the largest impact in terms of ADV to trade are Hankyu Hanshin Holdings (9042 JP), Kintetsu Group Holdings Co L (9041 JP), Hisamitsu Pharmaceutical Co (4530 JP), Bank Of Kyoto (8369 JP) and Hakuhodo Dy Holdings (2433 JP). 

BOJ Buying to Focus on TOPIX ETFs: Big Headline, Smaller Impact

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.

<p>We first wrote on Sony in mid-2017 noting that <a href="https://www.smartkarma.com/insights/sony-has-got-its-mojo-back-super-slomo-acoustic-surfaces-and-the-world-s-fastest-internet" target="_blank" rel="noopener">Sony Has Got Its Mojo Back: Super Slomo, Acoustic Surfaces, and the World’s Fastest Internet</a> as we felt that Kazuo Hirai’s efforts to restore the company’s innovative culture were starting to bear fruit in a lot of niche areas. In the more than three years since, Sony has built on this momentum and is firing on all cylinders moving into the launch of the PS5 which we believe will be a key driver of the company’s long-term value. While this is hardly a non-consensus opinion, we feel the market may not quite appreciate the degree of potential market share gains hinted at by subtle developments and choices on design. We discuss these and the valuation case below.</p>

We first wrote on Sony in mid-2017 noting that Sony Has Got Its Mojo Back: Super Slomo, Acoustic Surfaces, and the World’s Fastest Internet as we felt that Kazuo Hirai’s efforts to restore the company’s innovative culture were starting to bear fruit in a lot of niche areas. In the more than three years since, Sony has built on this momentum and is firing on all cylinders moving into the launch of the PS5 which we believe will be a key driver of the company’s long-term value. While this is hardly a non-consensus opinion, we feel the market may not quite appreciate the degree of potential market share gains hinted at by subtle developments and choices on design. We discuss these and the valuation case below.

2021 High Conviction – Sony’s Year of the PS5

Japan

Konami Holdings Corporation provides digital entertainment, health and fitness and gaming products. The Company develops and sells video games, mobile games and computer games, gaming machines, pachislot and pachinko machines, and fitness machines as well as operates health and fitness clubs.

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Konami Holdings (9766 JP)

Smartkarma Webinar | Asian Casino Outlook 2022: Challenges and Opportunities

On 6 October, 11am SGT, join us as Howard J Klein goes over his outlook on the casino and gaming sector in Asia for 2022 and presents opportunities...

Smartkarma Research

Konami Holdings Ltd: Gaming Equipment and Systems Sales Lead Segments in 2Q21 Earnings

Based on strong earnings for 2Q21 particularly for gaming equipment and systems as well as slowly improving return to casinos and increased online...

Howard J Klein

JAPAN PASSIVE: Who Owns What 2021?

This is the 2021 Version of Who Owns What in Japan Passive. It tries to present a relatively comprehensive idea of how much money/float tracks the...

Travis Lundy

BOJ Buying to Focus on TOPIX ETFs: Big Headline, Smaller Impact

The BOJ will only buy ETFs linked to the TOPIX going forward. While this makes for a big headline, the impact on the stocks is much more muted....

Brian Freitas

2021 High Conviction – Sony’s Year of the PS5

Sony is a key name investors should be focusing on in 2021 as we believe the company has outlined an excellent path to ensuring PS5 dominance and...

Mio Kato

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