Telco/Internet specialist

Kirk Boodry

Redex Research

Equity Bottom-Up

<ul>
<li>Results for Q4 and FY22 guidance were mixed with platform sales and revenue largely in-line but margins slightly weaker</li>
<li>The loss of a major B2B customer wipes out almost all the growth in that segment but core consumer growth remains solid (10%+) as do operating KPIs </li>
<li>The read across to parent Z Holdings is limited as the difference in company guidance and consensus operating profit is less than 1% of ZHD consolidated</li>
</ul>


Results for Q4 and FY22 guidance were mixed with platform sales and revenue largely in-line but margins slightly weaker
The loss of a major B2B customer wipes out almost all the growth in that segment but core consumer growth remains solid (10%+) as do operating KPIs 
The read across to parent Z Holdings is limited as the difference in company guidance and consensus operating profit is less than 1% of ZHD consolidated


Zozo - Q4 21 Results Reaction: Mixed but Underlying Consumer Growth Remains Solid

<ul>
<li>The company reports Thursday and markets have priced in bad news (shares down 22% YTD and 38% from November highs) but that pattern of weakness in year-end results isn't new</li>
<li>It has happened the last four years as management's penchant for investment dampens hopes for profitability growth but LINE synergies and digitization should enable double-digit EBITDA growth anyway</li>
<li>We are posting updated company forecasts/estimates including a separate table for PayPay</li>
</ul>


The company reports Thursday and markets have priced in bad news (shares down 22% YTD and 38% from November highs) but that pattern of weakness in year-end results isn't new
It has happened the last four years as management's penchant for investment dampens hopes for profitability growth but LINE synergies and digitization should enable double-digit EBITDA growth anyway
We are posting updated company forecasts/estimates including a separate table for PayPay


Z Holdings (Buy) - FY22 Should Be Brighter

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. 

Thematic (Sector/Industry)

<ul>
<li>Amazon Japan continues to lead in online merchandise sales, with GTVs rising faster than Rakuten in 2021 and far ahead of Z Holdings. </li>
<li>Nevertheless both the domestic incumbents are fighting hard to overcome their weaknesses and use their strengths in mobile networks, loyalty points and cashless payments to win share.</li>
<li>Rakuten is also now making it possible to consolidate orders from multiple merchants and plans to open this service to any online merchant – a game changer for online platforms. </li>
</ul>


Amazon Japan continues to lead in online merchandise sales, with GTVs rising faster than Rakuten in 2021 and far ahead of Z Holdings. 
Nevertheless both the domestic incumbents are fighting hard to overcome their weaknesses and use their strengths in mobile networks, loyalty points and cashless payments to win share.
Rakuten is also now making it possible to consolidate orders from multiple merchants and plans to open this service to any online merchant – a game changer for online platforms. 


Japan E-Commerce Wars Intensify Among the Big 3 Online Platforms

<ul>
<li>OniGo only opened its first dark store in the middle of last year and along with competitors is expanding rapidly.</li>
<li>But it also recently signed up to deliver orders from Lawson Store 100 and is running a trial from Comfort Market, Seven &amp; I’s concept store in Setagaya.  </li>
<li>In both cases, online orders are picked, not by store staff, but by OniGo’s own staff, to increase the speed of order preparation and to tie to store’s inventory systems.</li>
</ul>


OniGo only opened its first dark store in the middle of last year and along with competitors is expanding rapidly.
But it also recently signed up to deliver orders from Lawson Store 100 and is running a trial from Comfort Market, Seven &amp; I’s concept store in Setagaya.  
In both cases, online orders are picked, not by store staff, but by OniGo’s own staff, to increase the speed of order preparation and to tie to store’s inventory systems.


Dark Store Delivery in Japan Takes Off – Collaborating with Retailers

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

NTT (Nippon Telegraph & Telephone) / Event-Driven

<ul>
<li>The April-June TSE FFW Methodology Revision moves favour certain sectors over others. There is nearly ¥500bn of telecom stocks to buy with 60+% of that in four names.</li>
<li>Other factors may support some of the names as well. </li>
<li>There is enough excess buying to warrant trading tilts and keeping fundamental positions even as forward earnings multiples have expanded to multi-year highs.</li>
</ul>


The April-June TSE FFW Methodology Revision moves favour certain sectors over others. There is nearly ¥500bn of telecom stocks to buy with 60+% of that in four names.
Other factors may support some of the names as well. 
There is enough excess buying to warrant trading tilts and keeping fundamental positions even as forward earnings multiples have expanded to multi-year highs.


Strong Telecom Flows in TOPIX FFW Transition Months

Japan

LY Corporation operates as an internet search engine "Yahoo! JAPAN". The Company provides electronic commerce and settlement finance services for small medium enterprises and individuals. LY also operates media business including search linked advertising and display advertising services.

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LY (4689 JP)

Zozo - Q4 21 Results Reaction: Mixed but Underlying Consumer Growth Remains Solid

Zozo posted mixed results and guidance with platform sales and guidance largely in-line but profitability below consensus.

Kirk Boodry

Z Holdings (Buy) - FY22 Should Be Brighter

We are posting updated forecasts before results on Thursday. Shares are down 22% YTD and 38% from highs on profit worries but as with the last few...

Kirk Boodry

Japan E-Commerce Wars Intensify Among the Big 3 Online Platforms

The intensity of competition between the big 3 in e-commerce (Amazon, Rakuten, Z Holdings) means that all are investing heavily. Amazon leads but...

Michael Causton

Dark Store Delivery in Japan Takes Off – Collaborating with Retailers

Dark stores are taking off, set up by delivery firms to ship food and basic daily use products. Some are competing with retailers but others are...

Michael Causton

Strong Telecom Flows in TOPIX FFW Transition Months

The Telecom Sector is the biggest sector beneficiary of TOPIX FFW flows over the next few months. Still bullish NTT vs the others near-term. All...

Travis Lundy

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