Telco/Internet specialist

Kirk Boodry

Redex Research

Thematic (Sector/Industry)

Google is reportedly close to acquiring smartphone settlements company Pring for ¥20-30bn which would open the door for it to offer a mobile payments service in Japan directly linked to bank accounts. And that is the appeal of Pring which is a relative minnow in the Japanese payments market with &lt;1mn users but has relationships with a wide range of Japanese financial institutions. Google is not a global fintech player but it has had some success in a few markets like the US and India whilst it has started to expand in Europe, and now apparently, Japan. Competitively, the major domestic players with vast consumer ecosystems are formidable competition but Google connects to half of all smartphone users through Android and has merchant relationships through its Internet advertising business.

Google is reportedly close to acquiring smartphone settlements company Pring for ¥20-30bn which would open the door for it to offer a mobile payments service in Japan directly linked to bank accounts. And that is the appeal of Pring which is a relative minnow in the Japanese payments market with &lt;1mn users but has relationships with a wide range of Japanese financial institutions. Google is not a global fintech player but it has had some success in a few markets like the US and India whilst it has started to expand in Europe, and now apparently, Japan. Competitively, the major domestic players with vast consumer ecosystems are formidable competition but Google connects to half of all smartphone users through Android and has merchant relationships through its Internet advertising business.

Japan Fintech - Google Push into Mobile Payments Could Raise Competitive Intensity

Equity Bottom-Up

By year-end we expect there will be two newly minted public fintech companies in Asia as IPOs for Kakao Pay (August) and PayTM (Q4-ish) move ahead. These are both potential comparables for Softbank Group’s PayPay of which Z Holdings is the leading shareholder. Comparatively, proposed valuations for Kakao Pay ($7-11bn) and PayTM ($24-25bn) are much higher but these are also later stage businesses with established track records and offer some insight into what PayPay can turn into over time. We currently value PayPay at its carry value of $500mn but as monetization starts, we expect management aspirations for a unicorn valuation can be reached. This report includes forecasts updated for Q4 results, guidance, and the acquisition of Yahoo trademark rights from Verizon.

By year-end we expect there will be two newly minted public fintech companies in Asia as IPOs for Kakao Pay (August) and PayTM (Q4-ish) move ahead. These are both potential comparables for Softbank Group’s PayPay of which Z Holdings is the leading shareholder. Comparatively, proposed valuations for Kakao Pay ($7-11bn) and PayTM ($24-25bn) are much higher but these are also later stage businesses with established track records and offer some insight into what PayPay can turn into over time. We currently value PayPay at its carry value of $500mn but as monetization starts, we expect management aspirations for a unicorn valuation can be reached. This report includes forecasts updated for Q4 results, guidance, and the acquisition of Yahoo trademark rights from Verizon.

Z Holdings (Buy) - Asian Fintech App IPOs Highlight Potential PayPay Upside

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. 

<a href="https://www.smartkarma.com/entities/line-corp" target="_blank" data-smartkarma-citation="entities:22772:1" rel="noopener">LINE Corp (3938 JP)'s </a>new collaboration with Staff Start is a huge boost to the fledgling omnichannel service provider but also helps cement LINE's role at the heart of omnichannel customer services and Live Commerce. Given LINE's new role at the heart of <a href="https://www.smartkarma.com/entities/z-holdings-corp" target="_blank" data-smartkarma-citation="entities:19603:1" rel="noopener">Z Holdings (4689 JP)'s </a>digital ecosystem, it is likely that Staff Start will be adopted across the group and maybe even become another subsidiary.Staff Start is a phenomenon. What started as a simple digital tool to help retailers post blogs online has become a full-service marketing platform used by more than 1,200 brands and retailers across fashion, food, home and sports, up from 700 two years ago.Staff Start has seen sales jump three-fold in the last year alone.The top selling shop staff manage sales of as much as ¥90 million a month, with a record for a single post of ¥13 million, so clearly a marketing method that works. Staff blogging has become a vital tool for many retailers, with one claiming 40% of direct online sales come from staff generated online content.The benefits of the deal will provide yet further challenges to rivals, especially <a href="https://www.smartkarma.com/entities/rakuten-inc" target="_blank" data-smartkarma-citation="entities:31:1" rel="noopener">Rakuten Inc (4755 JP).</a>

LINE Corp (3938 JP)'s new collaboration with Staff Start is a huge boost to the fledgling omnichannel service provider but also helps cement LINE's role at the heart of omnichannel customer services and Live Commerce. Given LINE's new role at the heart of Z Holdings (4689 JP)'s digital ecosystem, it is likely that Staff Start will be adopted across the group and maybe even become another subsidiary.Staff Start is a phenomenon. What started as a simple digital tool to help retailers post blogs online has become a full-service marketing platform used by more than 1,200 brands and retailers across fashion, food, home and sports, up from 700 two years ago.Staff Start has seen sales jump three-fold in the last year alone.The top selling shop staff manage sales of as much as ¥90 million a month, with a record for a single post of ¥13 million, so clearly a marketing method that works. Staff blogging has become a vital tool for many retailers, with one claiming 40% of direct online sales come from staff generated online content.The benefits of the deal will provide yet further challenges to rivals, especially Rakuten Inc (4755 JP).

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

On Friday 11 June, the TSE published its final revisions to the Corporate Governance Code which had been undergoing review by the Council of Experts Concerning the Follow-up of Japan’s Stewardship Code and Japan’s Corporate Governance Code and subsequently comment for the past many months. The new Code went into effect as of 11 June. The first revision to the Guidelines for Investor and Company Engagement were published as well. The new version of Japan's Corporate Governance Code is <a href="https://www.jpx.co.jp/english/news/1020/b5b4pj0000046kxj-att/b5b4pj0000046l07.pdf" target="_blank" rel="noopener">here</a> with the tracked change version <a href="https://www.jpx.co.jp/english/news/1020/b5b4pj0000046kxj-att/b5b4pj0000046l0c.pdf" target="_blank" rel="noopener">here</a>. This is the second revision of the Code (the first revision was in 2018).The revisions to the JFSA Guidelines for Investor and Company Engagement are <a href="https://www.jpx.co.jp/english/news/1020/b5b4pj0000046kxj-att/b5b4pj0000046l3e.pdf" target="_blank" rel="noopener">here</a>. Tracked changes are <a href="https://www.jpx.co.jp/english/news/1020/b5b4pj0000046kxj-att/b5b4pj0000046l50.pdf" target="_blank" rel="noopener">here</a>.The major changes to the Code recommend enhancements to Board independence, diversity, Sustainability and ESG, and also recommend improvements to investor accessibility and voting and a small change to listed parent-listed subsidiary relationships which unfortunately will not do much to counter abuse by companies of listed sub minority shareholders. Below is more discussion of the changes and what they mean.But I remind investors, these changes are almost all box-ticking exercises. They will not improve governance for shareholders except at the margins. Companies which "get" good governance are still rare. And those which don't get it seem to abuse shareholders on a regular basis. And for that, investors still need more cowbell.

On Friday 11 June, the TSE published its final revisions to the Corporate Governance Code which had been undergoing review by the Council of Experts Concerning the Follow-up of Japan’s Stewardship Code and Japan’s Corporate Governance Code and subsequently comment for the past many months. The new Code went into effect as of 11 June. The first revision to the Guidelines for Investor and Company Engagement were published as well. The new version of Japan's Corporate Governance Code is here with the tracked change version here. This is the second revision of the Code (the first revision was in 2018).The revisions to the JFSA Guidelines for Investor and Company Engagement are here. Tracked changes are here.The major changes to the Code recommend enhancements to Board independence, diversity, Sustainability and ESG, and also recommend improvements to investor accessibility and voting and a small change to listed parent-listed subsidiary relationships which unfortunately will not do much to counter abuse by companies of listed sub minority shareholders. Below is more discussion of the changes and what they mean.But I remind investors, these changes are almost all box-ticking exercises. They will not improve governance for shareholders except at the margins. Companies which "get" good governance are still rare. And those which don't get it seem to abuse shareholders on a regular basis. And for that, investors still need more cowbell.

TSE Prime: Japan's Corporate Governance Code Finalized So Boxes Will Be Furiously Ticked

Event-Driven

<a href="https://www.smartkarma.com/entities/zozo-inc" target="_blank" data-smartkarma-citation="entities:18379:1" rel="noopener">ZOZO Inc (3092 JP)</a> today announced a JPY 32bn buyback. And it announced a JPY 25bn placement. The reasoning is that the company wants to have a place in the TSE Prime market and without a higher float, the company won't meet the 35% tradable shares criteria it is supposed to have in June. While this will not get them there by end of June, companies with a "plan" to get there will be granted provisional inclusion if they meet the other criteria, and this construct has a decent chance of getting them there.The explanation by the company is a little odd though. Investors should understand the details. Big picture they don't mean much, but the convoluted nature of the situation suggests

ZOZO Inc (3092 JP) today announced a JPY 32bn buyback. And it announced a JPY 25bn placement. The reasoning is that the company wants to have a place in the TSE Prime market and without a higher float, the company won't meet the 35% tradable shares criteria it is supposed to have in June. While this will not get them there by end of June, companies with a "plan" to get there will be granted provisional inclusion if they meet the other criteria, and this construct has a decent chance of getting them there.The explanation by the company is a little odd though. Investors should understand the details. Big picture they don't mean much, but the convoluted nature of the situation suggests 

Oh No ZoZo! An Overly Complicated Buyback+Issuance To Stay Prime

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)

Japan Fintech - Google Push into Mobile Payments Could Raise Competitive Intensity

Google is considering an acquisition that would allow it to compete directly in JP mobile payments. It lacks a direct consumer business but Android...

Kirk Boodry

Z Holdings (Buy) - Asian Fintech App IPOs Highlight Potential PayPay Upside

Upcoming IPOs for two Asian fintech companies provide some insight on what Z Holdings PayPay can become once it starts to monetize its business....

Kirk Boodry

LINE Ties with Staff Start

LINE has a promising new jv with Staff Start, which facilitates omnichannel retailing and which has tripled GTVs in a year and which generates...

Michael Causton

TSE Prime: Japan's Corporate Governance Code Finalized So Boxes Will Be Furiously Ticked

The TSE on Friday announced the revisions to the Governance Code. This codifies the "governance thresholds" required to join TSE Prime next year....

Travis Lundy

Oh No ZoZo! An Overly Complicated Buyback+Issuance To Stay Prime

Zozo's Buyback and Equity Commitment Line is minimally EPS accretive but creates a flow overhang. I expect the ToSTNeT-3 to go differently than the...

Travis Lundy

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