Equity Analyst, LightStream Research

Supun Walpola

Equity Analyst

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.

Equity Bottom-Up

There was hardly anything positive to take away from <a href="https://www.smartkarma.com/entities/z-holdings-corp" target="_blank" data-smartkarma-citation="entities:19603:1" rel="noopener">Z Holdings (4689 JP)</a>’s 2Q FY03/20 financial results except for maybe a quick recovery in the service e-commerce business. Other than this, Z’s core businesses, Yahoo! Shopping and Yahoo! JAPAN, are gradually moving towards saturation, while its new initiatives, such as PayPay Mall and PayPay (mobile payments), are also falling behind expectations.

There was hardly anything positive to take away from Z Holdings (4689 JP)’s 2Q FY03/20 financial results except for maybe a quick recovery in the service e-commerce business. Other than this, Z’s core businesses, Yahoo! Shopping and Yahoo! JAPAN, are gradually moving towards saturation, while its new initiatives, such as PayPay Mall and PayPay (mobile payments), are also falling behind expectations. 

Z Holdings: Core-Businesses Are Getting Closer to Saturation; New Ones Fail to Impress

Telco/Internet specialist

Kirk Boodry

Redex Research

Z Holdings posted Q2 20 results that were modestly ahead of consensus but its first pass at full-year guidance fell well short of analyst expectations. The difference is renewed investment to leverage solid H1 growth in eCommerce/fintech users. That makes sense but it is harder to justify a 57% YTD run in the shares with FY20 operating income growth of only 5%. Operationally, some moderation in merchandise eCommerce and sluggish ad sales was more than offset by a massive rebound in online travel and continued momentum for cashless payments.

Z Holdings posted Q2 20 results that were modestly ahead of consensus but its first pass at full-year guidance fell well short of analyst expectations. The difference is renewed investment to leverage solid H1 growth in eCommerce/fintech users. That makes sense but it is harder to justify a 57% YTD run in the shares with FY20 operating income growth of only 5%. Operationally, some moderation in merchandise eCommerce and sluggish ad sales was more than offset by a massive rebound in online travel and continued momentum for cashless payments.  

Z Holdings - Q2 20 Results: Travel Business Amazes but Guidance May Be Less Appealing

In our previous note, <a href="https://www.smartkarma.com/insights/zozo-nice-results-but-it-s-just-a-covid-bump" target="_blank" data-smartkarma-citation="insights:41718" rel="noopener">Zozo – Nice Results but It’s Just a COVID Bump</a>, we suggested that <a href="https://www.smartkarma.com/entities/zozo-inc" target="_blank" data-smartkarma-citation="entities:18379:1" rel="noopener">ZOZO Inc (3092 JP)</a>'s strong 1Q results could be a temporary bump due to the stay-at-home demand, and the company could quickly return to its decelerating growth post-lockdowns. ZOZO's 2Q results show early signs of this happening and we expect a correction over the next few quarters as the impact of the stay-at-home demand further subsides and potentially weak winter sales are booked.

In our previous note, Zozo – Nice Results but It’s Just a COVID Bump, we suggested that ZOZO Inc (3092 JP)'s strong 1Q results could be a temporary bump due to the stay-at-home demand, and the company could quickly return to its decelerating growth post-lockdowns. ZOZO's 2Q results show early signs of this happening and we expect a correction over the next few quarters as the impact of the stay-at-home demand further subsides and potentially weak winter sales are booked.

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. 

Another case of hubris in Japanese e-commerce? Shoplist operator, Crooz, made a big splash about its plans to build wa ¥100 billion fashion platform three years ago but made a thumping loss in 2018 and then sales actually fell last year, proving just how hard it is for smaller e-commerce platforms to shine in the shadow of the big three.

Another case of hubris in Japanese e-commerce? Shoplist operator, Crooz, made a big splash about its plans to build wa ¥100 billion fashion platform three years ago but made a thumping loss in 2018 and then sales actually fell last year, proving just how hard it is for smaller e-commerce platforms to shine in the shadow of the big three.

Only a marginal QoQ decrease in e-commerce web traffic suggests that similar to 1Q, <a href="https://www.smartkarma.com/entities/z-holdings-corp" target="_blank" data-smartkarma-citation="entities:19603:1" rel="noopener">Z Holdings (4689 JP)</a>’s 2Q results are also likely to be quite strong. Nevertheless, we do not believe this growth to be sustainable, and we continue to question Z’s aggressive growth strategy in a maturing Japanese e-commerce market.However, given the possibility of compelling near-term results, we do not expect an immediate correction, rather, we expect the correction to be more gradual over the next 12 months when the risks that we have highlighted below start materialising.

Only a marginal QoQ decrease in e-commerce web traffic suggests that similar to 1Q, Z Holdings (4689 JP)’s 2Q results are also likely to be quite strong. Nevertheless, we do not believe this growth to be sustainable, and we continue to question Z’s aggressive growth strategy in a maturing Japanese e-commerce market.However, given the possibility of compelling near-term results, we do not expect an immediate correction, rather, we expect the correction to be more gradual over the next 12 months when the risks that we have highlighted below start materialising.

Z Holdings [Alt Data]: Web Traffic Hints Strong 2Q Shopping Growth but Unlikely to Be Sustainable

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)

Z Holdings: Core-Businesses Are Getting Closer to Saturation; New Ones Fail to Impress

Z’s core businesses are gradually moving towards saturation, while its new initiatives, such as PayPay Mall and PayPay mobile payments, are also...

Supun Walpola

Z Holdings - Q2 20 Results: Travel Business Amazes but Guidance May Be Less Appealing

Newly issued full-year guidance is well below market expectations and driven by renewed investment to build eCommerce and fintech. That is sensible...

Kirk Boodry

ZOZO: Return to Collapsing Growth

ZOZO's 2Q results show early signs of returning to decelerating growth. We expect a correction over the next few quarters as the impact of the stay...

Supun Walpola

Shoplist Promise Withers on the Web

Crooz promised sales of ¥100 billion within a few years and a long-term target of a ¥1 trillion capitalisation. Its early promise has withered...

Michael Causton

Z Holdings [Alt Data]: Web Traffic Hints Strong 2Q Shopping Growth but Unlikely to Be Sustainable

Only a marginal QoQ decrease in e-commerce web traffic suggests that similar to 1Q, Z Holdings' 2Q results are also likely to be quite strong, but...

Supun Walpola

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