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.

Equity Bottom-Up

<ul>
<li>We got this wrong, expecting a beat on margins in spite of weak GMV, whereas Mercari actually fell into the red for the first time in six quarters. </li>
<li>The culprit is extremely aggressive promotional spend which looks to have hit all time highs in both Japan and the US. </li>
<li>The shift to an investment stance is not in and of itself a bad thing but the growth relative to the spend is disappointing so far.</li>
</ul>


We got this wrong, expecting a beat on margins in spite of weak GMV, whereas Mercari actually fell into the red for the first time in six quarters. 
The culprit is extremely aggressive promotional spend which looks to have hit all time highs in both Japan and the US. 
The shift to an investment stance is not in and of itself a bad thing but the growth relative to the spend is disappointing so far.


Telco/Internet specialist

Kirk Boodry

Redex Research

<ul>
<li>Q3 21 in-line for revenue but well ahead for EBITDA on solid advertising growth leading to an upgrade in management's full-year EBITDA target.</li>
<li>Operational results were encouraging with double-digit gains in ad sales and 7% eCommerce growth despite strong year-ago comps.</li>
<li>Impairment losses for equity associate Demae-Can sting but the overall story is positive.</li>
</ul>


Q3 21 in-line for revenue but well ahead for EBITDA on solid advertising growth leading to an upgrade in management's full-year EBITDA target.
Operational results were encouraging with double-digit gains in ad sales and 7% eCommerce growth despite strong year-ago comps.
Impairment losses for equity associate Demae-Can sting but the overall story is positive.


Z Holdings (Buy) Q3 21 Results Reaction: Mostly Positive as Ad Sales Continues to Impress

<ul>
<li>Mercari is down 33% since 22 November, actually underperforming the 31% decline in Mothers. </li>
<li>YoY numbers for the US may only modestly beat the 20% growth target for the year and this reset of expectations may have been the driver of the decline. </li>
<li>However, we expect significant upside surprises on profitability and that is our focus.</li>
</ul>


Mercari is down 33% since 22 November, actually underperforming the 31% decline in Mothers. 
YoY numbers for the US may only modestly beat the 20% growth target for the year and this reset of expectations may have been the driver of the decline. 
However, we expect significant upside surprises on profitability and that is our focus.


Mercari – US GMV Is Downside Risk but Profitability Is a Larger Upside Risk

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>Today the TSE announced its long-awaited segmentation of the 3,777 stocks listed on the five major venues, and where they will move on 4 April 2022. </li>
<li>TSE1 represented just under 98% of Japan's float market cap as of today's close. As some TSE1 members will move to TSE Standard, TSE Prime will represent 97+%. </li>
<li>There are tiny changes to TOPIX because of the moves - roughly 3bp of flow per quarter starting Oct 2022. The FFW Model Revision will be <em>far</em> more interesting.</li>
</ul>


Today the TSE announced its long-awaited segmentation of the 3,777 stocks listed on the five major venues, and where they will move on 4 April 2022. 
TSE1 represented just under 98% of Japan's float market cap as of today's close. As some TSE1 members will move to TSE Standard, TSE Prime will represent 97+%. 
There are tiny changes to TOPIX because of the moves - roughly 3bp of flow per quarter starting Oct 2022. The FFW Model Revision will be far more interesting.


TSE Announces Market Structure Revisions: Still Much Ado About Nothing

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. 

<ul>
<li>We remain very optimistic about the outlook for Mercari's fundamentals, both gross transaction values and operating margins.</li>
<li>The sharing economy in Japan alone remains nascent and Mercari has only just started adding on adjunct value-add services, most of which are (and will) carry high margins.</li>
<li>Even in the core fashion category, which some analysts have assumed is already reaching saturation, CtoC platforms and used retailers have barely scratched the surface as new research shows.</li>
</ul>


We remain very optimistic about the outlook for Mercari's fundamentals, both gross transaction values and operating margins.
The sharing economy in Japan alone remains nascent and Mercari has only just started adding on adjunct value-add services, most of which are (and will) carry high margins.
Even in the core fashion category, which some analysts have assumed is already reaching saturation, CtoC platforms and used retailers have barely scratched the surface as new research shows.


2022 High Conviction – Plenty of Growth Avenues for Mercari, the Apple of CtoC Services

Japan

Mercari, Inc. operates as an electronic commercial company. The Company offers electronic commercial software, operation management, marketing planning, and other marketplace services. Mercari serves customers worldwide.

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Mercari (4385 JP)

Mercari – Margin Miss Not Beat

We got this wrong, expecting a beat on margins whereas Mercari actually fell into the red. A shift to an investment stance is not bad but the...

Mio Kato

Z Holdings (Buy) Q3 21 Results Reaction: Mostly Positive as Ad Sales Continues to Impress

This was a good quarter with better-than-expected growth in eCommerce, ad sales and cashless payments and an upgrade to the full-year EBITDA target...

Kirk Boodry

Mercari – US GMV Is Downside Risk but Profitability Is a Larger Upside Risk

Mercari's YoY numbers for the US may only modestly beat the 20% growth target for the year, however, we expect significant upside surprises on...

Mio Kato

TSE Announces Market Structure Revisions: Still Much Ado About Nothing

The TSE today set the allocation of companies to the new TSE market structure segments. There are few surprises. Lots of noise, little change....

Travis Lundy

2022 High Conviction – Plenty of Growth Avenues for Mercari, the Apple of CtoC Services

Mercari is much, much more than its CtoC platform and will emerge as a pivotal part of Japan's consumer goods/services/finance distribution system...

Michael Causton

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