Japan Specialist

Mark Chadwick

Equity Bottom-Up

<ul>
<li>The share price is roughly flat since we turned Bearish on Nintendo citing concerns that the cycle had peaked</li>
<li>Q2 results released today suggest that the hardware cycle has indeed peaked – Switch hardware guidance cut</li>
<li>We see a lack of catalysts for the stock price over the next several months and remain bearish</li>
</ul>


The share price is roughly flat since we turned Bearish on Nintendo citing concerns that the cycle had peaked
Q2 results released today suggest that the hardware cycle has indeed peaked – Switch hardware guidance cut
We see a lack of catalysts for the stock price over the next several months and remain bearish


Nintendo (7974) | No Christmas Present This Year

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/bank-of-kyoto" target="_blank" data-smartkarma-citation="entities:5248:1" rel="noopener">Bank of Kyoto (8369 JP)</a> is currently at a 51% discount to the After Tax Value of its Equity Portfolio assuming its banking ops are priced at a RegionalBankAveragePBR.</li>
<li>That is, believe it or not, relatively narrow, and given the nature of the risks making it a range trade, it makes short-term timing probably a sell. </li>
<li>There is, helpfully, 6 days of ADV to sell in the TOPIX FFW adjustment on 28 October, and all five of the top holdings are also net sells (0.5-1.1 days).</li>
</ul>



Bank of Kyoto (8369 JP) is currently at a 51% discount to the After Tax Value of its Equity Portfolio assuming its banking ops are priced at a RegionalBankAveragePBR.
That is, believe it or not, relatively narrow, and given the nature of the risks making it a range trade, it makes short-term timing probably a sell. 
There is, helpfully, 6 days of ADV to sell in the TOPIX FFW adjustment on 28 October, and all five of the top holdings are also net sells (0.5-1.1 days).


Bank of Kyoto (8369 JP) Holdco Maybe Rich-Ish - Watch for TOPIX Rebal SELL Flow

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

Lionheart Studio  / Equity Capital Markets

<ul>
<li>
<a href="https://www.smartkarma.com/entities/lionheart-studio-corporation" target="_blank" data-smartkarma-citation="entities:36417:1" rel="noopener">Lionheart Studio (426630 KS)</a>, a game development studio based in South Korea,  aims to raise around US$420m via its South Korean IPO.</li>
<li>The company is majority owned by <a href="https://www.smartkarma.com/entities/kakao-games-corp" target="_blank" data-smartkarma-citation="entities:26730:1" rel="noopener">Kakao Games Corp (293490 KS)</a> , which after having recently hiked its stake, owned 54.94% of the company prior to listing.  </li>
<li>In this note, we will talk about the not-so-positive aspects of the deal.</li>
</ul>



Lionheart Studio (426630 KS), a game development studio based in South Korea,  aims to raise around US$420m via its South Korean IPO.
The company is majority owned by Kakao Games Corp (293490 KS) , which after having recently hiked its stake, owned 54.94% of the company prior to listing.  
In this note, we will talk about the not-so-positive aspects of the deal.


LionHeart Studio Pre-IPO - The Negatives - Appears to Be Well past Its Peak, Founder Cashed In $700m

<ul>
<li>Nintendo’s stocked recently popped on two positive developments – Splatoon 3 sales set a record for a Switch game &amp; Nintendo Direct announced the release date of Legend of Zelda</li>
<li>Switch life cycle is coming to an end.  The cycle had been extended by Covid and supply issues for Sony PS5</li>
<li>Nintendo’s stock is cheap, defensive and pays a reasonable dividend, but catalysts are running out and the stock will likely follow revenues lower</li>
</ul>


Nintendo’s stocked recently popped on two positive developments – Splatoon 3 sales set a record for a Switch game &amp; Nintendo Direct announced the release date of Legend of Zelda
Switch life cycle is coming to an end.  The cycle had been extended by Covid and supply issues for Sony PS5
Nintendo’s stock is cheap, defensive and pays a reasonable dividend, but catalysts are running out and the stock will likely follow revenues lower


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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

<ul>
<li>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> September rebalance will be done in three parts due to the delisting of <a href="https://www.smartkarma.com/entities/shizuoka-bank-ltd" target="_blank" data-smartkarma-citation="entities:4437:1" rel="noopener">Shizuoka Bank (8355 JP)</a> and the relisting of Shizuoka Financial Group (5831).</li>
<li>
<a href="https://www.smartkarma.com/entities/nidec-corp" target="_blank" data-smartkarma-citation="entities:7245:1" rel="noopener">Nidec Corp (6594 JP)</a>, <a href="https://www.smartkarma.com/entities/smc-corp" target="_blank" data-smartkarma-citation="entities:20866:1" rel="noopener">SMC Corp (6273 JP)</a> and <a href="https://www.smartkarma.com/entities/hoya-corp" target="_blank" data-smartkarma-citation="entities:8990:1" rel="noopener">Hoya Corp (7741 JP)</a> replace <a href="https://www.smartkarma.com/entities/unitika-ltd" target="_blank" data-smartkarma-citation="entities:7669:1" rel="noopener">Unitika Ltd (3103 JP)</a>, <a href="https://www.smartkarma.com/entities/oki-electric-industry-co-ltd" target="_blank" data-smartkarma-citation="entities:2181:1" rel="noopener">Oki Electric Industry (6703 JP)</a> and <a href="https://www.smartkarma.com/entities/maruha-nichiro-corp" target="_blank" data-smartkarma-citation="entities:20640:1" rel="noopener">Maruha Nichiro (1333 JP)</a>. </li>
<li>Passive trackers need to buy over 10 days ADV on the adds and there is a large impact of the funding trade given the add/delete size difference.</li>
</ul>


The Nikkei 225 (NKY INDEX) September rebalance will be done in three parts due to the delisting of Shizuoka Bank (8355 JP) and the relisting of Shizuoka Financial Group (5831).

Nidec Corp (6594 JP), SMC Corp (6273 JP) and Hoya Corp (7741 JP) replace Unitika Ltd (3103 JP), Oki Electric Industry (6703 JP) and Maruha Nichiro (1333 JP). 
Passive trackers need to buy over 10 days ADV on the adds and there is a large impact of the funding trade given the add/delete size difference.


Nikkei 225 Index Rebalance: Mostly on Expected Lines

Japan

Nintendo Co., Ltd. globally develops, manufactures and sells home-use video game hardware and software in home entertainment business.  The company also produces home-game products including cards.

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Nintendo (7974 JP)

Nintendo (7974) | No Christmas Present This Year

Switch hardware forecast reduced by 2m units to 19m units. 2H Switch guidance -17% YoY implying a tough Christmas. Expect stock price to follow top...

Mark Chadwick

Bank of Kyoto (8369 JP) Holdco Maybe Rich-Ish - Watch for TOPIX Rebal SELL Flow

Bank of Kyoto has upped its payout ratio. That has helped the discount narrow but near-term flows, possible relatively soft H1 accounts, and the...

Travis Lundy

LionHeart Studio Pre-IPO - The Negatives - Appears to Be Well past Its Peak, Founder Cashed In $700m

Lionheart Studio, a game development studio based in South Korea, aims to raise around US$420m via its South Korean IPO. In this note, we talk...

Sumeet Singh

Nintendo (7974) | Beware of Cycles

Nintendo’s stock is cheap, defensive and pays a reasonable dividend, but catalysts are running out and the stock will likely follow revenues lower

Mark Chadwick

Nikkei 225 Index Rebalance: Mostly on Expected Lines

There are 4 changes to the index that will be executed in three parts - changes were mostly expected. One-way turnover is expected at 2.68% and...

Brian Freitas

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