'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

ja research

ja research is an independent research platform focused exclusively on Japanese equities. Leveraging data and graphic analysis provided by Japan Analytics, we provide insights on small and medium-sized companies that have been ignored by the sell-side as well as challenging conventional wisdom on larger companies. We also offer analyst and corporate access, the latter with translation if required. 

Thematic (Sector/Industry)

<div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/083/132/original/2019-03-25_18-58-11.png?1553507902" class="editor-image img-responsive" data-smartkarma-image-id="83132"></figure>Source: Japan Analytics
</div>There are currently 241 listed Japanese companies that can be categorised as Internet businesses. Our classification overlaps with the TOPIX-33 Information &amp; Communication sub-Sector but is broader in that it encompasses all companies listed on all sections and exchanges but is also narrower in that we have excluded Telecommunications (including <a href="https://www.smartkarma.com/entities/315" target="_blank" data-smartkarma-citation="entities:315:1">S</a><a href="https://www.smartkarma.com/entities/315" target="_blank" data-smartkarma-citation="entities:315:1">oftbank Group (9984 JP)</a>) and Information Technology companies. We have adopted a 'quantamental' approach which covers the long-term and current trends for Japan's Internet Sector as a whole, as well as eight sub-Sectors or Peer Groups and the Sectors' leading companies by market capitalisation.  Our focus is exclusively on the locally-listed universe and is based on disclosed financial and market data. We do not provide any forecasts, other than the companies' own forecasts and we do not attempt to make any business model or strategic judgments. Our focus is purely on financial and market performance. We do not cover unlisted and defunct companies such as Livedoor and, therefore, there is implicit survivor bias in the data. The broad themes that are developed in DETAIL below are grouped into six topics as follows: - • SUMMARY •  • FUNDAMENTAL OVERVIEW •  • SCORING - RESULTS &amp; REVISIONS / RELATIVE PRICE •  • RESULTS TRENDS •  • VALUATION • • RECOMMENDATIONS •<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/083/206/original/2019-03-25_17-46-58.png?1553565764" class="editor-image img-responsive" data-smartkarma-image-id="83206"></figure><div class="content-caption">Source: Japan Analytics</div>OVERVIEW - As will be covered in greater DETAIL below, Japan has failed to evolve a substantial Internet Sector and, in many business models, has been passed by global competitors including in the home market. Although Internet Sector revenues have grown steadily and now account for close to 1% of the total for all listed companies, operating margins have declined by half in the last seven years and are now only four percentage points higher than the market average. Accordingly, as measured by our Results &amp; Revision Score, the Sector is close to a twelve-year low. The market's response is an unchanged Sector weight in the market composite despite the addition of 111 new companies in the last six years, and a Relative Price Score that has moved in a narrow range over that period. The Sector averages disguise the weak business and market performance of a handful of Sector leaders as well as the overvaluation of the Sector's more successful business models, which is partly a result of a lack of alternatives. Despite the world's most significant Internet investor - <a href="https://www.smartkarma.com/entities/315" target="_blank" data-smartkarma-citation="entities:315:1">Softbank Group (9984 JP)</a>'s Vision Fund - being based in Japan, this fund and other global investors in Internet business have been right to give Japan a 'pass'.


Source: Japan Analytics
There are currently 241 listed Japanese companies that can be categorised as Internet businesses. Our classification overlaps with the TOPIX-33 Information &amp; Communication sub-Sector but is broader in that it encompasses all companies listed on all sections and exchanges but is also narrower in that we have excluded Telecommunications (including Softbank Group (9984 JP)) and Information Technology companies. We have adopted a 'quantamental' approach which covers the long-term and current trends for Japan's Internet Sector as a whole, as well as eight sub-Sectors or Peer Groups and the Sectors' leading companies by market capitalisation.  Our focus is exclusively on the locally-listed universe and is based on disclosed financial and market data. We do not provide any forecasts, other than the companies' own forecasts and we do not attempt to make any business model or strategic judgments. Our focus is purely on financial and market performance. We do not cover unlisted and defunct companies such as Livedoor and, therefore, there is implicit survivor bias in the data. The broad themes that are developed in DETAIL below are grouped into six topics as follows: - • SUMMARY •  • FUNDAMENTAL OVERVIEW •  • SCORING - RESULTS &amp; REVISIONS / RELATIVE PRICE •  • RESULTS TRENDS •  • VALUATION • • RECOMMENDATIONS •Source: Japan AnalyticsOVERVIEW - As will be covered in greater DETAIL below, Japan has failed to evolve a substantial Internet Sector and, in many business models, has been passed by global competitors including in the home market. Although Internet Sector revenues have grown steadily and now account for close to 1% of the total for all listed companies, operating margins have declined by half in the last seven years and are now only four percentage points higher than the market average. Accordingly, as measured by our Results &amp; Revision Score, the Sector is close to a twelve-year low. The market's response is an unchanged Sector weight in the market composite despite the addition of 111 new companies in the last six years, and a Relative Price Score that has moved in a narrow range over that period. The Sector averages disguise the weak business and market performance of a handful of Sector leaders as well as the overvaluation of the Sector's more successful business models, which is partly a result of a lack of alternatives. Despite the world's most significant Internet investor - Softbank Group (9984 JP)'s Vision Fund - being based in Japan, this fund and other global investors in Internet business have been right to give Japan a 'pass'. 

🇯🇵 Japan • Internet Sector Review - 'Japan Passing'

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. 

E-commerce is set to account for 15% of retail sales in 2025, double the size of any other channel, and become the biggest channel for physical merchandise by 2023.
However, recent research, which considers online sales in a store context, suggests that already in 2016-17, 35.3% of all retail sales were at least partly a result of online interactions through an omnichannel process.
By 2024, total EC sales including omnichannel transactions are expected to hit 44.6% of all retail sales or approximately ¥76.4 trillion.

E-commerce is set to account for 15% of retail sales in 2025, double the size of any other channel, and become the biggest channel for physical merchandise by 2023.
However, recent research, which considers online sales in a store context, suggests that already in 2016-17, 35.3% of all retail sales were at least partly a result of online interactions through an omnichannel process.
By 2024, total EC sales including omnichannel transactions are expected to hit 44.6% of all retail sales or approximately ¥76.4 trillion.

Japan E-Commerce: Digital to Influence 45% of All Retail Sales by 2025

Below are several recent updates on Japanese retail and consumer markets that, while not meriting in-depth Insights of their own, are important trends impacting retail stocks.
<h2>TPP: profit and loss for Japan</h2>
The Trans-Pacific Partnership trade deal came into effect in late December, immediately cutting import tariffs across much of Southeast Asia. Despite some claims that this will help consumers, the cuts are most likely to benefit trading firms and leading food wholesalers like <a href="https://www.smartkarma.com/entities/19778" target="_blank" data-smartkarma-citation="entities:19778:1">Mitsubishi Shokuhin (7451 JP)</a> and <a href="https://www.smartkarma.com/entities/14985" target="_blank" data-smartkarma-citation="entities:14985:1">Itochu Shokuhin (2692 JP)</a> rather than result in lower retail prices.
<h2>Mash and Jun to start premium online lifestyle mall in October</h2>
Two leading lifestyle and fashion firms, Mash Holdings and Jun, will together launch a new challenger in the fashion and lifestyle online market in October. This is a threat to the premium end of <a href="https://www.smartkarma.com/entities/18379" target="_blank" data-smartkarma-citation="entities:18379:1">ZOZO's (3092 JP)</a> marketplace as well as the nascent Stripe Department, a joint venture between <a href="https://www.smartkarma.com/entities/27445" target="_blank" data-smartkarma-citation="entities:27445:1">Softbank (9434 JP)</a> and Stripe International, an unlisted fashion retailer.
<h2>A flat fashion market</h2>
A comprehensive recent survey of fashion industry managers suggests they are less optimistic about the outlook for 2019 compared to a year ago, weighed down with worries about depopulation, global trade, and changing consumer sentiment. More optimistically, many are investing in e-commerce as well as preparing to expand overseas.
<h2>Organic foods growing in popularity</h2>
After something of a false start back in the 1990s, organic fresh food is now moving out of a limited niche and into the mainstream, benefiting <a href="https://www.smartkarma.com/entities/10145" target="_blank" data-smartkarma-citation="entities:10145:1">Oisix Ra Daichi (3182 JP)</a> in particular.
<h2>Muji really is no name in China</h2>
<a href="https://www.smartkarma.com/entities/2765" target="_blank" data-smartkarma-citation="entities:2765:1">Ryohin Keikaku's (7453 JP)</a> Muji is popular in China, but trademark conflicts, easy replication, as well as new emulator brands, all mean the "no brand" brand is not assured of continued success in the market.

Below are several recent updates on Japanese retail and consumer markets that, while not meriting in-depth Insights of their own, are important trends impacting retail stocks.
TPP: profit and loss for Japan
The Trans-Pacific Partnership trade deal came into effect in late December, immediately cutting import tariffs across much of Southeast Asia. Despite some claims that this will help consumers, the cuts are most likely to benefit trading firms and leading food wholesalers like Mitsubishi Shokuhin (7451 JP) and Itochu Shokuhin (2692 JP) rather than result in lower retail prices.
Mash and Jun to start premium online lifestyle mall in October
Two leading lifestyle and fashion firms, Mash Holdings and Jun, will together launch a new challenger in the fashion and lifestyle online market in October. This is a threat to the premium end of ZOZO's (3092 JP) marketplace as well as the nascent Stripe Department, a joint venture between Softbank (9434 JP) and Stripe International, an unlisted fashion retailer.
A flat fashion market
A comprehensive recent survey of fashion industry managers suggests they are less optimistic about the outlook for 2019 compared to a year ago, weighed down with worries about depopulation, global trade, and changing consumer sentiment. More optimistically, many are investing in e-commerce as well as preparing to expand overseas.
Organic foods growing in popularity
After something of a false start back in the 1990s, organic fresh food is now moving out of a limited niche and into the mainstream, benefiting Oisix Ra Daichi (3182 JP) in particular.
Muji really is no name in China
Ryohin Keikaku's (7453 JP) Muji is popular in China, but trademark conflicts, easy replication, as well as new emulator brands, all mean the "no brand" brand is not assured of continued success in the market.

Also in the News: Updates from Japanese Retail Markets

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/1040" target="_blank" data-smartkarma-citation="entities:1040:1">Lawson (2651 JP)</a> Fresh Pick is the convenience store operator’s new e-commerce solution for food launched earlier this year, and replacing various other less successful experiments.Unlike competing services, Lawson's service is limited to just 600 SKUs (stock keeping units), all fresh foods, and Lawson offers no home delivery, only click-and-collect.In the nine months since launch, the service has expanded from 200 to 1,200 stores, currently concentrated in west Tokyo and Kanagawa.It is a model that will expand rapidly across the rest of the country because Lawson has to invest so little to make this happen.

Lawson (2651 JP) Fresh Pick is the convenience store operator’s new e-commerce solution for food launched earlier this year, and replacing various other less successful experiments.Unlike competing services, Lawson's service is limited to just 600 SKUs (stock keeping units), all fresh foods, and Lawson offers no home delivery, only click-and-collect.In the nine months since launch, the service has expanded from 200 to 1,200 stores, currently concentrated in west Tokyo and Kanagawa.It is a model that will expand rapidly across the rest of the country because Lawson has to invest so little to make this happen.

Lawson's New Online Service Is Working, Doubles Coverage

It’s not easy selling food online, and the pickiness of Japanese consumers makes it doubly difficult. Now, by adapting the growing meal-kit category into something very Japanese and simple to use, Japan might well have found a way to crack this particular problem.
Right now, <a href="https://www.smartkarma.com/entities/10145" target="_blank" data-smartkarma-citation="entities:10145:1">Oisix (3182 JP)</a> is the meal-kit king, and more and more retailers have realised the potential and are quickly adopting this new product to sell online, giving Oisix new channels to sell through including the leader in online fresh food delivery, Amazon.
The market for meal kits in Japan is growing fast thanks to higher rates of female participation the workforce, the growth in single person households, and the simple fact that meal kits offer convenience without sacrificing quality or being unhealthy. While more competitors are emerging, we think they will just help to grow the market, and Oisix is going to be a leader in what is likely to be a key staple of the fast-growing online food market.

It’s not easy selling food online, and the pickiness of Japanese consumers makes it doubly difficult. Now, by adapting the growing meal-kit category into something very Japanese and simple to use, Japan might well have found a way to crack this particular problem.
Right now, Oisix (3182 JP) is the meal-kit king, and more and more retailers have realised the potential and are quickly adopting this new product to sell online, giving Oisix new channels to sell through including the leader in online fresh food delivery, Amazon.
The market for meal kits in Japan is growing fast thanks to higher rates of female participation the workforce, the growth in single person households, and the simple fact that meal kits offer convenience without sacrificing quality or being unhealthy. While more competitors are emerging, we think they will just help to grow the market, and Oisix is going to be a leader in what is likely to be a key staple of the fast-growing online food market.

Oisix: King of the Meal Kit Boom, up 74%, and Plenty of Growth to Come

Japan

Oisix ra daichi Inc. sells various food products online. Among other products, the company sells vegetables, fruits, fish, meat, milk, and ready-made food.

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Oisix ra daichi (3182 JP)

🇯🇵 Japan • Internet Sector Review - 'Japan Passing'

There are currently 241 listed Japanese companies that can be categorised as Internet businesses. Our classification overlaps with the TOPIX-33...

Campbell Gunn

Japan E-Commerce: Digital to Influence 45% of All Retail Sales by 2025

E-commerce is set to account for 15% of retail sales in 2025, double the size of any other channel, and become the biggest channel for physical...

Michael Causton

Also in the News: Updates from Japanese Retail Markets

Below are several recent updates on Japanese retail and consumer markets that, while not meriting in-depth Insights of their own, are important...

Michael Causton

Lawson's New Online Service Is Working, Doubles Coverage

Lawson (2651 JP) Fresh Pick is the convenience store operator’s new e-commerce solution for food launched earlier this year, and replacing various...

Michael Causton

Oisix: King of the Meal Kit Boom, up 74%, and Plenty of Growth to Come

It’s not easy selling food online, and the pickiness of Japanese consumers makes it doubly difficult. Now, by adapting the growing meal-kit...

Michael Causton

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52-week Range

Market Cap (USDm)

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