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.

Event-Driven

The <a href="https://asia.nikkei.com/Politics/Japan-after-Abe/Japan-phone-carriers-fear-rate-cuts-under-a-Prime-Minister-Suga" target="_blank" rel="noopener">Nikkei has highlighted potential risks to Japan’s telcos</a> if Chief Cabinet Minister Yoshihide Suga becomes Japan’s next prime minister as is now widely expected.  While this trade follows on from pressure applied by Suga over the last couple of years and is unlikely to surprise investors we believe the context is important to note and discuss it briefly below.

The Nikkei has highlighted potential risks to Japan’s telcos if Chief Cabinet Minister Yoshihide Suga becomes Japan’s next prime minister as is now widely expected.  While this trade follows on from pressure applied by Suga over the last couple of years and is unlikely to surprise investors we believe the context is important to note and discuss it briefly below.

Softbank Corp – A Simple Suga PM Telco Trade

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

Thematic (Sector/Industry)

<div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/156/777/original/83v838d83t83b815b838b97p20188dc590v2028626x80029.jpg?1599082833" class="editor-image img-responsive" data-smartkarma-image-id="156777"></figure>Source: <a href="http://www.sugayoshihide.gr.jp/" target="_blank" rel="noopener">http://www.sugayoshihide.gr.jp/</a>
</div>PM SUGA - In this Insight, we offer some thoughts on what appears to be the foregone conclusion that current Chief Cabinet Secretary and Abe's right hand for the last eight years, Suga Yoshihide, will be next leader of the Liberal Democratic Party and Prime Minister of Japan.Abe Shinzo has done well during his tenure to divide and rule of the various LPD factional interest and has sought to (over-)promote allies and acolytes often those who supported his platform of constitutional reform. Mostly due to lack of political acumen, none of these 'friends-of-Shinzo' has emerged as a potential successor. Abe most fervent opponent within the LDP, Ishiba Shigeru, has been effectively sidelined and the rules for the upcoming election will be written to exclude his power base within the local LDP chapters.   Within the Cabinet, the most charismatic figures are Deputy PM Aso Taro (79-years old- not standing) and Defense Minister Kono Taro (57 years old-possibly standing). The latter is in the former's faction, and Aso has yet to content to Kono's candidature.<div class="content-highlight">Assuming the Suga Premiership commences on September 14th, the short-run market implications are benign; however, we believe that Suga's influence and control over policymaking could have more positive longer-term implications for Japan than anything achieved under 'Abenomics'.</div>


Source: http://www.sugayoshihide.gr.jp/
PM SUGA - In this Insight, we offer some thoughts on what appears to be the foregone conclusion that current Chief Cabinet Secretary and Abe's right hand for the last eight years, Suga Yoshihide, will be next leader of the Liberal Democratic Party and Prime Minister of Japan.Abe Shinzo has done well during his tenure to divide and rule of the various LPD factional interest and has sought to (over-)promote allies and acolytes often those who supported his platform of constitutional reform. Mostly due to lack of political acumen, none of these 'friends-of-Shinzo' has emerged as a potential successor. Abe most fervent opponent within the LDP, Ishiba Shigeru, has been effectively sidelined and the rules for the upcoming election will be written to exclude his power base within the local LDP chapters.   Within the Cabinet, the most charismatic figures are Deputy PM Aso Taro (79-years old- not standing) and Defense Minister Kono Taro (57 years old-possibly standing). The latter is in the former's faction, and Aso has yet to content to Kono's candidature.Assuming the Suga Premiership commences on September 14th, the short-run market implications are benign; however, we believe that Suga's influence and control over policymaking could have more positive longer-term implications for Japan than anything achieved under 'Abenomics'.

🇯🇵 JAPAN • Some Thoughts on Suga Yoshihide as PM

Equity Analyst, LightStream Research

Supun Walpola

Equity Analyst

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/rakuten-inc" target="_blank" data-smartkarma-citation="entities:31:1" rel="noopener">Rakuten Inc (4755 JP)</a>’s 2Q FY20 financial results did not carry any major surprises. Similar to its counterpart <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>, which reported its June quarter results in the previous week, Rakuten’s shopping business did well on the back of strong stay-at-home demand, which offset the negative impact of service DEC businesses like Rakuten Travel due to COVID-19. On the OP front, Rakuten missed consensus by around 22%, however, this was on the back of upfront investments in mobile and logistics operations.We continue to prefer Rakuten among other Japanese e-commerce names, as we believe its strategy of improving monetisation of its existing users and increasing penetration into untapped markets through logistics expansion, better suits the maturing Japanese e-commerce market. We believe Rakuten, excluding its mobile and logistics businesses, is undervalued, however, we do not see any short term catalysts that would drive Rakuten’s share price up, especially as we expect Rakuten to continue making operating losses in the next two years as the company continues to invest heavily on its mobile and logistics operations. However, we like Rakuten for its long-term growth potential and expect further upside once investments in mobile and logistics operations start making meaningful contributions.

Rakuten Inc (4755 JP)’s 2Q FY20 financial results did not carry any major surprises. Similar to its counterpart Z Holdings (4689 JP), which reported its June quarter results in the previous week, Rakuten’s shopping business did well on the back of strong stay-at-home demand, which offset the negative impact of service DEC businesses like Rakuten Travel due to COVID-19. On the OP front, Rakuten missed consensus by around 22%, however, this was on the back of upfront investments in mobile and logistics operations.We continue to prefer Rakuten among other Japanese e-commerce names, as we believe its strategy of improving monetisation of its existing users and increasing penetration into untapped markets through logistics expansion, better suits the maturing Japanese e-commerce market. We believe Rakuten, excluding its mobile and logistics businesses, is undervalued, however, we do not see any short term catalysts that would drive Rakuten’s share price up, especially as we expect Rakuten to continue making operating losses in the next two years as the company continues to invest heavily on its mobile and logistics operations. However, we like Rakuten for its long-term growth potential and expect further upside once investments in mobile and logistics operations start making meaningful contributions.

Rakuten: Core Businesses Are Doing Well but Logistics and Mobile Investments Are Eating into Profits

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/ryohin-keikaku-co-ltd" target="_blank" data-smartkarma-citation="entities:2765:1" rel="noopener">Ryohin Keikaku (7453 JP)</a> has had a busy few weeks. It is now trialling the sale of Muji product at three <a href="https://www.smartkarma.com/entities/lawson-inc" target="_blank" data-smartkarma-citation="entities:1040:1" rel="noopener">Lawson Inc (2651 JP)</a> stores after ditching <a href="https://www.smartkarma.com/entities/familymart-co-ltd" target="_blank" data-smartkarma-citation="entities:320:1" rel="noopener">FamilyMart Co Ltd (8028 JP)</a>, its long-term partner, last year. Muji and Lawson will collaborate on the exact range and marketing but Lawson presents a major opportunity for Muji to expand its volume.
Muji also opened online accounts with <a href="https://www.smartkarma.com/entities/amazon-com-inc" target="_blank" data-smartkarma-citation="entities:409:1" rel="noopener">Amazon.com Inc (AMZN US)</a>, <a href="https://www.smartkarma.com/entities/rakuten-inc" target="_blank" data-smartkarma-citation="entities:31:1" rel="noopener">Rakuten Inc (4755 JP)</a> and <a href="https://www.smartkarma.com/entities/askul-corp" target="_blank" data-smartkarma-citation="entities:16807:1" rel="noopener">Askul Corp (2678 JP)'s </a>Lohaco in the last two months.
The new ideas will help keep Muji relevant in an e-commerce age and offset the loss of the small US business – which had anyway been operating at a loss.

Ryohin Keikaku (7453 JP) has had a busy few weeks. It is now trialling the sale of Muji product at three Lawson Inc (2651 JP) stores after ditching FamilyMart Co Ltd (8028 JP), its long-term partner, last year. Muji and Lawson will collaborate on the exact range and marketing but Lawson presents a major opportunity for Muji to expand its volume.
Muji also opened online accounts with Amazon.com Inc (AMZN US), Rakuten Inc (4755 JP) and Askul Corp (2678 JP)'s Lohaco in the last two months.
The new ideas will help keep Muji relevant in an e-commerce age and offset the loss of the small US business – which had anyway been operating at a loss.

Muji Expands Channels with Lawson and Major Online Malls

In our previous note, <a href="https://www.smartkarma.com/insights/z-holdings-1q-update-strong-gmv-growth-is-not-expected-to-last-longer-than-covid-19" target="_blank" data-smartkarma-citation="insights:41903" rel="noopener">Z Holdings 1Q Update: Strong GMV Growth Is Not Expected to Last Longer Than COVID-19</a>, we suggested that <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 1Q FY03/21 could be a temporary bump driven by strong stay-at-home demand and is unlikely to continue in the post-COVID-19 environment. We believe the market has accounted for this somewhat, although, Z’s FY2 consensus revenue growth expectations still seem slightly aggressive. Moreover, Z’s FY2 EV/OP is at a 5-year high, but we believe Z’s declining growth in a maturing Japanese e-commerce market does not justify this high valuation. We expect a correction in the next two years as growth falls below expectations.

In our previous note, Z Holdings 1Q Update: Strong GMV Growth Is Not Expected to Last Longer Than COVID-19, we suggested that Z Holdings (4689 JP)’s 1Q FY03/21 could be a temporary bump driven by strong stay-at-home demand and is unlikely to continue in the post-COVID-19 environment. We believe the market has accounted for this somewhat, although, Z’s FY2 consensus revenue growth expectations still seem slightly aggressive. Moreover, Z’s FY2 EV/OP is at a 5-year high, but we believe Z’s declining growth in a maturing Japanese e-commerce market does not justify this high valuation. We expect a correction in the next two years as growth falls below expectations.

Z Holdings: Aggressive Consensus + Expensive Valuation

Japan

Rakuten Group, Inc. provides Internet services. The Company offers Internet finance services which including "Rakuten Card" and "Rakuten Bank". Rakuten Group also provides digital content services including electronic book services.

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Rakuten (4755 JP)

Softbank Corp – A Simple Suga PM Telco Trade

The Nikkei has highlighted potential risks to Japan’s telcos if Chief Cabinet Minister Yoshihide Suga becomes Japan’s next prime minister as is now...

Mio Kato

🇯🇵 JAPAN • Some Thoughts on Suga Yoshihide as PM

With only one results and two revisions yesterday this update will be brief.

Campbell Gunn

Rakuten: Core Businesses Are Doing Well but Logistics and Mobile Investments Are Eating into Profits

Rakuten Inc (4755 JP)’s 2Q FY20 financial results did not carry any major surprises. Similar to its counterpart Z Holdings (4689 JP), which...

Supun Walpola

Muji Expands Channels with Lawson and Major Online Malls

Ryohin Keikaku (7453 JP) has had a busy few weeks. It is now trialling the sale of Muji product at three Lawson Inc (2651 JP) stores after ditching...

Michael Causton

Z Holdings: Aggressive Consensus + Expensive Valuation

In our previous note, Z Holdings 1Q Update: Strong GMV Growth Is Not Expected to Last Longer Than COVID-19, we suggested that Z Holdings (4689...

Supun Walpola

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