Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<a href="https://www.smartkarma.com/entities/zozo-inc" target="_blank" data-smartkarma-citation="entities:18379:1" rel="noopener">ZOZO Inc (3092 JP)</a> today announced a JPY 32bn buyback. And it announced a JPY 25bn placement. The reasoning is that the company wants to have a place in the TSE Prime market and without a higher float, the company won't meet the 35% tradable shares criteria it is supposed to have in June. While this will not get them there by end of June, companies with a "plan" to get there will be granted provisional inclusion if they meet the other criteria, and this construct has a decent chance of getting them there.The explanation by the company is a little odd though. Investors should understand the details. Big picture they don't mean much, but the convoluted nature of the situation suggests

ZOZO Inc (3092 JP) today announced a JPY 32bn buyback. And it announced a JPY 25bn placement. The reasoning is that the company wants to have a place in the TSE Prime market and without a higher float, the company won't meet the 35% tradable shares criteria it is supposed to have in June. While this will not get them there by end of June, companies with a "plan" to get there will be granted provisional inclusion if they meet the other criteria, and this construct has a decent chance of getting them there.The explanation by the company is a little odd though. Investors should understand the details. Big picture they don't mean much, but the convoluted nature of the situation suggests 

Oh No ZoZo! An Overly Complicated Buyback+Issuance To Stay Prime

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. 

Equity Bottom-Up

Rakuten is playing catch up with Amazon in logistics and this is the primary driver behind its new collaboration with Japan Post.
The two companies will set up a new joint business in July to cover the country in new, efficient fulfilment centres. 
As a result, Rakuten will be able to save substantially on capital investment in its own logistics network, particularly the most expensive part of that: the last mile network Rakuten Express, which will now be cancelled in favour of partner services centred on Japan Post.
This will allow Rakuten to focus logistics investment on full coverage at the national level.
Rakuten is growing faster than Z Holding's in e-commerce, including in 1Q2021 and looks set to continue to do so, with the new logistics platform a key part of this, ensuring consumers receive the kind of fulfilment speed and consistency normally only associated with Amazon Japan.

Rakuten is playing catch up with Amazon in logistics and this is the primary driver behind its new collaboration with Japan Post.
The two companies will set up a new joint business in July to cover the country in new, efficient fulfilment centres. 
As a result, Rakuten will be able to save substantially on capital investment in its own logistics network, particularly the most expensive part of that: the last mile network Rakuten Express, which will now be cancelled in favour of partner services centred on Japan Post.
This will allow Rakuten to focus logistics investment on full coverage at the national level.
Rakuten is growing faster than Z Holding's in e-commerce, including in 1Q2021 and looks set to continue to do so, with the new logistics platform a key part of this, ensuring consumers receive the kind of fulfilment speed and consistency normally only associated with Amazon Japan.

Rakuten Ramps up Logistics to Increase Lead in E-Commerce

Telco/Internet specialist

Kirk Boodry

Redex Research

Thematic (Sector/Industry)

Kyodo News reports that Apple is asking the Ministry of Industry Affairs and Communications (MIC, the regulator) to allow higher subsidies for iPhones to help promote the spread of 5G services. To be clear, it is the mobile operators that would offer these subsidies which were capped last year by the regulator at ¥20,000/device even as handset/service pricing was unbundled. We thought this would be a good opportunity to highlight how Apple has grown in Japan especially compared to the mobile operators.

Kyodo News reports that Apple is asking the Ministry of Industry Affairs and Communications (MIC, the regulator) to allow higher subsidies for iPhones to help promote the spread of 5G services. To be clear, it is the mobile operators that would offer these subsidies which were capped last year by the regulator at ¥20,000/device even as handset/service pricing was unbundled. We thought this would be a good opportunity to highlight how Apple has grown in Japan especially compared to the mobile operators.

Apple (Japan) Is Asking the Regulator to Allow Higher Subsidies for IPhone

Rakuten posted Q1 results ahead of Redex forecasts flattered by ¥30bn in one-time investment gains but otherwise in-line. We see two clear takeaways from the quarter: 1) eCommerce GMV growth moderated after a punchy Q4 outpaced Z Holdings for a second consecutive quarter; and 2) mobile operating losses have accelerated as the company ramps up investment in infrastructure and customer acquisition. Strategically, Rakuten made great progress in the quarter with new equity and debt funding and approval from Apple to sell the iPhone. That makes us more optimistic on hopes for mobile but operating losses come first and we think the company is fairly valued in the near-term.

Rakuten posted Q1 results ahead of Redex forecasts flattered by ¥30bn in one-time investment gains but otherwise in-line. We see two clear takeaways from the quarter: 1) eCommerce GMV growth moderated after a punchy Q4 outpaced Z Holdings for a second consecutive quarter; and 2) mobile operating losses have accelerated as the company ramps up investment in infrastructure and customer acquisition. Strategically, Rakuten made great progress in the quarter with new equity and debt funding and approval from Apple to sell the iPhone. That makes us more optimistic on hopes for mobile but operating losses come first and we think the company is fairly valued in the near-term.

Rakuten Group: Q1 21 Results - Profit Beat on One-Time Gains/Mobile Investment Accelerates

NTT (Nippon Telegraph & Telephone) / Equity Bottom-Up

NTT posted results and guidance for FY21 ahead of Redex and consensus expectations. One key takeaway is how little mobile price reductions have impacted the company outlook with Q4 mobile revenue growth better than expected and forecast erosion in that segment less than half of what we had been looking for. That was augmented by another quarter of solid results from the fixed-line local businesses and a return to growth for the ICT businesses after six quarters of erosion. The FY21 dividend of ¥110 is in line with expectations and whilst a share buyback was not announced today, a positive outlook on financial progress in FY21 leads us to believe this will come at some point. We remain at Buy.

NTT posted results and guidance for FY21 ahead of Redex and consensus expectations. One key takeaway is how little mobile price reductions have impacted the company outlook with Q4 mobile revenue growth better than expected and forecast erosion in that segment less than half of what we had been looking for. That was augmented by another quarter of solid results from the fixed-line local businesses and a return to growth for the ICT businesses after six quarters of erosion. The FY21 dividend of ¥110 is in line with expectations and whilst a share buyback was not announced today, a positive outlook on financial progress in FY21 leads us to believe this will come at some point. We remain at Buy.

Nippon Telegraph and Telephone: Q4 20 Results/FY21 Guidance – A Return to Sustainable Growth

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)

Oh No ZoZo! An Overly Complicated Buyback+Issuance To Stay Prime

Zozo's Buyback and Equity Commitment Line is minimally EPS accretive but creates a flow overhang. I expect the ToSTNeT-3 to go differently than the...

Travis Lundy

Rakuten Ramps up Logistics to Increase Lead in E-Commerce

Rakuten's lead in e-commerce is strengthening against Z Holdings and its deal with Japan Post will ensure it is far, far ahead on fulfilment...

Michael Causton

Apple (Japan) Is Asking the Regulator to Allow Higher Subsidies for IPhone

Apple Japan is asking the regulator to allow higher smartphone subsidies so it can sell more handsets. That's after 49% growth in Q4 and where it...

Kirk Boodry

Rakuten Group: Q1 21 Results - Profit Beat on One-Time Gains/Mobile Investment Accelerates

Rakuten Q1 results were in line with expectations outside one-time gains that flattered profitability. Operationally, eCommerce looks good and...

Kirk Boodry

Nippon Telegraph and Telephone: Q4 20 Results/FY21 Guidance – A Return to Sustainable Growth

Q4 results and FY21 guidance were ahead of Redex and consensus forecasts on telework tailwinds and better mobile than expected. No buyback...

Kirk Boodry

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