Equity Analyst, LightStream Research

Shifara Samsudeen, ACMA, CGMA

Equity Analyst

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>
<a href="https://www.smartkarma.com/entities/shift-inc" target="_blank" data-smartkarma-citation="entities:7266:1" rel="noopener">Shift Inc (3697 JP)</a> ’s share price has been down more than 50% YTD with the release of 1QFY08/2024 results in January 2024 which saw a drop in margins.</li>
<li>The company’s aggressive investment in HR and system reinforcement led to a decline in margins, however, margins saw a QoQ improvement in 2QFY08/2024.</li>
<li>Despite there being an improvement in 2Q and the company expecting the margins to bounce back in 4Q, Shift’s share price has continued to fall.</li>
</ul>



Shift Inc (3697 JP) ’s share price has been down more than 50% YTD with the release of 1QFY08/2024 results in January 2024 which saw a drop in margins.
The company’s aggressive investment in HR and system reinforcement led to a decline in margins, however, margins saw a QoQ improvement in 2QFY08/2024.
Despite there being an improvement in 2Q and the company expecting the margins to bounce back in 4Q, Shift’s share price has continued to fall.


<ul>
<li>
<a href="https://www.smartkarma.com/entities/shift-inc" target="_blank" data-smartkarma-citation="entities:7266:1" rel="noopener">Shift Inc (3697 JP)</a> reported 1QFY08/2024 results last week. Revenue and OP increased 29.5% and 0.4% YoY to ¥25.1bn and ¥1.8bn respectively.</li>
<li>Both revenue and OP were below consensus estimates which triggered a more than 25% drop in Shift’s share price over the last 5 days.</li>
<li>We think the weaknesses in the company’s 1Q earnings were temporary and we expect the company’s earnings to show recovery going forward</li>
</ul>



Shift Inc (3697 JP) reported 1QFY08/2024 results last week. Revenue and OP increased 29.5% and 0.4% YoY to ¥25.1bn and ¥1.8bn respectively.
Both revenue and OP were below consensus estimates which triggered a more than 25% drop in Shift’s share price over the last 5 days.
We think the weaknesses in the company’s 1Q earnings were temporary and we expect the company’s earnings to show recovery going forward


Shift: Market Overreacts to Temporary Dip in Earnings

<ul>
<li>Our conviction long <a href="https://www.smartkarma.com/entities/shift-inc" target="_blank" data-smartkarma-citation="entities:7266:1" rel="noopener">Shift Inc (3697 JP)</a> 's share price went up by more than 50% in 2023 driven by strong growth in top line alongside further improvement in margins.</li>
<li>The company’s margins fell in 2022 due to unprofitable projects, however, as these projects came to an end and the company being careful with projects, margins began to recover.</li>
<li>Shift’s share price has declined over the last few days which we think is temporary and offers an  opportunity to make an entry.  </li>
</ul>


Our conviction long Shift Inc (3697 JP) 's share price went up by more than 50% in 2023 driven by strong growth in top line alongside further improvement in margins.
The company’s margins fell in 2022 due to unprofitable projects, however, as these projects came to an end and the company being careful with projects, margins began to recover.
Shift’s share price has declined over the last few days which we think is temporary and offers an  opportunity to make an entry.  


Japanese Turnaround Situations, Short-Ideas, Azabu Research

Michael Allen

Japanese Turnaround Situations, Short-Ideas

Azabu Research

Azabu Research is a publishing and consulting firm focused on distressed equities in the Japanese market. We specialize in turnaround strategies, corporate combinations, divestitures, and restructuring.

Publisher of the Tokyo Turnaround Letter, which conducts the most thorough research possible of publicly available information, including forensic tests for fraudulent overstatement of assets and understatement of liabilities, as well as rigorous market and industry analysis to assess the underlying strengths of the company’s products or services, the appropriateness of the company’s turnaround strategy, and the skill of its current management team. The average length of a report exceeds 25 pages of text and tables, excluding any disclosures or executive summaries.

We have more than 30 years of experience in applying this process to distressed equities in Japan. Additionally, subscribers have free access to detailed, yet easily navigated earnings models for the target company as well as the top five comparable companies, and unlimited access to the analyst for follow-up questions.

Azabu Research also conducts be-spoke research on a project basis, and provides consulting services to companies looking to restructure, divest, make acquisitions, go public, or improve investor sentiment toward their stock.

Independent Research and Consulting Firm

Thematic (Sector/Industry)

<ul>
<li>The median stock in our Dogs of Topix basket outperformed the median stock in the Topix 400 by 4% through Sept 2024.</li>
<li>This is below the average of 7% achieved by such stocks over the past 9 years, but it was a much tougher stretch than it looked. </li>
<li>Do we need to re-think? Much can be learned comparing the outperformers, whose median return was +34%, compared to the underperformers, which declined 23%.</li>
</ul>


The median stock in our Dogs of Topix basket outperformed the median stock in the Topix 400 by 4% through Sept 2024.
This is below the average of 7% achieved by such stocks over the past 9 years, but it was a much tougher stretch than it looked. 
Do we need to re-think? Much can be learned comparing the outperformers, whose median return was +34%, compared to the underperformers, which declined 23%.


Have the Rules for Bottom Fishing Changed?

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

Event-Driven

<ul>
<li>The review period for the <a href="https://www.smartkarma.com/entities/nikkei-225" target="_blank" data-smartkarma-citation="entities:22909:1" rel="noopener">Nikkei 225 Index</a> March rebalance ends in January. There could be one outright change and one or two others driven by sector balance.</li>
<li>Depending on the changes, passive trackers will need to buy between 8.2-20.5x ADV (8.75%-24.5% of real float) and sell between 9-38x ADV on the deletions.</li>
<li>
<a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:751:1" rel="noopener">Fast Retailing</a>'s PAF could see a double reduction to keep the stock weight capped at 10%. There will be huge passive selling leading to funding inflows for other index constituents.</li>
</ul>


The review period for the Nikkei 225 Index March rebalance ends in January. There could be one outright change and one or two others driven by sector balance.
Depending on the changes, passive trackers will need to buy between 8.2-20.5x ADV (8.75%-24.5% of real float) and sell between 9-38x ADV on the deletions.

Fast Retailing's PAF could see a double reduction to keep the stock weight capped at 10%. There will be huge passive selling leading to funding inflows for other index constituents.


Nikkei 225 Index Rebalance Preview (Mar 2025): Ranking, Capping, Funding & Other Changes

Japan

SHIFT Inc. offers information technology outsourcing services. The Company provides outsourcing software testing services to corporations and individual clients. SHIFT also provides software solutions and consulting services, as well as educational classes and programs.

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Shift Inc (3697 JP)

Shift: On a Road to Recovery

Shift's share price has been down more than 50% YTD due to a drop in the company's margins in 1QFY08/2024. There has been a notable improvement in...

Shifara Samsudeen, ACMA, CGMA

Shift: Market Overreacts to Temporary Dip in Earnings

Shift's 1QFY08/2024 revenues and operating profit fell below consensus which triggered a more than 25% drop in the company's share price over the...

Shifara Samsudeen, ACMA, CGMA

Shift: High Conviction Review 2023

Our conviction LONG Shift's share price surged over 50% in 2023. As we expected, completion of unprofitable projects and expansion into upstream...

Shifara Samsudeen, ACMA, CGMA

Have the Rules for Bottom Fishing Changed?

Increased passive investing and a rising interest rate environment have made the bottom-fishing game more treacherous, but the rules are still the...

Michael Allen

Nikkei 225 Index Rebalance Preview (Mar 2025): Ranking, Capping, Funding & Other Changes

There should be 1 change, could be 3 due to sector balance. The impact on the potential changes varies from 8-38x ADV. Fast Retailing could see a...

Brian Freitas

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Shift: On a Road to Recovery

​Shift's share price has been down more than 50% YTD due to a drop in the company's margins in 1QFY08/2024. There has been a notable improvement in...

Shifara Samsudeen, ACMA, CGMA

Shift: Market Overreacts to Temporary Dip in Earnings

​Shift's 1QFY08/2024 revenues and operating profit fell below consensus which triggered a more than 25% drop in the company's share price over the...

Shifara Samsudeen, ACMA, CGMA

Shift: High Conviction Review 2023

Our conviction LONG ​Shift's share price surged over 50% in 2023. As we expected, completion of unprofitable projects and expansion into upstream...

Shifara Samsudeen, ACMA, CGMA

Have the Rules for Bottom Fishing Changed?

Increased passive investing and a rising interest rate environment have made the bottom-fishing game more treacherous, but the rules are still the...

Michael Allen

Nikkei 225 Index Rebalance Preview (Mar 2025): Ranking, Capping, Funding & Other Changes

There should be 1 change, could be 3 due to sector balance. The impact on the potential changes varies from 8-38x ADV. Fast Retailing could see a...

Brian Freitas

Shift's share price has been down more than 50% YTD due to a drop in the company's margins in 1QFY08/2024. There has been a notable improvement in...

Shift's 1QFY08/2024 revenues and operating profit fell below consensus which triggered a more than 25% drop in the company's share price over the...

Our conviction LONG Shift's share price surged over 50% in 2023. As we expected, completion of unprofitable projects and expansion into upstream...