Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<p>In summer of 2016, I warned on Smartkarma that the BOJ was going to have to shift its ETF buy basket away from Nikkei 225. It did so in late 2016. I warned again in early 2018 that it was going to get worse, and suggested a revision to the Nikkei 225 Average methodology in <em><a href="https://www.smartkarma.com/insights/the-boj-s-ongoing-etf-impact-is-a-nikkei-225-reshuffle-in-the-cards" target="_blank" data-smartkarma-citation="insights:17331" rel="noopener">The BOJ's Ongoing ETF Impact - Is a Nikkei 225 Reshuffle in the Cards?</a></em> (followed by <em><a href="https://www.smartkarma.com/insights/japan-passive-boj-heading-for-trouble-with-nikkei-225" target="_blank" data-smartkarma-citation="insights:21980" rel="noopener">JAPAN PASSIVE:  BOJ Heading For Trouble with Nikkei 225</a></em>) whereby there would be a deemed minimum shares outstanding quantity so that Deemed Minimum Shares Out / Shares out multiplied by Existing Deemed Par Value would become NEW Deemed Par Value.</p>
<p>This would mean that some names would see lower weights, but on the whole, the Nikkei 225 basket would be much more liquid. </p>
<p>Nothing was done. The BOJ again lowered its use of Nikkei 225 ETFs, then recently finally stopped using the average altogether. </p>
<p>The Nikkei 225 had been made largely irrelevant by the Nikkei's refusal to adapt to the times.</p>
<h2>The NEW News</h2>
<p>Today after the close, the Nikkei Index Team announced the first proposed revision to the methodology of the Nikkei 225 Average in twenty years, and a consultation over the next five weeks. Because the concept of Par Value is no longer used in Japan in the Companies Act, it would get rid of the "Presumed Par Value" or "Deemed Par Value" for members and potential members of the Average, and replace it with a Price Adjustment Factor ("PAF") which is <em>an inverse multiplier of the Deemed Par Value. </em></p>
<p>In short.... it would do nothing to the index and its constituents as they stand today.</p>
<p>And new additions would be assigned a PAF which would presumably be related to their previously understood Deemed Par Value. But in any case, new constituents would be capped at 1% weightings so would see their Price Adjustment Factor.... adjusted. </p>
<p>There are other changes proposed which change the rebalancing possibilities, and there is a note that the Average would only include members of TSE Prime (such that existing TSE1 and Nikkei 225 members which chose not to become members of TSE Prime would find themselves booted from the Nikkei 225. </p>
<p>This is highly disappointing. A 20-year review could have been so much more interesting and the Nikkei could have rescued itself from effective oblivion. Alas, this misses the mark, by a wide margin. </p>
<p>But details are details so we look at them below. </p>

In summer of 2016, I warned on Smartkarma that the BOJ was going to have to shift its ETF buy basket away from Nikkei 225. It did so in late 2016. I warned again in early 2018 that it was going to get worse, and suggested a revision to the Nikkei 225 Average methodology in The BOJ's Ongoing ETF Impact - Is a Nikkei 225 Reshuffle in the Cards? (followed by JAPAN PASSIVE:  BOJ Heading For Trouble with Nikkei 225) whereby there would be a deemed minimum shares outstanding quantity so that Deemed Minimum Shares Out / Shares out multiplied by Existing Deemed Par Value would become NEW Deemed Par Value.
This would mean that some names would see lower weights, but on the whole, the Nikkei 225 basket would be much more liquid. 
Nothing was done. The BOJ again lowered its use of Nikkei 225 ETFs, then recently finally stopped using the average altogether. 
The Nikkei 225 had been made largely irrelevant by the Nikkei's refusal to adapt to the times.
The NEW News
Today after the close, the Nikkei Index Team announced the first proposed revision to the methodology of the Nikkei 225 Average in twenty years, and a consultation over the next five weeks. Because the concept of Par Value is no longer used in Japan in the Companies Act, it would get rid of the "Presumed Par Value" or "Deemed Par Value" for members and potential members of the Average, and replace it with a Price Adjustment Factor ("PAF") which is an inverse multiplier of the Deemed Par Value. 
In short.... it would do nothing to the index and its constituents as they stand today.
And new additions would be assigned a PAF which would presumably be related to their previously understood Deemed Par Value. But in any case, new constituents would be capped at 1% weightings so would see their Price Adjustment Factor.... adjusted. 
There are other changes proposed which change the rebalancing possibilities, and there is a note that the Average would only include members of TSE Prime (such that existing TSE1 and Nikkei 225 members which chose not to become members of TSE Prime would find themselves booted from the Nikkei 225. 
This is highly disappointing. A 20-year review could have been so much more interesting and the Nikkei could have rescued itself from effective oblivion. Alas, this misses the mark, by a wide margin. 
But details are details so we look at them below. 

After 20yrs, Nikkei 225 Proposes Minor Impact Rule Changes (Nintendo Disappointment?)

Telco/Internet specialist

Kirk Boodry

Redex Research

Equity Bottom-Up

<p>Sky Perfect JSAT results for Q4 20 were ahead of Redex and consensus expectations whilst guidance is mixed with revenue expectations better than expected (seriously, they are) but profitability slightly worse. As for that revenue guidance, an accounting change under Japanese GAAP makes it look like forecasts of a 13% decline but it would like-for-like growth is closer to 3%. Media segment weakness appears set to continue but that is largely expected and growth in the space business, which drives our positive thesis, continues. We remain at Buy. </p>

Sky Perfect JSAT results for Q4 20 were ahead of Redex and consensus expectations whilst guidance is mixed with revenue expectations better than expected (seriously, they are) but profitability slightly worse. As for that revenue guidance, an accounting change under Japanese GAAP makes it look like forecasts of a 13% decline but it would like-for-like growth is closer to 3%. Media segment weakness appears set to continue but that is largely expected and growth in the space business, which drives our positive thesis, continues. We remain at Buy. 

Sky Perfect JSAT Q4 20 Results: Quarterly Beat and Revenue Growth for FY21

<p>Sky Perfect JSAT operates Japan’s only direct-to-home (DTH) video service and is Asia’s largest satellite operator. As a well-known consumer-facing service, the former is better known and has often driven sentiment but the key to unlock value may be in the latter as the space industry expands. An increase in space industry investment brings new opportunities but also heightened competition from low-earth satellite fleets albeit at less intensity than its global peers. On balance, we think the changes are positive and we initiate coverage at Buy with a ¥640 FY21-end target price.</p>

Sky Perfect JSAT operates Japan’s only direct-to-home (DTH) video service and is Asia’s largest satellite operator. As a well-known consumer-facing service, the former is better known and has often driven sentiment but the key to unlock value may be in the latter as the space industry expands. An increase in space industry investment brings new opportunities but also heightened competition from low-earth satellite fleets albeit at less intensity than its global peers. On balance, we think the changes are positive and we initiate coverage at Buy with a ¥640 FY21-end target price.

Sky Perfect JSAT - Upside Potential in Space Business (Initiation of Coverage)

'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. 

<div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/086/610/original/2019-05-02_15-37-25.png?1556779059" class="editor-image img-responsive" data-smartkarma-image-id="86610"></figure><p>Source: Japan Analytics</p>
</div><div class="content-caption">This update on <a href="https://www.smartkarma.com/entities/8197" target="_blank" data-smartkarma-citation="entities:8197:1">CyberAgent Inc (4751 JP)</a> should be read in conjunction with our earlier Insight <a href="https://www.smartkarma.com/insights/cyberagent-tumbling-dice" target="_blank" data-smartkarma-citation="insights:27690">CyberAgent: Tumbling Dice</a>. </div><p><strong>RECORD SALES</strong> - As the company never tires of pointing out, CyberAgent's revenues continue to grow apace. The interim quarter saw a record amount of revenue in any quarter of ¥117b, an increase of 7% year-on-year and a record amount for any trailing-twelve-month (TTM) period of ¥440b, 10% above the level reached in FY18-Q2. The IR materials describe this achievement as <em>'reaching cruising speed again'</em>, although from the TTM chart above it is hard to see when there was any deceleration. </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/086/616/original/2019-05-02_15-56-10.png?1556780188" class="editor-image img-responsive" data-smartkarma-image-id="86616"></figure><div class="content-caption">Source: CyberAgent</div><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/086/614/original/2019-05-02_15-35-10.png?1556779655" class="editor-image img-responsive" data-smartkarma-image-id="86614"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>DON'T LOOK ANY FURTHER</strong> - The further down the Income Statment one travels, the less appealing the picture. The company likes to present its profitability in terms of what it describes as 'existing business, excluding investment development'. The latter has produced over ¥20b in one-off gains over the last five years, which have helped offset nearly ¥62b in 'up-front investment in the AbemaTV business' which will presumably cease not to exist if and when it turns a profit. Even using CyberAgent's logic, the second quarter was the third straight quarter of declining year-on-year profitability. Shareholders meanwhile have to make do with what is generated at the true bottom-line of the Income Statement - Comprehensive Income which saw an increase of just ¥3.2b in the quarter, 24% of 'adjusted' profits.  <strong>CyberAgent's Shareholders' Equity (including Other Comprehensive Income) is ¥358m lower than at FY17-Q4 and has declined by 4% since peaking in FY18-Q3.  It is no surprise therefore that the company's PBR has declined by a third in less than a year, although it is still 39% above the FY17-Q4 low.  </strong></p><div class="content-highlight"><p>In the<strong> DETAIL</strong> section below, we shall cover the interim results in more detail and update the implied valuation for the AbemaTV business. In keeping with the previous report, we provide this brief musical interlude from <strong>M People</strong> in Berlin.</p></div><p><iframe src="https://www.youtube.com/embed/IwBCyvBMgjQ" width="1280" height="720" frameborder="0" allow="accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture" allowfullscreen="allowfullscreen"></iframe></p>


Source: Japan Analytics
This update on CyberAgent Inc (4751 JP) should be read in conjunction with our earlier Insight CyberAgent: Tumbling Dice. RECORD SALES - As the company never tires of pointing out, CyberAgent's revenues continue to grow apace. The interim quarter saw a record amount of revenue in any quarter of ¥117b, an increase of 7% year-on-year and a record amount for any trailing-twelve-month (TTM) period of ¥440b, 10% above the level reached in FY18-Q2. The IR materials describe this achievement as 'reaching cruising speed again', although from the TTM chart above it is hard to see when there was any deceleration. Source: CyberAgentSource: Japan AnalyticsDON'T LOOK ANY FURTHER - The further down the Income Statment one travels, the less appealing the picture. The company likes to present its profitability in terms of what it describes as 'existing business, excluding investment development'. The latter has produced over ¥20b in one-off gains over the last five years, which have helped offset nearly ¥62b in 'up-front investment in the AbemaTV business' which will presumably cease not to exist if and when it turns a profit. Even using CyberAgent's logic, the second quarter was the third straight quarter of declining year-on-year profitability. Shareholders meanwhile have to make do with what is generated at the true bottom-line of the Income Statement - Comprehensive Income which saw an increase of just ¥3.2b in the quarter, 24% of 'adjusted' profits.  CyberAgent's Shareholders' Equity (including Other Comprehensive Income) is ¥358m lower than at FY17-Q4 and has declined by 4% since peaking in FY18-Q3.  It is no surprise therefore that the company's PBR has declined by a third in less than a year, although it is still 39% above the FY17-Q4 low.  In the DETAIL section below, we shall cover the interim results in more detail and update the implied valuation for the AbemaTV business. In keeping with the previous report, we provide this brief musical interlude from M People in Berlin.

4751 🇯🇵 CyberAgent • Interim Update - Don't Look Any Further

Equity Analyst, LightStream Research

Supun Walpola

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.

<p><span lang="EN-GB">Toyota’s current dividend and buyback yields are 3.1% and 2.1% respectively (at the current market price of JPY7,199 as of 22<sup>nd</sup> June 2018) bringing Toyota’s current cash yield (dividend yield plus buyback yield) to 5.2%. Toyota’s cash yield has been above the 5% mark consistently since FY03/15.</span></p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/055/962/original/Toyota.PNG?1529972342" class="editor-image img-responsive" data-smartkarma-image-id="55962"></figure><div class="content-remarks"><p><em>Source: Capital IQ and LSR Calculations</em></p></div><p><strong>We find Toyota’s high cash yield attractive as markets head towards bear territory.</strong> Toyota is in the higher end of the dividend yield spectrum among the Nikkei 225…</p>

Toyota’s current dividend and buyback yields are 3.1% and 2.1% respectively (at the current market price of JPY7,199 as of 22nd June 2018) bringing Toyota’s current cash yield (dividend yield plus buyback yield) to 5.2%. Toyota’s cash yield has been above the 5% mark consistently since FY03/15.Source: Capital IQ and LSR CalculationsWe find Toyota’s high cash yield attractive as markets head towards bear territory. Toyota is in the higher end of the dividend yield spectrum among the Nikkei 225…

Toyota for Bears: How Attractive Are Income Yields?

Japan

SKY Perfect JSAT Holdings, Inc. is a holding company, which manages financial operations for its subsidiaries. As a group, the Company provides broadcasting and data transmission services via satellites. SKY Perfect JSAT delivers digital TV programs including movies, music, sports and entertainment to its subscribers.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Sky Perfect Jsat (9412 JP)

After 20yrs, Nikkei 225 Proposes Minor Impact Rule Changes (Nintendo Disappointment?)

TWENTY YEARS after its last major index methodology review, the Nikkei has proposed changes to the Nikkei 225. Existing constituents are not...

Travis Lundy

Sky Perfect JSAT Q4 20 Results: Quarterly Beat and Revenue Growth for FY21

Sky Perfect JSAT results for Q4 20 were ahead of consensus and guidance is also good. It might not look that way at first but 13% sales erosion is...

Kirk Boodry

Sky Perfect JSAT - Upside Potential in Space Business (Initiation of Coverage)

Sky Perfect JSAT is better known for its direct broadcast satellite (DBS) video business but the space business represents more value and has been...

Kirk Boodry

4751 🇯🇵 CyberAgent • Interim Update - Don't Look Any Further

RECORD SALES - As the company never tires of pointing out, CyberAgent's revenues continue to grow apace. The interim quarter saw a record amount of...

Campbell Gunn

Toyota for Bears: How Attractive Are Income Yields?

Toyota’s current dividend and buyback yields are 3.1% and 2.1% respectively (at the current market price of JPY7,199 as of 22nd June 2018) bringing...

Supun Walpola

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)