Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

Mitsubishi UFJ Financial (MUFG) / Equity Bottom-Up

*Weak May 2020 Data: ACOM (8572.JP) released poor May 2020 monthly performance data on June 10th which exhibited negative consumer lending growth for the first time since 2014  - declining 0.6% YOY during the month. ACOM is chronically understates kaburai risk;* No Guidance Still: Senior management did not issue FY3/21 guidance, we remain in the dark regarding treatment of credit costs and its overseas operations; and  * MUFG Should Struggle Globally Too: The lack of provisioning is far from the only problem MUFG must manage. Post-COVID-19, we calculate that MUFG America’s will have a regulatory capital shortfall of up to USD 6.5 bn or 40% of MUFG America’s stated equity; continued impairments on subsidiaries; significant Softbank (9984.JP) exposure; and Morgan Stanley’s (MS.US) MUFG dilutive E*Trade (ETFC.US) transaction.

*Weak May 2020 Data: ACOM (8572.JP) released poor May 2020 monthly performance data on June 10th which exhibited negative consumer lending growth for the first time since 2014  - declining 0.6% YOY during the month. ACOM is chronically understates kaburai risk;* No Guidance Still: Senior management did not issue FY3/21 guidance, we remain in the dark regarding treatment of credit costs and its overseas operations; and  * MUFG Should Struggle Globally Too: The lack of provisioning is far from the only problem MUFG must manage. Post-COVID-19, we calculate that MUFG America’s will have a regulatory capital shortfall of up to USD 6.5 bn or 40% of MUFG America’s stated equity; continued impairments on subsidiaries; significant Softbank (9984.JP) exposure; and Morgan Stanley’s (MS.US) MUFG dilutive E*Trade (ETFC.US) transaction.

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

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.

Thematic (Sector/Industry)

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/139/255/original/2020-06-11_08-36-54.png?1591832240" class="editor-image img-responsive" data-smartkarma-image-id="139255"></figure><div class="content-caption">Source: Japan Analytics</div>STRESS TESTS - This Insight is the first in a series that will use a variety of standard and less-frequently used 'stress-tests' to look through the current euphoria and assess where business risk is concentrated among larger Japanese companies. According to Tokyo Shoko Research, 171 listed Japanese firms have raised nearly ¥10 trillion in new funds to weather COVID-19.ALTMAN Z-SCORES - The first Insight will update our earlier Who's<a href="https://www.smartkarma.com/insights/japan-who-s-swimming-naked-part-2-altman-z-score" target="_blank" data-smartkarma-citation="insights:37316" rel="noopener"> Swimming Naked?</a> Insight and focus on the Altman Z-Score as updated for the most recent quarterly results for both manufacturing and non-manufacturing companies.  In each category, ee will look at both the companies that are below Altman's 'distress' levels and those companies that have the most significant negative deviation from their seven-year average score. Only six of the bottom-thirty manufacturing and five of the bottom-thirty manufacturing companies have outperformed over one year. Many are already Oversold and offer potential value opportunities -as with <a href="https://www.smartkarma.com/entities/nissan-motor-co-ltd" target="_blank" data-smartkarma-citation="entities:72:1" rel="noopener">Nissan Motor (7201 JP)</a> which is now as distressed as when Carlos Ghosn first arrived.  QUASI-FINANCIAL FIRMS - The Z-Score methodology does not work for financial firms. Accordingly, five non-financial companies which have significant financial subsidiaries -  <a href="https://www.smartkarma.com/entities/rakuten-inc" target="_blank" data-smartkarma-citation="entities:31:1" rel="noopener">Rakuten (4755 JP)</a>, <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>, <a href="https://www.smartkarma.com/entities/japan-post-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:359:1" rel="noopener">Japan Post (6178 JP)</a>, <a href="https://www.smartkarma.com/entities/softbank-group-corp" target="_blank" data-smartkarma-citation="entities:315:1" rel="noopener">Softbank Group (9984 JP)</a> and <a href="https://www.smartkarma.com/entities/sony-corp" target="_blank" data-smartkarma-citation="entities:563:1" rel="noopener">Sony (6758 JP)</a>- have been excluded from this analysis.

Source: Japan AnalyticsSTRESS TESTS - This Insight is the first in a series that will use a variety of standard and less-frequently used 'stress-tests' to look through the current euphoria and assess where business risk is concentrated among larger Japanese companies. According to Tokyo Shoko Research, 171 listed Japanese firms have raised nearly ¥10 trillion in new funds to weather COVID-19.ALTMAN Z-SCORES - The first Insight will update our earlier Who's Swimming Naked? Insight and focus on the Altman Z-Score as updated for the most recent quarterly results for both manufacturing and non-manufacturing companies.  In each category, ee will look at both the companies that are below Altman's 'distress' levels and those companies that have the most significant negative deviation from their seven-year average score. Only six of the bottom-thirty manufacturing and five of the bottom-thirty manufacturing companies have outperformed over one year. Many are already Oversold and offer potential value opportunities -as with Nissan Motor (7201 JP) which is now as distressed as when Carlos Ghosn first arrived.  QUASI-FINANCIAL FIRMS - The Z-Score methodology does not work for financial firms. Accordingly, five non-financial companies which have significant financial subsidiaries -  Rakuten (4755 JP), Z Holdings (4689 JP), Japan Post (6178 JP), Softbank Group (9984 JP) and Sony (6758 JP)- have been excluded from this analysis. 

🇯🇵 JAPAN - Stress Tests Part 1 - Altman Z-Scores

Telco/Internet specialist

Kirk Boodry

Redex Research

Softbank has tested 44,000 people for Covid-19 antibodies with an infection rate of 0.44% including 1.8% for medical workers and 0.23% for its own employees.  A government spokesman said these results largely match what the Health Ministry has seen implying the number of Covid-19 infections in Japan is close to 291,000. That is higher than the 17,156 confirmed cases reported through diagnostic testing (looks for active cases) but either number confirms that Japan has managed to mitigate the impacts of Covid-19 so far. Japan has been an enigma in global comparisons as Covid-19 rates stayed low despite a lack of aggressive testing, contract tracing and lock-down measures used in Korea, Taiwan and Hong Kong.  It appears that social distancing and use of PPE have helped and we look at some of the measures below.

Softbank has tested 44,000 people for Covid-19 antibodies with an infection rate of 0.44% including 1.8% for medical workers and 0.23% for its own employees.  A government spokesman said these results largely match what the Health Ministry has seen implying the number of Covid-19 infections in Japan is close to 291,000. That is higher than the 17,156 confirmed cases reported through diagnostic testing (looks for active cases) but either number confirms that Japan has managed to mitigate the impacts of Covid-19 so far. Japan has been an enigma in global comparisons as Covid-19 rates stayed low despite a lack of aggressive testing, contract tracing and lock-down measures used in Korea, Taiwan and Hong Kong.  It appears that social distancing and use of PPE have helped and we look at some of the measures below.

Softbank Covid-19 Testing Highlights Japan's Resistance to the Pandemic

Softbank-backed insurtech platform Lemonade has filed a preliminary prospectus to list on NYSE. The company reportedly considered an IPO last year but Uber share price erosion and the failed WeWork listing made that unattractive for the loss-making company. The financials are modestly better now although the major change may be a recovery in equity markets that makes testing the waters palatable. This is not a major listing for Vision Fund as the estimated SVF investment of $400mn puts it mid-table in size (#33 on our list) but a successful listing would mark the first IPO for the fund since last year, signaling a path to liquidity for private investments that have caused so much concern in 2020. There are risks as Lemonade boasts the same combination of a high valuation and material operating losses that drove choppy trading for VF candidates but upside for those same companies now bodes well (VF’s public portfolio is +28% QTD). The main driver for Softbank’s share price continues to be market reactions to asset sale and debt reduction plans whilst ongoing share buybacks provide support.

Softbank-backed insurtech platform Lemonade has filed a preliminary prospectus to list on NYSE. The company reportedly considered an IPO last year but Uber share price erosion and the failed WeWork listing made that unattractive for the loss-making company. The financials are modestly better now although the major change may be a recovery in equity markets that makes testing the waters palatable. This is not a major listing for Vision Fund as the estimated SVF investment of $400mn puts it mid-table in size (#33 on our list) but a successful listing would mark the first IPO for the fund since last year, signaling a path to liquidity for private investments that have caused so much concern in 2020. There are risks as Lemonade boasts the same combination of a high valuation and material operating losses that drove choppy trading for VF candidates but upside for those same companies now bodes well (VF’s public portfolio is +28% QTD). The main driver for Softbank’s share price continues to be market reactions to asset sale and debt reduction plans whilst ongoing share buybacks provide support.

Softbank Group: When Your Private Portfolio Gives You Lemons, Offer Lemonade

The underlying value of Softbank Group is back over ¥10,000/share, the same level as mid-February just before the initial concerns about Covid-19 slammed the markets.  The corresponding share price has slightly lagged as concerns over private valuations at Vision Fund have been weighted more heavily than the positive benefits of buying backs shares, at least so far, but shares are up 94% off the 19 March low.  Softbank shares now trade at a 48% discount to fair value up compared to the all-time low of 68% and largely in-line with the levels last year after the WeWork IPO debacle. There is room for Softbank shares to move slightly higher should recent stock market gains hold but we think the discount is approaching appropriate levels.

The underlying value of Softbank Group is back over ¥10,000/share, the same level as mid-February just before the initial concerns about Covid-19 slammed the markets.  The corresponding share price has slightly lagged as concerns over private valuations at Vision Fund have been weighted more heavily than the positive benefits of buying backs shares, at least so far, but shares are up 94% off the 19 March low.  Softbank shares now trade at a 48% discount to fair value up compared to the all-time low of 68% and largely in-line with the levels last year after the WeWork IPO debacle. There is room for Softbank shares to move slightly higher should recent stock market gains hold but we think the discount is approaching appropriate levels. 

Softbank Group: Covid-19 Round Trip for the Share Price

Japan

SoftBank Group Corp provides telecommunication services.  The Company also operates ADSL (Asymmetric Digital Subscriber Line) and fiber optic high-speed Internet connection, e-Commerce businesses, and Internet based advertising and auction businesses.

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Softbank Group (ADR) (SFTBY US)

MUFG – ACOM Monthly Data Disappoints

*Weak May 2020 Data: ACOM (8572.JP) released poor May 2020 monthly performance data on June 10th which exhibited negative consumer lending growth...

Thomas J. Monaco

🇯🇵 JAPAN - Stress Tests Part 1 - Altman Z-Scores

STRESS TESTS - This Insight is the first in a series that will use a variety of standard and less-frequently used 'stress-tests' to look through...

Campbell Gunn

Softbank Covid-19 Testing Highlights Japan's Resistance to the Pandemic

Softbank has tested 44,000 people for Covid-19 antibodies with an infection rate of 0.44% including 1.8% for medical workers and 0.23% for its own...

Kirk Boodry

Softbank Group: When Your Private Portfolio Gives You Lemons, Offer Lemonade

Softbank-backed insurtech platform Lemonade has filed a preliminary prospectus to list on NYSE. The company reportedly considered an IPO last year...

Kirk Boodry

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

MUFG – ACOM Monthly Data Disappoints

*Weak May 2020 Data: ACOM (8572.JP) released poor May 2020 monthly performance data on June 10th which exhibited negative consumer lending growth...

Thomas J. Monaco

🇯🇵 JAPAN - Stress Tests Part 1 - Altman Z-Scores

STRESS TESTS - This Insight is the first in a series that will use a variety of standard and less-frequently used 'stress-tests' to look through...

Campbell Gunn

Softbank Covid-19 Testing Highlights Japan's Resistance to the Pandemic

Softbank has tested 44,000 people for Covid-19 antibodies with an infection rate of 0.44% including 1.8% for medical workers and 0.23% for its own...

Kirk Boodry

Softbank Group: When Your Private Portfolio Gives You Lemons, Offer Lemonade

Softbank-backed insurtech platform Lemonade has filed a preliminary prospectus to list on NYSE. The company reportedly considered an IPO last year...

Kirk Boodry

Softbank Group: Covid-19 Round Trip for the Share Price

The underlying value of Softbank Group is back over ¥10,000/share, the same level as mid-February just before the initial concerns about Covid-19...

Kirk Boodry