Telco/Internet specialist

Kirk Boodry

Redex Research

Thematic (Sector/Industry)

Japanese telcos have plenty of financial flexibility and political/social cover to maintain current policies on returns to shareholders. We expect modest annual increases in dividends to continue but the level of buybacks may be less than FY19 which were at historically high levels (we are not including Softbank Group’s policies here). The impact of Covid-19 on returns policy should be limited although pricing/service revenue growth may be under some pressure from government policies to promote telework and online education. We have seen evidence of this already as the incumbent annual student discount plan campaigns now include free data.  Despite Covid-19 and Rakuten mobile entry, the Japanese telcos remain a safe harbor for investors.

Japanese telcos have plenty of financial flexibility and political/social cover to maintain current policies on returns to shareholders. We expect modest annual increases in dividends to continue but the level of buybacks may be less than FY19 which were at historically high levels (we are not including Softbank Group’s policies here). The impact of Covid-19 on returns policy should be limited although pricing/service revenue growth may be under some pressure from government policies to promote telework and online education. We have seen evidence of this already as the incumbent annual student discount plan campaigns now include free data.  Despite Covid-19 and Rakuten mobile entry, the Japanese telcos remain a safe harbor for investors. 

Japan Telecoms: Drilling Down on Free Cash Flow and Shareholder Returns

Lakshmi Iyer, CFA

Credit

We have examined  the impact of  change of control clauses across various companies' bonds (<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> , <a href="https://www.smartkarma.com/entities/future-retail-ltd-4b025726-3be6-41e3-9f59-22ab2a17a8b2" target="_blank" data-smartkarma-citation="entities:26799:1" rel="noopener">Future Retail (FRETAIL IN)</a> and <a href="https://www.smartkarma.com/entities/car-inc" target="_blank" data-smartkarma-citation="entities:942:1" rel="noopener">Car Inc (699 HK)</a> in terms of market reactions and non-reactions.  Given the current scenario, we think investors should keep an eye on the stock prices of issuers as well as promoters' shareholding data, wherever possible.

We have examined  the impact of  change of control clauses across various companies' bonds (Softbank Group (9984 JP) , Future Retail (FRETAIL IN) and Car Inc (699 HK) in terms of market reactions and non-reactions.  Given the current scenario, we think investors should keep an eye on the stock prices of issuers as well as promoters' shareholding data, wherever possible.

Change of Control Clauses - Adding to Volatility

Consumer Analyst / Channel Surveillance Specialist, Trudence Capital Advisors

Pranav Bhavsar

Consumer Analyst / Channel Surveillance Specialist

ASA Capital Management

ASA Capital Management is a boutique Research and Investment Advisory firm focusing on primary research in India. ASA provides bespoke research services to Institutional Clients with a focus on due diligence backed with primary research, Field Trips & Channel Checks.

Equity Bottom-Up

Meta Platforms (Facebook) / Equity Bottom-Up

In this Insight, we give you an overview of the potential impact of the recently announced deal between <a href="https://www.smartkarma.com/entities/facebook-inc-a" target="_blank" data-smartkarma-citation="entities:665:1" rel="noopener">Facebook Inc A (FB US)</a> and <a href="https://www.smartkarma.com/entities/reliance-industries-ltd" target="_blank" data-smartkarma-citation="entities:198:1" rel="noopener">Reliance Industries (RIL IN)</a> for its Jio Platforms, a wholly-owned subsidiary of RIL. The Insight will focus upon implications of the deal on Online Retail (JioMart), Payments (JioMoney, Whatsapp Pay) along with the strategy for digitising Kirana (Small Mom and Pop Stores). 
While the <a href="https://www.smartkarma.com/entities/reliance-industries-ltd" target="_blank" data-smartkarma-citation="entities:198:1" rel="noopener">Reliance Industries (RIL IN)</a> shareholders may rejoice on this deal, <a href="https://www.smartkarma.com/entities/facebook-inc-a" target="_blank" data-smartkarma-citation="entities:665:1" rel="noopener">Facebook Inc A (FB US)</a> will have to wait a little longer before they can see any material benefits from this deal.
Our Previous Insights that would be relevant to this Insight and our arguments 
<a href="https://www.smartkarma.com/insights/paytm-aiming-for-the-moon-dominance-to-further-strengthen-with-all-in-one-pos" target="_blank" data-smartkarma-citation="insights:36377" rel="noopener">Paytm | Aiming for the Moon | Dominance to Further Strengthen with All-In-One POS</a> 
<a href="https://www.smartkarma.com/insights/alibaba-baba-covid-19-and-the-great-india-opportunity-an-on-ground-perspective" target="_blank" data-smartkarma-citation="insights:36902" rel="noopener">Alibaba (BABA) | COVID-19 and the Great India Opportunity - An On Ground Perspective</a> 
<a href="https://www.smartkarma.com/insights/india-payments-paytm-a-first-time-investor-s-guide" target="_blank" data-smartkarma-citation="insights:31955" rel="noopener">India Payments | Paytm - A First Time Investor's Guide</a> 
<a href="https://www.smartkarma.com/insights/visit-note-the-case-for-kirana-stores-their-fight-with-modern-retail" target="_blank" data-smartkarma-citation="insights:29130" rel="noopener">Visit Note | The Case For "Kirana" Stores &amp; Their Fight with Modern Retail</a> 
<a href="https://www.smartkarma.com/insights/india-payments-what-really-matters-and-suggested-channel-checks" target="_blank" data-smartkarma-citation="insights:29036" rel="noopener">India Payments | What Really Matters and Suggested Channel Checks</a> 
<a href="https://www.smartkarma.com/insights/changing-lanes-why-regulation-and-npci-makes-payments-a-low-moat-losing-business-in-india" target="_blank" data-smartkarma-citation="insights:26931" rel="noopener">Changing Lanes | Why Regulation and NPCI Makes Payments a Low Moat Losing Business in India</a>

In this Insight, we give you an overview of the potential impact of the recently announced deal between Facebook Inc A (FB US) and Reliance Industries (RIL IN) for its Jio Platforms, a wholly-owned subsidiary of RIL. The Insight will focus upon implications of the deal on Online Retail (JioMart), Payments (JioMoney, Whatsapp Pay) along with the strategy for digitising Kirana (Small Mom and Pop Stores). 
While the Reliance Industries (RIL IN) shareholders may rejoice on this deal, Facebook Inc A (FB US) will have to wait a little longer before they can see any material benefits from this deal.
Our Previous Insights that would be relevant to this Insight and our arguments 
Paytm | Aiming for the Moon | Dominance to Further Strengthen with All-In-One POS 
Alibaba (BABA) | COVID-19 and the Great India Opportunity - An On Ground Perspective 
India Payments | Paytm - A First Time Investor's Guide 
Visit Note | The Case For "Kirana" Stores &amp; Their Fight with Modern Retail 
India Payments | What Really Matters and Suggested Channel Checks 
Changing Lanes | Why Regulation and NPCI Makes Payments a Low Moat Losing Business in India 

Facebook (FB US) | FB Shareholders Have Little to Rejoice About India's Jio Platforms

'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.

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/129/019/original/2020-04-22_06-23-27.png?1587504229" class="editor-image img-responsive" data-smartkarma-image-id="129019"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/129/021/original/2020-04-22_06-24-35.png?1587504305" class="editor-image img-responsive" data-smartkarma-image-id="129021"></figure><div class="content-caption">Source • Financial Times</div>CATCHING UP - Japan has now surpassed South Korea in terms of both the number of confirmed cases of COVID-19 (11,431) and the cumulative number of deaths (275). Although the daily number of new cases has peaked, the number of daily death will increase for the rest of this month which will likely require an extension of the nationwide 'state of emergency' beyond the end of the Golden Week holidays on March 6th. Such a prolongation is not yet discounted in the equity market. A recent YouGov survey suggests that only 18% of Japan people have stopped going to work, the lowest level amongst the 26 countries covered.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/129/022/original/2020-04-22_06-48-21.png?1587505730" class="editor-image img-responsive" data-smartkarma-image-id="129022"></figure><div class="content-caption">Source • Japan Analytics</div>DAIRY DEFICIENCY - With schools and many restaurants and hotels closed, the consumption of dairy products in Japan has declined to the point that the food ministry (MAFF) is requesting those at home to drink milk to save farms and livestock. Please see our recent bearish <a href="https://www.smartkarma.com/insights/quantamental-analysis-shows-meiji-s-perception-as-a-defensive-stock-could-be-a-delusion" target="_blank" data-smartkarma-citation="insights:38288" rel="noopener">Insight</a> on <a href="https://www.smartkarma.com/entities/meiji-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:15996:1" rel="noopener">Meiji Holdings (2269 JP)</a>.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/129/024/original/2020-04-22_06-53-01.png?1587506077" class="editor-image img-responsive" data-smartkarma-image-id="129024"></figure><div class="content-caption">Source • Japan Analytics</div>TAXI FARE - The are now hordes of empty taxis roaming the streets plying for non-existent fares.  The transport ministry (MLITT) has decided to loosen its taxi regulations to allow taxis to engage in food delivery. While a negative for <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>'s Uber Eats in Japan, this news seems to have prompted a 'pop' in the shares of Japan's only listed, and normally uninvestable, taxi company - <a href="https://www.smartkarma.com/entities/daiwa-motor-transportation" target="_blank" data-smartkarma-citation="entities:11886:1" rel="noopener">Daiwa Motor Transportation (9082 JP)</a>. In the DETAIL below, we shall review the results, revisions and initial forecast announcements made yesterday.  The positive/neutral/negative balance for the seven results was 2:2:3; and for the 13 revisions/forecasts, the split was 3:1:9. Of the six companies reporting annual results, only one made a forecast for the current year. Three companies withdrew annual forecasts, of which one also cancelled its dividend, while one REIT, <a href="https://www.smartkarma.com/entities/mirai-corp" target="_blank" data-smartkarma-citation="entities:27741:1" rel="noopener">Mirai (3476 JP)</a>, cut its dividend.

Source • Financial TimesCATCHING UP - Japan has now surpassed South Korea in terms of both the number of confirmed cases of COVID-19 (11,431) and the cumulative number of deaths (275). Although the daily number of new cases has peaked, the number of daily death will increase for the rest of this month which will likely require an extension of the nationwide 'state of emergency' beyond the end of the Golden Week holidays on March 6th. Such a prolongation is not yet discounted in the equity market. A recent YouGov survey suggests that only 18% of Japan people have stopped going to work, the lowest level amongst the 26 countries covered.Source • Japan AnalyticsDAIRY DEFICIENCY - With schools and many restaurants and hotels closed, the consumption of dairy products in Japan has declined to the point that the food ministry (MAFF) is requesting those at home to drink milk to save farms and livestock. Please see our recent bearish Insight on Meiji Holdings (2269 JP).Source • Japan AnalyticsTAXI FARE - The are now hordes of empty taxis roaming the streets plying for non-existent fares.  The transport ministry (MLITT) has decided to loosen its taxi regulations to allow taxis to engage in food delivery. While a negative for Softbank Group (9984 JP)'s Uber Eats in Japan, this news seems to have prompted a 'pop' in the shares of Japan's only listed, and normally uninvestable, taxi company - Daiwa Motor Transportation (9082 JP). In the DETAIL below, we shall review the results, revisions and initial forecast announcements made yesterday.  The positive/neutral/negative balance for the seven results was 2:2:3; and for the 13 revisions/forecasts, the split was 3:1:9. Of the six companies reporting annual results, only one made a forecast for the current year. Three companies withdrew annual forecasts, of which one also cancelled its dividend, while one REIT, Mirai (3476 JP), cut its dividend. 

🇯🇵 JAPAN • Revisions & Results 21st April - Catching Up : Revising Down

In this report, we dig into the Vision Fund portfolio to see which investments drive what looks to be a ~¥1,000bn operating loss for Q4. We have a fairly good idea that Didi Chuxing drives one-quarter of that, whilst an impairment at Grab is also likely. Beyond that, we believe ride hailing and selected eCommerce (Ola Cabs, Guazi are the largest), struggling start-ups (Oyo Hotels and CloudMinds lead this group) and bankruptcies (Brandless for sure but possibly Zume, Opendoor, Getaround and Fair) can account for most of the downside. We expect that Covid-19 is going to feature strongly when results are presented but many of these companies were hurting before the impact of the pandemic became clear and it is possible that further impairments are still to come. Softbank share have recently outperformed in the bear market rally and (probably) share repurchases but we would be cautious.

In this report, we dig into the Vision Fund portfolio to see which investments drive what looks to be a ~¥1,000bn operating loss for Q4. We have a fairly good idea that Didi Chuxing drives one-quarter of that, whilst an impairment at Grab is also likely. Beyond that, we believe ride hailing and selected eCommerce (Ola Cabs, Guazi are the largest), struggling start-ups (Oyo Hotels and CloudMinds lead this group) and bankruptcies (Brandless for sure but possibly Zume, Opendoor, Getaround and Fair) can account for most of the downside. We expect that Covid-19 is going to feature strongly when results are presented but many of these companies were hurting before the impact of the pandemic became clear and it is possible that further impairments are still to come. Softbank share have recently outperformed in the bear market rally and (probably) share repurchases but we would be cautious.

Softbank Group: Deep Dive into Vision Fund's $10bn in Expected Valuation Losses for This Quarter

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)

Japan Telecoms: Drilling Down on Free Cash Flow and Shareholder Returns

Japanese telcos have plenty of financial flexibility and political/social cover to maintain current policies on returns to shareholders. We expect...

Kirk Boodry

Change of Control Clauses - Adding to Volatility

We have examined the impact of change of control clauses across various companies' bonds (Softbank Group (9984 JP) , Future Retail (FRETAIL IN)...

Lakshmi Iyer, CFA

Facebook (FB US) | FB Shareholders Have Little to Rejoice About India's Jio Platforms

In this Insight, we give you an overview of the potential impact of the recently announced deal between Facebook Inc A (FB US) and Reliance...

Pranav Bhavsar

🇯🇵 JAPAN • Revisions & Results 21st April - Catching Up : Revising Down

CATCHING UP - Japan has now surpassed South Korea in terms of both the number of confirmed cases of COVID-19 (11,431) and the cumulative number of...

Campbell Gunn

Softbank Group: Deep Dive into Vision Fund's $10bn in Expected Valuation Losses for This Quarter

In this report, we dig into the Vision Fund portfolio to see which investments drive what looks to be a ~¥1,000bn operating loss for Q4. We have a...

Kirk Boodry

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