Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<a href="https://www.smartkarma.com/entities/315" target="_blank" data-smartkarma-citation="entities:315:1">Softbank Group (9984 JP)</a> last week announced its Q3 results. The stock popped 15+% quickly that day and stayed up all day long, closing at +17.7%. The next day was up small. Over the two days volume was 74.1 million shares. 
I expect the shares were up for two reasons.
<ol>
<li>People figured out Son-san could sell as well as buy. And the sale of <a href="https://www.smartkarma.com/entities/5891" target="_blank" data-smartkarma-citation="entities:5891:1">NVIDIA Corp (NVDA US)</a> shares was done very well. </li>
<li>Softbank announced a buyback of ¥600 billion - its largest buyback ever. </li>
</ol>
The first was surprisingly well-executed. The ownership and transfers of assets from Softbank to the Softbank Vision Fund are sometimes tough to follow, and this should give non-Softbank SVF investors some pause, but Softbank's ability to get leverage on assets is good, and the collar transaction was - in the eyes of this former derivatives strategist - very well done.
The US$15bn+ gain in market cap over the next two days was probably 10 times the net income impact of the savings on the NVIDIA trade, which means investors are paying 10x earnings for the same thing to incrementally happen every year vs what they thought was going to happen before Thursday. Financial trading businesses have generally traded over time in the high single digit PERs because of the variability of results, so the jump was a little more than it should have been for that, especially if you think some years the "right" jump because of better-than-market execution will have less impact than $2.9bn.
So the rest was either due to other business going well, or the share buyback. At ¥600 billion and at Friday's closing price, it is about 7 days worth of volume using the 3-month volume average prior to the earnings release and 8.6 days of volume using a one-year average. That means they could buy 10% of ADV every day for 70-86 trading days and complete the buyback, or it means they could buy 3.4% of the volume every trading day. 
That doesn't seem like a lot. But it is.

Softbank Group (9984 JP) last week announced its Q3 results. The stock popped 15+% quickly that day and stayed up all day long, closing at +17.7%. The next day was up small. Over the two days volume was 74.1 million shares. 
I expect the shares were up for two reasons.

People figured out Son-san could sell as well as buy. And the sale of NVIDIA Corp (NVDA US) shares was done very well. 
Softbank announced a buyback of ¥600 billion - its largest buyback ever. 

The first was surprisingly well-executed. The ownership and transfers of assets from Softbank to the Softbank Vision Fund are sometimes tough to follow, and this should give non-Softbank SVF investors some pause, but Softbank's ability to get leverage on assets is good, and the collar transaction was - in the eyes of this former derivatives strategist - very well done.
The US$15bn+ gain in market cap over the next two days was probably 10 times the net income impact of the savings on the NVIDIA trade, which means investors are paying 10x earnings for the same thing to incrementally happen every year vs what they thought was going to happen before Thursday. Financial trading businesses have generally traded over time in the high single digit PERs because of the variability of results, so the jump was a little more than it should have been for that, especially if you think some years the "right" jump because of better-than-market execution will have less impact than $2.9bn.
So the rest was either due to other business going well, or the share buyback. At ¥600 billion and at Friday's closing price, it is about 7 days worth of volume using the 3-month volume average prior to the earnings release and 8.6 days of volume using a one-year average. That means they could buy 10% of ADV every day for 70-86 trading days and complete the buyback, or it means they could buy 3.4% of the volume every trading day. 
That doesn't seem like a lot. But it is.

Softbank Buyback More Than It Appears To Be

IPO and L/S equity, 2015 Starmine top stock picker, Global Equity Research Ltd

Rickin Thakrar

IPO and L/S equity, 2015 Starmine top stock picker

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

In this version of the GER weekly research wrap, we remind of our work on <a href="https://www.smartkarma.com/entities/315" target="_blank" data-smartkarma-citation="entities:315:1" rel="noopener">Softbank Group (9984 JP)</a> before its 20% share rally which may have been prognosticated by its sweeping debt tender. Secondly, Arun updates on his excellent and contrarian call on <a href="https://www.smartkarma.com/entities/27250" target="_blank" data-smartkarma-citation="entities:27250:1" rel="noopener">Pinduoduo (PDD US)</a> after its follow on placement announcement - of which he takes a more moderated view with the shares up 60% since IPO launch. Finally, we update on the IPO of <a href="https://www.smartkarma.com/entities/27796" target="_blank" data-smartkarma-citation="entities:27796:1" rel="noopener">Koolearn (1373356D HK)</a> which provided an update to its prospectus.  A calendar of upcoming catalysts is also attached. 
More details can be found below. 
Best of luck for the new week - Rickin, Venkat and Arun

In this version of the GER weekly research wrap, we remind of our work on Softbank Group (9984 JP) before its 20% share rally which may have been prognosticated by its sweeping debt tender. Secondly, Arun updates on his excellent and contrarian call on Pinduoduo (PDD US) after its follow on placement announcement - of which he takes a more moderated view with the shares up 60% since IPO launch. Finally, we update on the IPO of Koolearn (1373356D HK) which provided an update to its prospectus.  A calendar of upcoming catalysts is also attached. 
More details can be found below. 
Best of luck for the new week - Rickin, Venkat and Arun

Last Week in GER Research: Softbank, Pinduoduo, and Koolearn

'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. 

Quantitative Analysis

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/078/341/original/2019-02-10_05-07-57.png?1549742898" class="editor-image img-responsive" data-smartkarma-image-id="78341"></figure><div class="content-caption">Source: Japan Analytics</div>BOTTOM LINE BREAKDOWN - 1,277 earnings results and/or revisions announcements were released last week in Japan covering 36% of listed market capitalisation. The good news is that aggregate trailing-twelve-month (TTM) Operating Income only declined by ¥300b. Less welcome is the ¥1.7t decline in TTM Net Income to which <a href="https://www.smartkarma.com/entities/73" target="_blank" data-smartkarma-citation="entities:73:1">Toyota Motor (7203 JP)</a>, <a href="https://www.smartkarma.com/entities/154" target="_blank" data-smartkarma-citation="entities:154:1">Honda Motor (7267 JP)</a>, <a href="https://www.smartkarma.com/entities/315" target="_blank" data-smartkarma-citation="entities:315:1">Softbank Group (9984 JP)</a>, <a href="https://www.smartkarma.com/entities/7797" target="_blank" data-smartkarma-citation="entities:7797:1">Hitachi (6501 JP)</a> were the most significant contributors, each declining by more than ¥200b. Three 'financials', <a href="https://www.smartkarma.com/entities/742" target="_blank" data-smartkarma-citation="entities:742:1">Nomura Holdings (8604 JP)</a>, <a href="https://www.smartkarma.com/entities/219" target="_blank" data-smartkarma-citation="entities:219:1">Mizuho Financial Group (8411 JP)</a>, and <a href="https://www.smartkarma.com/entities/6267" target="_blank" data-smartkarma-citation="entities:6267:1">Suruga Bank (8358 JP)</a> subtracted ¥400b between them. Only <a href="https://www.smartkarma.com/entities/563" target="_blank" data-smartkarma-citation="entities:563:1">Sony (6758 JP)</a> and <a href="https://www.smartkarma.com/entities/637" target="_blank" data-smartkarma-citation="entities:637:1">Toshiba (6502 JP)</a> added more than ¥100b for the quarter. The substantial 'gap' between forecast and TTM Net Income has been reduced to just ¥600b, again confirming the reliability of corporate forecasting in Japan. The All-Market PER is now 13.5 times but will likely rise as aggregate Net Income falls further in the next two weeks.<div class="content-highlight">In the DETAIL section below, we review this year's results of all listed companies in aggregate, update our All-Market and Sector Results &amp; Revision Scores and look at the twenty-five best and worst large-cap company results over the last week, with short comments on <a href="https://www.smartkarma.com/entities/13176" target="_blank" data-smartkarma-citation="entities:13176:1">Nabtesco Corp (6268 JP)</a>, <a href="https://www.smartkarma.com/entities/8467" target="_blank" data-smartkarma-citation="entities:8467:1">Workman (7564 JP)</a>, <a href="https://www.smartkarma.com/entities/20823" target="_blank" data-smartkarma-citation="entities:20823:1">Nakanishi (7716 JP)</a>, and <a href="https://www.smartkarma.com/entities/747" target="_blank" data-smartkarma-citation="entities:747:1">DeNA (2432 JP)</a></div>

Source: Japan AnalyticsBOTTOM LINE BREAKDOWN - 1,277 earnings results and/or revisions announcements were released last week in Japan covering 36% of listed market capitalisation. The good news is that aggregate trailing-twelve-month (TTM) Operating Income only declined by ¥300b. Less welcome is the ¥1.7t decline in TTM Net Income to which Toyota Motor (7203 JP), Honda Motor (7267 JP), Softbank Group (9984 JP), Hitachi (6501 JP) were the most significant contributors, each declining by more than ¥200b. Three 'financials', Nomura Holdings (8604 JP), Mizuho Financial Group (8411 JP), and Suruga Bank (8358 JP) subtracted ¥400b between them. Only Sony (6758 JP) and Toshiba (6502 JP) added more than ¥100b for the quarter. The substantial 'gap' between forecast and TTM Net Income has been reduced to just ¥600b, again confirming the reliability of corporate forecasting in Japan. The All-Market PER is now 13.5 times but will likely rise as aggregate Net Income falls further in the next two weeks.In the DETAIL section below, we review this year's results of all listed companies in aggregate, update our All-Market and Sector Results &amp; Revision Scores and look at the twenty-five best and worst large-cap company results over the last week, with short comments on Nabtesco Corp (6268 JP), Workman (7564 JP), Nakanishi (7716 JP), and DeNA (2432 JP)

Japan: Results & Revisions Second Cut - Bottom Line Breakdown

Senior Credit Analyst, Lucror Analytics

Trung Nguyen

Senior Credit Analyst

High Yield Experts

Lucror Analytics

Lucror Analytics is a leading credit and ESG research specialist and a provider of technology solutions for differentiated fixed income strategies. Our roots are in bottom-up fundamental credit analysis with a specialization in high yield corporate credits from Europe, Asia and Latin America. We are one of few research specialists integrating ESG considerations with fundamental credit research through a dedicated ESG platform. Our ESG assessment covers five key criteria: Disclosure, E,S, & G Pillars, Controversies, ESG Impact on Credit and ESG Momentum.

Recognizing the importance and value-add of Factor Investing in fixed income, Lucror developed the Smart Quant Navigator (SQN), an intuitive platform that helps clients devise and implement factor-based strategies ranging from pure quant to active fundamental, with integrated ESG.

Our company has been at the forefront of developments in the fixed income markets, identifying opportunities and consistently delivering new products and value-adding solutions to clients. Lucror has close relationships with the largest and most reputable asset managers, family offices, hedge funds, investment and wealth managers globally.

Credit

Softbank has reported sound results for the nine months ended 31 December 2018. The company is proposing to buy back JPY 600 bn of its shares, which will be funded by part of the proceeds from the domestic IPO. Our Credit Bias remains "Negative", owing to the deterioration in the financial risk profile in recent years. However, this trend appears to have abated given the recent results, and we may return to "Stable" should the full-year numbers evidence the same trend.

   Softbank has reported sound results for the nine months ended 31 December 2018. The company is proposing to buy back JPY 600 bn of its shares, which will be funded by part of the proceeds from the domestic IPO.    Our Credit Bias remains "Negative", owing to the deterioration in the financial risk profile in recent years. However, this trend appears to have abated given the recent results, and we may return to "Stable" should the full-year numbers evidence the same trend. 

Softbank - Earnings Flash - Q3 FY 2018-19 Results - Lucror Analytics

In this version of the GER weekly research wrap, we dig into the debt tender for <a href="https://www.smartkarma.com/entities/315" target="_blank" data-smartkarma-citation="entities:315:1" rel="noopener">Softbank Group (9984 JP)</a> and assess the merger between <a href="https://www.smartkarma.com/entities/323" target="_blank" data-smartkarma-citation="entities:323:1" rel="noopener">TPG Telecom Ltd (TPM AU)</a> and VHA. On the IPO front, we initiate on <a href="https://www.smartkarma.com/entities/27882" target="_blank" data-smartkarma-citation="entities:27882:1" rel="noopener">CStone Pharma (CSTONE HK)</a> while we update on <a href="https://www.smartkarma.com/entities/27247" target="_blank" data-smartkarma-citation="entities:27247:1" rel="noopener">Ebang (EBANG HK)</a> . Finally, we dig into the beat at <a href="https://www.smartkarma.com/entities/665" target="_blank" data-smartkarma-citation="entities:665:1" rel="noopener">Facebook Inc A (FB US)</a> and assess whether there are further legs for the investment case. We also provide a list of upcoming catalysts for upcoming event-driven ideas. 
More details can be found below. 
Best of luck for the new week - Rickin, Venkat and Arun

In this version of the GER weekly research wrap, we dig into the debt tender for Softbank Group (9984 JP) and assess the merger between TPG Telecom Ltd (TPM AU) and VHA. On the IPO front, we initiate on CStone Pharma (CSTONE HK) while we update on Ebang (EBANG HK) . Finally, we dig into the beat at Facebook Inc A (FB US) and assess whether there are further legs for the investment case. We also provide a list of upcoming catalysts for upcoming event-driven ideas. 
More details can be found below. 
Best of luck for the new week - Rickin, Venkat and Arun

Last Week in GER Research: Softbank, TPG Telecom, Cstone Pharma, Ebang and Facebook

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)

Softbank Buyback More Than It Appears To Be

Softbank Group (9984 JP) last week announced its Q3 results. The stock popped 15+% quickly that day and stayed up all day long, closing at +17.7%....

Travis Lundy

Last Week in GER Research: Softbank, Pinduoduo, and Koolearn

In this version of the GER weekly research wrap, we remind of our work on Softbank Group (9984 JP) before its 20% share rally which may have been...

Rickin Thakrar

Japan: Results & Revisions Second Cut - Bottom Line Breakdown

BOTTOM LINE BREAKDOWN - 1,277 earnings results and/or revisions announcements were released last week in Japan covering 36% of listed market...

Campbell Gunn

Softbank - Earnings Flash - Q3 FY 2018-19 Results - Lucror Analytics

Softbank has reported sound results for the nine months ended 31 December 2018. The company is proposing to buy back JPY 600 bn of its shares,...

Lucror Analytics

Last Week in GER Research: Softbank, TPG Telecom, Cstone Pharma, Ebang and Facebook

In this version of the GER weekly research wrap, we dig into the debt tender for Softbank Group (9984 JP) and assess the merger between TPG Telecom...

Rickin Thakrar

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