Telco/Internet specialist

Kirk Boodry

Redex Research

Equity Bottom-Up

Z Holdings shares have sold off on disappointment over mid-term profitability targets that remain unchanged despite the addition of Line and possible synergies (and equity dilution). But management believes investments will pay off with stronger top-line growth. Some of its aspirational targets (like eCommerce leadership) seem to be a stretch but we do think that the merger gives it the resources to compete with heavyweights like Google (online ads), Facebook (social media), Amazon (eCommerce) and Rakuten (fintech). We are initiating coverage at Buy with a <a target="_blank">¥680 </a>FY21 (Mar-22) target price.

Z Holdings shares have sold off on disappointment over mid-term profitability targets that remain unchanged despite the addition of Line and possible synergies (and equity dilution). But management believes investments will pay off with stronger top-line growth. Some of its aspirational targets (like eCommerce leadership) seem to be a stretch but we do think that the merger gives it the resources to compete with heavyweights like Google (online ads), Facebook (social media), Amazon (eCommerce) and Rakuten (fintech). We are initiating coverage at Buy with a ¥680 FY21 (Mar-22) target price.

Z Holdings - Great Expectations On (The) LINE (Initiation of Coverage)

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Traditionally, telecom companies in mature markets are "easy."  Infrastructure is basically built, but there is always maintenance and capex to upgrade throughput. Churn is low. Customers occasionally add on new services. They are generally cash machines. Comparing telcos is often reasonably easy. Mostly it comes down to how aggressively the company prices to customers, how it seeks non-standard revenue off its infrastructure and sales base, or how it returns capital to shareholders. <div class="content-highlight">Every now and then, a telecom company gets complicated. <a href="https://www.smartkarma.com/entities/softbank-corp" target="_blank" data-smartkarma-citation="entities:27445:1" rel="noopener">Softbank Corp (9434 JP)</a> is now one of those companies.</div>The issue is now significant enough that one should avoid using EBIT or EBITDA (or EBITDA less capex) for Softbank Corp as a comparative tool to <a href="https://www.smartkarma.com/entities/nippon-telegraph-telephone-corporation" target="_blank" data-smartkarma-citation="entities:623:1" rel="noopener">NTT (Nippon Telegraph &amp; Telephone) (9432 JP)</a> and <a href="https://www.smartkarma.com/entities/kddi-corp" target="_blank" data-smartkarma-citation="entities:639:1" rel="noopener">KDDI Corp (9433 JP)</a> without more clarity. There is recently a new kicker involved too, which means one should probably consider Softbank Corp differently than the other two for OTHER reasons too.

Traditionally, telecom companies in mature markets are "easy."  Infrastructure is basically built, but there is always maintenance and capex to upgrade throughput. Churn is low. Customers occasionally add on new services. They are generally cash machines. Comparing telcos is often reasonably easy. Mostly it comes down to how aggressively the company prices to customers, how it seeks non-standard revenue off its infrastructure and sales base, or how it returns capital to shareholders. Every now and then, a telecom company gets complicated. Softbank Corp (9434 JP) is now one of those companies.The issue is now significant enough that one should avoid using EBIT or EBITDA (or EBITDA less capex) for Softbank Corp as a comparative tool to NTT (Nippon Telegraph &amp; Telephone) (9432 JP) and KDDI Corp (9433 JP) without more clarity. There is recently a new kicker involved too, which means one should probably consider Softbank Corp differently than the other two for OTHER reasons too. 

Softbank Corp - Accounting for The Accounting Is Complicated

Fintech & EM-focused Analyst, KT Capital Group

Alec Tseung

Fintech & EM-focused Analyst

ZhongAn Online P&C Insurance C / Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/zhongan-online-p-c-insurance-co-ltd" target="_blank" data-smartkarma-citation="entities:23681:1" rel="noopener">ZhongAn Online P&amp;C Insurance (6060 HK)</a> and <a href="https://www.smartkarma.com/entities/lemonade-inc" target="_blank" data-smartkarma-citation="entities:29163:1" rel="noopener">Lemonade Inc (LMND US)</a> are two widely known Insurtech companies in the world's two largest property &amp; casualty (P&amp;C) insurance markets</li>
<li>Based on the comparison in the following article, ZhongAn is preferred to Lemonade, both in terms of the valuation and company development</li>
<li>ZhongAn further showed encouraging signs in 2020 as it shifted the product mix towards the health segment, thanks to the pandemic, and its combined ratio was at the lowest since it started operations  </li>
</ul>



ZhongAn Online P&amp;C Insurance (6060 HK) and Lemonade Inc (LMND US) are two widely known Insurtech companies in the world's two largest property &amp; casualty (P&amp;C) insurance markets
Based on the comparison in the following article, ZhongAn is preferred to Lemonade, both in terms of the valuation and company development
ZhongAn further showed encouraging signs in 2020 as it shifted the product mix towards the health segment, thanks to the pandemic, and its combined ratio was at the lowest since it started operations  


ZhongAn Vs. Lemonade: Which One Is a Better Insurtech Bet?

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 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)

NTT (Nippon Telegraph & Telephone) / Equity Bottom-Up

It is mid-late April. That means it is time for my annual NTT Earnings Could Surprise To The Upside Because the Street Is Too Slack insight.Just over 6 months ago, <a href="https://www.smartkarma.com/entities/nippon-telegraph-telephone-corporation" target="_blank" data-smartkarma-citation="entities:623:1" rel="noopener">NTT (Nippon Telegraph &amp; Telephone) (9432 JP)</a> announced a deal to take <a href="https://www.smartkarma.com/entities/ntt-docomo-inc" target="_blank" data-smartkarma-citation="entities:1089:1" rel="noopener">NTT Docomo Inc (9437 JP)</a> private, spending nearly US$40bn to buy out minorities. I thought they paid too much for it, but given the purchase was entirely funded by debt, and they bought the remainder of NTT DoCoMo at a 5% earnings yield and a 6+% cashflow yield, and borrowed money at less than 1%, this is a pretty "easy" thing to accept as a shareholder but for whatever reason, NTT shares dipped after the purchase. Perhaps some thought there would be an equity offering but investors had to know that was nigh impossible as the NTT Law requires the government to hold one third of the shares and there is no way that the government was going to pony up to buy more NTT shares.But investors and Street analysts seemed to have ignored the major effect of the purchase. And we discussed that at the time. That meant an additional ¥200bn in annual net income to NTT shareholders. Six months later, the Street has almost caught up. Now what?

It is mid-late April. That means it is time for my annual NTT Earnings Could Surprise To The Upside Because the Street Is Too Slack insight.Just over 6 months ago, NTT (Nippon Telegraph &amp; Telephone) (9432 JP) announced a deal to take NTT Docomo Inc (9437 JP) private, spending nearly US$40bn to buy out minorities. I thought they paid too much for it, but given the purchase was entirely funded by debt, and they bought the remainder of NTT DoCoMo at a 5% earnings yield and a 6+% cashflow yield, and borrowed money at less than 1%, this is a pretty "easy" thing to accept as a shareholder but for whatever reason, NTT shares dipped after the purchase. Perhaps some thought there would be an equity offering but investors had to know that was nigh impossible as the NTT Law requires the government to hold one third of the shares and there is no way that the government was going to pony up to buy more NTT shares.But investors and Street analysts seemed to have ignored the major effect of the purchase. And we discussed that at the time. That meant an additional ¥200bn in annual net income to NTT shareholders. Six months later, the Street has almost caught up. Now what?

NTT 2022 Consensus Has *almost* Caught Up To Pro-Forma - But It's Still Probably Low

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 (9984 JP)

Z Holdings - Great Expectations On (The) LINE (Initiation of Coverage)

Z Holdings has sold off on disappointment over profitability targets that remain unchanged despite the addition of Line but near-term investments...

Kirk Boodry

Softbank Corp - Accounting for The Accounting Is Complicated

Softbank Corporation is more expensive than it appears when one uses traditional telco metrics such as EV/EBITDA or EV/OP multiples. It's all in...

Travis Lundy

ZhongAn Vs. Lemonade: Which One Is a Better Insurtech Bet?

With encouraging signs shown in 2020, ZhongAn Online is preferred to Lemonade, both from the perspectives of the valuation and company development.

Alec Tseung

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

NTT 2022 Consensus Has almost Caught Up To Pro-Forma - But It's Still Probably Low

NTT Street Consensus for FY21-23 should have had a jump shift at the end of September last year. It did not. It slowly drifted higher. I expect a...

Travis Lundy

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