Senior Credit Analyst, Lucror Analytics

Leonard Law, CFA

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

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.<ul><li><a href='#lucror-entity-315'>Softbank Group</a></li></ul>

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.Softbank Group

Telco/Internet specialist

Kirk Boodry

Redex Research

Equity Bottom-Up

It has been a roller-coaster week for Vision Fund performance with Coupang pricing its IPO at a premium to already heady valuations whilst at the opposite end of the spectrum fintech investee Greensill has completed a rather quick move to insolvency. Markets seems to have taken both in stride as Softbank shares continues to hover above the ¥10,000 level whilst the corresponding discount to underlying public values remains at c. 20%. Since Softbank reported Q3 results, tech shares in the US have weakened and Vision Fund portfolio companies are down 14%/$7bn. Whilst expectations of further IPOs (Grab and or Didi) are supportive, share price performance will rely heavily on US tech sentiment going forward. HighlightsCoupang has reportedly priced its IPO at $35, which is well ahead of our fair value but not surprising in a frothy market. Coupang’s recent growth acceleration and move towards profitability make the stock attractive despite the premium valuation. The reported price implies a 3.1x EV/FY21e sales which is much higher than a direct peer group that includes Amazon (2.8x sales).Greensill has collapsed with Vision Fund exposure of up to $2bn. That is a lot of money but Coupang upside will outshine the impact on Vision Fund performance when quarterly numbers come out. What is worrisome is that this marks the second time a Softbank-backed financial firm has failed following Wirecard last summer. In addition, Greensill reportedly provided funding to four or five Vision Fund companies (Katerra, Oyo, View, Fair, Guazi) and without any disclosure it is not known whether Greensill’s demise would have a knock-on effect.Vision Fund’s public portfolio is down 14% since Q3 results. The volatility in tech valuations in the US has had an impact on Vision Fund’s public portfolio which is down 14% (or $6.9bn) since 9 February led by a 28% decline in DoorDash and a 19% decline in Beike (in VF 2).  That excludes any losses that may come at the cash management subsidiary Northstar which had $22bn invested in liquid tech assets at the end of Dec. AT Q3 results, Softbank said a $1bn loss at the end of the quarter had inverted to a c. $1bn gain by 9 February and that easily could have inflected again.

It has been a roller-coaster week for Vision Fund performance with Coupang pricing its IPO at a premium to already heady valuations whilst at the opposite end of the spectrum fintech investee Greensill has completed a rather quick move to insolvency. Markets seems to have taken both in stride as Softbank shares continues to hover above the ¥10,000 level whilst the corresponding discount to underlying public values remains at c. 20%. Since Softbank reported Q3 results, tech shares in the US have weakened and Vision Fund portfolio companies are down 14%/$7bn. Whilst expectations of further IPOs (Grab and or Didi) are supportive, share price performance will rely heavily on US tech sentiment going forward. HighlightsCoupang has reportedly priced its IPO at $35, which is well ahead of our fair value but not surprising in a frothy market. Coupang’s recent growth acceleration and move towards profitability make the stock attractive despite the premium valuation. The reported price implies a 3.1x EV/FY21e sales which is much higher than a direct peer group that includes Amazon (2.8x sales).Greensill has collapsed with Vision Fund exposure of up to $2bn. That is a lot of money but Coupang upside will outshine the impact on Vision Fund performance when quarterly numbers come out. What is worrisome is that this marks the second time a Softbank-backed financial firm has failed following Wirecard last summer. In addition, Greensill reportedly provided funding to four or five Vision Fund companies (Katerra, Oyo, View, Fair, Guazi) and without any disclosure it is not known whether Greensill’s demise would have a knock-on effect.Vision Fund’s public portfolio is down 14% since Q3 results. The volatility in tech valuations in the US has had an impact on Vision Fund’s public portfolio which is down 14% (or $6.9bn) since 9 February led by a 28% decline in DoorDash and a 19% decline in Beike (in VF 2).  That excludes any losses that may come at the cash management subsidiary Northstar which had $22bn invested in liquid tech assets at the end of Dec. AT Q3 results, Softbank said a $1bn loss at the end of the quarter had inverted to a c. $1bn gain by 9 February and that easily could have inflected again.   

Softbank Group - Vision Fund Ups and Downs: Coupang and Greensill

'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)

GAMING PAYABLES - As part of the fallout from Greensill Capital's collapse, much has been made of the risks involved in supply chain finance and the accounting treatment of payables that can be used to 'flatter' balance sheets that are often overloaded with debt. As @matt_levineobserved yesterday:-<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/193/505/original/2021-03-11_10-33-14.png?1615426510" class="editor-image img-responsive" data-smartkarma-image-id="193505"></figure></section>APPLYING THE 'DUMB RULE OF THUMB' TO JAPAN - Accordingly, we have applied a simple screen to our universe of 3,689 Japanse companies with the following criteria:<ol>
<li>Market Cap, ex Treasury Stock,&gt; ¥100 billion (672 companies)</li>
<li> Last Quarter Payable Days &gt; -100 (93 companies)</li>
<li>1-Year change in Average Days Payable &gt; -25 (7 companies)</li>
</ol>We have excluded <a href="https://www.smartkarma.com/entities/sony-corp" target="_blank" data-smartkarma-citation="entities:563:1" rel="noopener">Sony (6758 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/rakuten-inc" target="_blank" data-smartkarma-citation="entities:31:1" rel="noopener">Rakuten (4755 JP)</a>, and <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> from the screening due to their consolidation of financial subsidiaries. The results are in the DETAIL section below; however, the TTM Working Capital Day chart for the largest of the seven by market cap is below. It's 'owner' should be no surprise to followers of the Greensill saga.<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/193/508/original/2021-03-11_11-04-24.png?1615428279" class="editor-image img-responsive" data-smartkarma-image-id="193508"></figure></section><div class="content-caption">Source for all charts &amp; tables: Japan Analytics</div>

GAMING PAYABLES - As part of the fallout from Greensill Capital's collapse, much has been made of the risks involved in supply chain finance and the accounting treatment of payables that can be used to 'flatter' balance sheets that are often overloaded with debt. As @matt_levineobserved yesterday:-APPLYING THE 'DUMB RULE OF THUMB' TO JAPAN - Accordingly, we have applied a simple screen to our universe of 3,689 Japanse companies with the following criteria:
Market Cap, ex Treasury Stock,&gt; ¥100 billion (672 companies)
 Last Quarter Payable Days &gt; -100 (93 companies)
1-Year change in Average Days Payable &gt; -25 (7 companies)
We have excluded Sony (6758 JP), Z Holdings (4689 JP), Rakuten (4755 JP), and Japan Post (6178 JP) from the screening due to their consolidation of financial subsidiaries. The results are in the DETAIL section below; however, the TTM Working Capital Day chart for the largest of the seven by market cap is below. It's 'owner' should be no surprise to followers of the Greensill saga.Source for all charts &amp; tables: Japan Analytics

🇯🇵 JAPAN • Greensill, Gaming Payables & The Seven Samurai of Supply Chain Finance

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.<ul><li><a href='#lucror-entity-14882'>Seazen (Formerly Future Land)</a></li><li><a href='#lucror-entity-315'>Softbank Group</a></li><li><a href='#lucror-entity-29239'>Sunac Services Holdings</a></li></ul>

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.Seazen (Formerly Future Land)Softbank GroupSunac Services Holdings

Morning Views Asia: Seazen (Formerly Future Land), Softbank Group, Sunac Services Holdings

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

*Greensill Bankruptcy: Greensill Capital (Greensill) has filed for insolvency in the United Kingdom today after Apollo Global Management’s (APO.US) [Apollo] walked away from this deal. Lawyers for Greensill cited Greensill’s inability to repay a USD 140 mn bridge loan provided by Credit Suisse Group (CSGN.VX) [Credit Suisse]. In addition, Greensill allegedly has USD 5 bn in risk outstanding to  GFG Alliance Group (GFG) – a company owned by Sanjeev Gupta, who appears to be at the center of this debacle; and*Further Tail Risk: Credit Suisse , GAM Holdings (GAM.VX), Tokio Marine Holdings (8766.JP), SoftBank Group (9984.JP) amongst others are likely to see additional weakness given the growing uncertainties with Greemsill and GFG Alliance. In particular, the allegations of fraud by Bafin and the British Business Bank removing UK government guarantee on COVID-19 lending highlight the increased likelihood of substantially higher losses and other tail risk. With the UK and European Central Bank (ECB) asking their institutions for their Greensill and GFG exposures, no doubt the hit parade will continue.

*Greensill Bankruptcy: Greensill Capital (Greensill) has filed for insolvency in the United Kingdom today after Apollo Global Management’s (APO.US) [Apollo] walked away from this deal. Lawyers for Greensill cited Greensill’s inability to repay a USD 140 mn bridge loan provided by Credit Suisse Group (CSGN.VX) [Credit Suisse]. In addition, Greensill allegedly has USD 5 bn in risk outstanding to  GFG Alliance Group (GFG) – a company owned by Sanjeev Gupta, who appears to be at the center of this debacle; and*Further Tail Risk: Credit Suisse , GAM Holdings (GAM.VX), Tokio Marine Holdings (8766.JP), SoftBank Group (9984.JP) amongst others are likely to see additional weakness given the growing uncertainties with Greemsill and GFG Alliance. In particular, the allegations of fraud by Bafin and the British Business Bank removing UK government guarantee on COVID-19 lending highlight the increased likelihood of substantially higher losses and other tail risk. With the UK and European Central Bank (ECB) asking their institutions for their Greensill and GFG exposures, no doubt the hit parade will continue.

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)

Morning Views Asia: Softbank Group

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region,...

Lucror Analytics

Softbank Group - Vision Fund Ups and Downs: Coupang and Greensill

Vision Fund is having an interesting week: Coupang's IPO priced at a premium (+2.8bn in incremental gains) but portfolio company Greensill has...

Kirk Boodry

🇯🇵 JAPAN • Greensill, Gaming Payables & The Seven Samurai of Supply Chain Finance

As part of the fallout from Greensill Capital's collapse, much has been made of the risks involved in supply chain finance and the accounting...

Campbell Gunn

Morning Views Asia: Seazen (Formerly Future Land), Softbank Group, Sunac Services Holdings

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region,...

Lucror Analytics

Credit Suisse – Greensill Goes BK

CREDIT SUISSE: Greensill has filed for insolvency. Lawyers for Greensill cited its inability to repay a USD 140 mn bridge loan from Credit Suisse...

Thomas J. Monaco

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