Telco/Internet specialist

Kirk Boodry

Redex Research

Equity Bottom-Up

<ul>
<li>Tech weakness has not only eroded the underlying asset value but raised concerns on leverage and the potential for an ARM IPO. The discount expanded by 4pp in one week</li>
<li>The timing and pricing of an ARM IPO looks more precarious as the semiconductor sector fell 13% over two days and is now down 34% from all-time highs</li>
<li>Currency tailwinds have provided some offset with an unprecedented dollar move mimiting downside in Softbank shares to 8% YTD versus a 24% decline for the $-based ADR</li>
</ul>


Tech weakness has not only eroded the underlying asset value but raised concerns on leverage and the potential for an ARM IPO. The discount expanded by 4pp in one week
The timing and pricing of an ARM IPO looks more precarious as the semiconductor sector fell 13% over two days and is now down 34% from all-time highs
Currency tailwinds have provided some offset with an unprecedented dollar move mimiting downside in Softbank shares to 8% YTD versus a 24% decline for the $-based ADR


Softbank Group - Semiconductor Weakness Expands Discount

<ul>
<li>Softbank is a $23bn winner on the China bounce as Alibaba (+37% over 2 days, $18bn) and Vision Fund (+$4.8bn) recovered from selling pressure over the last week</li>
<li>Improving sentiment aside the discount remains above 50% and the rebound appears to be more about correcting excess selling than a change in market outlook</li>
<li>We remain wary of Chinese exposure in the near-term on political, regulatory and economic risks although the worst appears to be over for now</li>
</ul>


Softbank is a $23bn winner on the China bounce as Alibaba (+37% over 2 days, $18bn) and Vision Fund (+$4.8bn) recovered from selling pressure over the last week
Improving sentiment aside the discount remains above 50% and the rebound appears to be more about correcting excess selling than a change in market outlook
We remain wary of Chinese exposure in the near-term on political, regulatory and economic risks although the worst appears to be over for now


Softbank Group - China Bounce Erases a Week of Losses

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

<ul>
<li>Kakao Bank (KB) is South Korea’s largest digital bank. It's a subsidiary of Kakao, which holds a 27.3% stake post listing.</li>
<li>It is a branchless digital bank that only started operations in 2017. As of Sep 21, it had a loan book of US$21bn, deposit base of US$24bn and 17.4m customers.</li>
<li>Even though Kakao started operations only in July 2017, by 2020 it had already garnered more than 1% market share of overall loans and deposits in South Korea.</li>
</ul>


Kakao Bank (KB) is South Korea’s largest digital bank. It's a subsidiary of Kakao, which holds a 27.3% stake post listing.
It is a branchless digital bank that only started operations in 2017. As of Sep 21, it had a loan book of US$21bn, deposit base of US$24bn and 17.4m customers.
Even though Kakao started operations only in July 2017, by 2020 it had already garnered more than 1% market share of overall loans and deposits in South Korea.


2022 High Conviction - Kakao Bank - A Long Way to Go

Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

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.

Event-Driven

<ul>
<li>At one point Softbank stock rose as much as 17% on a ¥1trn buyback that sounded surprisingly unconfident.</li>
<li>It closed today at just 0.8% above the pre-announcement price. </li>
<li>We believe the 47% holdco discount offers little protection due to stretched valuations for its holdings.</li>
</ul>


At one point Softbank stock rose as much as 17% on a ¥1trn buyback that sounded surprisingly unconfident.
It closed today at just 0.8% above the pre-announcement price. 
We believe the 47% holdco discount offers little protection due to stretched valuations for its holdings.


Softbank – Uuuge Buyback!... Aaand It’s Gone

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

<p>A few years ago I started this series, and I updated it last year. Since last year, it has been a top 10 insight in terms of views. </p><p>I personally think it is important for investors of all types to understand WHO OWNS WHAT. </p><p>Many fundamental investors are reticent to spend any time on this but there are many reasons why active investors in Japan should be interested in understanding the ownership and shareholder dynamics of passive investors in Japan.</p><div><p>Some of the places active investors will see their influence are:</p></div><div>
<ul style="list-style-type: disc;">
<li>Stories intermittently published about the BOJ's presence in Japanese ETFs (especially the fact that it owns 85+% of the outstanding ETF market),</li>
<li>Relatively constant interest in Nikkei 225 rebalances like the one we saw in July 2020, which helped push up <a href="https://www.smartkarma.com/entities/japan-exchange-group-inc" target="_blank" data-smartkarma-citation="entities:11266:1" rel="noopener">Japan Exchange Group (8697 JP)</a> by 30+% from May to July, then helped it slide 13% in a week, or the changes in the Nikkei 225 review rules published earlier this year which may change what happens this September to a few large caps, and the announcement of the BOJ that it would no longer buy Nikkei 225 ETFs which started a long slide in <a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:751:1" rel="noopener">Fast Retailing (9983 JP)</a> shares against comps and the Nikkei itself. Long "held up" by 'market inventory' and Nikkei 225 ETF buying, when the BOJ stopped, it removed the cushion and existing inventory holders had to sell out. </li>
<li>Then if you look at the shareholder structure of Fast Retailing today, you will see that it is STILL fundamentally a serious problem for large foreign active investors who would actually wish to take an <em>active</em> (but not activist) position. <em>Real World Float</em> on the stock is, by my calculation, less than 15% of shares outstanding. </li>
<li>The relatively recent policy of increased stewardship regarding the passive management portion of the GPIF (the Government Pension Investment Fund) - an investing heavyweight in Japan.</li>
<li>The timing and quantum of after-event support or overhang on corporate actions such as buybacks, secondary offerings, primary offerings, mergers, etc. </li>
<li>Index inclusions mean big flows. If you follow the insights on <strong><a href="https://www.smartkarma.com/collections/topix-inclusion/insights?item=54585" target="_blank" rel="noopener">TOPIX Inclusions</a></strong> by <a href="https://www.smartkarma.com/profiles/janaghan-jeyakumar-cfa" target="_blank" data-smartkarma-citation="accounts:3173" rel="noopener">Janaghan Jeyakumar, CFA</a> and myself, you will often see big moves. Sometimes these stocks move 50% between when we write about them and when they go into the index. If you own them and are considering an exit, you need to know when to take profits, and the dynamic of the liquidity. If you are thinking about getting in for fundamental reasons, it pays to know early so you can get ahead of the major flow.</li>
<li>The return of <a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1" rel="noopener">Toshiba Corp (6502 JP)</a> to the TSE First Section in Q1 this year changed the foreign shareholder percentage ownership, lowering it by 10%. Smartkarma readers knew this last year and in January, which prepared them for the June AGM when the shareholder category ownership was released.</li>
<li>The changes to the TSE's market structure, which will affect TOPIX membership, which will affect many companies' issuance, buyback, share cancellation, etc decisions over the next several months. They are doing this because of the TSE Prime listing rules which will effectively also determine whether or not they will be included in TOPIX in future, or whether they will fall out of TSE Prime and will see constant selling over late 2022 to early 2025. </li>
</ul>
<p>Of course, TOPIX is just over half of the passive tracking AUM in Japan. There's more. </p>
<p>Find out WHO OWNS WHAT in Japan Passive below the fold. </p>
</div>

A few years ago I started this series, and I updated it last year. Since last year, it has been a top 10 insight in terms of views. I personally think it is important for investors of all types to understand WHO OWNS WHAT. Many fundamental investors are reticent to spend any time on this but there are many reasons why active investors in Japan should be interested in understanding the ownership and shareholder dynamics of passive investors in Japan.Some of the places active investors will see their influence are:

Stories intermittently published about the BOJ's presence in Japanese ETFs (especially the fact that it owns 85+% of the outstanding ETF market),
Relatively constant interest in Nikkei 225 rebalances like the one we saw in July 2020, which helped push up Japan Exchange Group (8697 JP) by 30+% from May to July, then helped it slide 13% in a week, or the changes in the Nikkei 225 review rules published earlier this year which may change what happens this September to a few large caps, and the announcement of the BOJ that it would no longer buy Nikkei 225 ETFs which started a long slide in Fast Retailing (9983 JP) shares against comps and the Nikkei itself. Long "held up" by 'market inventory' and Nikkei 225 ETF buying, when the BOJ stopped, it removed the cushion and existing inventory holders had to sell out. 
Then if you look at the shareholder structure of Fast Retailing today, you will see that it is STILL fundamentally a serious problem for large foreign active investors who would actually wish to take an active (but not activist) position. Real World Float on the stock is, by my calculation, less than 15% of shares outstanding. 
The relatively recent policy of increased stewardship regarding the passive management portion of the GPIF (the Government Pension Investment Fund) - an investing heavyweight in Japan.
The timing and quantum of after-event support or overhang on corporate actions such as buybacks, secondary offerings, primary offerings, mergers, etc. 
Index inclusions mean big flows. If you follow the insights on TOPIX Inclusions by Janaghan Jeyakumar, CFA and myself, you will often see big moves. Sometimes these stocks move 50% between when we write about them and when they go into the index. If you own them and are considering an exit, you need to know when to take profits, and the dynamic of the liquidity. If you are thinking about getting in for fundamental reasons, it pays to know early so you can get ahead of the major flow.
The return of Toshiba Corp (6502 JP) to the TSE First Section in Q1 this year changed the foreign shareholder percentage ownership, lowering it by 10%. Smartkarma readers knew this last year and in January, which prepared them for the June AGM when the shareholder category ownership was released.
The changes to the TSE's market structure, which will affect TOPIX membership, which will affect many companies' issuance, buyback, share cancellation, etc decisions over the next several months. They are doing this because of the TSE Prime listing rules which will effectively also determine whether or not they will be included in TOPIX in future, or whether they will fall out of TSE Prime and will see constant selling over late 2022 to early 2025. 

Of course, TOPIX is just over half of the passive tracking AUM in Japan. There's more. 
Find out WHO OWNS WHAT in Japan Passive below the fold. 


Japan

KDDI CORPORATION provides mobile communication services and sells mobile devices.  The Company also is a broadband provider.

Softbank Corporation provides mobile phone telecommunication and networking services. The Company offers mobile communication opening, short messaging function opening, video function opening, and other services. Softbank also provides mobile phones.

OKINAWA CELLULAR TELEPHONE COMPANY provides cellular and car phone services in Okinawa Prefecture.  The Company also sells cellular phones and accessories.

Nippon Telegraph and Telephone Corporation provides a variety of telecommunication services, including telephone, telegraph, leased circuits, data communication, terminal equipment sales, and related services. The Company provides both local and long distance telephone services within Japan.

NTT (Nippon Telegraph & Telephone) (9432 JP)

Japan Communications Inc. provides telecommunication services to corporate clients.  The Company also provides wireless high-speed internet access mainly to consumers.

Nintendo Co., Ltd. globally develops, manufactures and sells home-use video game hardware and software in home entertainment business.  The company also produces home-game products including cards.

USEN-NEXT HOLDINGS Co.,Ltd. provides network information services. The Company provides video contents distribution, music contents distribution, and other services. USEN-NEXT HOLDINGS also provides internet agency, mobile communication, and other services.

LY Corporation operates as an internet search engine "Yahoo! JAPAN". The Company provides electronic commerce and settlement finance services for small medium enterprises and individuals. LY also operates media business including search linked advertising and display advertising services.

ARTERIA Networks Corporation provides telecommunication services. The Company offers internet connection, virtual private network construction, colocation, mobile connection, mobile device management, optical fiber network construction, and other services.

WirelessGate, Inc. provides wireless communication services including Wi-Fi, WiMAX, and LTE for end users at train stations, airports, retail outlets, restaurants and other locations. It provides broadband services through agreements with public LAN, Wifi hotspots and other third-party networks, and its application allows users to access Wifi hotspots from multiple providers.

Bharti Airtel Limited, a part of Bharti Enterprises, provides telecommunications services throughout India. The Company provides GSM Mobile Services, broadband, fixed line telephone services, long distance services (international & national) and enterprise services.

America Movil SAB de C.V. provides wireless communications in 18 countries across Latin America, the Caribbean and the U.S. The company also offers fixed-line phone, Internet and pay-TV services in most parts of the region.

America Movil SAB de C.V. provides telecommunications services. The Company offers wireless and fixed voice services, including airtime, local, domestic, international long-distance, and broadband services. America Movil serves customers worldwide.

Vodafone Group PLC is a mobile telecommunications company providing a range of services, including voice and data communications.  The Company operates in Continental Europe, the United Kingdom, the United States, Asia Pacific, Africa and the Middle East through its subsidiaries, associates, and investments.

Advanced Info Service Public Company Limited is granted a 25-year concession expiring the year 2015 by the Telephone Organization of Thailand to provide cellular phone services.  The Company provides analog mobile phone services through the Nordic Mobile Telephone (NMT900) network, and digital phone services through the Global Systems for Mobile Communication (GSM) network.

China United Network Communications Limited provides a variety of telecommunication services, including GSM and CDMA wireless telecommunication services, international and domestic long distance communication services, data communication and Internet services, as well as paging services.

Rogers Communications, Inc. is a diversified Canadian communications and media company. The Company's activities include wireless voice and data communications services over its national GSM, HSPA and LTE networks; cable television, telephony and high speed Internet access services over its broadband networks; and radio and TV broadcasting, televised shopping, magazines, and sports.

Vodacom Group Limited operates a cellular telephone network in South Africa. The Company has mobile operations in Tanzania, Mozambique, Lesotho and the Democratic Republic of Congo.

SK Telecom Co., Ltd. is a Korean mobile and telecommunications operator. The Company provides cellular voice, wireless data, and wireless internet services. SK Telecom also offers fixed line services and platform services.

CelcomDigi Berhad is a mobile network operator. The Company offers Internet and wireless telecommunication products and services through the global system for mobile telecommunications (GSM) network. CelcomDigi serves customers in Malaysia.

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)

Softbank Group - Semiconductor Weakness Expands Discount

The discount to fair value has expanded by 4pp in a week as tech weakness not only reduces net asset value but also raises concerns on an IPO of...

Kirk Boodry

Softbank Group - China Bounce Erases a Week of Losses

China bounce has added $4.8bn to Vision Fund and $18bn to Alibaba and that is enough to get us back to early March levels. We have updated the main...

Kirk Boodry

2022 High Conviction - Kakao Bank - A Long Way to Go

Kakao Bank (KB) is South Korea’s largest digital bank. It's a subsidiary of Kakao, which holds a 27.3% stake post listing.

Sumeet Singh

Softbank – Uuuge Buyback!... Aaand It’s Gone

We believe the rapid extinguishment of Softbank's post buyback announcement rally bodes ill for the stock which remains highly exposed to...

Mio Kato

JAPAN PASSIVE: Who Owns What 2021?

This is the 2021 Version of Who Owns What in Japan Passive. It tries to present a relatively comprehensive idea of how much money/float tracks the...

Travis Lundy

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