'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/000/073/556/original/Update.png?1545212207" class="editor-image img-responsive" data-smartkarma-image-id="73556"></figure>
<div class="content-caption">Source: Japan Analytics</div>
JAPAN CORPORATE CASH FLOW UPDATE - This insight updates our previous Insight <a href="https://www.smartkarma.com/insights/japan-quarterly-cash-flow-update-yen-weakens-normal-service-resumed" target="_blank" data-smartkarma-citation="insights:23357">Yen Weakens &gt; Normal Service Resumed</a> with data from all of the most quarterly reports filed last month. Our aggregate cash flow model reformulated cash flows into eight categories which sum to Change in Cash - Free Cash Flow (Operating Cash Flow less Investing Cash Flow), Financing Cash Flow, Shareholder Cash Flow (Equity Cash Flow and Dividend Cash Flow) and Minorities. In the last three months, Japan's non-financial companies generated ¥12.1t in Operating Cash Flow while investing ¥9.2t - the largest quarterly amount of capex since 2016-Q4.  Of the total ¥2.9t in Free Cash Flow, 65% was returned to shareholders of which half was in the form of reductions in equity - an improving and welcome trend which we covered in an earlier <a href="https://www.smartkarma.com/insights/japan-share-buybacks-less-than-meets-the-eye" target="_blank" data-smartkarma-citation="insights:22599">Insight</a>. After a ¥0.8t increase in debt and a ¥0.3t increase in Minorities Cash Flow, aggregate cash rose by ¥2.2t for the quarter. Since 2011-Q4, 58% of the ¥102.7t in cumulative FCF has been allocated to shareholders and 40% to cash, leaving considerable room for improvement in the relative size of these ratios.
SECTORS &amp; STOCKS - In the DETAIL below, we also look at sector cash flow trends and provide brief comments on some of the most significant changes in individual cash flows over the last three months including <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/3548" target="_blank" data-smartkarma-citation="entities:3548:1">Kawasaki Kisen Kaisha (9107 JP)</a>, <a href="https://www.smartkarma.com/entities/2818" target="_blank" data-smartkarma-citation="entities:2818:1">Hanwa (8078 JP)</a>, <a href="https://www.smartkarma.com/entities/19550" target="_blank" data-smartkarma-citation="entities:19550:1">Open House (3288 JP)</a>, <a href="https://www.smartkarma.com/entities/26074" target="_blank" data-smartkarma-citation="entities:26074:1">Macnica Fuji Electronics (3132 JP)</a>, and <a href="https://www.smartkarma.com/entities/13747" target="_blank" data-smartkarma-citation="entities:13747:1">Digital Garage (4819 JP)</a>.


Source: Japan Analytics
JAPAN CORPORATE CASH FLOW UPDATE - This insight updates our previous Insight Yen Weakens &gt; Normal Service Resumed with data from all of the most quarterly reports filed last month. Our aggregate cash flow model reformulated cash flows into eight categories which sum to Change in Cash - Free Cash Flow (Operating Cash Flow less Investing Cash Flow), Financing Cash Flow, Shareholder Cash Flow (Equity Cash Flow and Dividend Cash Flow) and Minorities. In the last three months, Japan's non-financial companies generated ¥12.1t in Operating Cash Flow while investing ¥9.2t - the largest quarterly amount of capex since 2016-Q4.  Of the total ¥2.9t in Free Cash Flow, 65% was returned to shareholders of which half was in the form of reductions in equity - an improving and welcome trend which we covered in an earlier Insight. After a ¥0.8t increase in debt and a ¥0.3t increase in Minorities Cash Flow, aggregate cash rose by ¥2.2t for the quarter. Since 2011-Q4, 58% of the ¥102.7t in cumulative FCF has been allocated to shareholders and 40% to cash, leaving considerable room for improvement in the relative size of these ratios.
SECTORS &amp; STOCKS - In the DETAIL below, we also look at sector cash flow trends and provide brief comments on some of the most significant changes in individual cash flows over the last three months including Softbank Group (9984 JP), Kawasaki Kisen Kaisha (9107 JP), Hanwa (8078 JP), Open House (3288 JP), Macnica Fuji Electronics (3132 JP), and Digital Garage (4819 JP).

Japan: The 2018-Q3 Cash Flow Stakes - Runners, Riders & Red Flags

Japan TMT Analyst

Pelham Smithers

Market Intel on Asian Tech with a Japan focus

Pelham Smithers Associates

Founded in 2009, Pelham Smithers Associates (PSA) provides market intelligence on Asian technology, focusing in particular on Japan. The industries covered by our team of specialists are: consumer electronics, telecomms, pharmaceuticals, internet, electronic parts and materials, automotive technology, retail and capital goods. 

Research is provided by the following:
Pelham Smithers: Macro, consumer electronics, telecoms & pharma
Joel Scheiman: Electronics materials / components
Julie Boote: Autos
Will Nestuk: Capital goods, machinery & transportation equipment parts
Thao Nguyen: eCommerce, internet content, marketing & advertising

Equity Bottom-Up

The market has assumed that Mixi not only can't replicate the success of Monster Strike but will continue to waste the proceeds trying. That no longer appears to be the case, with the result that Mixi looks to be one of the bigger bargains in the bargain-rich Japanese stock market right now.

The market has assumed that Mixi not only can't replicate the success of Monster Strike but will continue to waste the proceeds trying. That no longer appears to be the case, with the result that Mixi looks to be one of the bigger bargains in the bargain-rich Japanese stock market right now.

Mixi (2121 JP) - When You've Got a Golden Goose...

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Delta Electronics Thailand  / Event-Driven

On 1st August 2018, electronics components manufacturer <a href="https://www.smartkarma.com/entities/20912" target="_blank" data-smartkarma-citation="entities:20912:1">Delta Electronics Thai (DELTA TB)</a> ("DET") announced that Delta Electronics International (Singapore) (a wholly-owned subsidiary of <a href="https://www.smartkarma.com/entities/12688" target="_blank" data-smartkarma-citation="entities:12688:1">Delta Electronics (2308 TT)</a>) had made a<a href="http://www.deltathailand.com/imgadmins/press_file/DELTA_press_file_en_2018-08-01_10-59-08.pdf" target="_blank"> conditional voluntary tender offer</a> (CVTO) to acquire 100% of DELTA at Bt71/share, a 1.79% premium to last close (28% above its recent low), in a US$2.1bn deal. Delta currently holds 20.93% in DET.
The CVTO is subject to pre-conditions, including merger control clearance from the US Federal Trade Commission and Antitrust Division of Department of Justice, the European Commission of European Union, and the State Administration for Market Regulation Anti-monopoly Bureau of China. These approvals are expected to be received within 6 months, therefore (potentially) two months from now.  The European Commission's <a href="http://europa.eu/rapid/press-release_MEX-18-6206_en.htm" target="_blank">approval</a> was granted on 24th October.
Delta's decision to buy out the remaining 79.07% of shares out it does not own is a de-risking move in response to the US/China trade war. 35% of Delta's production facilities (from a $ value) are based in China - and 15% of revenue is sourced from the US - whereas 51% of DET's facilities are in Thailand and the US accounts for 28% of revenue. DET has no facilities in China.
To capitalise on Thailand's lower labour costs, DET was established in 1988 as a production base for Delta. The two companies remain close, from an intercompany business point of view, through to management and stakeholders. Because Delta and DET are intertwined - yet there are limited horizontal overlaps and vertical links - the remaining regulatory approvals should not pose a significant risk. 
Currently trading at gross/annualised spread of 3.3%/11.1%, assuming payment in late March.

On 1st August 2018, electronics components manufacturer Delta Electronics Thai (DELTA TB) ("DET") announced that Delta Electronics International (Singapore) (a wholly-owned subsidiary of Delta Electronics (2308 TT)) had made a conditional voluntary tender offer (CVTO) to acquire 100% of DELTA at Bt71/share, a 1.79% premium to last close (28% above its recent low), in a US$2.1bn deal. Delta currently holds 20.93% in DET.
The CVTO is subject to pre-conditions, including merger control clearance from the US Federal Trade Commission and Antitrust Division of Department of Justice, the European Commission of European Union, and the State Administration for Market Regulation Anti-monopoly Bureau of China. These approvals are expected to be received within 6 months, therefore (potentially) two months from now.  The European Commission's approval was granted on 24th October.
Delta's decision to buy out the remaining 79.07% of shares out it does not own is a de-risking move in response to the US/China trade war. 35% of Delta's production facilities (from a $ value) are based in China - and 15% of revenue is sourced from the US - whereas 51% of DET's facilities are in Thailand and the US accounts for 28% of revenue. DET has no facilities in China.
To capitalise on Thailand's lower labour costs, DET was established in 1988 as a production base for Delta. The two companies remain close, from an intercompany business point of view, through to management and stakeholders. Because Delta and DET are intertwined - yet there are limited horizontal overlaps and vertical links - the remaining regulatory approvals should not pose a significant risk. 
Currently trading at gross/annualised spread of 3.3%/11.1%, assuming payment in late March. 

China/US Trade War Spurs Delta To Buy Thai Associate

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

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.

Equity Capital Markets

iDreamsky Technology Limited / Equity Capital Markets

<a href="https://www.smartkarma.com/entities/5570" target="_blank" data-smartkarma-citation="entities:5570:1">iDreamsky Technology Limited (1119 HK)</a> is an independent game publisher and developer in China, backed by <a href="https://www.smartkarma.com/entities/26" target="_blank" data-smartkarma-citation="entities:26:1">Tencent Holdings (700 HK)</a> which a 21% shareholder. iDreamSky is being marketed at a price range of HK$6.0-HK$7.8 ($0.77-$1.00), giving it a potential valuation of $1.3 billion.<div class="content-highlight">We had previously noted that iDreamSky recently pulled off a game-changing acquisition of Huohan to make the IPO a whole lot more palatable. Based on our estimates, iDreamSky is attractive at the low-end of the proposed IPO price range.</div>

iDreamsky Technology Limited (1119 HK) is an independent game publisher and developer in China, backed by Tencent Holdings (700 HK) which a 21% shareholder. iDreamSky is being marketed at a price range of HK$6.0-HK$7.8 ($0.77-$1.00), giving it a potential valuation of $1.3 billion.We had previously noted that iDreamSky recently pulled off a game-changing acquisition of Huohan to make the IPO a whole lot more palatable. Based on our estimates, iDreamSky is attractive at the low-end of the proposed IPO price range.

IDreamSky IPO Valuation: Ready Player One

<a href="https://www.smartkarma.com/entities/5570" target="_blank" data-smartkarma-citation="entities:5570:1">Idreamsky Technology Co Adr (DSKY US)</a> is an independent game publisher and developer in China, backed by <a href="https://www.smartkarma.com/entities/26" target="_blank" data-smartkarma-citation="entities:26:1">Tencent Holdings (700 HK)</a> which a 21% shareholder. It plans to relist in Hong Kong to raise $100 million which is down from an earlier indication of a $300 million raise. <a href="https://www.smartkarma.com/entities/446" target="_blank" data-smartkarma-citation="entities:446:1">JD.com Inc (ADR) (JD US)</a> and <a href="https://www.smartkarma.com/entities/563" target="_blank" data-smartkarma-citation="entities:563:1">Sony Corp (6758 JP)</a> have together committed to buying $10 million of the IPO shares, according to Bloomberg.<div class="content-highlight">iDreamSky is bravely testing the appetite of investors despite the challenging industry backdrop. While iDreamSky's financials are starting to show strains from the current regulatory quagmire, it has recently pulled off a game-changing acquisition which makes the IPO a whole lot more palatable.</div>

Idreamsky Technology Co Adr (DSKY US) is an independent game publisher and developer in China, backed by Tencent Holdings (700 HK) which a 21% shareholder. It plans to relist in Hong Kong to raise $100 million which is down from an earlier indication of a $300 million raise. JD.com Inc (ADR) (JD US) and Sony Corp (6758 JP) have together committed to buying $10 million of the IPO shares, according to Bloomberg.iDreamSky is bravely testing the appetite of investors despite the challenging industry backdrop. While iDreamSky's financials are starting to show strains from the current regulatory quagmire, it has recently pulled off a game-changing acquisition which makes the IPO a whole lot more palatable.

IDreamSky IPO Update: A Game-Changing Acquisition to Save the Day

Japan

Sony Group Corporation manufactures and distributes electronics products and provides related solutions. The Company produces televisions, cameras, mobiles, audio and video products. game equipment, and more. Sony Group also engages in game production,  movie production, music production, and other businesses.

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Sony Corp (SONY US)

Japan: The 2018-Q3 Cash Flow Stakes - Runners, Riders & Red Flags

JAPAN CORPORATE CASH FLOW UPDATE - This insight updates our previous Insight Yen Weakens > Normal Service Resumed with data from all of the...

Campbell Gunn

Mixi (2121 JP) - When You've Got a Golden Goose...

The market has assumed that Mixi not only can't replicate the success of Monster Strike but will continue to waste the proceeds trying. That no...

Pelham Smithers Associates

China/US Trade War Spurs Delta To Buy Thai Associate

On 1st August 2018, electronics components manufacturer Delta Electronics Thai (DELTA TB) ("DET") announced that Delta Electronics International...

David Blennerhassett

IDreamSky IPO Valuation: Ready Player One

iDreamsky Technology Limited (1119 HK) is an independent game publisher and developer in China, backed by Tencent Holdings (700 HK) which a 21%...

Arun George

IDreamSky IPO Update: A Game-Changing Acquisition to Save the Day

Idreamsky Technology Co Adr (DSKY US) is an independent game publisher and developer in China, backed by Tencent Holdings (700 HK) which a 21%...

Arun George

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