Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/kddi-corp" target="_blank" data-smartkarma-citation="entities:639:1" rel="noopener">KDDI Corp (9433 JP)</a> announced in-line results, decent forecasts, yet another dividend hike (20 consecutive years of dividend hikes), and in something of a surprise, a big buyback. Smartkarma's resident expert Japan telecoms analyst <a href="https://www.smartkarma.com/profiles/kirk-boodry" target="_blank" data-smartkarma-citation="accounts:1920" rel="noopener">Kirk Boodry</a> discussed the results and the breakdown of KDDI's results in <a href="https://www.smartkarma.com/insights/kddi-q4-20-results-slightly-better-guidance-and-solid-shareholder-returns" target="_blank" data-smartkarma-citation="insights:51467" rel="noopener">KDDI Q4 20 Results: Slightly Better Guidance and Solid Shareholder Returns</a> Friday night. The very sharp move in the share price Friday appears to have anticipated the slight "surprise" to earnings and the forecast. I personally note that the strength in KDDI earnings in the corporate segment will face increasing competition as NTT gets its act together. More below.

KDDI Corp (9433 JP) announced in-line results, decent forecasts, yet another dividend hike (20 consecutive years of dividend hikes), and in something of a surprise, a big buyback. Smartkarma's resident expert Japan telecoms analyst Kirk Boodry discussed the results and the breakdown of KDDI's results in KDDI Q4 20 Results: Slightly Better Guidance and Solid Shareholder Returns Friday night. The very sharp move in the share price Friday appears to have anticipated the slight "surprise" to earnings and the forecast. I personally note that the strength in KDDI earnings in the corporate segment will face increasing competition as NTT gets its act together. More below.

Expert on Japan Retail and Consumer Markets, JapanConsuming

Michael Causton

Expert on Japan Retail and Consumer Markets

Real Insight on Japanese Consumer Markets

JapanConsuming

JapanConsuming is a specialist research firm producing intelligence on Japanese retail and consumer markets. Founded in 2000, JapanConsuming has become the leading provider of insights on Japanese retailers and consumer trends to retailers, brands, government agencies and investors. As well as a highly regarded monthly report on the market, JapanConsuming produces in-depth reports on retail sectors, seminars on key trends and telephone consulting to investors on trends and retailers.

JapanConsuming was founded by Michael Causton and Roy Larke. 

<a href="https://www.smartkarma.com/entities/zozo-inc" target="_blank" data-smartkarma-citation="entities:18379:1" rel="noopener">ZOZO Inc (3092 JP)</a>  had a great 2020, boosted in part by consumers’ buying online in the pandemic but also because of longer-term strategic changes to its business – and its new collaborative engagement with its majority shareholder, <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>. While there may be a short-term correction once consumers return to stores, Zozo’s current operations and its future plans are so much stronger and more viable than two years ago that it is likely to emerge as a contender to be 2nd in apparel rankings behind Uniqlo.OPM should also improve on the back of category expansion into high ticket items such as luxury and designer brands.Zozo is also working on a plan to create new sources of profit that don’t rely on ever-growing GTVs, with a target of hitting ¥100 billion in operating profit in the next few years. The three areas where Zozo expects to find new revenues are in:<ol>
<li>Increasing traffic for non-shopping activities </li>
<li>Expanding its role in design and production through private/D2C brands, and </li>
<li>Selling technology licenses overseas.</li>
</ol>Zozo's renewed strategic direction and controlled management should deliver a smoother and more consistent progress than in recent years.

ZOZO Inc (3092 JP)  had a great 2020, boosted in part by consumers’ buying online in the pandemic but also because of longer-term strategic changes to its business – and its new collaborative engagement with its majority shareholder, Z Holdings (4689 JP). While there may be a short-term correction once consumers return to stores, Zozo’s current operations and its future plans are so much stronger and more viable than two years ago that it is likely to emerge as a contender to be 2nd in apparel rankings behind Uniqlo.OPM should also improve on the back of category expansion into high ticket items such as luxury and designer brands.Zozo is also working on a plan to create new sources of profit that don’t rely on ever-growing GTVs, with a target of hitting ¥100 billion in operating profit in the next few years. The three areas where Zozo expects to find new revenues are in:
Increasing traffic for non-shopping activities 
Expanding its role in design and production through private/D2C brands, and 
Selling technology licenses overseas.
Zozo's renewed strategic direction and controlled management should deliver a smoother and more consistent progress than in recent years.

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.

Zozo released earnings today which were strong with OP of ¥44.1bn above consensus at ¥42.4bn and guidance of ¥41.5bn. For next year Zozo guided for ¥47.8bn in OP, just above consensus at ¥47.2bn. After examining the company’s guidance for GMV and margins we believe there is potential for a very juicy miss.

Zozo released earnings today which were strong with OP of ¥44.1bn above consensus at ¥42.4bn and guidance of ¥41.5bn. For next year Zozo guided for ¥47.8bn in OP, just above consensus at ¥47.2bn. After examining the company’s guidance for GMV and margins we believe there is potential for a very juicy miss.

Zozo – 2021 Conviction Call Short Unlikely to Hit Its GMV Targets

Telco/Internet specialist

Kirk Boodry

Redex Research

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)

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

Japan

ZOZO Inc operates internet shopping sites for apparel.  The Company also provides communication services relating to apparel such as blogs by fashion moguls and internet chat room for users.

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ZOZO Inc (3092 JP)

KDDI Results and Yet Another Buyback

KDDI announced in-line earnings, better forecast, and a big buyback, in line with previous years. The company should be buying about 7% of ADV and...

Travis Lundy

Zozo: Record Sales and a Future Plan

Zozo has turned the corner on the upsets around the time of the founder's exit with clear signs of management stability and strategic, long-term...

Michael Causton

Zozo – 2021 Conviction Call Short Unlikely to Hit Its GMV Targets

ZOZO posted relatively strong results but we believe the market will find guidance underwhelming and we believe ZOZO will miss its GMV targets.

Mio Kato

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

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