Japan

In today’s briefing:

Advantest (6857) – Strong SoC Sales, Record Profits, Bullish Guidance, and a Buyback (+ Index Flow)
Softbank Group – BABA Pressure Has Didi Read Across but a 41% NAV Discount Provides Cushion
KDDI (Buy) – Q1 22 Results Reaction: Mixed Quarter as Consumer Predictably Weak
Zozo: Social Fashion Commerce, Omnichannel and New Ventures
Takeda 1Q: Top Line Beat Consensus – Development Pipeline Continues to Progress
When Will Kyoto Bank’s Policy Change?

Advantest (6857) – Strong SoC Sales, Record Profits, Bullish Guidance, and a Buyback (+ Index Flow)

Advantest Corp (6857 JP) yesterday announced Q1 results, with Revenues/OP/NP at record levels, a H1 div hike of 30%, guidance well ahead of consensus, and a buyback.
They also announced a Mid-Term Plan revision which shows forward guidance better than consensus.
The buyback is smaller than the last one BUT float is not what you think it is. Understanding float dynamics here is key.

Softbank Group – BABA Pressure Has Didi Read Across but a 41% NAV Discount Provides Cushion

Alibaba is under pressure again with a direct read-across to Softbank
Worries on China regulation are bad news for another Softbank holding DIdi Global as it stands alongside Alibaba as a high-profile regulatory target
Alibaba weakness could drive risk pricing (CDS) and the discount to NAV higher. A silver lining is that discount makes Softbank attractive for investors looking for indirect China exposure

KDDI (Buy) – Q1 22 Results Reaction: Mixed Quarter as Consumer Predictably Weak

By Shifara Samsudeen, ACMA, CGMA

Results for the quarter were mixed with a slight miss for profitability despite one-time gains for financial services taken in the quarter
Revenue erosion from a reduction in the Rakuten roaming service area was relatively modest whilst there are signs of improvement in erosion from mobile price cuts
KDDI will reimburse users ¥7bn (v Redex forecast of ¥10bn) for its network outage earlier this month; the operational impact won’t be clear until Q2 churn is reported

Zozo: Social Fashion Commerce, Omnichannel and New Ventures

By Michael Causton

Zozo recorded its highest profit ever last year, countering the sceptics once again.
The company has shrugged off the uncertainties surrounding the departure of its founder and, while sticking to its core values, is looking for new growth beyond fashion e-commerce.
While there are some headwinds, Zozo has a solid set of strategies in place to offset these and find new growth streams.

Takeda 1Q: Top Line Beat Consensus – Development Pipeline Continues to Progress

Takeda Pharmaceutical (4502 JP) reported 1QFY03/23 results yesterday. Reported revenue grew 2.4% YoY to JPY972.5bn (vs consensus JPY929.6bn) while OP decreased 39.4% YoY to JPY150.5bn (vs consensus JPY173.1bn).
Decline in OP was due to one-time gain from the sale of Japan diabetes portfolio of JPY131.4bn in 1Q last year, however, excluding this, OP increased 28.4% YoY in 1QFY03/2023.
Takeda’s share price dropped 1.5% at the end of today’s trading as investor sentiment has changed post earnings as some of the company’s key drugs have started experiencing generic erosion.

When Will Kyoto Bank’s Policy Change?

The current shareholder structure of Kyoto Bank, where domestic financial institutions are the top shareholders and still continue to hold cross-shareholdings, will make it difficult to pass the shareholder proposal.
In environment of continued sluggish bank earnings, the dividend income from policy shareholdings and the huge unrealized gains on stocks are valuable assets for weathering this difficult business environment.
Kyoto Bank’s policy will change when the interest rate environment changes and earnings are expected to improve, or when the shareholder structure changes due to a significant reduction in cross-shareholdings.

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Jul 29

Daily Brief Japan: Shin Etsu Chemical, MonotaRO Co Ltd, Japan Tobacco, M3 Inc, CyberAgent Inc, Isetan Mitsukoshi Holdings Ltd, Renesas Electronics and more

In today’s briefing:

Shin-Etsu Chemical (4063 JP) Salutary Earnings, Conservative Forecasts, and Another Buyback
MonotaRO (3064) | Another Decade of Secular Growth
Japan Tobacco High Conviction Update: 50% Upside Potential as Investors Move on From Russia Fears
M3: Revenue and OP Beat Consensus but Don’t Rush to Make an Entry
CyberAgent 3Q: Revenue and OP Miss Consensus as Game Titles Struggle
50% of Sales at Isetan-Mitsukoshi Flagships from Top 5% of Customers
Renesas (6723) | Buy the Dip

Shin-Etsu Chemical (4063 JP) Salutary Earnings, Conservative Forecasts, and Another Buyback

Shin Etsu Chemical (4063 JP) reported Q1 earnings after the close on 27 July, and they blew the lights out. Higher margins and 10-year record high Q1 progression ratios.
The company also announced guidance which was pretty healthy, but progression ratios suggest it is conservative.
The company announced its second ¥100bn buyback in three months. This one lasts 6 months so impact will be lower, but it will have some impact.

MonotaRO (3064) | Another Decade of Secular Growth

By Shifara Samsudeen, ACMA, CGMA

MonotaRo is well placed to monetise the shift of enterprise MRO spending as it moves increasingly online
The company’s new distribution centre will enable the company to increase capacity, speed up deliveries, and offer improved services to enterprise clients
Structural growth stories are few and far between in Japan. MonotaRo is one of them and appears expensive on most valuation metrics. Our LT DCF model suggests 30% upside

Japan Tobacco High Conviction Update: 50% Upside Potential as Investors Move on From Russia Fears

By Oshadhi Kumarasiri

We expect a strong 2Q22 and an upgrade to annual guidance from Japan Tobacco (2914 JP) through strong Domestic and International Tobacco performance.
It also seems that investors are starting to move on from JT’s Russia exposure-related fears.
Based on Japan Tobacco’s earnings potential, we think that there’s around 50% further upside to shares in the short term.

M3: Revenue and OP Beat Consensus but Don’t Rush to Make an Entry

M3 Inc (2413 JP) reported 1QFY03/2023 results yesterday. Revenue grew 22.8% YoY to JPY57.0bn (vs consensus JPY50.8bn) while OP decreased 24.2% YoY to JPY19.0bn (vs consensus JPY16.3bn).
The decline in OP was due to decrease in profit from overseas business where 1QFY03/2022 benefited from the Medlive IPO.
Though m3’s earnings have beaten consensus and the company’s core Medical Platform has seen some recovery in earnings, we would not be rushing to make an entry.

CyberAgent 3Q: Revenue and OP Miss Consensus as Game Titles Struggle

By Shifara Samsudeen, ACMA, CGMA

CyberAgent Inc (4751 JP) reported 3QFY09/22 financial results after the market closed on 27th. Revenue for the quarter decreased 10.4% YoY to JPY 172.2bn vs consensus revenue of JPY 173.2bn.
OP declined 76.7% YoY to JPY 10.4bn vs consensus JPY 16.0bn (miss of 35%) due to decline in profits from gaming. OPM declined to 6.0% from 23.2% in 3QFY09/21.
Though CA has proven in the past that it can turn around its business with just one hit title, it has not yet been able to launch another hit title

50% of Sales at Isetan-Mitsukoshi Flagships from Top 5% of Customers

By Michael Causton

Isetan-Mitsukoshi is dangerously dependent on a small number of wealthy customers for a lot of its revenue.
Wealthy VIP customers account for around half of sales at both Isetan Shinjuku and Mitsukoshi Nihonbashi department stores
But the wealth market is one of the few segments to continue to grow so should be a source of growth even while the rest of its market shrinks.

Renesas (6723) | Buy the Dip

Renesas stock is down around 8% following quarterly earnings and a very conservative Q3 outlook
We think the market is over reacting and believe that Renesas is a key beneficiary of secular growth in auto and industrial electronics
The stock trades at a discount to global peers, despite a strong story for improving shareholder returns

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Jul 28

Daily Brief Japan: Chugai Pharmaceutical, Mercari Inc, Canon Inc, Rakus Co Ltd, Softbank Corp, Otsuka Holdings, Tokyo Stock Exchange Tokyo Price Index Topix and more

In today’s briefing:

TOPIX July Rebalance: Good Performance, Low Progression, Should Trade Right Way
Mercari (4385) | We Were Wrong…its Worse
TOPIX July Rebalance: Flows at the Close Today
JPX-Nikkei 400 2022 Rebal: Final Pre-Event Phase Strategy Worked. What Next?
Softbank Corp (Buy) – PayPay Conversion, Re-Valuation Gain Confirmed for Q3
Otsuka Holdings (4578 JP): Revenue Guidance Raise and New Products Line-Up Enhance Conviction
The State of Listed Companies Should Be Discussed Together with Discussion of Quarterly Disclosure

TOPIX July Rebalance: Good Performance, Low Progression, Should Trade Right Way

The TOPIX Free-Float Rebalance for July will be executed tomorrow at the close.
There should be about US$3.5bn to trade one-way with 150+ names down-weighted, 36 names up-weighted, and one inclusion – Mercari Inc (4385 JP).
The trade has performed well so far, and excess volume appears limited in most cases. It appears uncrowded.

Mercari (4385) | We Were Wrong…its Worse

Shopify Inc (SHOP US) ‘s share price declined by -15% in after hours trade on weaker-than-expected US E-commerce trends
Mercari Inc (4385 JP) ‘s US business is highly correlated with its US peer, as is its stock price
A normalisation of e-commerce trends could also impact its much larger Japanese GMV as consumers shift spending patterns back to normal

TOPIX July Rebalance: Flows at the Close Today

By Brian Freitas

FFW changes and Mercari Inc (4385 JP)‘s inclusion in the TOPIX will lead to a one-way turnover of 0.55% and one-way trade of JPY 443bn (US$3.23bn) at the close today.
There is net buying in Consumer Discretionary, Financials and Communication Services stocks, while there will be net selling in Consumer Staples and Health Care stocks.
The upweights have outperformed the downweights since announcement of the changes and there has not been a lot of excess volume traded in the last couple of weeks.

JPX-Nikkei 400 2022 Rebal: Final Pre-Event Phase Strategy Worked. What Next?

By Janaghan Jeyakumar, CFA

In JPX-Nikkei 400 2022 Rebal: Final Predictions, I discussed Quiddity’s final predictions for Potential ADDs/DELs for the JPX-Nikkei Index August 2022 Annual Review.
In that insight, I classified the potential ADDs/DELs by conviction levels and discussed why the high conviction ADDs and DELs deserved a higher weight than the other baskets.
Since then, the LONG High Conviction ADDs – SHORT High conviction DELs Trade has outperformed the other LONG-SHORT combinations.

Softbank Corp (Buy) – PayPay Conversion, Re-Valuation Gain Confirmed for Q3

Softbank and Z Holdings have confirmed the conversion of PayPay preferred equity into common in-line with previous guidance for ownership levels and a revaluation gain
Z Holdings will sell the credit card business to PayPay to align transactional fintech which makes distribution, product development and branding easier
Our outlook has not changed but we are lowering our target price to reflect diminished expectations announced at Q4 results. We remain at Buy but prefer NTT/KDDI in telcos

Otsuka Holdings (4578 JP): Revenue Guidance Raise and New Products Line-Up Enhance Conviction

By Tina Banerjee

Otsuka Holdings (4578 JP) has raised revenue guidance for H1FY23 by 6%, due to continued strong performance of its four global brands, which contribute more than 35% of total revenue.
However, the company has cut operating and net profit guidance for H1FY23, mainly due to one-off charge related to elimination of unrealized gains on inventories caused by yen depreciation.
Otsuka received positive CHMP opinion for lupus nephritis drug, Lupkynis. This will pave the way for gaining marketing approval of the drug in Europe.

The State of Listed Companies Should Be Discussed Together with Discussion of Quarterly Disclosure

The proposal is to reduce the workload on companies by eliminating the requirement for quarterly disclosure in the annual securities report and instead submitting the financial results to the TSE.
Future discussions will focus on how much of the new sustainability disclosures. Listed companies are diverse, and while a few companies are proactive, many are backward-looking in their efforts.
In conjunction with the quarterly disclosure, the time has come to discuss how listed companies should be. 300 companies are allowed to list without meeting the prime market listing criteria.

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Jul 27

Daily Brief Japan: Shimano Inc, W Scope Corp, Terumo Corp, Nitori Holdings and more

In today’s briefing:

Shimano (7309) | Join the Race
W Scope (6619): Don’t Sell Too Early
Terumo Corp (4543 JP): A COVID Recovery Play; Cardiac & Vascular Business to Drive Multi-Year Growth
Nitori’s Biggest Challenge, the Succession Plan, Is an Even Bigger Risk

Shimano (7309) | Join the Race

Shimano’s stock price has declined by 25% year to date on expectations that bike sales will soon start going downhill
We model a GFC-style recession and find that Shimano’s valuation has already reflected the worst case scenario
If we are heading for a collapse, then Ferrari N.V. (RACE US) should be acting more like Shimano. The valuation discount between the two is as wide as ever

W Scope (6619): Don’t Sell Too Early

By Henry Soediarko

Revised guidance with 17.6% higher sales that caused a 40% increase in operating profit and an increase in EPS by 344% by 1H 2022.
Spin off its Korean subsidiary by this August for up to KRW 900 bn or USD 692 million or almost as big as W Scope Corp (6619 JP)currently.
The company is trading at a 65% PBR discount to its Chinese peers which are bigger but less growth catalysts. Don’t sell too early.

Terumo Corp (4543 JP): A COVID Recovery Play; Cardiac & Vascular Business to Drive Multi-Year Growth

By Tina Banerjee

Terumo Corp (4543 JP) earns 56% revenue from cardiac and vascular segment, which is the fastest growing segment of the company. The segment is seeing continued recovery from COVID impact.
For FY23, Terumo guided for cardiac and vascular segment revenue of ¥445.5B (+12% y/y) and adjusted operating profit of ¥113.4B (+22% y/y), leading to operating margin of 25.5% (+200bps y/y).
Over the next five years, Terumo aims for high single-digit revenue growth from the segment, through new product launches and expanding adoption of existing products across disease areas.

Nitori’s Biggest Challenge, the Succession Plan, Is an Even Bigger Risk

Nitori attributed the missed profit guidance to foreign currency forward contract approach changes a few years ago, which resulted in missed foreign currency projections.
Since Nitori changed its FX forward approach several years ago for a reason, it’s concerned about the impact on Nitori’s business if it were to return to its original approach.
The approach of relying on the market views of Mr. Nitori is not sustainable. The biggest challenge, the Succession problem, adds to the risk of finding a market genius.

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Jul 25

Daily Brief Japan: CyberAgent Inc, Nissan Motor and more

In today’s briefing:

Cyberagent (4751) | More than a One-Hit Wonder
AGM Is the Highest Body for a Company, but Have Japanese Companies Got Too Used to It Not Being So?

Cyberagent (4751) | More than a One-Hit Wonder

Supersized profits in the game division will of course normalise, but there are strategies to extend profits in the segment
At 7x EV/EBITDA we think the market has become too pessimistic on the long-term outlook for not only games, but also internet advertising and media
The company will release Q3 results in three days time – we expect a them to beat consensus

AGM Is the Highest Body for a Company, but Have Japanese Companies Got Too Used to It Not Being So?

The fact at least 80% of votes are approved in company agenda shows how large the presence of ruling shareholders is and how little interest there is from ordinary shareholders.
The ruling shareholder structure with cross-shareholdings has made this watered-down for Japanese companies. Companies should strive to increase shareholder interest. To this end, information disclosure efforts must be promoted.
Companies are encouraged to make efforts to disclose sufficient information to shareholders, not after AGM, but before it, which is the highest body of the company in the first place.

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Jul 24

Daily Brief Japan: Toshiba Corp, Nexon and more

In today’s briefing:

Last Week in Event SPACE: Toshiba, Swire, SOHO, Link Admin, DIDI Global, 51job
What We Should Know About the Nexon Inheritance Tax Dilemmas

Last Week in Event SPACE: Toshiba, Swire, SOHO, Link Admin, DIDI Global, 51job

By David Blennerhassett

Toshiba Corp (6502 JP)‘s bidder list is out. It is Bain, Brookfield, JIP-JIC, and CVC. Overall, the impression of this pool of candidates is negative
Swire Pacific (A) (19 HK) is trading cheap at a look-through forward P/B of 0.26x compared to its five-year average of 0.38x, and the two-year average pre-Covid of 0.48x.
Soho China (410 HK)‘s name was toxic after SAMR dinged Blackstone’s deal. It is no less toxic now. Arguably the upside is greater than the downside. But on what timeframe?

What We Should Know About the Nexon Inheritance Tax Dilemmas

By Sanghyun Park

A critical issue arose lately. The Nexon heirs do not have collateral for installment payment. The Korea NTS doesn’t accept shares of an unlisted company as collateral for tax payment.
So, the contingency plan is a direct equity sale. The more feasible would be for NXC to sell its stake in Nexon for the convenience of valuation and finding buyers.
The deal size is so large that it can come out in multiple block deals rather than a single buyer deal by the end of October.

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Jul 23

Daily Brief Japan: NTT (Nippon Telegraph & Telephone), Tokyo Stock Exchange Tokyo Price Index Topix and more

In today’s briefing:

NTT (Buy) – Some Quick Takeaways from the Subsea Cable Announcement
Simply Returning Profits to Shareholders Will Increase Gap in Valuations Among Companies

NTT (Buy) – Some Quick Takeaways from the Subsea Cable Announcement

NTT announced it would build and operate a third trans-Pacific subsea cable (JUNO) with NEC as the vendor and a 2024 activation date
This also represents the second trans-Pacific cable in five years and the one with the highest capacity to date
This is not core to NTT’s business but it does highlight how capacity needs are expanding as network speeds accelerate and how those costs can be managed

Simply Returning Profits to Shareholders Will Increase Gap in Valuations Among Companies

It can be said that companies that do not specify cash allocation and only execute shareholder return, thus encouraging shareholders to find and invest in reinvestment targets on their own.
Since the stock valuations of companies as a whole haven’t increased, investment capital has gone to a few companies with high profitability, raising gap between profitability and valuations among companies.
If the information asymmetry between management and investors could be bridged, even changes in the capital structure could have an impact on stock prices.

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Jul 22

Daily Brief Japan: Hitachi Transport System, Sanrio, Yamato Holdings and more

In today’s briefing:

Hitachi Transport (9086 JP): STILL Trading Too Wide
Sanrio – Hello Kitty and Kuromi Characters to Expand in China But Valuations Remain Lofty
Sanrio: The Market Is a Bit Too Excited About The Licensing Agreement With Alifish
Yamato Builds Courier Ecosystem

Hitachi Transport (9086 JP): STILL Trading Too Wide

Overnight we got news that the EU had cleared the purchase of Hitachi Transport System (9086 JP) by the KKR bidco.
What started as an expected five-month process to gain regulatory clearances should now be down to two months. Risk arb is trading wide, but this is an “easy” deal.
Now trading at 10% annualised to the cash-out date implied by a 30-Sep start date, this is a “good risk.”

Sanrio – Hello Kitty and Kuromi Characters to Expand in China But Valuations Remain Lofty

By Douglas Kim

On 30 June 2022, Sanrio reached a five year licensing deal with Alifish, which will cover Sanrio’s cast of popular characters including Hello Kitty and Kuromi in China.
In July 2020, Shintaro Tsuji (founder of the company) handed over control of Sanrio to his 31 year old (as of 2020) grandson Tomokuni Tsuji.
Despite the longevity of Hello Kitty as well as the recent partnership with Alifish (Alibaba’s subsidiary) to expand its business in China, we remain concerned with Sanrio’s lofty valuation multiples.

Sanrio: The Market Is a Bit Too Excited About The Licensing Agreement With Alifish

By Oshadhi Kumarasiri

Sanrio (8136 JP) , the company behind Hello Kitty, has bounced 12% since striking a deal with Alibaba’s IP licensing platform Alifish to produce and sell merchandise of 26 characters.
This seems like a way to combat copyright infringements. However, we are sceptical that this agreement could stop cheap counterfeits from entering the market.
Sanrio badly needs a revival. However, history is not on the company’s side as they have been trying to revive the business over the last 20 years.

Yamato Builds Courier Ecosystem

By Michael Causton

Yamato Transport is Japan’s largest courier service, owning nearly 50% share, but even the biggest player needs to race to keep up with booming demand for e-commerce.
Over the past six years, it has gradually built an ecosystem of online tools and physical infrastructure to help vendors and customers, importing knowhow when needed.
So far, these measures have helped it stay on top of spiralling demand but there remain pressures.

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Jul 21

Daily Brief Japan: Toshiba Corp, Softbank Group, Nidec Corp, Tokyo Stock Exchange Tokyo Price Index Topix and more

In today’s briefing:

Toshiba (6502) Update – Shares Down Since Last Look, “News” Isn’t Really. IRR Grid.
Toshiba – The Bidders Emerge
Softbank (9984 JP) – EToro’s Funding “Down Round”
Nidec (6594) | The Number One EV Play in Japan
Don’t Forget to Check for Deemed Shares Even if a Company Have Reduced Its Policy Shareholdings

Toshiba (6502) Update – Shares Down Since Last Look, “News” Isn’t Really. IRR Grid.

Overnight, Toshiba Corp (6502 JP) has released an update “Progress Report on Discussions with Potential Investors and Sponsors. Four advance to the second round, including both PE and strategic investors.
Nikkei reported those advancing were Bain, CVC, Brookfield, and JIP-JIC. Blackstone did not advance. Yesterday, Reuters reported that KKR had declined to bid, but might join another bid.
Now parties will start due diligence, and Toshiba will examine bids for “measures to enhance corporate value” and certainty of execution (given national security-sensitive issues, and funding).

Toshiba – The Bidders Emerge

By Mio Kato

The Nikkei reported yesterday that Toshiba had winnowed the pool of potential partners down to four candidates.
All four names (Bain, CVC, Brookfield and Japan Industrial Partners/Japan Investment Corp) have been connected to Toshiba previously.
We wonder whether this pool of candidates points to a higher likelihood of a strategic partnership rather than a full buyout.

Softbank (9984 JP) – EToro’s Funding “Down Round”

By Victor Galliano

The planned eToro IPO via SPAC merger with FinTech V was terminated in early July, due delayed regulatory process as well as poor market conditions
The now defunct SPAC deal had implied an eToro valuation in excess of USD10bn; post failed SPAC deal, its latest funding round implies a valuation range of USD5bn to USD6bn
Softbank made its eToro investment through the Vision Fund 2 in 4Q 2020; Softbank had been counting on the SPAC deal with FinTech V as its partial eToro exit strategy

Nidec (6594) | The Number One EV Play in Japan

Nidec reported 1Q earnings with clear evidence that near-turn earnings have bottomed. Now the market can focus on what matters, E-Axles
The E-Axle outlook strong than ever across demand, production, and profitability
We are bullish on the stock at 30x forward earnings versus the 5-year average of 55x, especially as China accelerates policies to drive EV adoption

Don’t Forget to Check for Deemed Shares Even if a Company Have Reduced Its Policy Shareholdings

I believe the change in TOPIX float calculation criteria had significant impact on the pace of reductions last year. It’s necessary to pay attention to whether the pace will continue.
“Deemed shares held” are shares contributed to the retirement benefit trust, and the company retains the right to direct the voting rights. Remember that cross-held shares exist here as well.
I would like listed companies to settle the issue of policy shareholdings as soon as possible and focus on how to raise profit margins, which is the biggest issue.

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Jul 20

Daily Brief Japan: Nidec Corp, Hoya Corp, Tokyo Stock Exchange Tokyo Price Index Topix and more

In today’s briefing:

Nikkei 225 Sep Annual Review Predictions – 3 In, 3 Out
Nikkei 225 March 2023 Rebal On The Follow – Predictions (3 In, 3 Out) & Problems
Tighter ESG-Wash Monitoring Will Follow the New Securities Report Disclosure Rule in in 2 Years?

Nikkei 225 Sep Annual Review Predictions – 3 In, 3 Out

The Nikkei 225 Annual Review is in September based on end-July data. Jumping the gun, I propose 3 additions and 3 deletions with granular data and details offered per sector.
I see ¥600bn to buy and a funding trade of 99% of that. There are 15+ names with more than 1 day of ADV to sell (funding only).
The impact on Real World Float is non-negligible. One name in particular is deserving of attention.

Nikkei 225 March 2023 Rebal On The Follow – Predictions (3 In, 3 Out) & Problems

Yesterday I published Nikkei 225 Sep Annual Review Predictions – 3 In, 3 Out. Assuming correct, and we move the last 6mos of data 6mos forward, March23 Rebal is below.
This too is 3 in, 3 out. But it is complicated. “Required” changes would move the sector balance further out of whack.
And while some of the trades are “interesting”, the rebal is smaller and the bigger question is “What comes after that?”

Tighter ESG-Wash Monitoring Will Follow the New Securities Report Disclosure Rule in in 2 Years?