Brief Japan: Nexon Controlling Stake Sale: Tax Situation Assessment & Tender Implications and more

In this briefing:

1. Nexon Controlling Stake Sale: Tax Situation Assessment & Tender Implications
2. Bull Or Bear? Latest Global Liquidity Readings
3. Risk of Future LNG Supply Glut as Bubble of New Projects Grows
4. Japan E-Commerce: Digital to Influence 45% of All Retail Sales by 2025
5. Japan Mobile: MVNO Data for Q3 Includes Slowest Growth Since 2014 but that Makes Sense for Rakuten

1. Nexon Controlling Stake Sale: Tax Situation Assessment & Tender Implications

This post looks at the tax situations that Nexon’s Kim may be facing for each of the two options and the signals that he may be sending with regard to his decision. Also, this post discusses how each option may impact on mandatory tender offer which is a crucial point for current massive short buildup on Nexon Japan shares.

2. Bull Or Bear? Latest Global Liquidity Readings

• Global Liquidity bottoming out, but Central Banks not yet easing
• US Fed only withdrew $30bn in Q1, versus $350 bn in Q4
• PBoC still tightening through OMOs
• ECB  on ‘pause’
• QE4 is coming in 2019, but no evidence it has started yet

3. Risk of Future LNG Supply Glut as Bubble of New Projects Grows

The rapidly improving outlook in the LNG industry over the last few years, reinforced towards the end of 2017 by the unexpected growth of demand from China, has set off a proliferation of new LNG projects especially from the US (Exhibit 1).

In its latest LNG Outlook report, Royal Dutch Shell (RDSA LN) is projecting from 2023 onwards a significant gap between the future LNG demand and the existing supply including the capacity under construction that could require up to 100mtpa of new LNG project sanctions by 2023.

The race to gain market share in the projected LNG demand-supply gap has produced an aggregated capacity of proposed new projects of up to 475mtpa, a number larger than the total LNG traded volume in 2018 of 319mtpa and way above the capacity required to meet the future growth in LNG demand.

Exhibit 1: Funnel of proposed LNG projects getting bigger

4. Japan E-Commerce: Digital to Influence 45% of All Retail Sales by 2025

E-commerce is set to account for 15% of retail sales in 2025, double the size of any other channel, and become the biggest channel for physical merchandise by 2023.

However, recent research, which considers online sales in a store context, suggests that already in 2016-17, 35.3% of all retail sales were at least partly a result of online interactions through an omnichannel process.

By 2024, total EC sales including omnichannel transactions are expected to hit 44.6% of all retail sales or approximately ¥76.4 trillion.

5. Japan Mobile: MVNO Data for Q3 Includes Slowest Growth Since 2014 but that Makes Sense for Rakuten

The Ministry of Industry Affairs and Communications (MIC, the regulator) released Q3 (Dec 2018) data for industry mobile virtual network operator (MVNO) subs today (29 March) characterized by continued declines in growth YoY (+15% in Q3 v 18% in Q2) and the lowest absolute net adds (+480K) since Q2 2014.  Growth for the largest consumer-focused MVNO Rakuten Inc (4755 JP) also appears to be the lowest since data has become available but that is not necessarily a sign of strength for the existing network operators as it makes sense for Rakuten to slow MVNO growth before its October real network launch.