In this briefing:
- Prored Partners (7034) – A Fast Growing Recent Listing in Japan.
- Ten Years On – Asia’s Time Is Coming, Don’t Miss The Boat
- NTT Buyback Almost Done
- NCsoft – A Strategy for Trading in 1H 2019
- Japan Hotel REIT Placement – Biggish Acquisition, Smallish Accretion
1. Prored Partners (7034) – A Fast Growing Recent Listing in Japan.
Prored Partners is a business consulting company founded in 2009 by the CEO, Mr Satani (who retains 60% of the equity). Prior to setting up Prored, he worked as a business consultant at a consultancy firm subsequently acquired by PwC Consulting. The shares were registered on the Mother’s exchange at the end of July 2018. Unfortunately, it is a micro-cap (market cap Y24bn) but should be of interest to those looking for a very fast growing small cap name. It trades on 17x our forecasts for this year to 10/19. The company has been growing at a fast pace over the last few years. We expect this strong rate of growth to continue, see below.
2. Ten Years On – Asia’s Time Is Coming, Don’t Miss The Boat
We noted in Ten Years On – Asia Outperforms Advanced Economies Asia’s economies and companies have outperformed advanced country peers in the ten years to 2017. Growing by 6.8%, real, through the crisis the region is 188% larger in US dollar terms while US dollar per capita incomes 170% higher compared with 2007. In this note we argue even though Asian stock markets have underperformed since 2010 and the bulk of global capital flows have gone to advanced countries, Asia’s time is coming. Valuations are cheap. Growth fundamentals strong. There are few external or internal imbalances. Macroeconomic management has been better than in advanced economies and the scope to ease policy to ward off headwinds in 2019 is greater. China has already started.
3. NTT Buyback Almost Done
On November 6th, NTT (Nippon Telegraph & Telephone) (9432 JP)announced a ¥150 billion buyback program, and NTT Docomo Inc (9437 JP)announced that its very large ¥600 billion buyback program presented days before would be done through a single below-market-price Tender Offer where NTT was expected to be the only seller. That left NTT buying shares on market and NTT Docomo buying shares off-market in the immediate future.
The Tender Offer went through as planned (though NTT sold a tiny trifle less than expected).
On January 7th, NTT announced it had repurchased 8.4mm shares for ¥38.8 billion, leaving only ¥15.35 billion to repurchase in this program. That is worth about 7-8 trading days of buying. The buyback is therefore almost done.
A hint as to the future came in a Nikkei article in December. It may be many months before we see more NTT on-market buybacks.
4. NCsoft – A Strategy for Trading in 1H 2019
In this report, we will explain our strategy for trading NCsoft Corp (036570 KS) shares in 2019. NCsoft is expected to launch five new mobile games in 2019 including “Lineage 2M”, “AION 2”, “Blade & Soul 2”, “Blade & Soul M”, and “Blade & Soul S”. These five new games are based on its existing MMORPG franchise games. The company is hoping to release all five of these new mobile games in 1H 2019.
Lineage 2M, which is perhaps the most anticipated mobile game among these five games, is expected to be launched in 2Q19. Traders are starting to gear up for the launch of this important game in the coming months. Many investors are likely to take the “buy on rumor and sell on news” strategy, which in this case the news would refer to the launch of the Lineage 2M game.
Nonetheless, in this case, we believe that because many investors may be getting ready to sell NCsoft near the launch date of Lineage 2M, many savvy investors are likely to sell their shares a few days/weeks earlier than the actual launch date. At this point, the most likely period as to when Lineage 2M may be launched is in May 2019. As a result, a good time to consider selling NCsoft may be sometime in March/April 2019.
5. Japan Hotel REIT Placement – Biggish Acquisition, Smallish Accretion
Japan Hotel Reit Investment (8985 JP) (JHR) plans to raise around US$300m/JPY33bn to part fund the acquisition of Hilton properties located in Tokyo and Osaka.
We have previously covered four other capital raising by JHR:
- US$170m in Jun 2017, Japan Hotel REIT Placement – An Accretive Acquisition, JGB 10Y Yield Seems Stable
- US$340m in July 2016, Japan Hotel REIT – YEN a Bigger Driver than the Acquisitions,
- US$120m in Jan 2016, Japan Hotel REIT – Acquisition to Aid DPU Growth, but RMB Needs to Hold Up for the Stock to Perform, and
- US$230m in Jan 2015, Japan Hotel REIT (8985 JP) – Acquisition to aid DPU growth; take the deal
The prior-deals have given mixed bag results over the short-term. In this insight, we will run the deal through our framework and analyse past performance.
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