In this briefing:
- SoftBank Corp (9434 JP) & Arteria Networks (4423 JP): A Tale of Two IPOs
- Are US Stocks Still Expensive?
- Seven Eleven, Familymart and Lawson Find New Growth Strategies in Tighter Market
- Business Happenings in the Americas that May Be “Below the Radar” – Week Ending December 22, 2018
- Japan Convenience Stores Still Innovating in a Saturated Market
1. SoftBank Corp (9434 JP) & Arteria Networks (4423 JP): A Tale of Two IPOs
During the second half of December 2018, Japan saw two telecom companies list on the Tokyo Stock Exchange: Softbank Corp (9434 JP) and ARTERIA Networks (4423 JP). After years of industry consolidation, which saw several stocks delist, this felt like a Christmas miracle (at least for those watching the sector’s stocks).
It would be hard to find two companies in the same industry that are so different – both in their business models as well as in how their IPOs were positioned to investors. One stock is 100 times larger than the other, but this is not a story of David and Goliath. It is two unique stories in parallel.
While each company took a very different approach to selling its stock, both have suffered from the subsequent broader market weakness, irrespective of company specifics. We can’t say it has been the worst of times, but it certainly has been a tough time with SoftBank Corp down 13% and Arteria down 20% from their IPO prices.
In this Insight we explore how each company approached its IPO and how each has fared since.
2. Are US Stocks Still Expensive?
There are striking parallels between 1929 and 2018.
The 1929 crash put a halt to a nine-year bull run on the market.
Up until October 1929, same as this year, market consensus was that asset prices could only go up from their current level.
As we mentioned in When the Tide Goes Out, Dominoes Fall, a decade of building up excesses meant a painful burst, back 79 years ago: between October of 1929 and September of 1932, eighty-nine percent of the value of stocks was erased and the market didn’t recover to its former peak until 25 years later.
Are we in a similar situation right now?
3. Seven Eleven, Familymart and Lawson Find New Growth Strategies in Tighter Market
The following is an in-depth review of the big three Japanese convenience store (CVS) players, Seven Eleven (Seven & I Holdings (3382 JP)), Familymart (8028 JP) and Lawson Inc (2651 JP). This follows our review of the Japanese convenience store sector overall, which is best to read first.
The key operational and strategic themes relevant to investors regarding the Big Three in Japan:
- Saturation has encouraged the top three operators to take over the remaining smaller chains while pushing into regions where they have fewer stores.
- All are expanding new forms of retail:
- Seven Eleven and Lawson have launched new e-commerce ventures that make the best use of their existing store networks and could reach national coverage quite soon.
- Diversification: Familymart, in particular, is tying with all manner of partners to try and come up with a hit hybrid format to find new growth.
- While competition from drugstores and discount food retailers is a threat, convenience stores will continue to find new growth from e-commerce, hybrid stores and innovative products.
4. Business Happenings in the Americas that May Be “Below the Radar” – Week Ending December 22, 2018
Highlights of significant recent happenings include:
- Feeding the Dragon – Sumitomo Corp (8053 JP) buying into massive Chile copper project; Mitsui & Co Ltd (8031 JP) and Tokyo Gas (9531 JP) announced plans to be long-term buyers of Mexican LNG.
- Local News on Global Companies – Huawei Technology (40978Z CH)‘s to do “whatever is required” to meet Canada’s 5G security standards; Ant Financial (1051260D CH)’s Sesame Credit be used to apply for Canadian visas; Facebook Inc A (FB US) offered data to Netflix Inc (NFLX US) and Royal Bank Of Canada (RY CN); BlackBerry Ltd (BB CN)‘s high-security reputation increasingly valuable; Fedex Corp (FDX US) and United Parcel Service Cl B (UPS US) deny negative impact from Amazon.com Inc (AMZN US)‘s Amazon Air operations; and Anheuser Busch Inbev Sa (Adr) (BUD US) and Tilray Inc (TLRY US) are doing “joint” product development.
- Trade Deals & No Deals – Bosideng Intl Hldgs (3998 HK) got an unexpected boost, while Canada Goose Holdings (GOOS CN) took an unexpected hit as a consequence of the U.S.A. Government’s problems with Huawei Technology (40978Z CH) .
- Outliers – Another “silver lining” to global warming? The Warming Arctic Opens the Northwest Passage as a Potential Maritime Superhighway
5. Japan Convenience Stores Still Innovating in a Saturated Market
The following is an in-depth review of the Japanese convenience store (CVS) sector and, in particular, the top three players, Seven Eleven (Seven & I Holdings (3382 JP)), Familymart (8028 JP) and Lawson Inc (2651 JP). Also covered are the smaller firms like Ministop Co Ltd (9946 JP), Poplar Co Ltd (7601 JP), Daily Yamazaki, Cvs Bay Area (2687 JP), Three F Co Ltd (7544 JP) and Secoma which are targets for the Big Three.
The key operational and strategic themes relevant to investors in CVS in Japan:
- The Japanese convenience store sector may have reached saturation but this has just encouraged the top three operators to speed up their quest to take over the remaining smaller chains while pushing into regions where they have fewer stores.
- At the same time, all are looking at new forms of retailing to expand further:
- All of the top three had previously failed to come up with coherent e-commerce strategies, but this year Seven Eleven and Lawson have launched new ideas that make better use of their existing store networks and could reach national coverage quite soon.
- Diversification is another strategy to overcome saturation, and Familymart, in particular, is tying with all manner of partners to try and come up with a hit hybrid format to find new growth.
- While competition from drugstores and discount food retailers is a threat, convenience stores will continue to find new sources of growth from e-commerce, hybrid stores and innovative products.
This first report reviews the sector overall and the main players, while a second report looks at the big three CVS operators – which have a combined 91% share of the market – in detail.
