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. 

Thematic (Sector/Industry)

FY2020 was clearly a year when department store executives would have been better to live in an induced coma. Big city stores suffered especially because inbound tourists, their main growth driver of the past few years, disappeared and local shoppers stayed away, although some stores did manage to harness support from Japan’s expanding wealth market to offset the rout a little bit. The good news is that executives pushing for change in the last five years in the face of perennial intransigence are increasingly taking charge and the result should be a leaner, smaller and more clearly defined format that is more overtly upscale.

FY2020 was clearly a year when department store executives would have been better to live in an induced coma. Big city stores suffered especially because inbound tourists, their main growth driver of the past few years, disappeared and local shoppers stayed away, although some stores did manage to harness support from Japan’s expanding wealth market to offset the rout a little bit. The good news is that executives pushing for change in the last five years in the face of perennial intransigence are increasingly taking charge and the result should be a leaner, smaller and more clearly defined format that is more overtly upscale.

Japan's Department Stores: Radical Contraction Still to Come if Sector Is to Survive

Equity Bottom-Up

Pan Pacific International Holdings / Equity Bottom-Up

The pandemic led to slower growth at <a href="https://www.smartkarma.com/entities/pan-pacific-international-holdings-corporation" target="_blank" data-smartkarma-citation="entities:13475:1" rel="noopener">Pan Pacific International Holdings (7532 JP)</a> last year, but the country’s largest discounter still managed an improved performance thanks to ongoing turnaround of stores acquired from Uny and expansion overseas.

The pandemic led to slower growth at Pan Pacific International Holdings (7532 JP) last year, but the country’s largest discounter still managed an improved performance thanks to ongoing turnaround of stores acquired from Uny and expansion overseas.

Don Quijote: Slower Growth, Better Stores

Japan’s  largest retail conglomerate is just emerging from years of group restructuring and, despite perennial complaints from investors that it should make more money, achieved record operating profits in FY2019 before the pandemic. Now, the group is looking at technology to create a whole new future to ensure leadership ahead of <a href="https://www.smartkarma.com/entities/seven-i-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:1041:1" rel="noopener">Seven &amp; I Holdings (3382 JP)</a> for the long-term.

Japan’s  largest retail conglomerate is just emerging from years of group restructuring and, despite perennial complaints from investors that it should make more money, achieved record operating profits in FY2019 before the pandemic. Now, the group is looking at technology to create a whole new future to ensure leadership ahead of Seven &amp; I Holdings (3382 JP) for the long-term.

Aeon Vs Seven & I: New Ideas to Stay Ahead

Equity Analyst, LightStream Research

Oshadhi Kumarasiri

Equity Analyst

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.

<ul>
<li>Our 2021 High Conviction call, <a href="https://www.smartkarma.com/entities/seven-i-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:1041:1" rel="noopener">Seven &amp; I Holdings (3382 JP)</a> delivered 2QFY22 results yesterday with revenue surpassing consensus estimate by around 9.7%. The company’s 2QFY22 operating income was 8% below consensus.</li>
<li>Although Q2 results seemed a bit weak on profitability with 0.3% YoY growth, we think it was driven mainly by a temporary rise in SG&amp;A costs in the overseas convenience stores business due to the completion of the Speedway acquisition.</li>
<li>The initial price reaction to results was negative. Yet we think it's mostly down to the overall weaknesses in the Japanese market.</li>
<li>Nevertheless, there are many positives to look forward to in the near term as the increase in the Speedway synergies, strong growth in America and the expansion into India could provide an impetus for Seven &amp; I to break the resistance, which is currently at around the ¥5,400 level.</li>
</ul>


Our 2021 High Conviction call, Seven &amp; I Holdings (3382 JP) delivered 2QFY22 results yesterday with revenue surpassing consensus estimate by around 9.7%. The company’s 2QFY22 operating income was 8% below consensus.
Although Q2 results seemed a bit weak on profitability with 0.3% YoY growth, we think it was driven mainly by a temporary rise in SG&amp;A costs in the overseas convenience stores business due to the completion of the Speedway acquisition.
The initial price reaction to results was negative. Yet we think it's mostly down to the overall weaknesses in the Japanese market.
Nevertheless, there are many positives to look forward to in the near term as the increase in the Speedway synergies, strong growth in America and the expansion into India could provide an impetus for Seven &amp; I to break the resistance, which is currently at around the ¥5,400 level.


2021 High Conviction: Seven & I Raises Speedway Synergies & India Expansion Could Break The Deadlock

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

On 9 September, <a href="https://www.smartkarma.com/entities/sbi-holdings-inc" target="_blank" data-smartkarma-citation="entities:10928:1" rel="noopener">SBI Holdings (8473 JP)</a> announced they would launch a Tender Offer at ¥2,000/share to acquire 27.68% of <a href="https://www.smartkarma.com/entities/shinsei-bank-ltd" target="_blank" data-smartkarma-citation="entities:16897:1" rel="noopener">Shinsei Bank (8303 JP)</a> to take them to 48.00%. This was discussed in <a href="https://www.smartkarma.com/insights/sbi-8473-launches-a-hostile-tender-offer-on-shinsei-bank-8303" target="_blank" data-smartkarma-citation="insights:57426" rel="noopener">SBI (8473) Launches a HOSTILE Tender Offer on Shinsei Bank (8303)!</a> After the weekend had passed, there was news that Shinsei was looking for a white knight, and the Board would meet this past week to discuss a poison pill warrant issuance. This was discussed in <a href="https://www.smartkarma.com/insights/shinsei-looks-to-a-poison-pill-but-probably-not-really" target="_blank" data-smartkarma-citation="insights:57630" rel="noopener">Shinsei Looks To A Poison Pill, But Probably Not Really</a> on 14 September. During the week, there were suggestions from the Nikkei that Shinsei had approached <a href="https://www.smartkarma.com/entities/seven-i-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:1041:1" rel="noopener">Seven &amp; I Holdings (3382 JP)</a> and <a href="https://www.smartkarma.com/entities/sony-corp" target="_blank" data-smartkarma-citation="entities:563:1" rel="noopener">Sony Corp (6758 JP)</a> and possibly a "rehabilitation fund" to be white knights. The two corporates already own banks but are relatively and highly independent from bank-led keiretsu affiliations and associations, and the rehabilitation fund would almost necessarily be independent.  Shibata Hisashi, the head of the Regional Banks Association of Japan said on the 15th in a press conference that hostile takeover bids for regional banks were not the preferable outcome because they can unsettle customers and business partners within their region. On 16 September, Shinsei released a long <a href="https://www.shinseibank.com/corporate/en/news/pdf/pdf2021/210916_Announcement_e.pdf" target="_blank" rel="noopener">report</a>, suggesting SBI's account of the relationship to date had been "inaccurate" or "insufficient" and proceeded to clarify things. SBI had said their proposal for a capital and business alliance in September 2019 had been ignored but Shinsei explained the reason for the rejection, and said that SBI accepted it at the time. Shinsei said they had not received a subsequent proposal (despite SBI saying they had made proposals on a continuous basis). Shinsei appears to correct the facts about the Monex tie-up. The details are somewhat eye-opening. <ul>
<li>SBI had proposed it buy up to 48%, then have Shinsei buy back shares from the market to reduce the percentage of general shareholders holding shares. When SBI and the government together owned 90%, they would squeeze out minority shareholders. After doing so, they would repurchase shares held by the government [unspoken is that it would happen at a higher price]. </li>
<li>The Board of Shinsei noted that without control, synergies would not have been meaningful, and buying out minorities at a price lower than the government posted logistical and governance problems. </li>
<li>Furthermore, Shinsei's clarification of the Monex situation seems to not jive with SBI's claims. </li>
</ul>There will always be a "he said, she said" problem where context, perceptions, and explanation do not match, but when they do show up, one side often gets the worse public perception because of the method and timing of presentation. On the 17th September, Shinsei <a href="https://www.shinseibank.com/corporate/en/news/pdf/pdf2021/210917_Announcement2_e.pdf" target="_blank" rel="noopener">announced</a> that it "reserved" its Target Opinion on the SBI Tender Offer based on having sent SBI questions but having not received answers yet. Shinsei also <a href="https://www.shinseibank.com/corporate/en/news/pdf/pdf2021/210917_Announcement1_e.pdf" target="_blank" rel="noopener">announced</a> the introduction of Takeover Defense Measures via Poison PillShareholder Rights (56 pages) to be introduced at an EGM, also <a href="https://www.shinseibank.com/corporate/en/news/pdf/pdf2021/210917_Announcement3_e.pdf" target="_blank" rel="noopener">announcing</a> that the Record Date would be 13 October (and an official announcement would be made 28 September.SBI provided an <a href="https://www.sbigroup.co.jp/news/2021/0917_12649.html" target="_blank" rel="noopener">initial response</a> (in Japanese) saying that the Tender Offer was long enough, and that the Shinsei request for an extension was only a tactic to waste time, and warned they may be required to withdraw the Tender Offer under certain circumstances.That sets the stage we discuss more fully below.

On 9 September, SBI Holdings (8473 JP) announced they would launch a Tender Offer at ¥2,000/share to acquire 27.68% of Shinsei Bank (8303 JP) to take them to 48.00%. This was discussed in SBI (8473) Launches a HOSTILE Tender Offer on Shinsei Bank (8303)! After the weekend had passed, there was news that Shinsei was looking for a white knight, and the Board would meet this past week to discuss a poison pill warrant issuance. This was discussed in Shinsei Looks To A Poison Pill, But Probably Not Really on 14 September. During the week, there were suggestions from the Nikkei that Shinsei had approached Seven &amp; I Holdings (3382 JP) and Sony Corp (6758 JP) and possibly a "rehabilitation fund" to be white knights. The two corporates already own banks but are relatively and highly independent from bank-led keiretsu affiliations and associations, and the rehabilitation fund would almost necessarily be independent.  Shibata Hisashi, the head of the Regional Banks Association of Japan said on the 15th in a press conference that hostile takeover bids for regional banks were not the preferable outcome because they can unsettle customers and business partners within their region. On 16 September, Shinsei released a long report, suggesting SBI's account of the relationship to date had been "inaccurate" or "insufficient" and proceeded to clarify things. SBI had said their proposal for a capital and business alliance in September 2019 had been ignored but Shinsei explained the reason for the rejection, and said that SBI accepted it at the time. Shinsei said they had not received a subsequent proposal (despite SBI saying they had made proposals on a continuous basis). Shinsei appears to correct the facts about the Monex tie-up. The details are somewhat eye-opening. 
SBI had proposed it buy up to 48%, then have Shinsei buy back shares from the market to reduce the percentage of general shareholders holding shares. When SBI and the government together owned 90%, they would squeeze out minority shareholders. After doing so, they would repurchase shares held by the government [unspoken is that it would happen at a higher price]. 
The Board of Shinsei noted that without control, synergies would not have been meaningful, and buying out minorities at a price lower than the government posted logistical and governance problems. 
Furthermore, Shinsei's clarification of the Monex situation seems to not jive with SBI's claims. 
There will always be a "he said, she said" problem where context, perceptions, and explanation do not match, but when they do show up, one side often gets the worse public perception because of the method and timing of presentation. On the 17th September, Shinsei announced that it "reserved" its Target Opinion on the SBI Tender Offer based on having sent SBI questions but having not received answers yet. Shinsei also announced the introduction of Takeover Defense Measures via Poison PillShareholder Rights (56 pages) to be introduced at an EGM, also announcing that the Record Date would be 13 October (and an official announcement would be made 28 September.SBI provided an initial response (in Japanese) saying that the Tender Offer was long enough, and that the Shinsei request for an extension was only a tactic to waste time, and warned they may be required to withdraw the Tender Offer under certain circumstances.That sets the stage we discuss more fully below.

Shinsei To Launch a Poison Pill; SBI Plays Coy, So We Wait

Japan

Seven & i Holdings Co., Ltd. is a holding company which was established through the merger of Ito-Yokado Co., Seven Eleven Japan Co., and Denny's Japan. The Company plans, manages, and operates mainly convenience stores, supermarkets, and department stores.

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Seven & I Holdings (3382 JP)

Japan's Department Stores: Radical Contraction Still to Come if Sector Is to Survive

Japan's department stores are in trouble and were well before the pandemic but their outlook is much worse now. Major changes are required, not...

Michael Causton

Don Quijote: Slower Growth, Better Stores

Don Quijote remains a solid bet. At home, its staples discounting offers guaranteed growth given the buoyancy of discount demand and overseas,...

Michael Causton

Aeon Vs Seven & I: New Ideas to Stay Ahead

After Seven & I's purchase in the US, Aeon is no longer far ahead of its rival by sales volume but now expects to grow ¥3 trillion in the next 5...

Michael Causton

2021 High Conviction: Seven & I Raises Speedway Synergies & India Expansion Could Break The Deadlock

There are many positives to look forward to in the near term as the increase in the Speedway synergies, strong growth in America and the expansion...

Oshadhi Kumarasiri

Shinsei To Launch a Poison Pill; SBI Plays Coy, So We Wait

Shinsei announced Friday it would later announce a Poison Pill at end-Sep, followed by an EGM Record Date in mid-Oct. This is setting up to go full...

Travis Lundy

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