Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Equity Capital Markets

<ul>
<li>
<a href="https://www.smartkarma.com/entities/gmo-ad-partners-inc" target="_blank" data-smartkarma-citation="entities:9029:1" rel="noopener">Gmo Ad Partners (4784 JP)</a> has become GMO Internet as of 1 January 2025. On that day, it merged with the "internet infrastructure business" of <a href="https://www.smartkarma.com/entities/gmo-internet-inc" target="_blank" data-smartkarma-citation="entities:13631:1" rel="noopener">GMO Internet (9449 JP)</a>. </li>
<li>It was a kind of reverse takeover - a backdoor listing - and it on 24-Dec-2024, it was announced GMO Internet would move from TSE Standard to TSE Prime end-Jan2025.</li>
<li>The stock is +300% since then. Why? A squeeze. Share count increase? 15x. Float share increase? Zero. Resulting Real World Float? 1.24% of shares out and about to shrink.</li>
</ul>



Gmo Ad Partners (4784 JP) has become GMO Internet as of 1 January 2025. On that day, it merged with the "internet infrastructure business" of GMO Internet (9449 JP). 
It was a kind of reverse takeover - a backdoor listing - and it on 24-Dec-2024, it was announced GMO Internet would move from TSE Standard to TSE Prime end-Jan2025.
The stock is +300% since then. Why? A squeeze. Share count increase? 15x. Float share increase? Zero. Resulting Real World Float? 1.24% of shares out and about to shrink.


GMO Internet (4784) DropDown Holdco Gone Ballistic - Squeezed on Truly Tiny Float

Equity Bottom-Up

In mid-February 2020, upon releasing full-year earnings, <a href="https://www.smartkarma.com/entities/gmo-internet-inc" target="_blank" data-smartkarma-citation="entities:13631:1" rel="noopener">GMO Internet (9449 JP)</a> announced a buyback programme which looked big but had some interesting and distinguishing characteristics given where the shares were and what the ownership structure was. This was discussed in <a href="https://www.smartkarma.com/insights/gmo-internet-9449-buyback-bigger-than-it-looks-smaller-than-it-looks" target="_blank" data-smartkarma-citation="insights:36580" rel="noopener">GMO Internet (9449) Buyback - Bigger Than It Looks, Smaller Than It Looks</a>. The Investment/Trading Conclusion offered was Bullish (see the green line at the top) for some specific reasons hinted at in the title (you want to know why? Read the first piece or see below).The stock closed at ¥2179 that day. The shares were up for two days. Then everything fell apart as COVID-19 caused the market to fall out of bed in Asia earlier than in the west. Since then, TOPIX is down 15.8% but GMO Internet is up 16.4% so it has seen decent outperformance in the 90 days since then. <h2>The NEW News</h2><a href="https://ir.gmo.jp/pdf/presen/GMO_FY20_Q1_Consolidated_Results_Statement_200512.pdf" target="_blank" rel="noopener">Q1 earnings</a> were out on the 12th. Revenues were up 14.6% yoy, OP is up 65%, and Net Profit is +11.4%. The stock gained more than 10% yesterday on the highest volume since Q1 earnings last year, and fell back a bit today.TODAY after the close, after having <a href="https://ir.gmo.jp/pdf/irlibrary/gmo_disclose_info20200512_01.pdf" target="_blank" rel="noopener">announced</a> the progress programme-to-date of its buyback on 12 May (1.28mm shares for ¥2.48bn), the company <a href="https://ir.gmo.jp/pdf/irlibrary/gmo_disclose_info2020514.pdf" target="_blank" rel="noopener">announced</a> a ToSTNeT-3 buyback to be executed tomorrow morning, of up to 3.153mm shares and up to ¥8bn at today's close of ¥2,537/share. Assuming the company buys back all 3.153mm shares they bid, that will mean 70% of the monies allocated for the buyback program lasting through next February will have been used, and at current price, that would mean the company could buy back another 1.78mm shares, maximum. That is about 1.6% of shares out and a bit under three days of volume. It's worth looking at where we stand now.

In mid-February 2020, upon releasing full-year earnings, GMO Internet (9449 JP) announced a buyback programme which looked big but had some interesting and distinguishing characteristics given where the shares were and what the ownership structure was. This was discussed in GMO Internet (9449) Buyback - Bigger Than It Looks, Smaller Than It Looks. The Investment/Trading Conclusion offered was Bullish (see the green line at the top) for some specific reasons hinted at in the title (you want to know why? Read the first piece or see below).The stock closed at ¥2179 that day. The shares were up for two days. Then everything fell apart as COVID-19 caused the market to fall out of bed in Asia earlier than in the west. Since then, TOPIX is down 15.8% but GMO Internet is up 16.4% so it has seen decent outperformance in the 90 days since then. The NEW NewsQ1 earnings were out on the 12th. Revenues were up 14.6% yoy, OP is up 65%, and Net Profit is +11.4%. The stock gained more than 10% yesterday on the highest volume since Q1 earnings last year, and fell back a bit today.TODAY after the close, after having announced the progress programme-to-date of its buyback on 12 May (1.28mm shares for ¥2.48bn), the company announced a ToSTNeT-3 buyback to be executed tomorrow morning, of up to 3.153mm shares and up to ¥8bn at today's close of ¥2,537/share. Assuming the company buys back all 3.153mm shares they bid, that will mean 70% of the monies allocated for the buyback program lasting through next February will have been used, and at current price, that would mean the company could buy back another 1.78mm shares, maximum. That is about 1.6% of shares out and a bit under three days of volume. It's worth looking at where we stand now.

<a href="https://www.smartkarma.com/profiles/david-blennerhassett" target="_blank" data-smartkarma-citation="accounts:840" rel="noopener">David Blennerhassett</a> has written about <a href="https://www.smartkarma.com/entities/gmo-internet-inc" target="_blank" data-smartkarma-citation="entities:13631:1" rel="noopener">GMO Internet (9449 JP)</a> over the years as an interesting holdco and most recently wrote about the situation as both a holdco and corporate governance situation in <a href="https://www.smartkarma.com/insights/gmo-internet-listed-holdings-preferred" target="_blank" data-smartkarma-citation="insights:29641" rel="noopener">GMO Internet: Listed Holdings Preferred</a>. Others including <a href="https://www.smartkarma.com/profiles/campbell-gunn" target="_blank" data-smartkarma-citation="accounts:2531" rel="noopener">Campbell Gunn</a> have written about it <a href="https://www.smartkarma.com/entities/gmo-internet-inc/insights?item=27803" target="_blank" rel="noopener">here</a>.
The stock has been the subject of activist interest in the past few years, and as such it has enjoyed a fair bit of press as well, though not always laudatory.
<h2>The NEW News Yesterday</h2>
The NEW News yesterday was that the company reported full-year earnings, with consolidated revenues climbing 5.9% to ¥196.2bn, OP climbing 16.0% to ¥25.3bn, and Net Income up sharply from last year's net loss to +¥8.3bn. 
The company also announced a downward-facing dividend (i.e. a slight cut in the Q4 dividend for 2019 vs 2018), and most importantly, a <a href="https://ir.gmo.jp/en/pdf/irlibrary/gmo_disclose_info20200212_3_e.pdf" target="_blank" rel="noopener">stock buyback</a>. 
It's a big one.
The company announced a buyback of up to ¥15bn or up to 9 million shares (7.95% of shares outstanding). This is an advancement on the company's Total Shareholder Returns Policy instituted in 2016, which stated that the company aimed to return 50% of parent profits to shareholders, with a dividend payout of 33% of total parent earnings, and the rest paid back in the form of share buybacks (but with flexible timing).
Given the share price of recent, assuming no change, it would be a buyback of only 6.9mm shares, which is 6.1% of shares outstanding, but it's a start.

David Blennerhassett has written about GMO Internet (9449 JP) over the years as an interesting holdco and most recently wrote about the situation as both a holdco and corporate governance situation in GMO Internet: Listed Holdings Preferred. Others including Campbell Gunn have written about it here.
The stock has been the subject of activist interest in the past few years, and as such it has enjoyed a fair bit of press as well, though not always laudatory.
The NEW News Yesterday
The NEW News yesterday was that the company reported full-year earnings, with consolidated revenues climbing 5.9% to ¥196.2bn, OP climbing 16.0% to ¥25.3bn, and Net Income up sharply from last year's net loss to +¥8.3bn. 
The company also announced a downward-facing dividend (i.e. a slight cut in the Q4 dividend for 2019 vs 2018), and most importantly, a stock buyback. 
It's a big one.
The company announced a buyback of up to ¥15bn or up to 9 million shares (7.95% of shares outstanding). This is an advancement on the company's Total Shareholder Returns Policy instituted in 2016, which stated that the company aimed to return 50% of parent profits to shareholders, with a dividend payout of 33% of total parent earnings, and the rest paid back in the form of share buybacks (but with flexible timing).
Given the share price of recent, assuming no change, it would be a buyback of only 6.9mm shares, which is 6.1% of shares outstanding, but it's a start. 

GMO Internet (9449) Buyback - Bigger Than It Looks, Smaller Than It Looks

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

ja research

ja research is an independent research platform focused exclusively on Japanese equities. Leveraging data and graphic analysis provided by Japan Analytics, we provide insights on small and medium-sized companies that have been ignored by the sell-side as well as challenging conventional wisdom on larger companies. We also offer analyst and corporate access, the latter with translation if required. 

Thematic (Sector/Industry)

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/115/170/original/2020-01-28_05-14-43.png?1580156104" class="editor-image img-responsive" data-smartkarma-image-id="115170"></figure><div class="content-caption">Source • Japan Analytics</div>TRACKING RESULTS &amp; REVISIONS - As the 'season' for quarterly results picks up again, this series of daily insights will summarise the announcements released over the previous twenty-four hours and highlight 'winners' and 'losers' using our scoring methodology for both Results and Revisions. Until the number of daily announcements becomes excessive, we shall focus on companies with a market capitalisation fo over ¥50 billion.SCORING METHODOLOGY - Results Scores are calculated using the most recent eight quarters of company data for Revenues, Operating Income and Operating Margin and, for each, measure the rate, degree and consistency of change. The score has a maximum of +30 and a minimum of -30 for each period. The Forecast/Revision Score is based on both Annual and Interim period company forecasts and compares changes from previous forecasts as well as against the trailing twelve-month (TTM) or previous first-half results, with annual forecasts being double-weighted. This score also has a maximum of +30 and a minimum of -30 for each period.  The combined Results &amp; Revision Score (RRS) is the average of the Results Score and the Forecasts/Revision Score. These scores are then cap-weight aggregated into Sector and Market Composite Scores for which the seventeen-year track record is shown above.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/115/171/original/2020-01-28_05-28-10.png?1580156919" class="editor-image img-responsive" data-smartkarma-image-id="115171"></figure><div class="content-caption">Source • Japan Analytics/Cabinet Office</div>TRENDING LOWER - Although the Results Score has been moving sideways since November, the Forecast/Revision Score continues to make new ten-year lows. This downward trend is in accord with the Cabinet Office Business Conditions Leading Indicator which reached a new post-GFC low in November, before the impact of the Coronavirus.<div class="content-highlight">Note that our Scoring of both Results and Forecasts/Revisions has a strong momentum component which may lead reported earnings which tend to be a lagging indicator, hence the tighter correlations with the Leading Indicator and the market.</div>

Source • Japan AnalyticsTRACKING RESULTS &amp; REVISIONS - As the 'season' for quarterly results picks up again, this series of daily insights will summarise the announcements released over the previous twenty-four hours and highlight 'winners' and 'losers' using our scoring methodology for both Results and Revisions. Until the number of daily announcements becomes excessive, we shall focus on companies with a market capitalisation fo over ¥50 billion.SCORING METHODOLOGY - Results Scores are calculated using the most recent eight quarters of company data for Revenues, Operating Income and Operating Margin and, for each, measure the rate, degree and consistency of change. The score has a maximum of +30 and a minimum of -30 for each period. The Forecast/Revision Score is based on both Annual and Interim period company forecasts and compares changes from previous forecasts as well as against the trailing twelve-month (TTM) or previous first-half results, with annual forecasts being double-weighted. This score also has a maximum of +30 and a minimum of -30 for each period.  The combined Results &amp; Revision Score (RRS) is the average of the Results Score and the Forecasts/Revision Score. These scores are then cap-weight aggregated into Sector and Market Composite Scores for which the seventeen-year track record is shown above.Source • Japan Analytics/Cabinet OfficeTRENDING LOWER - Although the Results Score has been moving sideways since November, the Forecast/Revision Score continues to make new ten-year lows. This downward trend is in accord with the Cabinet Office Business Conditions Leading Indicator which reached a new post-GFC low in November, before the impact of the Coronavirus.Note that our Scoring of both Results and Forecasts/Revisions has a strong momentum component which may lead reported earnings which tend to be a lagging indicator, hence the tighter correlations with the Leading Indicator and the market.

🇯🇵 JAPAN • Results & Revisions Daily Roundup - 27th January - Too Early to Call a Bottom

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/078/817/original/2019-02-14_15-52-58.png?1550127199" class="editor-image img-responsive" data-smartkarma-image-id="78817"></figure><div class="content-caption">Source: Japan Analytics</div><a href="https://www.smartkarma.com/entities/13631" target="_blank" data-smartkarma-citation="entities:13631:1">GMO internet (9449 JP)</a> released 2018 full-year results in 12th February. 2018 was a turbulent year for the company as it 'surfed' the cryptocurrency wave. The subsequent downfall was swift and brutal. However, the company deserves some plaudits for cutting its (substantial) losses and attempting to move on (albeit somewhat half-heartedly). Unfortunately, GMO-i has 'form' in writing off large losses as shown above.  The positive consequence of this saga is a renewed commitment to return value to shareholders with a stated aim of returning 50% of profits. Two-third of that goal is to be met by quarterly dividends, with the balance allocated to share repurchases in the following year.  Having royally 'screwed up' with 'cryptocurrencies', and trying the patience of remaining shareholders yet again, this policy is to be commended, particularly if more attention is paid to generating the wherewithal to meet the 50% without raiding the listed subsidiaries' 'piggy bank'.  Apart from the excitement that this move has generated and the year-long support this buying programme will provide to the share price, our two valuation models, find little in the way of further upside potential. We remain sceptical of investing in GMO-i over the long-term and prefer <a href="https://www.smartkarma.com/entities/1492" target="_blank" data-smartkarma-citation="entities:1492:1">GMO Payment Gateway (3769 JP)</a> - the best business in the GMO-i 'stable' - but consider GMO-PG's stock overvalued at 57x EV/OP.

Source: Japan AnalyticsGMO internet (9449 JP) released 2018 full-year results in 12th February. 2018 was a turbulent year for the company as it 'surfed' the cryptocurrency wave. The subsequent downfall was swift and brutal. However, the company deserves some plaudits for cutting its (substantial) losses and attempting to move on (albeit somewhat half-heartedly). Unfortunately, GMO-i has 'form' in writing off large losses as shown above.  The positive consequence of this saga is a renewed commitment to return value to shareholders with a stated aim of returning 50% of profits. Two-third of that goal is to be met by quarterly dividends, with the balance allocated to share repurchases in the following year.  Having royally 'screwed up' with 'cryptocurrencies', and trying the patience of remaining shareholders yet again, this policy is to be commended, particularly if more attention is paid to generating the wherewithal to meet the 50% without raiding the listed subsidiaries' 'piggy bank'.  Apart from the excitement that this move has generated and the year-long support this buying programme will provide to the share price, our two valuation models, find little in the way of further upside potential. We remain sceptical of investing in GMO-i over the long-term and prefer GMO Payment Gateway (3769 JP) - the best business in the GMO-i 'stable' - but consider GMO-PG's stock overvalued at 57x EV/OP.

GMO.internet FY2018 Results - The Shareholder's [Re]Turn

Japan

GMO Financial Holdings, Inc. offers wealth management services. The Company provides financial trading, business renewal, investment information offering, and other services. GMO Financial Holdings provides its services throughout Japan.

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GMO Financial Holdings (7177 JP)

GMO Buyback - Approaching The End But...

In mid-February 2020, upon releasing full-year earnings, GMO Internet (9449 JP) announced a buyback programme which looked big but had some...

Travis Lundy

GMO Internet (9449) Buyback - Bigger Than It Looks, Smaller Than It Looks

David Blennerhassett has written about GMO Internet (9449 JP) over the years as an interesting holdco and most recently wrote about the situation...

Travis Lundy

🇯🇵 JAPAN • Results & Revisions Daily Roundup - 27th January - Too Early to Call a Bottom

TRACKING RESULTS & REVISIONS - As the 'season' for quarterly results picks up again, this series of daily insights will summarise the...

Campbell Gunn

GMO.internet FY2018 Results - The Shareholder's [Re]Turn

GMO internet (9449 JP) released 2018 full-year results in 12th February. 2018 was a turbulent year for the company as it 'surfed' the...

Campbell Gunn

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GMO Internet (4784) DropDown Holdco Gone Ballistic - Squeezed on Truly Tiny Float

GMO Internet is the old GMO Ad Partners with a reverse takeover executed as of Jan 1. Float now is low. The company sees it as 1.44%. It's lower...

Travis Lundy

GMO Buyback - Approaching The End But...

In mid-February 2020, upon releasing full-year earnings, GMO Internet (9449 JP) announced a buyback programme which looked big but had some...

Travis Lundy

GMO Internet (9449) Buyback - Bigger Than It Looks, Smaller Than It Looks

David Blennerhassett has written about GMO Internet (9449 JP) over the years as an interesting holdco and most recently wrote about the situation...

Travis Lundy

🇯🇵 JAPAN • Results & Revisions Daily Roundup - 27th January - Too Early to Call a Bottom

TRACKING RESULTS & REVISIONS - As the 'season' for quarterly results picks up again, this series of daily insights will summarise the...

Campbell Gunn

GMO.internet FY2018 Results - The Shareholder's [Re]Turn

GMO internet (9449 JP) released 2018 full-year results in 12th February. 2018 was a turbulent year for the company as it 'surfed' the...

Campbell Gunn