Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

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.

Equity Bottom-Up

Mercari fell today despite posting strong results, generating an operating profit in the US for the first time and generating a profitable month in May for its Merpay business. The reaction is somewhat understandable given a slight deceleration in the US which we previously flagged, but the underlying metrics are highly promising and we are starting to get properly bulled-up on the name again.

Mercari fell today despite posting strong results, generating an operating profit in the US for the first time and generating a profitable month in May for its Merpay business. The reaction is somewhat understandable given a slight deceleration in the US which we previously flagged, but the underlying metrics are highly promising and we are starting to get properly bulled-up on the name again.

Mercari – Down 6% on What Should Have Been an Unsurprising Deceleration in the US

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. 

Mercari may dominate the re-use market but retailers still have a role to play. Komehyo thinks the way to compete is to make it much easier for vendors to sell their stuff and plans to quadruple store numbers to achieve this.
While Mercari will continue to expand faster than competitors, there looks to be room in the market for these more traditional physical retailers. According to the Reuse Business Journal’s recent study, Re-Use Market Data Book 2020, the re-use market is expected to expand to ¥3.25 trillion by 2025, up from ¥2.19 trillion in 2018. One noted trend in the report is the growing acceptance of re-use transactions by more age groups, including seniors.

Mercari may dominate the re-use market but retailers still have a role to play. Komehyo thinks the way to compete is to make it much easier for vendors to sell their stuff and plans to quadruple store numbers to achieve this.
While Mercari will continue to expand faster than competitors, there looks to be room in the market for these more traditional physical retailers. According to the Reuse Business Journal’s recent study, Re-Use Market Data Book 2020, the re-use market is expected to expand to ¥3.25 trillion by 2025, up from ¥2.19 trillion in 2018. One noted trend in the report is the growing acceptance of re-use transactions by more age groups, including seniors.

Komehyo Combats Online Threat with More Stores

Executive Director, Metrical Inc

Aki Matsumoto

Executive Director

Independent Leading Corporate Governance Research

Metrical Inc

METRICAL INC. is an independent leading Corporate Governance research firm in Japan where Corporate Governance is increasingly recognized as an important element on corporate management in these days. Thus, CG research and solutions would become an essential component of global capital markets and play important to contribute to transparency of the markets and maximize shareholders’ value in Japan. 

METRICAL INC. provides Corporate Governance research and analysis including rating services, and  also offers investment research and IR services with solutions and customized profound research on CG and IR issues.

Mercari (4385) on June 29th, DMG Mori Seiki (6141) on June 30th, and Sosei Group (4565) on July 7th, all announced the issuance of Euro-Yen convertible bonds one after another (there are still other small issues to be announced). Although each company is in a different industry and has a different background and reason for the issuance, it can be assumed that they have started to raise funds now that the stock market has recovered significantly from last year's lows and the business environment is looking post-COVID pandemic. It is expected that the issue of convertible bonds will continue in the future as companies want to raise funds while avoiding the immediate dilution of shareholder interests by issuing new shares.

Mercari (4385) on June 29th, DMG Mori Seiki (6141) on June 30th, and Sosei Group (4565) on July 7th, all announced the issuance of Euro-Yen convertible bonds one after another (there are still other small issues to be announced). Although each company is in a different industry and has a different background and reason for the issuance, it can be assumed that they have started to raise funds now that the stock market has recovered significantly from last year's lows and the business environment is looking post-COVID pandemic. It is expected that the issue of convertible bonds will continue in the future as companies want to raise funds while avoiding the immediate dilution of shareholder interests by issuing new shares.

Japan's Governance: Convertible Bonds Issue

Telco/Internet specialist

Kirk Boodry

Redex Research

Thematic (Sector/Industry)

Google is reportedly close to acquiring smartphone settlements company Pring for ¥20-30bn which would open the door for it to offer a mobile payments service in Japan directly linked to bank accounts. And that is the appeal of Pring which is a relative minnow in the Japanese payments market with &lt;1mn users but has relationships with a wide range of Japanese financial institutions. Google is not a global fintech player but it has had some success in a few markets like the US and India whilst it has started to expand in Europe, and now apparently, Japan. Competitively, the major domestic players with vast consumer ecosystems are formidable competition but Google connects to half of all smartphone users through Android and has merchant relationships through its Internet advertising business.

Google is reportedly close to acquiring smartphone settlements company Pring for ¥20-30bn which would open the door for it to offer a mobile payments service in Japan directly linked to bank accounts. And that is the appeal of Pring which is a relative minnow in the Japanese payments market with &lt;1mn users but has relationships with a wide range of Japanese financial institutions. Google is not a global fintech player but it has had some success in a few markets like the US and India whilst it has started to expand in Europe, and now apparently, Japan. Competitively, the major domestic players with vast consumer ecosystems are formidable competition but Google connects to half of all smartphone users through Android and has merchant relationships through its Internet advertising business.

Japan Fintech - Google Push into Mobile Payments Could Raise Competitive Intensity

Mercari revised up its guidance for the full year to ¥4.5bn in OP and ¥106bn in sales vs. consensus at ¥1.73bn and ¥104.8bn respectively. The intensity of the move is surprising and demonstrates that the market seems to be as behind as consensus in understanding Mercari.

Mercari revised up its guidance for the full year to ¥4.5bn in OP and ¥106bn in sales vs. consensus at ¥1.73bn and ¥104.8bn respectively. The intensity of the move is surprising and demonstrates that the market seems to be as behind as consensus in understanding Mercari.

Mercari – Up 10% on What Should Have Been an Unsurprising Upward Revision

Japan

Mercari, Inc. operates as an electronic commercial company. The Company offers electronic commercial software, operation management, marketing planning, and other marketplace services. Mercari serves customers worldwide.

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Mercari (4385 JP)

Mercari – Down 6% on What Should Have Been an Unsurprising Deceleration in the US

While the market's reaction to a slight deceleration in Mercari's US GMV is understandable, the underlying metrics are highly promising and we are...

Mio Kato

Komehyo Combats Online Threat with More Stores

Re-use retailers often get a hard rap given the growing dominance of Mercari but many Japanese still support re-use stores for both buying and...

Michael Causton

Japan's Governance: Convertible Bonds Issue

As the issuance of convertible bonds is expected to increase going forward, issuers will be required to be even more accountable for their future...

Metrical Inc

Japan Fintech - Google Push into Mobile Payments Could Raise Competitive Intensity

Google is considering an acquisition that would allow it to compete directly in JP mobile payments. It lacks a direct consumer business but Android...

Kirk Boodry

Mercari – Up 10% on What Should Have Been an Unsurprising Upward Revision

The intensity of Mercari's 10% up move on an upward revision is surprising and demonstrates that the market seems to be as behind as consensus in...

Mio Kato

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