Telco/Internet specialist

Kirk Boodry

Redex Research

Thematic (Sector/Industry)

<p style="text-align: justify;">A new era in the Japanese telecom sector has arrived. If the Abe era was defined by better corporate governance and improved returns to shareholders, with Prime Minister Suga the focus may be shifting to national industrial policy. Reports from the <a href="https://www.nikkei.com/article/DGXMZO66833950Q0A131C2MM8000" target="_blank" rel="noopener">Nikkei</a> that DoCoMo will cut prices for high end plans by c. 50% are disruptive and deliver a political win for the current government just as NTT prepares to argue in front of the Ministry of Internal Affairs and Communications (MIC, the regulator) for deeper integration of its mobile and ICT businesses. </p><p style="text-align: justify;">Accelerated concerns from competitors in the wake of NTT’s acquisition of DoCoMo minorities makes a lot more sense now as the possibility that the MIC could decide cooperation with NTT to lower mobile prices is as effective as support for MVNOs and Rakuten. Winners include the government, NEC and (possibly) Apple whilst mobile operators get the short end of the stick. In particular, Rakuten looks fragile as its disruptive ¥2,980/month price point has been matched by Japan’s largest mobile operator less than a year after it launched service. </p>

A new era in the Japanese telecom sector has arrived. If the Abe era was defined by better corporate governance and improved returns to shareholders, with Prime Minister Suga the focus may be shifting to national industrial policy. Reports from the Nikkei that DoCoMo will cut prices for high end plans by c. 50% are disruptive and deliver a political win for the current government just as NTT prepares to argue in front of the Ministry of Internal Affairs and Communications (MIC, the regulator) for deeper integration of its mobile and ICT businesses. Accelerated concerns from competitors in the wake of NTT’s acquisition of DoCoMo minorities makes a lot more sense now as the possibility that the MIC could decide cooperation with NTT to lower mobile prices is as effective as support for MVNOs and Rakuten. Winners include the government, NEC and (possibly) Apple whilst mobile operators get the short end of the stick. In particular, Rakuten looks fragile as its disruptive ¥2,980/month price point has been matched by Japan’s largest mobile operator less than a year after it launched service. 

Japan Telecom Sector: DoCoMo Move Is More than a Price Reduction

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

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.

<section class="figure"><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/175/629/original/2020-12-01_06-32-57.png?1606771992" class="editor-image img-responsive" data-smartkarma-image-id="175629"></figure></section><p><strong>FOUR QUADRANTS </strong>- By combining our two scoring methodologies - the Relative Price Score (RPS) and the Results &amp; Revision Score (RRS), we can assign companies into four quadrants:-</p></section><div><ul style="list-style-type: disc;">
<li>
<strong>CONTRARIAN BUYS </strong>- Low Results &amp; Revision and Relative Price Scores</li>
<li>
<strong>CONTRARIAN SELLS </strong>- High Results &amp; Revision and Relative Price Scores</li>
<li>
<strong>TURNAROUND BUYS </strong>- High Results &amp; Revision Scores &amp; low Relative Price Scores</li>
<li>
<strong>EX-GROWTH</strong><strong>SELLS</strong> - Low Results &amp; Revision Scores &amp; high Relative Price Scores</li>
</ul></div><div>
<p>Turnaround Buys are quite rare but tend to offer reasonable upside for relatively low risk. Examples from 2020 include <a href="https://www.smartkarma.com/entities/lixil-group-corp" target="_blank" data-smartkarma-citation="entities:454:1" rel="noopener">Lixil (5938 JP)</a> and <a href="https://www.smartkarma.com/entities/nec-corp" target="_blank" data-smartkarma-citation="entities:17084:1" rel="noopener">NEC (6701 JP)</a>.</p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/175/110/original/2020-11-30_09-39-21.png?1606696981" class="editor-image img-responsive" data-smartkarma-image-id="175110"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/175/111/original/2020-11-30_09-43-17.png?1606697029" class="editor-image img-responsive" data-smartkarma-image-id="175111"></figure></section><p><strong><a href="https://www.dropbox.com/s/7b61jl02dh0pzno/2020-11-25_12-43-55.png?dl=0" target="_blank" rel="noopener">TURNAROUND BUYS</a> -</strong> In the<strong> DETAIL </strong>section below, we shall review the current 'crop' of Turnaround Buys. The last Insight in this mini-series will look at Ex-Growth Sells before concluding with one '2021 High Conviction' recommendation. The first two Insights in the Series can be found at - <a href="https://www.smartkarma.com/insights/japan-four-quadrants-contrarian-buys" target="_blank" data-smartkarma-citation="insights:45688" rel="noopener">Contrarian Buys </a>and <a href="https://www.smartkarma.com/insights/japan-four-quadrants-contrarian-sells" target="_blank" data-smartkarma-citation="insights:45725" rel="noopener">Contrarian Sells</a>.  </p>
</div>

FOUR QUADRANTS - By combining our two scoring methodologies - the Relative Price Score (RPS) and the Results &amp; Revision Score (RRS), we can assign companies into four quadrants:-

CONTRARIAN BUYS - Low Results &amp; Revision and Relative Price Scores

CONTRARIAN SELLS - High Results &amp; Revision and Relative Price Scores

TURNAROUND BUYS - High Results &amp; Revision Scores &amp; low Relative Price Scores

EX-GROWTHSELLS - Low Results &amp; Revision Scores &amp; high Relative Price Scores

Turnaround Buys are quite rare but tend to offer reasonable upside for relatively low risk. Examples from 2020 include Lixil (5938 JP) and NEC (6701 JP).
TURNAROUND BUYS - In the DETAIL section below, we shall review the current 'crop' of Turnaround Buys. The last Insight in this mini-series will look at Ex-Growth Sells before concluding with one '2021 High Conviction' recommendation. The first two Insights in the Series can be found at - Contrarian Buys and Contrarian Sells.  


🇯🇵 JAPAN • Four Quadrants - Turnaround Buys

Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

Equity Bottom-Up

<p><a href="https://www.smartkarma.com/entities/sony-corp" target="_blank" data-smartkarma-citation="entities:563:1" rel="noopener">Sony Corp (6758 JP)</a> has seen an upward shift in ownership among active Global fund managers.  The percentage of funds invested in <a href="https://www.smartkarma.com/entities/sony-corp" target="_blank" data-smartkarma-citation="entities:563:1" rel="noopener">Sony Corp (6758 JP)</a>  is at record levels, with weights and overweights continuing to rise. </p><p>Sony is also moving from being an Aggressive Growth play to a stock more appealing to a wider group of Growth, Value and GARP investors.  Our data also shows that this switch has further to run, with many investors with previous knowledge and exposure to <a href="https://www.smartkarma.com/entities/sony-corp" target="_blank" data-smartkarma-citation="entities:563:1" rel="noopener">Sony Corp (6758 JP)</a> remaining on the sidelines, or at lower levels of exposure, for now. </p><p>For this reason, we would expect ownership among Global investors to be well supported, which, given the relationship between fund ownership and price, should be supportive of returns going forwards.</p>

Sony Corp (6758 JP) has seen an upward shift in ownership among active Global fund managers.  The percentage of funds invested in Sony Corp (6758 JP)  is at record levels, with weights and overweights continuing to rise. Sony is also moving from being an Aggressive Growth play to a stock more appealing to a wider group of Growth, Value and GARP investors.  Our data also shows that this switch has further to run, with many investors with previous knowledge and exposure to Sony Corp (6758 JP) remaining on the sidelines, or at lower levels of exposure, for now. For this reason, we would expect ownership among Global investors to be well supported, which, given the relationship between fund ownership and price, should be supportive of returns going forwards.

Sony Corp:  Momentum Strong as Global Funds Continue to Add.

Equity Analyst, LightStream Research

Supun Walpola

Equity Analyst

<p>Japan’s #2 e-commerce company, <a href="https://www.smartkarma.com/entities/rakuten-inc" target="_blank" data-smartkarma-citation="entities:31:1" rel="noopener">Rakuten Inc (4755 JP)</a>, is the latest challenger for <a href="https://www.smartkarma.com/entities/ntt-docomo-inc" target="_blank" data-smartkarma-citation="entities:1089:1" rel="noopener">NTT Docomo Inc (9437 JP)</a>, <a href="https://www.smartkarma.com/entities/kddi-corp" target="_blank" data-smartkarma-citation="entities:639:1" rel="noopener">KDDI Corp (9433 JP)</a>, and <a href="https://www.smartkarma.com/entities/softbank-corp" target="_blank" data-smartkarma-citation="entities:27445:1" rel="noopener">Softbank Corp (9434 JP)</a> in the Japanese MNO (mobile network operator) space. Rakuten has been offering MNO services through the networks of other operators for some time, but in April 2020, the company launched its own mobile network. Since the launch, Rakuten has sought to an aggressive pricing strategy backed by extensive network virtualisation.</p><p>In this note, we take a deep dive into Rakuten’s Mobile business.</p>

Japan’s #2 e-commerce company, Rakuten Inc (4755 JP), is the latest challenger for NTT Docomo Inc (9437 JP), KDDI Corp (9433 JP), and Softbank Corp (9434 JP) in the Japanese MNO (mobile network operator) space. Rakuten has been offering MNO services through the networks of other operators for some time, but in April 2020, the company launched its own mobile network. Since the launch, Rakuten has sought to an aggressive pricing strategy backed by extensive network virtualisation.In this note, we take a deep dive into Rakuten’s Mobile business.

Rakuten Mobile: Affordability Overshadowed by Poor Coverage

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. 

<p>Zozo’s new business model as a brand producer was off to a strong start last month with most of the new 18 private brands selling out.</p>
<p>The online platform also re-launched the Zozosuit, suggesting a revival of the Zozo brand may be on the cards.</p>
<p><a href="https://www.smartkarma.com/entities/zozo-inc" target="_blank" data-smartkarma-citation="entities:18379:1" rel="noopener">ZOZO Inc (3092 JP)</a> needs these new initiatives if it is to successfully transition to becoming a still distinctive but much more volume-based mall, a medium-term project that should lead to improving growth rates and profitability.</p>

Zozo’s new business model as a brand producer was off to a strong start last month with most of the new 18 private brands selling out.
The online platform also re-launched the Zozosuit, suggesting a revival of the Zozo brand may be on the cards.
ZOZO Inc (3092 JP) needs these new initiatives if it is to successfully transition to becoming a still distinctive but much more volume-based mall, a medium-term project that should lead to improving growth rates and profitability.

Japan

Softbank Corporation provides mobile phone telecommunication and networking services. The Company offers mobile communication opening, short messaging function opening, video function opening, and other services. Softbank also provides mobile phones.

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Softbank Corp (9434 JP)

Japan Telecom Sector: DoCoMo Move Is More than a Price Reduction

If the Abe era for telcos was defined by better corporate governance and improved returns to shareholders, with Prime Minister Suga the focus may...

Kirk Boodry

🇯🇵 JAPAN • Four Quadrants - Turnaround Buys

Turnaround Buys are quite rare but tend to offer reasonable upside for relatively low risk. Examples from 2020 include Lixil (5938 JP) and NEC...

Campbell Gunn

Sony Corp: Momentum Strong as Global Funds Continue to Add.

Sony Corp (6758 JP) has seen an upward shift in ownership among active Global fund managers, but is far from over owned...

Steven Holden

Rakuten Mobile: Affordability Overshadowed by Poor Coverage

In this note, we take a deep dive into Rakuten’s Mobile business, which is the latest challenger for NTT, KDDI, and Softbank in the Japanese MNO...

Supun Walpola

Zozo Transitions, Zozosuit Returns

Zozo continues its transition from fashion premium mall to lifestyle mall for all. This will take time but the spate of new projects are promising...

Michael Causton

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