Equity Analyst, LightStream Research

Supun Walpola

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.

Equity Bottom-Up

The "acquisition" offers both the capital and a fairly big cross-selling opportunity for Demae-can to stay ahead of competition and accelerate growth in an underpenetrated Japanese food delivery market. Demae-can’s valuation doesn’t look particularly cheap to us at the moment (nor particularly expensive), however, we believe further upside is likely as Demae-can looks to tap into LINE’s 83m messaging app users.

The "acquisition" offers both the capital and a fairly big cross-selling opportunity for Demae-can to stay ahead of competition and accelerate growth in an underpenetrated Japanese food delivery market. Demae-can’s valuation doesn’t look particularly cheap to us at the moment (nor particularly expensive), however, we believe further upside is likely as Demae-can looks to tap into LINE’s 83m messaging app users. 

LINE’s “Acquisition” Would Accelerate Demae-Can’s Growth in the Japanese Food Delivery Market

'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/000/124/934/original/2020-03-27_06-28-40.png?1585258181" class="editor-image img-responsive" data-smartkarma-image-id="124934"></figure><div class="content-caption">Source • Japan Analytics</div>THURSDAY 26th MARCH - Yesterday saw six companies reporting results, of which only two -<a href="https://www.smartkarma.com/entities/optoelectronics-co-ltd" target="_blank" data-smartkarma-citation="entities:9374:1" rel="noopener">Optoelectronics (6664 JP)</a> and <a href="https://www.smartkarma.com/entities/fukushima-printing-co-ltd" target="_blank" data-smartkarma-citation="entities:3931:1" rel="noopener">Fukushima Printing (7870 JP)</a> - has positive scores. Seventeen companies revised their forecasts, and one made initial forecasts. In terms of our scoring system, the ratio of positive to negative 'scores' was 5:11, with <a href="https://www.smartkarma.com/entities/jxtg-holdings-inc" target="_blank" data-smartkarma-citation="entities:638:1" rel="noopener">JXTG (5020 JP) </a>being the largest negative-scoring company and <a href="https://www.smartkarma.com/entities/maxvalu-nishinihon-co-ltd" target="_blank" data-smartkarma-citation="entities:13743:1" rel="noopener">Maxvalu Nishinihon (8287 JP)</a> being unchanged. Of the six companies announcing results, only two had positive outcomes.<div class="content-caption"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/124/936/original/File%202020-03-27%200%2015%2036.jpeg?1585258841" class="editor-image img-responsive" data-smartkarma-image-id="124936"></figure></div><div class="content-caption">Source • NHK</div>GOOD NEWS • BAD NEWS - The good news is that the increase in disclosed cases of Covid-19 outside Tokyo has not increased significantly; Tokyo, however, has seen an alarming rise. Forty-seven new cases were confirmed yesterday, taking the total in the metropolis to 259. Tokyo will implement a 'stay-at-home-policy' this weekend. Surrounding prefectures have encouraged their residents not to travel into the city over the weekend. Amusement parks that had reopened last weekend will now close their doors.ODD NEWS - In other 'news', the Sapporo Board of Education is debating whether to allow students to wear face masks that are not white. In the past, many schools have mandated that children can only have black hair, forcing some children whose hair is naturally lighter to dye their hair black to conform to the 'norm'.

Source • Japan AnalyticsTHURSDAY 26th MARCH - Yesterday saw six companies reporting results, of which only two -Optoelectronics (6664 JP) and Fukushima Printing (7870 JP) - has positive scores. Seventeen companies revised their forecasts, and one made initial forecasts. In terms of our scoring system, the ratio of positive to negative 'scores' was 5:11, with JXTG (5020 JP) being the largest negative-scoring company and Maxvalu Nishinihon (8287 JP) being unchanged. Of the six companies announcing results, only two had positive outcomes.Source • NHKGOOD NEWS • BAD NEWS - The good news is that the increase in disclosed cases of Covid-19 outside Tokyo has not increased significantly; Tokyo, however, has seen an alarming rise. Forty-seven new cases were confirmed yesterday, taking the total in the metropolis to 259. Tokyo will implement a 'stay-at-home-policy' this weekend. Surrounding prefectures have encouraged their residents not to travel into the city over the weekend. Amusement parks that had reopened last weekend will now close their doors.ODD NEWS - In other 'news', the Sapporo Board of Education is debating whether to allow students to wear face masks that are not white. In the past, many schools have mandated that children can only have black hair, forcing some children whose hair is naturally lighter to dye their hair black to conform to the 'norm'.  

🇯🇵 JAPAN • Revisions & Results Alert - 26th March

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Quantitative Analysis

After the worst week in US equity markets in a long time, with sharply rising equity volatility causing risk parity funds and their ilk to shed what looked like $100bn+ of delta, and S&amp;P500 ETFs to see $20bn+ redeemed (amid fears of the possible uncontrollable spread of COVID-19 coronavirus), there were strong rumours of imminent coordinated central bank action over the weekend to prove that governments around the world were willing to act quickly to counter fears of economic weakness.We didn't get that. We got suggestions from Italy they would produce a stimulus package. German lawmakers tussled over whether or not stimulus was appropriate. EU officials high and low suggested that for the moment EU-level spending was inappropriate, some US politicians got upset that coronavirus test kits for the uninsured cost $3000+ (they don't), other politicians suggested $3000 was fine because the free market determined the price, and a president suggested the entire coronavirus thing was simultaneously a terrible blow to China and "fake news" - a hoax by the "deep state" and Democrats to try to injure his presidency (whatever else will be remembered by history in the decades to come, there will be memes).One central bank on Monday, however, did its thing.The BOJ governor issued an inter-meeting statement for the first time in many years. It was a simple statement, which said very little. <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/121/375/original/Screenshot%202020-03-04%20at%2010.08.27%20PM.png?1583330921" class="editor-image img-responsive" data-smartkarma-image-id="121375"></figure>Given an ongoing program of ETF buying and JGB YCC/QQE, it was not clear what this meant, however, by day-end, it WAS clear.<div class="content-highlight">The BOJ had symbolically stepped in to buy ¥100.2bn of ETFs - its largest one-day purchase program in many years. </div>That leaves us with a "What Next" question. Discussion ensues below.

After the worst week in US equity markets in a long time, with sharply rising equity volatility causing risk parity funds and their ilk to shed what looked like $100bn+ of delta, and S&amp;P500 ETFs to see $20bn+ redeemed (amid fears of the possible uncontrollable spread of COVID-19 coronavirus), there were strong rumours of imminent coordinated central bank action over the weekend to prove that governments around the world were willing to act quickly to counter fears of economic weakness.We didn't get that. We got suggestions from Italy they would produce a stimulus package. German lawmakers tussled over whether or not stimulus was appropriate. EU officials high and low suggested that for the moment EU-level spending was inappropriate, some US politicians got upset that coronavirus test kits for the uninsured cost $3000+ (they don't), other politicians suggested $3000 was fine because the free market determined the price, and a president suggested the entire coronavirus thing was simultaneously a terrible blow to China and "fake news" - a hoax by the "deep state" and Democrats to try to injure his presidency (whatever else will be remembered by history in the decades to come, there will be memes).One central bank on Monday, however, did its thing.The BOJ governor issued an inter-meeting statement for the first time in many years. It was a simple statement, which said very little. Given an ongoing program of ETF buying and JGB YCC/QQE, it was not clear what this meant, however, by day-end, it WAS clear.The BOJ had symbolically stepped in to buy ¥100.2bn of ETFs - its largest one-day purchase program in many years. That leaves us with a "What Next" question. Discussion ensues below.

Korea / Special Situations, Clepsydra Capital

Sanghyun Park

Korea / Special Situations

Event-Driven

Elliott left Korea, but it didn't go very far. It chose Korea's closest neighbor, Japan, as its next stop. It is now sitting on SoftBank Group with about a 3% stake. Elliott reportedly wants to see a vast improvement in SoftBank's venture investment, the so-called Vision Fund. Well, it is quite understandable and no surprise. Then, what would be an immediate target? Again, unsurprisingly, it is Coupang that is in the limelight at this point. Korea's local street is speculating that Elliott may single out Coupang as an exemplary target of its activism efforts.Of course, we can not know what Elliott demands and how it will exercise its activism muscle on SoftBank and Coupang. It may or may not force SoftBank to completely get out of Coupang by selling off all of its stakes. But what at least seems inevitable is that Elliott will demand a quick and viable liquidation strategy. That is, SoftBank will likely find it extremely difficult to provide another massive capital injection into Coupang. Then, where does Coupang stand in terms of the money situation? Well, it is pretty bad and urgent. Last year again, it reportedly put up a ₩1.4tril operating loss.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/119/974/original/1.png?1582667306" class="editor-image img-responsive" data-smartkarma-image-id="119974"></figure>It got about ₩2.3tril in 2018 from the Vision Fund, but out of that ₩2.3tril, it has already consumed nearly ₩1.4tril. The street estimation is, at the current pace of operating loss, Coupang will completely deplete its capital pool by the third quarter of this year. So, like it or not, SoftBank will have two options left, either say farewell or have it go public. Of course, neither option would be a walk in the park. Finding a buyer in the short-term for a company that is losing like US$1bil a year would be one hell of a job (although the local street speculates about Amazon being as a potential buyer). For a similar reason, IPO on either KOSPI or NASDAQ should also be a very challenging job.So, SoftBank and Coupang need someone from outside for a makeup purpose. Realistically, that makeup would be for IPO. Then, who would that be? Well, the local street has been heavily speculating that Naver would take the role, yes again. We have seen at least three local news reports on the possibility since last December. Lately, a couple of the local brokerages have jumped in to argue on the likelihood of another SoftBank and Naver marriage.

Elliott left Korea, but it didn't go very far. It chose Korea's closest neighbor, Japan, as its next stop. It is now sitting on SoftBank Group with about a 3% stake. Elliott reportedly wants to see a vast improvement in SoftBank's venture investment, the so-called Vision Fund. Well, it is quite understandable and no surprise. Then, what would be an immediate target? Again, unsurprisingly, it is Coupang that is in the limelight at this point. Korea's local street is speculating that Elliott may single out Coupang as an exemplary target of its activism efforts.Of course, we can not know what Elliott demands and how it will exercise its activism muscle on SoftBank and Coupang. It may or may not force SoftBank to completely get out of Coupang by selling off all of its stakes. But what at least seems inevitable is that Elliott will demand a quick and viable liquidation strategy. That is, SoftBank will likely find it extremely difficult to provide another massive capital injection into Coupang. Then, where does Coupang stand in terms of the money situation? Well, it is pretty bad and urgent. Last year again, it reportedly put up a ₩1.4tril operating loss.It got about ₩2.3tril in 2018 from the Vision Fund, but out of that ₩2.3tril, it has already consumed nearly ₩1.4tril. The street estimation is, at the current pace of operating loss, Coupang will completely deplete its capital pool by the third quarter of this year. So, like it or not, SoftBank will have two options left, either say farewell or have it go public. Of course, neither option would be a walk in the park. Finding a buyer in the short-term for a company that is losing like US$1bil a year would be one hell of a job (although the local street speculates about Amazon being as a potential buyer). For a similar reason, IPO on either KOSPI or NASDAQ should also be a very challenging job.So, SoftBank and Coupang need someone from outside for a makeup purpose. Realistically, that makeup would be for IPO. Then, who would that be? Well, the local street has been heavily speculating that Naver would take the role, yes again. We have seen at least three local news reports on the possibility since last December. Lately, a couple of the local brokerages have jumped in to argue on the likelihood of another SoftBank and Naver marriage.

Naver, SoftBank's Savior Again? This Time with Coupang?

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. 

When Origami, the only independent mobile payments provider, last month agreed to be bought by Mercari and merge its systems with Mercari’s own Merpay service, it was a sign of the growing necessity for scale in what is the fastest consolidating sector in Japan today.
Origami had scored a couple of major successes since launching in 2016 but, after the recent consolidation among the biggest players, it realised it just didn't have the budget to scale fast enough on its own. Mercari is in a similar situation but, even with Origami, Merpay remains one of the smaller players in the market.
Origami, Merpay and LINE are all too small to be able to afford the kind of aggressive incentives that PayPay has been offering and is a key reason why LINE agreed to a takeover by Z Holdings and Origami's merger with Merpay. Even then, this is not enough to take on the digital zaibatsu, Softbank/Z and Rakuten.
Last week's announcement of a tie-up between Mercari and NTT Docomo and the latter's determination not to lose out to Rakuten and Softbank/Z – it even tied with Amazon to avoid this – and the impossibility of Merpay being able to scale alone, suggests a full takeover of Merpay by NTT Docomo is on the cards.
If so, NTT Docomo has a chance to be one of the big 3 in cashless payments in Japan, alongside PayPay and Rakuten Pay (in the long-term).
The trouble is no one is going to be making money out of payments for a long time – unless PayPay stops offering all those juicy incentives.

When Origami, the only independent mobile payments provider, last month agreed to be bought by Mercari and merge its systems with Mercari’s own Merpay service, it was a sign of the growing necessity for scale in what is the fastest consolidating sector in Japan today.
Origami had scored a couple of major successes since launching in 2016 but, after the recent consolidation among the biggest players, it realised it just didn't have the budget to scale fast enough on its own. Mercari is in a similar situation but, even with Origami, Merpay remains one of the smaller players in the market.
Origami, Merpay and LINE are all too small to be able to afford the kind of aggressive incentives that PayPay has been offering and is a key reason why LINE agreed to a takeover by Z Holdings and Origami's merger with Merpay. Even then, this is not enough to take on the digital zaibatsu, Softbank/Z and Rakuten.
Last week's announcement of a tie-up between Mercari and NTT Docomo and the latter's determination not to lose out to Rakuten and Softbank/Z – it even tied with Amazon to avoid this – and the impossibility of Merpay being able to scale alone, suggests a full takeover of Merpay by NTT Docomo is on the cards.
If so, NTT Docomo has a chance to be one of the big 3 in cashless payments in Japan, alongside PayPay and Rakuten Pay (in the long-term).
The trouble is no one is going to be making money out of payments for a long time – unless PayPay stops offering all those juicy incentives.

Japan Payment Wars: NTT Docomo and Merpay/Origami to Attempt Catch up with PayPay and Rakuten

Japan

A Holdings Corporation develops and operates the LINE application for smartphones. The Company offers games distribution, music distribution, advertisements, and other services. A Holdings serves clients across worldwide.

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A Holdings (3938 JP)

LINE’s “Acquisition” Would Accelerate Demae-Can’s Growth in the Japanese Food Delivery Market

The "acquisition" offers both the capital and a fairly big cross-selling opportunity for Demae-can to stay ahead of competition and accelerate...

Supun Walpola

🇯🇵 JAPAN • Revisions & Results Alert - 26th March

THURSDAY 26th MARCH - Yesterday saw six companies reporting results, of which only two -Optoelectronics (6664 JP) and Fukushima Printing (7870 JP)...

Campbell Gunn

Coronavirus QE, the BOJ, and ETF Buying

After the worst week in US equity markets in a long time, with sharply rising equity volatility causing risk parity funds and their ilk to shed...

Travis Lundy

Naver, SoftBank's Savior Again? This Time with Coupang?

Elliott left Korea, but it didn't go very far. It chose Korea's closest neighbor, Japan, as its next stop. It is now sitting on SoftBank Group with...

Sanghyun Park

Japan Payment Wars: NTT Docomo and Merpay/Origami to Attempt Catch up with PayPay and Rakuten

When Origami, the only independent mobile payments provider, last month agreed to be bought by Mercari and merge its systems with Mercari’s own...

Michael Causton

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