Telco/Internet specialist

Kirk Boodry

Redex Research

Equity Bottom-Up

Askul posted a mixed quarter as revenue growth slowed but margin improvements continued apace. FY22 is largely a rebuilding year as the company more tightly integrates B2C and logistics into the Z Holdings ecosystem and Q1 performance gives them a solid start in meeting full-year guidance. We do not cover Askul but we follow it as part of our Z Holdings coverage.

Askul posted a mixed quarter as revenue growth slowed but margin improvements continued apace. FY22 is largely a rebuilding year as the company more tightly integrates B2C and logistics into the Z Holdings ecosystem and Q1 performance gives them a solid start in meeting full-year guidance. We do not cover Askul but we follow it as part of our Z Holdings coverage.   

Askul Corp Q1 22 Results Reaction: Slowing Revenue Growth but Profit Beat

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. 

In 2002, Seiyu was saved by the foreign might of Walmart. Today it is about 25% smaller but over the same 20 years, it has gone from a ¥90 billion loss to an estimated ¥40 billion operating profit last year. Now, with the backing of its new majority owners, <a href="https://www.smartkarma.com/entities/kkr-co-inc" target="_blank" data-smartkarma-citation="entities:27333:1" rel="noopener">KKR &amp; Co Inc (KKR US)</a> and <a href="https://www.smartkarma.com/entities/rakuten-inc" target="_blank" data-smartkarma-citation="entities:31:1" rel="noopener">Rakuten Inc (4755 JP)</a>, Seiyu has announced ambitious plans to become Japan’s largest online supermarket by 2025. This is increasingly likely thanks to Rakuten's new reach through its new joint venture with <a href="https://www.smartkarma.com/entities/japan-post-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:359:1" rel="noopener">Japan Post Holdings (6178 JP).</a> Right now, online food retailing is a two horse race between Amazon and Rakuten, with Z Holdings nowhere in sight.

In 2002, Seiyu was saved by the foreign might of Walmart. Today it is about 25% smaller but over the same 20 years, it has gone from a ¥90 billion loss to an estimated ¥40 billion operating profit last year. Now, with the backing of its new majority owners, KKR &amp; Co Inc (KKR US) and Rakuten Inc (4755 JP), Seiyu has announced ambitious plans to become Japan’s largest online supermarket by 2025. This is increasingly likely thanks to Rakuten's new reach through its new joint venture with Japan Post Holdings (6178 JP). Right now, online food retailing is a two horse race between Amazon and Rakuten, with Z Holdings nowhere in sight.

Seiyu: Back in the Mainstream Thanks to Rakuten

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<a href="https://www.smartkarma.com/entities/zozo-inc" target="_blank" data-smartkarma-citation="entities:18379:1" rel="noopener">ZOZO Inc (3092 JP)</a> today announced a JPY 32bn buyback. And it announced a JPY 25bn placement. The reasoning is that the company wants to have a place in the TSE Prime market and without a higher float, the company won't meet the 35% tradable shares criteria it is supposed to have in June. While this will not get them there by end of June, companies with a "plan" to get there will be granted provisional inclusion if they meet the other criteria, and this construct has a decent chance of getting them there.The explanation by the company is a little odd though. Investors should understand the details. Big picture they don't mean much, but the convoluted nature of the situation suggests

ZOZO Inc (3092 JP) today announced a JPY 32bn buyback. And it announced a JPY 25bn placement. The reasoning is that the company wants to have a place in the TSE Prime market and without a higher float, the company won't meet the 35% tradable shares criteria it is supposed to have in June. While this will not get them there by end of June, companies with a "plan" to get there will be granted provisional inclusion if they meet the other criteria, and this construct has a decent chance of getting them there.The explanation by the company is a little odd though. Investors should understand the details. Big picture they don't mean much, but the convoluted nature of the situation suggests 

Oh No ZoZo! An Overly Complicated Buyback+Issuance To Stay Prime

Traditionally, telecom companies in mature markets are "easy."  Infrastructure is basically built, but there is always maintenance and capex to upgrade throughput. Churn is low. Customers occasionally add on new services. They are generally cash machines. Comparing telcos is often reasonably easy. Mostly it comes down to how aggressively the company prices to customers, how it seeks non-standard revenue off its infrastructure and sales base, or how it returns capital to shareholders. <div class="content-highlight">Every now and then, a telecom company gets complicated. <a href="https://www.smartkarma.com/entities/softbank-corp" target="_blank" data-smartkarma-citation="entities:27445:1" rel="noopener">Softbank Corp (9434 JP)</a> is now one of those companies.</div>The issue is now significant enough that one should avoid using EBIT or EBITDA (or EBITDA less capex) for Softbank Corp as a comparative tool to <a href="https://www.smartkarma.com/entities/nippon-telegraph-telephone-corporation" target="_blank" data-smartkarma-citation="entities:623:1" rel="noopener">NTT (Nippon Telegraph &amp; Telephone) (9432 JP)</a> and <a href="https://www.smartkarma.com/entities/kddi-corp" target="_blank" data-smartkarma-citation="entities:639:1" rel="noopener">KDDI Corp (9433 JP)</a> without more clarity. There is recently a new kicker involved too, which means one should probably consider Softbank Corp differently than the other two for OTHER reasons too.

Traditionally, telecom companies in mature markets are "easy."  Infrastructure is basically built, but there is always maintenance and capex to upgrade throughput. Churn is low. Customers occasionally add on new services. They are generally cash machines. Comparing telcos is often reasonably easy. Mostly it comes down to how aggressively the company prices to customers, how it seeks non-standard revenue off its infrastructure and sales base, or how it returns capital to shareholders. Every now and then, a telecom company gets complicated. Softbank Corp (9434 JP) is now one of those companies.The issue is now significant enough that one should avoid using EBIT or EBITDA (or EBITDA less capex) for Softbank Corp as a comparative tool to NTT (Nippon Telegraph &amp; Telephone) (9432 JP) and KDDI Corp (9433 JP) without more clarity. There is recently a new kicker involved too, which means one should probably consider Softbank Corp differently than the other two for OTHER reasons too. 

Softbank Corp - Accounting for The Accounting Is Complicated

Thanks to Covid-19 and the more long-term shift to digital shopping, the big three e-commerce platforms, Amazon, Rakuten and Z Holdings, plundered the physical retail sector last year, grabbing a significantly increased share of consumption, but the wider battle for digital dominance isn’t over yet.Z Holdings is just closing on its deal with <a href="https://www.smartkarma.com/entities/line-corp" target="_blank" data-smartkarma-citation="entities:22772:1" rel="noopener">LINE Corp (3938 JP)</a> and following that up with a proposed ¥500 billion investment programme which includes a focus on e-commerce. But <a href="https://www.smartkarma.com/entities/rakuten-inc" target="_blank" data-smartkarma-citation="entities:31:1" rel="noopener">Rakuten Inc (4755 JP)</a> has already responded this week with its breakthrough deal with <a href="https://www.smartkarma.com/entities/japan-post-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:359:1" rel="noopener">Japan Post Holdings (6178 JP), </a><a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a> and <a href="https://www.smartkarma.com/entities/walmart-inc" target="_blank" data-smartkarma-citation="entities:11134:1" rel="noopener">Walmart (WMT US).</a>Meanwhile, despite these efforts by the two domestics giants, <a href="https://www.smartkarma.com/entities/amazon-com-inc" target="_blank" data-smartkarma-citation="entities:409:1" rel="noopener">Amazon.com Inc (AMZN US)</a> remained Japan's largest e-commerce operator in 2020 (by Gross Transaction Values) and doesn't look like giving up its poll position anytime soon.ZHD has a lot of advantages and strengths on the customer capture and marketing side. It has one of the biggest and more alluring datasets of Japanese consumers out there, which is not just social media handles and click data but names and addresses and – adding in Zozo data – body and foot size and, as of last month, skin type.ZHD needs to work hard to integrate all this and if it does so, will have a shot at leadership in digital ecosystems, but to win in e-commerce it must do something about fulfilment where it remains worryingly weak.

Thanks to Covid-19 and the more long-term shift to digital shopping, the big three e-commerce platforms, Amazon, Rakuten and Z Holdings, plundered the physical retail sector last year, grabbing a significantly increased share of consumption, but the wider battle for digital dominance isn’t over yet.Z Holdings is just closing on its deal with LINE Corp (3938 JP) and following that up with a proposed ¥500 billion investment programme which includes a focus on e-commerce. But Rakuten Inc (4755 JP) has already responded this week with its breakthrough deal with Japan Post Holdings (6178 JP), Tencent Holdings (700 HK) and Walmart (WMT US).Meanwhile, despite these efforts by the two domestics giants, Amazon.com Inc (AMZN US) remained Japan's largest e-commerce operator in 2020 (by Gross Transaction Values) and doesn't look like giving up its poll position anytime soon.ZHD has a lot of advantages and strengths on the customer capture and marketing side. It has one of the biggest and more alluring datasets of Japanese consumers out there, which is not just social media handles and click data but names and addresses and – adding in Zozo data – body and foot size and, as of last month, skin type.ZHD needs to work hard to integrate all this and if it does so, will have a shot at leadership in digital ecosystems, but to win in e-commerce it must do something about fulfilment where it remains worryingly weak.

E-Commerce Wars in Japan: How Z Holdings Is Facing off Against Rakuten and Amazon

Japan

ASKUL Corporation sells office equipment products to medium and small sized business offices via the Internet and facsimiles.  The Company provides next day delivery services throughout Japan.

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Askul Corp (2678 JP)

Askul Corp Q1 22 Results Reaction: Slowing Revenue Growth but Profit Beat

Askul posted a mixed quarter as revenue growth slowed but margin improvements continued apace. Covid-19 dislocation makes it hard to find real...

Kirk Boodry

Seiyu: Back in the Mainstream Thanks to Rakuten

Online is only 3% of food retail in Japan but this is about to change fast. Amazon leads in this race but Rakuten is about to catch up through...

Michael Causton

Oh No ZoZo! An Overly Complicated Buyback+Issuance To Stay Prime

Zozo's Buyback and Equity Commitment Line is minimally EPS accretive but creates a flow overhang. I expect the ToSTNeT-3 to go differently than the...

Travis Lundy

Softbank Corp - Accounting for The Accounting Is Complicated

Softbank Corporation is more expensive than it appears when one uses traditional telco metrics such as EV/EBITDA or EV/OP multiples. It's all in...

Travis Lundy

E-Commerce Wars in Japan: How Z Holdings Is Facing off Against Rakuten and Amazon

2020 boosted the fortunes of the big 3 e-commerce platforms in Japan but Z Holdings remains far behind Amazon Japan and Rakuten in sales volume and...

Michael Causton

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