'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)

<div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/083/132/original/2019-03-25_18-58-11.png?1553507902" class="editor-image img-responsive" data-smartkarma-image-id="83132"></figure>Source: Japan Analytics
</div>There are currently 241 listed Japanese companies that can be categorised as Internet businesses. Our classification overlaps with the TOPIX-33 Information &amp; Communication sub-Sector but is broader in that it encompasses all companies listed on all sections and exchanges but is also narrower in that we have excluded Telecommunications (including <a href="https://www.smartkarma.com/entities/315" target="_blank" data-smartkarma-citation="entities:315:1">S</a><a href="https://www.smartkarma.com/entities/315" target="_blank" data-smartkarma-citation="entities:315:1">oftbank Group (9984 JP)</a>) and Information Technology companies. We have adopted a 'quantamental' approach which covers the long-term and current trends for Japan's Internet Sector as a whole, as well as eight sub-Sectors or Peer Groups and the Sectors' leading companies by market capitalisation.  Our focus is exclusively on the locally-listed universe and is based on disclosed financial and market data. We do not provide any forecasts, other than the companies' own forecasts and we do not attempt to make any business model or strategic judgments. Our focus is purely on financial and market performance. We do not cover unlisted and defunct companies such as Livedoor and, therefore, there is implicit survivor bias in the data. The broad themes that are developed in DETAIL below are grouped into six topics as follows: - • SUMMARY •  • FUNDAMENTAL OVERVIEW •  • SCORING - RESULTS &amp; REVISIONS / RELATIVE PRICE •  • RESULTS TRENDS •  • VALUATION • • RECOMMENDATIONS •<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/083/206/original/2019-03-25_17-46-58.png?1553565764" class="editor-image img-responsive" data-smartkarma-image-id="83206"></figure><div class="content-caption">Source: Japan Analytics</div>OVERVIEW - As will be covered in greater DETAIL below, Japan has failed to evolve a substantial Internet Sector and, in many business models, has been passed by global competitors including in the home market. Although Internet Sector revenues have grown steadily and now account for close to 1% of the total for all listed companies, operating margins have declined by half in the last seven years and are now only four percentage points higher than the market average. Accordingly, as measured by our Results &amp; Revision Score, the Sector is close to a twelve-year low. The market's response is an unchanged Sector weight in the market composite despite the addition of 111 new companies in the last six years, and a Relative Price Score that has moved in a narrow range over that period. The Sector averages disguise the weak business and market performance of a handful of Sector leaders as well as the overvaluation of the Sector's more successful business models, which is partly a result of a lack of alternatives. Despite the world's most significant Internet investor - <a href="https://www.smartkarma.com/entities/315" target="_blank" data-smartkarma-citation="entities:315:1">Softbank Group (9984 JP)</a>'s Vision Fund - being based in Japan, this fund and other global investors in Internet business have been right to give Japan a 'pass'.


Source: Japan Analytics
There are currently 241 listed Japanese companies that can be categorised as Internet businesses. Our classification overlaps with the TOPIX-33 Information &amp; Communication sub-Sector but is broader in that it encompasses all companies listed on all sections and exchanges but is also narrower in that we have excluded Telecommunications (including Softbank Group (9984 JP)) and Information Technology companies. We have adopted a 'quantamental' approach which covers the long-term and current trends for Japan's Internet Sector as a whole, as well as eight sub-Sectors or Peer Groups and the Sectors' leading companies by market capitalisation.  Our focus is exclusively on the locally-listed universe and is based on disclosed financial and market data. We do not provide any forecasts, other than the companies' own forecasts and we do not attempt to make any business model or strategic judgments. Our focus is purely on financial and market performance. We do not cover unlisted and defunct companies such as Livedoor and, therefore, there is implicit survivor bias in the data. The broad themes that are developed in DETAIL below are grouped into six topics as follows: - • SUMMARY •  • FUNDAMENTAL OVERVIEW •  • SCORING - RESULTS &amp; REVISIONS / RELATIVE PRICE •  • RESULTS TRENDS •  • VALUATION • • RECOMMENDATIONS •Source: Japan AnalyticsOVERVIEW - As will be covered in greater DETAIL below, Japan has failed to evolve a substantial Internet Sector and, in many business models, has been passed by global competitors including in the home market. Although Internet Sector revenues have grown steadily and now account for close to 1% of the total for all listed companies, operating margins have declined by half in the last seven years and are now only four percentage points higher than the market average. Accordingly, as measured by our Results &amp; Revision Score, the Sector is close to a twelve-year low. The market's response is an unchanged Sector weight in the market composite despite the addition of 111 new companies in the last six years, and a Relative Price Score that has moved in a narrow range over that period. The Sector averages disguise the weak business and market performance of a handful of Sector leaders as well as the overvaluation of the Sector's more successful business models, which is partly a result of a lack of alternatives. Despite the world's most significant Internet investor - Softbank Group (9984 JP)'s Vision Fund - being based in Japan, this fund and other global investors in Internet business have been right to give Japan a 'pass'. 

🇯🇵 Japan • Internet Sector Review - 'Japan Passing'

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<a href="https://www.smartkarma.com/entities/27349" target="_blank" data-smartkarma-citation="entities:27349:1">Defactostandard Ltd (3545 JP)</a> is a small-cap MOTHERS-listed company based in eastern Tokyo, which has been in the online commerce business in Japan for almost 15 years. It was the company from which <a href="https://www.smartkarma.com/entities/10405" target="_blank" data-smartkarma-citation="entities:10405:1">Aucfan Co Ltd (3674 JP)</a> spun off several years ago. Defactostandard operates a combination of online platforms including a C2B2C used goods online buying and selling business and a B2B platform, with some face-to-face interaction, but much of it in an online infrastructure with outsourced sub-contracting. 
<div class="content-highlight">
<h2>WARNING:  Tiny-cap TOPIX inclusion situation. Low liquidity and low dollar value event. Look away if not interested. </h2>
</div>
The company operates a group of websites under the name "brandear" whereby users (2,000,000 registered users now) can sell their secondhand branded goods (7000+ types of goods across an enormous number of <a href="https://brandear.jp/kakosatei/brandlist_alphabet" target="_blank">brands</a> - mostly clothing, bags, and accessories (watches and branded jewelry)) to the company (they have an enormous list of goods to which they can give guide prices) which are then marked up and resold through various channels (their own, eBay, etc). If you have a Louis Vuitton bag in the bottom of your closet and would rather have some cash, they want to buy it from you. They will buy it at a discount to where you might be able to sell it direct in an online auction or in a store, but they remove the hassle (and most people don't run stores).
The company offers detailed pages for many of the brands, with sample prices for different models of goods. One example is TAG Heuer watches, and a sample "guide" page is below. On this page they indicate they would buy those watches for around that price, though actual price per item may change depending on condition, age, replacement parts, service history, etc.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/062/185/original/Screen%20Shot%202018-08-30%20at%207.07.27%20PM.png?1535627336" class="editor-image img-responsive" data-smartkarma-image-id="62185"></figure>
Today the company announced that it would move its listing from MOTHERS to TSE First Section as of September 6th 2018. 
TSE1 reassignment triggers inclusion into the TOPIX Index. Based on the TOPIX Index Methodology (p7 of the <a href="http://www.jpx.co.jp/english/markets/indices/line-up/files/e_cal_16_Divf.pdf" target="_blank">TOPIX Index Guidebook</a>), inclusion will be on the last business day on the month following entrance into the First Section. This means the inclusion event will be at the close of trading October 30, 2018. 
Details below.

Defactostandard Ltd (3545 JP) is a small-cap MOTHERS-listed company based in eastern Tokyo, which has been in the online commerce business in Japan for almost 15 years. It was the company from which Aucfan Co Ltd (3674 JP) spun off several years ago. Defactostandard operates a combination of online platforms including a C2B2C used goods online buying and selling business and a B2B platform, with some face-to-face interaction, but much of it in an online infrastructure with outsourced sub-contracting. 

WARNING:  Tiny-cap TOPIX inclusion situation. Low liquidity and low dollar value event. Look away if not interested. 

The company operates a group of websites under the name "brandear" whereby users (2,000,000 registered users now) can sell their secondhand branded goods (7000+ types of goods across an enormous number of brands - mostly clothing, bags, and accessories (watches and branded jewelry)) to the company (they have an enormous list of goods to which they can give guide prices) which are then marked up and resold through various channels (their own, eBay, etc). If you have a Louis Vuitton bag in the bottom of your closet and would rather have some cash, they want to buy it from you. They will buy it at a discount to where you might be able to sell it direct in an online auction or in a store, but they remove the hassle (and most people don't run stores).
The company offers detailed pages for many of the brands, with sample prices for different models of goods. One example is TAG Heuer watches, and a sample "guide" page is below. On this page they indicate they would buy those watches for around that price, though actual price per item may change depending on condition, age, replacement parts, service history, etc.

Today the company announced that it would move its listing from MOTHERS to TSE First Section as of September 6th 2018. 
TSE1 reassignment triggers inclusion into the TOPIX Index. Based on the TOPIX Index Methodology (p7 of the TOPIX Index Guidebook), inclusion will be on the last business day on the month following entrance into the First Section. This means the inclusion event will be at the close of trading October 30, 2018. 
Details below.

DeFacto Standard (3545 JP) TOPIX Inclusion Event

Japan

Defacto Standard Co.,Ltd. operates an online resale marketplace platform which allows users to sell goods through a customer-to-customer (C2C) channel. The Company also operates online auction site.

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Defactostandard Ltd (3545 JP)

🇯🇵 Japan • Internet Sector Review - 'Japan Passing'

There are currently 241 listed Japanese companies that can be categorised as Internet businesses. Our classification overlaps with the TOPIX-33...

Campbell Gunn

DeFacto Standard (3545 JP) TOPIX Inclusion Event

Defactostandard Ltd (3545 JP) is a small-cap MOTHERS-listed company based in eastern Tokyo, which has been in the online commerce business in Japan...

Travis Lundy

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