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.

Event-Driven

<p>Early this morning NHk reported that <a href="https://www.smartkarma.com/entities/yahoo-japan-corp" target="_blank" data-smartkarma-citation="entities:19603:1" rel="noopener">Yahoo Japan (4689 JP)</a> and <a href="https://www.smartkarma.com/entities/zozo-inc" target="_blank" data-smartkarma-citation="entities:18379:1" rel="noopener">ZOZO Inc (3092 JP)</a> were in final talks for Yahoo Japan to take a majority stake in the online apparel mall. Details offered by the NHK and Nikkei are that:</p><ul>
<li>Yahoo Japan will acquire a majority stake for a sum of several hundred billion yen</li>
<li>Zozo will remain listed</li>
<li>Zozo CEO Yusaku Maezawa will sell shares into the tender and could step down</li>
</ul><p>The announcement was then made that Yahoo Japan's tender would occur with the following terms:</p><ul>
<li>The tender will be at a price of ¥2,620 and seek 50.1% of outstanding shares</li>
<li>Maezawa will sell the majority of his stake, 30.4% of outstanding shares, of which 21.34% appear to have been pledged as collateral for personal borrowings</li>
<li>Minimum shares for the tender will be 101,968,591 shares (33.4% of outstanding excluding treasury shares)</li>
<li>Maximum shares for the tender will be 152,952,900 shares (50.1% of outstanding excluding treasury shares)</li>
</ul><p>We discuss our preliminary thoughts on this development below.</p>

Early this morning NHk reported that Yahoo Japan (4689 JP) and ZOZO Inc (3092 JP) were in final talks for Yahoo Japan to take a majority stake in the online apparel mall. Details offered by the NHK and Nikkei are that:
Yahoo Japan will acquire a majority stake for a sum of several hundred billion yen
Zozo will remain listed
Zozo CEO Yusaku Maezawa will sell shares into the tender and could step down
The announcement was then made that Yahoo Japan's tender would occur with the following terms:
The tender will be at a price of ¥2,620 and seek 50.1% of outstanding shares
Maezawa will sell the majority of his stake, 30.4% of outstanding shares, of which 21.34% appear to have been pledged as collateral for personal borrowings
Minimum shares for the tender will be 101,968,591 shares (33.4% of outstanding excluding treasury shares)
Maximum shares for the tender will be 152,952,900 shares (50.1% of outstanding excluding treasury shares)
We discuss our preliminary thoughts on this development below.

Zozo: Yahoo Japan Tenders, Maezawa Is Out, Will GMO PG Be Squeezed Out?

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Quantitative Analysis

<p style="text-align: left;">The short notional in the market for the week ended 30 August is US$24.65bn with the largest short positions in <a href="https://www.smartkarma.com/entities/itochu-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:18448:1">Itochu Corp (8001 JP)</a>, <a href="https://www.smartkarma.com/entities/toyota-motor-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:73:1">Toyota Motor (7203 JP)</a>, <a href="https://www.smartkarma.com/entities/taiyo-yuden-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:9924:1">Taiyo Yuden (6976 JP)</a>, <a href="https://www.smartkarma.com/entities/canon-inc" target="_blank" rel="noopener" data-smartkarma-citation="entities:1:1">Canon Inc (7751 JP)</a>,  and <a href="https://www.smartkarma.com/entities/sumitomo-mitsui-financial-gr" target="_blank" rel="noopener" data-smartkarma-citation="entities:217:1">Sumitomo Mitsui Financial (8316 JP)</a> . Most shorted stocks as a percentage of free float are Amazia, <a href="https://www.smartkarma.com/entities/taiyo-yuden-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:9924:1">Taiyo Yuden (6976 JP)</a>, <a href="https://www.smartkarma.com/entities/leopalace21-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:8244:1">Leopalace21 Corp (8848 JP)</a> and <a href="https://www.smartkarma.com/entities/extreme-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:5311:1">Extreme Co Ltd (6033 JP)</a>, while the stocks with the highest days to cover are <a href="https://www.smartkarma.com/entities/katakura-industries-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:2007:1">Katakura Industries (3001 JP)</a>, <a href="https://www.smartkarma.com/entities/vital-ksk-holdings-inc" target="_blank" rel="noopener" data-smartkarma-citation="entities:7398:1">Vital Ksk Holdings (3151 JP)</a>, <a href="https://www.smartkarma.com/entities/mirait-holdings-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:7034:1">Mirait Holdings (1417 JP)</a> and <a href="https://www.smartkarma.com/entities/j-trust-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:20246:1">J Trust Co Ltd (8508 JP)</a>. </p><p style="text-align: left;">The largest increases in short notional over the week were <a href="https://www.smartkarma.com/entities/nippon-steel-corporation" target="_blank" rel="noopener" data-smartkarma-citation="entities:961:1">Nippon Steel Corporation (5401 JP)</a>, <a href="https://www.smartkarma.com/entities/sumitomo-dainippon-pharma-co" target="_blank" rel="noopener" data-smartkarma-citation="entities:1935:1">Sumitomo Dainippon Pharma Co (4506 JP)</a>, <a href="https://www.smartkarma.com/entities/cosmos-pharmaceutical-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:3797:1">Cosmos Pharmaceutical (3349 JP)</a> and <a href="https://www.smartkarma.com/entities/gmo-payment-gateway-inc" target="_blank" rel="noopener" data-smartkarma-citation="entities:1492:1">GMO Payment Gateway (3769 JP)</a> while shorts were covered in <a href="https://www.smartkarma.com/entities/ricoh-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:15359:1">Ricoh Co Ltd (7752 JP)</a>, <a href="https://www.smartkarma.com/entities/sumco-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:379:1">Sumco Corp (3436 JP)</a>, <a href="https://www.smartkarma.com/entities/m3-inc" target="_blank" rel="noopener" data-smartkarma-citation="entities:13316:1">M3 Inc (2413 JP)</a> and <a href="https://www.smartkarma.com/entities/rakuten-inc" target="_blank" rel="noopener" data-smartkarma-citation="entities:31:1">Rakuten Inc (4755 JP)</a>.   <a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:751:1"></a></p><p style="text-align: left;">Sectorally, new short positions were built in Consumer Staples and Health Care, while shorts were covered in Communication Services, Information Technology and Consumer Discretionary.</p>

The short notional in the market for the week ended 30 August is US$24.65bn with the largest short positions in Itochu Corp (8001 JP), Toyota Motor (7203 JP), Taiyo Yuden (6976 JP), Canon Inc (7751 JP),  and Sumitomo Mitsui Financial (8316 JP) . Most shorted stocks as a percentage of free float are Amazia, Taiyo Yuden (6976 JP), Leopalace21 Corp (8848 JP) and Extreme Co Ltd (6033 JP), while the stocks with the highest days to cover are Katakura Industries (3001 JP), Vital Ksk Holdings (3151 JP), Mirait Holdings (1417 JP) and J Trust Co Ltd (8508 JP). The largest increases in short notional over the week were Nippon Steel Corporation (5401 JP), Sumitomo Dainippon Pharma Co (4506 JP), Cosmos Pharmaceutical (3349 JP) and GMO Payment Gateway (3769 JP) while shorts were covered in Ricoh Co Ltd (7752 JP), Sumco Corp (3436 JP), M3 Inc (2413 JP) and Rakuten Inc (4755 JP).   Sectorally, new short positions were built in Consumer Staples and Health Care, while shorts were covered in Communication Services, Information Technology and Consumer Discretionary.

Equity Analyst, LightStream Research

Shifara Samsudeen, FCMA, CGMA

Equity Analyst

Equity Bottom-Up

<p><a href="https://www.smartkarma.com/entities/gmo-internet-inc/overview" target="_blank" rel="noopener">GMO Internet’s (9449 JP)</a> Cryptocurrency segment, which contributes close to 5% of consolidated revenues, has struggled in the recent past due to low bitcoin prices alongside an increase in its bitcoin mining expenses. The company managed to exit from its loss-making mining machine business (production and sale of mining machinery) while it is currently relocating its crypto mining business into countries with cheap electricity costs as a measure to turn-around the segment’s deteriorating performance.</p>
<p>The segment’s revenues are highly correlated with bitcoin prices and the current surge in bitcoin prices has caused a rally in GMO Internet’s stock prices. We have discussed the segment’s performance and its relationship with bitcoin prices in detail below.</p>

GMO Internet’s (9449 JP) Cryptocurrency segment, which contributes close to 5% of consolidated revenues, has struggled in the recent past due to low bitcoin prices alongside an increase in its bitcoin mining expenses. The company managed to exit from its loss-making mining machine business (production and sale of mining machinery) while it is currently relocating its crypto mining business into countries with cheap electricity costs as a measure to turn-around the segment’s deteriorating performance.
The segment’s revenues are highly correlated with bitcoin prices and the current surge in bitcoin prices has caused a rally in GMO Internet’s stock prices. We have discussed the segment’s performance and its relationship with bitcoin prices in detail below.

GMO Internet: Steady Growth in Share Price Due to Bitcoin Recovery

<p>We visited <a href="https://www.smartkarma.com/entities/gmo-payment-gateway-inc" target="_blank" data-smartkarma-citation="entities:1492:1" rel="noopener">GMO Payment Gateway (3769 JP)</a> ​last week to discuss their overseas strategy and Money Services Business in more depth. We came away with a better understanding of the depth and solidity of the company's long-term growth trajectory and a better appreciation of quality of the company's strategy and forward planning. While we previously noted that we did not believe GMO PG was a short, with a correction to the stock price and stronger confidence in the long-term prospects for the company we view current levels as an attractive entry point for long-term investors. Details below.</p>

We visited GMO Payment Gateway (3769 JP) ​last week to discuss their overseas strategy and Money Services Business in more depth. We came away with a better understanding of the depth and solidity of the company's long-term growth trajectory and a better appreciation of quality of the company's strategy and forward planning. While we previously noted that we did not believe GMO PG was a short, with a correction to the stock price and stronger confidence in the long-term prospects for the company we view current levels as an attractive entry point for long-term investors. Details below.

GMO Payment Gateway: Overseas, ST Lending and B2B Lay the Groundwork for Growth Far Into Future

'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. 

<p style="text-align: center;"><strong>• RELATIVE PRICE SCORE</strong> • </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/090/226/original/2019-06-13_16-47-07.png?1560412038" class="editor-image img-responsive" data-smartkarma-image-id="90226"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>INTRODUCTION </strong>- The Relative Price Score (RPS) is a measure of stock price performance relative to TOPIX calculated by comparing the current deviation with the mean absolute deviation of monthly and daily relative share prices. As all companies are thus on a comparable scale, 'Overbought' and 'Oversold' outliers and changes in scoring can reveal short-term and longer-term trading opportunities. Company outlier thresholds are set at<strong> +4</strong> &amp; <strong>-2</strong> and equate to the top and bottom first-to-second percentiles of historical observations from which mean reversion takes a matter of months. RPS outliers with a Score of greater than 10.0 are rare outside of the 2000 tech 'bubble'. <a href="https://www.smartkarma.com/entities/goldwin-inc" target="_blank" data-smartkarma-citation="entities:410:1">Goldwin (8111 JP)</a> has the distinction of being one of only two large-cap RPS 'ten-baggers' since that time.</p><p><strong>This insight updates our list of Overbought and Oversold companies, reviews the best and worst performing companies in terms of RPS over the last three months and adds some specific comments on stocks on each category.</strong></p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/090/196/original/2019-06-13_11-15-27.png?1560392157" class="editor-image img-responsive" data-smartkarma-image-id="90196"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>STATISTICS</strong> - Currently, of the 3,832 listed companies for which daily RPS data is available, 94 companies are 'Overbought', and 131 are 'Oversold' - 2.5% and 3.4%, respectively of the total. For the 758 companies with a market capitalisation of over ¥100b, there are 50 'Overbought' and 18 'Oversold' companies, 6.6% and 5.0%, respectively. As noted the companion Insight, <a href="https://www.smartkarma.com/insights/japan-june-relative-price-scores-market-sectors-peer-groups-more-of-the-same" target="_blank" data-smartkarma-citation="insights:30323">🇯🇵 Japan • June Relative Price Scores: Market, Sectors &amp; Peer Groups - More of The Same</a>, these numbers and percentages are unusual and were last seen in the Japanese market in 2000. </p><hr><p style="text-align: center;"><strong>• RELATIVE PRICE SCORE TOPS •</strong></p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/090/202/original/2019-06-13_13-06-49.png?1560398835" class="editor-image img-responsive" data-smartkarma-image-id="90202"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>RPS 'TOPS'</strong> - In the last two years, 444 companies have achieved an RPS of '4' or more and the average Overbought 'persistence' is 43 days. 1.4% of the total of 1.29 million traded stock days were by companies with an RPS of over 4. For companies with a market capitalisation higher than ¥100b, the numbers are 96 companies and 75 days - demonstrating the superior persistence of large capitalisation companies in this regard. Some examples of RPS mean reversion in the last three months have been <a href="https://www.smartkarma.com/entities/descente-ltd" target="_blank" data-smartkarma-citation="entities:8225:1">Descente (8114 JP)</a>, <a href="https://www.smartkarma.com/entities/alfresa-holdings-corp" target="_blank" data-smartkarma-citation="entities:10610:1">Alfresa (2784 JP)</a>, <a href="https://www.smartkarma.com/entities/320" target="_blank" data-smartkarma-citation="entities:320:1">FamilyMart Uny (8028 JP)</a>, <a href="https://www.smartkarma.com/entities/kikkoman-corp" target="_blank" data-smartkarma-citation="entities:11720:1">Kikkoman (2801 JP)</a>, <a href="https://www.smartkarma.com/entities/kobayashi-pharmaceutical-co" target="_blank" data-smartkarma-citation="entities:14930:1">Kobayashi Pharmaceutical (4967 JP)</a>, and <a href="https://www.smartkarma.com/entities/eiken-chemical-co-ltd" target="_blank" data-smartkarma-citation="entities:12675:1">Eiken Chemical (4549 JP)</a>.  </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/090/201/original/2019-06-13_13-04-38.png?1560398780" class="editor-image img-responsive" data-smartkarma-image-id="90201"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/090/203/original/2019-06-13_13-08-46.png?1560398945" class="editor-image img-responsive" data-smartkarma-image-id="90203"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/090/204/original/2019-06-13_13-09-37.png?1560399049" class="editor-image img-responsive" data-smartkarma-image-id="90204"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/090/205/original/2019-06-13_13-12-01.png?1560399142" class="editor-image img-responsive" data-smartkarma-image-id="90205"></figure><div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/090/316/original/2019-06-15_19-45-47.png?1560595558" class="editor-image img-responsive" data-smartkarma-image-id="90316"></figure><p>Source: Japan Analytics</p>
</div><p><strong>RPS 'BOTTOMS'</strong> - 372 companies have seen their RPS fall to '-2' or below in the last two years, and the average Oversold 'persistence' is 61 days. 1.5% of the total of 1.29 million traded stock days were by companies with an RPS of less than -2.  For larger capitalisation companies, the numbers are 85 companies and 89 days. A recent example of positive RPS mean reversion is <a href="https://www.smartkarma.com/entities/k-o-energy-group-inc" target="_blank" data-smartkarma-citation="entities:17701:1">K&amp;O Energy (1663 JP)</a>.</p><div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/090/207/original/2019-06-13_13-14-03.png?1560399270" class="editor-image img-responsive" data-smartkarma-image-id="90207"></figure><p>Source: Japan Analytics</p>
</div><div class="content-highlight"><p>In the <strong>DETAIL </strong>section below, we list the current very overbought (RPS&gt;5), too late to buy (RPS &gt;4&lt;5) and oversold (RPS &lt;-2) stocks as well as the most substantial three-month positive and negative changes in RPS.</p></div>

• RELATIVE PRICE SCORE • Source: Japan AnalyticsINTRODUCTION - The Relative Price Score (RPS) is a measure of stock price performance relative to TOPIX calculated by comparing the current deviation with the mean absolute deviation of monthly and daily relative share prices. As all companies are thus on a comparable scale, 'Overbought' and 'Oversold' outliers and changes in scoring can reveal short-term and longer-term trading opportunities. Company outlier thresholds are set at +4 &amp; -2 and equate to the top and bottom first-to-second percentiles of historical observations from which mean reversion takes a matter of months. RPS outliers with a Score of greater than 10.0 are rare outside of the 2000 tech 'bubble'. Goldwin (8111 JP) has the distinction of being one of only two large-cap RPS 'ten-baggers' since that time.This insight updates our list of Overbought and Oversold companies, reviews the best and worst performing companies in terms of RPS over the last three months and adds some specific comments on stocks on each category.Source: Japan AnalyticsSTATISTICS - Currently, of the 3,832 listed companies for which daily RPS data is available, 94 companies are 'Overbought', and 131 are 'Oversold' - 2.5% and 3.4%, respectively of the total. For the 758 companies with a market capitalisation of over ¥100b, there are 50 'Overbought' and 18 'Oversold' companies, 6.6% and 5.0%, respectively. As noted the companion Insight, 🇯🇵 Japan • June Relative Price Scores: Market, Sectors &amp; Peer Groups - More of The Same, these numbers and percentages are unusual and were last seen in the Japanese market in 2000. • RELATIVE PRICE SCORE TOPS •Source: Japan AnalyticsRPS 'TOPS' - In the last two years, 444 companies have achieved an RPS of '4' or more and the average Overbought 'persistence' is 43 days. 1.4% of the total of 1.29 million traded stock days were by companies with an RPS of over 4. For companies with a market capitalisation higher than ¥100b, the numbers are 96 companies and 75 days - demonstrating the superior persistence of large capitalisation companies in this regard. Some examples of RPS mean reversion in the last three months have been Descente (8114 JP), Alfresa (2784 JP), FamilyMart Uny (8028 JP), Kikkoman (2801 JP), Kobayashi Pharmaceutical (4967 JP), and Eiken Chemical (4549 JP).  
Source: Japan Analytics
RPS 'BOTTOMS' - 372 companies have seen their RPS fall to '-2' or below in the last two years, and the average Oversold 'persistence' is 61 days. 1.5% of the total of 1.29 million traded stock days were by companies with an RPS of less than -2.  For larger capitalisation companies, the numbers are 85 companies and 89 days. A recent example of positive RPS mean reversion is K&amp;O Energy (1663 JP).
Source: Japan Analytics
In the DETAIL section below, we list the current very overbought (RPS&gt;5), too late to buy (RPS &gt;4&lt;5) and oversold (RPS &lt;-2) stocks as well as the most substantial three-month positive and negative changes in RPS.

🇯🇵 Japan • Relative Price Scores - Overbought & Oversold Companies - June 2019

Japan

GMO Payment Gateway, Inc. provides credit card transaction services for electronic commerce firms.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

GMO Payment Gateway (3769 JP)

Zozo: Yahoo Japan Tenders, Maezawa Is Out, Will GMO PG Be Squeezed Out?

Early this morning NHk reported that Yahoo Japan (4689 JP) and ZOZO Inc (3092 JP) were in final talks for Yahoo Japan to take a majority stake in...

Mio Kato

Japan Short Interest - The Numb3rs

The short notional in the market for the week ended 30 August is US$24.65bn with the largest short positions in Itochu Corp (8001 JP), Toyota Motor...

Brian Freitas

GMO Payment Gateway: Overseas, ST Lending and B2B Lay the Groundwork for Growth Far Into Future

We visited GMO Payment Gateway (3769 JP) last week to discuss their overseas strategy and Money Services Business in more depth. We came away with...

Mio Kato

🇯🇵 Japan • Relative Price Scores - Overbought & Oversold Companies - June 2019

• RELATIVE PRICE SCORE • INTRODUCTION - The Relative Price Score (RPS) is a measure of stock price performance relative to TOPIX calculated by...

Campbell Gunn

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Zozo: Yahoo Japan Tenders, Maezawa Is Out, Will GMO PG Be Squeezed Out?

Early this morning NHk reported that Yahoo Japan (4689 JP) and ZOZO Inc (3092 JP) were in final talks for Yahoo Japan to take a majority stake in...

Mio Kato

Japan Short Interest - The Numb3rs

The short notional in the market for the week ended 30 August is US$24.65bn with the largest short positions in Itochu Corp (8001 JP), Toyota Motor...

Brian Freitas

GMO Internet: Steady Growth in Share Price Due to Bitcoin Recovery

GMO Internet’s (9449 JP) Cryptocurrency segment, which contributes close to 5% of consolidated revenues, has struggled in the recent past due to...

Shifara Samsudeen, FCMA, CGMA

GMO Payment Gateway: Overseas, ST Lending and B2B Lay the Groundwork for Growth Far Into Future

We visited GMO Payment Gateway (3769 JP) ​last week to discuss their overseas strategy and Money Services Business in more depth. We came away with...

Mio Kato

🇯🇵 Japan • Relative Price Scores - Overbought & Oversold Companies - June 2019

• RELATIVE PRICE SCORE • INTRODUCTION - The Relative Price Score (RPS) is a measure of stock price performance relative to TOPIX calculated by...

Campbell Gunn

We visited GMO Payment Gateway (3769 JP) last week to discuss their overseas strategy and Money Services Business in more depth. We came away with...