Pan-Asia Tactical Market Calls (Quant-Driven), MRM Research

Nico Rosti

Pan-Asia Tactical Market Calls (Quant-Driven)

MRM Research

Quantitative Research

Equity Derivatives

<ul>
<li>While the bidding war for <a href="https://www.smartkarma.com/entities/kakaku-com-inc" target="_blank" data-smartkarma-citation="entities:7408:1" rel="noopener">Kakaku.com Inc (2371 JP)</a> goes towards the showdown, the stock remains semi-paralized since early June (right when EQT and Bain/LY started to compete).</li>
<li>In this insight we want to evaluate the next possible trend direction and targets, using our quantitative forecast model.</li>
<li>We have to say upfront that the upside looks limited (unless the bidders formally structure binding offers above current market levels).</li>
</ul>


While the bidding war for Kakaku.com Inc (2371 JP) goes towards the showdown, the stock remains semi-paralized since early June (right when EQT and Bain/LY started to compete).
In this insight we want to evaluate the next possible trend direction and targets, using our quantitative forecast model.
We have to say upfront that the upside looks limited (unless the bidders formally structure binding offers above current market levels).


Kakaku.com (2371 JP) Tactical Outlook Ahead of Bain/LY Counter-Offer: Pop or Drop?

Derivatives and Quantitative Strategist

Gaudenz Schneider

<ul>
<li>
What’s new: SoftBank Group (9984 JP) has pulled back from its 2 June high, losing 15.6% over ten days, while implied volatility remains elevated at 92%, in the 96th percentile.</li>
<li>
The opportunity: Elevated volatility creates unusually rich short-dated put premium, allowing investors to harvest income while potentially setting a lower entry point if the stock is assigned.</li>
<li>
Options angle: The setup shifts SoftBank from a pure post-pullback stock call to a tactical option-income opportunity, with strike selection framed around support levels, breakeven prices, and assignment risk.</li>
</ul>



What’s new: SoftBank Group (9984 JP) has pulled back from its 2 June high, losing 15.6% over ten days, while implied volatility remains elevated at 92%, in the 96th percentile.

The opportunity: Elevated volatility creates unusually rich short-dated put premium, allowing investors to harvest income while potentially setting a lower entry point if the stock is assigned.

Options angle: The setup shifts SoftBank from a pure post-pullback stock call to a tactical option-income opportunity, with strike selection framed around support levels, breakeven prices, and assignment risk.


SoftBank (9984 JP): Tactical Put Underwriting After Sharp Pullback

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

<ul>
<li>On 4 June, the <a href="https://www.nikkei.com/article/DGXZQOUC04CCA0U6A600C2000000/" target="_blank" rel="noopener">Nikkei reported</a> that <a href="https://www.smartkarma.com/entities/digital-garage-inc" target="_blank" data-smartkarma-citation="entities:13747:1" rel="noopener">Digital Garage (4819 JP)</a> will not accept Bain/<a href="https://www.smartkarma.com/entities/ly-corp" target="_blank" data-smartkarma-citation="entities:19603:1" rel="noopener">LY (4689 JP)</a>'s higher offer for <a href="https://www.smartkarma.com/entities/kakaku-com-inc" target="_blank" data-smartkarma-citation="entities:7408:1" rel="noopener">Kakaku.com Inc (2371 JP)</a>, as it is not feasible.</li>
<li>Digital Garage’s reasoning is not credible. The most likely reason is that, unlike the EQT offer, Bain/LY are not allowing reinvestment to take a 20% stake in the offeror.</li>
<li>While a setback, Bain/LY can succeed if it secures support from <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 Oasis. Irrespective of Digital Garage’s stance, EQT will likely need to bump to succeed.</li>
</ul>


On 4 June, the Nikkei reported that Digital Garage (4819 JP) will not accept Bain/LY (4689 JP)'s higher offer for Kakaku.com Inc (2371 JP), as it is not feasible.
Digital Garage’s reasoning is not credible. The most likely reason is that, unlike the EQT offer, Bain/LY are not allowing reinvestment to take a 20% stake in the offeror.
While a setback, Bain/LY can succeed if it secures support from KDDI Corp (9433 JP) and Oasis. Irrespective of Digital Garage’s stance, EQT will likely need to bump to succeed.


Kakaku.com (2371 JP): Digital Garage Moves to Thwart Bain/LY

Telco/Internet specialist

Kirk Boodry

Redex Research

Thematic (Sector/Industry)

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. 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.

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.

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/162/891/original/2020-10-01_13-26-50.png?1601526452" class="editor-image img-responsive" data-smartkarma-image-id="162891"></figure>
<div class="content-caption">Source for all charts &amp; tables unless otherwise stated: Japan Analytics</div>
SHORT TENURE - Since 1979 the average prime ministerial tenure in Japan has been 750 days. Excluding the three longest-serving Prime Ministers of the last forty years - Nakasone, Koizumi and Abe 2 - the average is 494 days. The equity market has favoured long-serving Liberal Democratic Party government (marked in light green above) and disliked periods of coalition or opposition (野党 yatō) government and also tenures of less than eighteen months.
PM SUGA - Prime Minister Suga Yoshihide succeeded former Prime Minister Abe on 16th September the latter having stepped down for health reasons. Suga had served as Chief Cabinet Secretary (内閣官房長官, Naikaku-kanbō-chōkan) for all of Abe's premiership. The continuity offered by Suga's elevation provides Japan with the prospect of an extended period of political stability. From his policy statements made during the brief prime-ministerial election campaign, Suga has bold aims for challenging Japan's economic and social ills. Given his previous role and mastery of the balance between political necessities and bureaucratic realities, the Suga era could be as impactful as those of Nakasone, Koizumi and Abe 2. We view such an outcome as bullish for the Japanese economy and stock market.
<hr>
In the DETAIL below, we shall cover the following topics:-
I: SUGA's BACKGROUND &amp; POLITICAL CAREER
II: POLICY PRIORITIES
Defence &amp; Foreign Policy
Economic Policy
Administrative Reform
The Digital Agency
Telecommunications Services
Birth-rate and Fertility Treatment
Regional Revitalisation &amp; Regional Bank Reform
SME restructuring
Carbon Neutrality &amp; A Nuclear Renaissance
III: SUGA STOCKS RECOMMENDATIONS
<hr>
WHAT'S ORIGINAL? - This Insight reviews the implications of PM Suga's policy platform for specific sectors and stocks in the Japanse equity market and concludes with five long and five short recommendations for large-cap growth and value-orientated portfolios.  
<hr>
<blockquote class="">
"Self-help, mutual help, public help, and "kizuna" (bonds) is our vision for society. With that in mind, we firmly believe, overcoming various issues, such as regional revitalization and the shrinking population, as well as the declining birth-rate and aging society, will create dynamism in Japan. To this end, we will meet the people's expectations by giving birth to a "Cabinet that works for the People," which gives its all to advance regulatory reforms without being constrained by the vested interests of the stakeholders, tearing down bureaucratic sectionalism and the notorious habit of following past precedents.
<h3>Statement of the Prime Minister</h3>
September 16th, 2020
</blockquote>


Source for all charts &amp; tables unless otherwise stated: Japan Analytics
SHORT TENURE - Since 1979 the average prime ministerial tenure in Japan has been 750 days. Excluding the three longest-serving Prime Ministers of the last forty years - Nakasone, Koizumi and Abe 2 - the average is 494 days. The equity market has favoured long-serving Liberal Democratic Party government (marked in light green above) and disliked periods of coalition or opposition (野党 yatō) government and also tenures of less than eighteen months.
PM SUGA - Prime Minister Suga Yoshihide succeeded former Prime Minister Abe on 16th September the latter having stepped down for health reasons. Suga had served as Chief Cabinet Secretary (内閣官房長官, Naikaku-kanbō-chōkan) for all of Abe's premiership. The continuity offered by Suga's elevation provides Japan with the prospect of an extended period of political stability. From his policy statements made during the brief prime-ministerial election campaign, Suga has bold aims for challenging Japan's economic and social ills. Given his previous role and mastery of the balance between political necessities and bureaucratic realities, the Suga era could be as impactful as those of Nakasone, Koizumi and Abe 2. We view such an outcome as bullish for the Japanese economy and stock market.

In the DETAIL below, we shall cover the following topics:-
I: SUGA's BACKGROUND &amp; POLITICAL CAREER
II: POLICY PRIORITIES
Defence &amp; Foreign Policy
Economic Policy
Administrative Reform
The Digital Agency
Telecommunications Services
Birth-rate and Fertility Treatment
Regional Revitalisation &amp; Regional Bank Reform
SME restructuring
Carbon Neutrality &amp; A Nuclear Renaissance
III: SUGA STOCKS RECOMMENDATIONS

WHAT'S ORIGINAL? - This Insight reviews the implications of PM Suga's policy platform for specific sectors and stocks in the Japanse equity market and concludes with five long and five short recommendations for large-cap growth and value-orientated portfolios.  


"Self-help, mutual help, public help, and "kizuna" (bonds) is our vision for society. With that in mind, we firmly believe, overcoming various issues, such as regional revitalization and the shrinking population, as well as the declining birth-rate and aging society, will create dynamism in Japan. To this end, we will meet the people's expectations by giving birth to a "Cabinet that works for the People," which gives its all to advance regulatory reforms without being constrained by the vested interests of the stakeholders, tearing down bureaucratic sectionalism and the notorious habit of following past precedents.
Statement of the Prime Minister
September 16th, 2020


🇯🇵 Japan in the Suga Era - Policy Priorities & 'Suga Stocks'

Japan

KDDI CORPORATION provides mobile communication services and sells mobile devices.  The Company also is a broadband provider.

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KDDI Corp (9433 JP)

Kakaku.com (2371 JP) Tactical Outlook Ahead of Bain/LY Counter-Offer: Pop or Drop?

The bidding war for Kakaku.com has left the price stagnant since June. We see limited short-term upside (unless the bidders increase their offers)....

Nico Rosti

SoftBank (9984 JP): Tactical Put Underwriting After Sharp Pullback

SoftBank’s pullback and elevated implied volatility create a tactical put-underwriting setup, offering short-dated premium income with strike...

Gaudenz Schneider

Kakaku.com (2371 JP): Digital Garage Moves to Thwart Bain/LY

The Nikkei reports that Bain/LY’s binding offer is around JPY3,500, a 16.7% premium to EQT’s JPY3,000 offer and a 3.2% premium to the last close....

Arun George

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 in the Suga Era - Policy Priorities & 'Suga Stocks'

We believe the Suga era could be as impactful as those of Nakasone, Koizumi and Abe 2. We view such an outcome as bullish for the Japanese economy...

Campbell Gunn

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