Japanese Turnaround Situations, Short-Ideas, Azabu Research

Michael Allen

Japanese Turnaround Situations, Short-Ideas

Azabu Research

Azabu Research is a publishing and consulting firm focused on distressed equities in the Japanese market. We specialize in turnaround strategies, corporate combinations, divestitures, and restructuring.

Publisher of the Tokyo Turnaround Letter, which conducts the most thorough research possible of publicly available information, including forensic tests for fraudulent overstatement of assets and understatement of liabilities, as well as rigorous market and industry analysis to assess the underlying strengths of the company’s products or services, the appropriateness of the company’s turnaround strategy, and the skill of its current management team. The average length of a report exceeds 25 pages of text and tables, excluding any disclosures or executive summaries.

We have more than 30 years of experience in applying this process to distressed equities in Japan. Additionally, subscribers have free access to detailed, yet easily navigated earnings models for the target company as well as the top five comparable companies, and unlimited access to the analyst for follow-up questions.

Azabu Research also conducts be-spoke research on a project basis, and provides consulting services to companies looking to restructure, divest, make acquisitions, go public, or improve investor sentiment toward their stock.

Independent Research and Consulting Firm

Equity Bottom-Up

<ul>
<li>Shiseido’s share price dropped 70% over the past six years, compared to a 110% gain by Topix, but the stock just crossed its 200-day MAV. Time for another look?  </li>
<li>In our view, the stock lacks most of the required criteria for a successful turnaround, and reeks of all the important criteria for failure. </li>
<li>Shiseido’s stock already prices in a 50% earnings recovery. To be compelling, the forecast needs to be 4 standard deviations above the mean, or the price needs to decline 30%.  </li>
</ul>


Shiseido’s share price dropped 70% over the past six years, compared to a 110% gain by Topix, but the stock just crossed its 200-day MAV. Time for another look?  
In our view, the stock lacks most of the required criteria for a successful turnaround, and reeks of all the important criteria for failure. 
Shiseido’s stock already prices in a 50% earnings recovery. To be compelling, the forecast needs to be 4 standard deviations above the mean, or the price needs to decline 30%.  


Why Shiseido (4911) Never Worked as a Turnaround Stock

Japanese Equity Specialist, Ortus Advisors

Andrew Jackson

Japanese Equity Specialist

Ortus Advisors

Thematic (Sector/Industry)

<ul>
<li>Nervous markets overnight with a number of earnings misses adding downside pressure.</li>
<li>Tokyo Metro IPO kicks off today which should see strong demand especially from risk-adverse retail investors.</li>
<li>Tokyo Metro grey market last Y1400 vs Y1200 listing price, although bookrunners are calling higher levels to start.</li>
</ul>


Nervous markets overnight with a number of earnings misses adding downside pressure.
Tokyo Metro IPO kicks off today which should see strong demand especially from risk-adverse retail investors.
Tokyo Metro grey market last Y1400 vs Y1200 listing price, although bookrunners are calling higher levels to start.


Japan Morning Connection: Tokyo Metro IPO Should See Strong Demand

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

Taiwan Stock Exchange Weighted Index / Technical Analysis

<ul>
<li>Rallies appear to be stalling-out near logical resistances in the largest global equity markets. That includes 5670-5783 on SPX, 2690-2700 on Japan's TOPIX, and 4884 on Europe's EURO STOXX 50.</li>
<li>We continue to believe these indexes will roll over near current or marginally higher levels, fitting with our ongoing belief that MSCI ACWI is going through a 1-to-4-month pullback/consolidation.</li>
<li>Long-Term uptrend violations on global indexes and continued outperformance from defensive Sectors are our top concerns for global equities, though recession indicators and a Fed cutting cycle are also concerns.</li>
</ul>


Rallies appear to be stalling-out near logical resistances in the largest global equity markets. That includes 5670-5783 on SPX, 2690-2700 on Japan's TOPIX, and 4884 on Europe's EURO STOXX 50.
We continue to believe these indexes will roll over near current or marginally higher levels, fitting with our ongoing belief that MSCI ACWI is going through a 1-to-4-month pullback/consolidation.
Long-Term uptrend violations on global indexes and continued outperformance from defensive Sectors are our top concerns for global equities, though recession indicators and a Fed cutting cycle are also concerns.


Expecting Downside Ahead; Stick With Defensives; Downgrading Taiwan to Market Weight; Risk-Off Signs

<ul>
<li>Snap-Back rallies have continued in the largest global equity markets (U.S., Japan, and Europe).</li>
<li>Japan's TOPIX is still below 2690-2700 and the EURO STOXX 50 is below 4884, and whether they roll over here or from marginally higher levels, lower highs remain likely.</li>
<li>It all fits with our ongoing belief (since our July 25, 2024 Int'l Compass) that MSCI ACWI is going through a 1- to 4-month pullback/consolidation (we are one month in).</li>
</ul>


Snap-Back rallies have continued in the largest global equity markets (U.S., Japan, and Europe).
Japan's TOPIX is still below 2690-2700 and the EURO STOXX 50 is below 4884, and whether they roll over here or from marginally higher levels, lower highs remain likely.
It all fits with our ongoing belief (since our July 25, 2024 Int'l Compass) that MSCI ACWI is going through a 1- to 4-month pullback/consolidation (we are one month in).


Shift Now to Defensives; Snap-Back Rally Testing Resistance $ACWI $SPX; Neutral Outlook Intact

<ul>
<li>Big tech reversal after yesterdays gains and a horrible earnings print for INTC sends it -20% in AH trading setting a very bleak tone for JP tech</li>
<li>AMZN miss after-mkt on its e-commerce seller services and advertising will weigh on likes of 4755 Rakuten and 4689 LY Corp.</li>
<li>Flight to perceived safety in names such as P&amp;G, CL and KMB may provide a bid for related plays in JP such as 4452 Kao, 4912 Lion, and 8113 Unicharm.</li>
</ul>


Big tech reversal after yesterdays gains and a horrible earnings print for INTC sends it -20% in AH trading setting a very bleak tone for JP tech
AMZN miss after-mkt on its e-commerce seller services and advertising will weigh on likes of 4755 Rakuten and 4689 LY Corp.
Flight to perceived safety in names such as P&amp;G, CL and KMB may provide a bid for related plays in JP such as 4452 Kao, 4912 Lion, and 8113 Unicharm.


Japan

Lion Corporation manufactures a variety of household products such as toothpaste and detergents. The Company also produces pharmaceuticals, chemical products, and seasonings.  Lion sells its products primarily in Asia.

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Lion Corp (4912 JP)

Why Shiseido (4911) Never Worked as a Turnaround Stock

Shiseido's stock may have crossed its 200-day MAV, but it lacks the criteria for a successful turnaround and may still be overpriced.

Michael Allen

Japan Morning Connection: Tokyo Metro IPO Should See Strong Demand

Nervous markets overnight due to a number of earnings misses. Tokyo Metro IPO expected to see strong demand, especially from risk-adverse retail...

Andrew Jackson

Expecting Downside Ahead; Stick With Defensives; Downgrading Taiwan to Market Weight; Risk-Off Signs

Expecting Downside Ahead $ACWI $SPX; Stick With Defensive Sectors; Downgrading Taiwan $EWT $TSM to Market Weight; Global Discretionary vs. Staples...

Vermilion Research

Shift Now to Defensives; Snap-Back Rally Testing Resistance $ACWI $SPX; Neutral Outlook Intact

Shift Now to Defensives (Health Care, Telecommunications, Utilities, and Consumer Staples); Snap-Back Rally Testing Resistance $ACWI $SPX; Neutral...

Vermilion Research

Japan Morning Connection: Tech Tumbles

Big tech stocks tumble after poor earnings from INTC, AMZN miss to impact JP tech sector, flight to safety in consumer goods may boost related...

Andrew Jackson

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52-week Range

Market Cap (USDm)

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Why Shiseido (4911) Never Worked as a Turnaround Stock

​Shiseido's stock may have crossed its 200-day MAV, but it lacks the criteria for a successful turnaround and may still be overpriced.

Michael Allen

Japan Morning Connection: Tokyo Metro IPO Should See Strong Demand

​Nervous markets overnight due to a number of earnings misses. Tokyo Metro IPO expected to see strong demand, especially from risk-adverse retail...

Andrew Jackson

Expecting Downside Ahead; Stick With Defensives; Downgrading Taiwan to Market Weight; Risk-Off Signs

Expecting Downside Ahead $ACWI $SPX; Stick With Defensive Sectors; Downgrading Taiwan $EWT $TSM to Market Weight; Global Discretionary vs. Staples...

Vermilion Research

Shift Now to Defensives; Snap-Back Rally Testing Resistance $ACWI $SPX; Neutral Outlook Intact

Shift Now to Defensives (Health Care, Telecommunications, Utilities, and Consumer Staples); Snap-Back Rally Testing Resistance $ACWI $SPX; Neutral...

Vermilion Research

Japan Morning Connection: Tech Tumbles

​Big tech stocks tumble after poor earnings from INTC, AMZN miss to impact JP tech sector, flight to safety in consumer goods may boost related...

Andrew Jackson

Shiseido's stock may have crossed its 200-day MAV, but it lacks the criteria for a successful turnaround and may still be overpriced.

Nervous markets overnight due to a number of earnings misses. Tokyo Metro IPO expected to see strong demand, especially from risk-adverse retail...

Big tech stocks tumble after poor earnings from INTC, AMZN miss to impact JP tech sector, flight to safety in consumer goods may boost related...