Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>The Nikkei 225 data for the March 2024 rebalance is a wrap. The names are the same as before but there is likely less <a href="https://www.smartkarma.com/entities/disco-corp" target="_blank" data-smartkarma-citation="entities:15817:1" rel="noopener">DISCO Corp (6146 JP)</a> to buy.</li>
<li>It's still big, but smaller than before because of the difference between performance and the change in PAF required to be below 1%. A 4:1 share split would be optimal.</li>
<li>I recommend a few positioning changes from before, and the Fast Retailing trade loses one short-term option but the longer-term one stays in place.</li>
</ul>


The Nikkei 225 data for the March 2024 rebalance is a wrap. The names are the same as before but there is likely less DISCO Corp (6146 JP) to buy.
It's still big, but smaller than before because of the difference between performance and the change in PAF required to be below 1%. A 4:1 share split would be optimal.
I recommend a few positioning changes from before, and the Fast Retailing trade loses one short-term option but the longer-term one stays in place.


FINAL PREDICTIONS: March 2024 Nikkei 225 Rebal (Socionext, Disco, and 1 Consumer Goods Stock to ADD)

Senior Technology Analyst, Japanese Equities, LightStream Research

Scott Foster

Senior Technology Analyst, Japanese Equities

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.

Equity Bottom-Up

<ul>
<li>Annual sales growth has dropped from 20% or more in recent years to 12.5% in FY Dec-23. The operating margin ticked up last year, but is basically trending sideways.</li>
<li>The share price has dropped by 35% since April 2023, bringing the projected P/E ratio down to the bottom of its 10-year range. Buy back in for the long term. </li>
<li>Guidance, which is usually accurate, is for 12.7% sales growth this year and an operating margin of 12.5%. Growth should continue in future years with flat or better margins.</li>
</ul>


Annual sales growth has dropped from 20% or more in recent years to 12.5% in FY Dec-23. The operating margin ticked up last year, but is basically trending sideways.
The share price has dropped by 35% since April 2023, bringing the projected P/E ratio down to the bottom of its 10-year range. Buy back in for the long term. 
Guidance, which is usually accurate, is for 12.7% sales growth this year and an operating margin of 12.5%. Growth should continue in future years with flat or better margins.


MonotaRO (3064 JP): Slowdown in the Price

Japan Specialist

Mark Chadwick

Thematic (Sector/Industry)

<ul>
<li>Market Watch: This week, the Topix Index gained 44pts (2%) to close at 2,309, influenced by Wall Street's response to US inflation data and expectations of extended elevated interest rates.</li>
<li>Major Movers: Lasertec (6920) surged +17%, Fast Retailing (9983) rose +12%, and Monotaro (3064) declined -18%</li>
<li>Activist Watch: ValueAct lifted its stake in Topcon. I like the LT fundamentals for the company and look forward to positive dialogue with the activist</li>
</ul>


Market Watch: This week, the Topix Index gained 44pts (2%) to close at 2,309, influenced by Wall Street's response to US inflation data and expectations of extended elevated interest rates.
Major Movers: Lasertec (6920) surged +17%, Fast Retailing (9983) rose +12%, and Monotaro (3064) declined -18%
Activist Watch: ValueAct lifted its stake in Topcon. I like the LT fundamentals for the company and look forward to positive dialogue with the activist


Japan Weekly | Lasertec, Fast Retailing, Monotaro, Topcon

Equity Analyst, LightStream Research

Oshadhi Kumarasiri

Equity Analyst

<ul>
<li>
<a href="https://www.smartkarma.com/entities/rakuten-group-inc" target="_blank" data-smartkarma-citation="entities:31:1" rel="noopener">Rakuten Group (4755 JP)</a>, having experienced an 80% decline in value over the last 8 years, now emerges as an enticing prospect for value investors.</li>
<li>The combined fair value of Rakuten's Cards, Bank, and Mobile businesses now surpasses 100% of the company's market capitalization.</li>
<li>Rakuten Ichiba, valued at ¥600bn, appears significantly undervalued when compared to <a href="https://www.smartkarma.com/entities/zozo-inc" target="_blank" data-smartkarma-citation="entities:18379:1" rel="noopener">ZOZO Inc (3092 JP)</a> and <a href="https://www.smartkarma.com/entities/monotaro-co-ltd" target="_blank" data-smartkarma-citation="entities:15441:1" rel="noopener">MonotaRO Co Ltd (3064 JP)</a>, which hold approximately 2.0x Rakuten Ichiba’s valuation.</li>
</ul>



Rakuten Group (4755 JP), having experienced an 80% decline in value over the last 8 years, now emerges as an enticing prospect for value investors.
The combined fair value of Rakuten's Cards, Bank, and Mobile businesses now surpasses 100% of the company's market capitalization.
Rakuten Ichiba, valued at ¥600bn, appears significantly undervalued when compared to ZOZO Inc (3092 JP) and MonotaRO Co Ltd (3064 JP), which hold approximately 2.0x Rakuten Ichiba’s valuation.


Rakuten: An Attractive Value Opportunity After 80% Value Decline in 8 Years

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

<ul>
<li>
<a href="https://www.smartkarma.com/entities/jd-industrials" target="_blank" data-smartkarma-citation="entities:36875:1" rel="noopener">JD Industrials</a>  is looking to raise about US$1bn in its upcoming HK IPO. </li>
<li>JDI is a leading industrial supply chain technology and service provider in China in terms of GMV in each year during the Track Record Period, according to CIC.</li>
<li>We have looked at the company background and undertaken a peer comparison in our previous notes. In this note, we will talk about valuations.</li>
</ul>



JD Industrials  is looking to raise about US$1bn in its upcoming HK IPO. 
JDI is a leading industrial supply chain technology and service provider in China in terms of GMV in each year during the Track Record Period, according to CIC.
We have looked at the company background and undertaken a peer comparison in our previous notes. In this note, we will talk about valuations.


JD Industrials Pre-IPO - Initial Thoughts on Valuation

Japan

MonotaRO Co., Ltd. mainly sells machine tools, engine parts, and factory consumable goods on the web site.

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MonotaRO Co Ltd (3064 JP)

FINAL PREDICTIONS: March 2024 Nikkei 225 Rebal (Socionext, Disco, and 1 Consumer Goods Stock to ADD)

The announcement will come out in <3 weeks. Since I published, we have an update that Yanai-san sold Fast Retailing shares, Nitori jumped 8% on...

Travis Lundy

MonotaRO (3064 JP): Slowdown in the Price

Share price down 35% since April 2023, discounting the transition to slower growth. Operating margin improving with price hikes and efficiency...

Scott Foster

Japan Weekly | Lasertec, Fast Retailing, Monotaro, Topcon

Topix Index rises despite US inflation data and expectations for higher interest rates. Lasertec and Fast Retailing see gains, while Monotaro...

Mark Chadwick

Rakuten: An Attractive Value Opportunity After 80% Value Decline in 8 Years

The combined fair value of Rakuten's Cards, Bank, and Mobile businesses now surpasses 100% of Rakuten's market capitalization.

Oshadhi Kumarasiri

JD Industrials Pre-IPO - Initial Thoughts on Valuation

JD Industrials is looking to raise about US$1bn in its upcoming HK IPO. In this note, we talk about our initial thoughts on valuations.

Sumeet Singh

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

FINAL PREDICTIONS: March 2024 Nikkei 225 Rebal (Socionext, Disco, and 1 Consumer Goods Stock to ADD)

The announcement will come out in <3 weeks. Since I published, we have an update that Yanai-san sold Fast Retailing shares, Nitori jumped 8% on...

Travis Lundy

MonotaRO (3064 JP): Slowdown in the Price

Share price down 35% since April 2023, discounting the transition to slower growth. Operating margin improving with price hikes and efficiency...

Scott Foster

Japan Weekly | Lasertec, Fast Retailing, Monotaro, Topcon

​Topix Index rises despite US inflation data and expectations for higher interest rates. Lasertec and Fast Retailing see gains, while Monotaro...

Mark Chadwick

Rakuten: An Attractive Value Opportunity After 80% Value Decline in 8 Years

The combined fair value of Rakuten's Cards, Bank, and Mobile businesses now surpasses 100% of Rakuten's market capitalization.

Oshadhi Kumarasiri

JD Industrials Pre-IPO - Initial Thoughts on Valuation

JD Industrials is looking to raise about US$1bn in its upcoming HK IPO. In this note, we talk about our initial thoughts on valuations.

Sumeet Singh

Topix Index rises despite US inflation data and expectations for higher interest rates. Lasertec and Fast Retailing see gains, while Monotaro...