Telco/Internet specialist

Kirk Boodry

Redex Research

Equity Bottom-Up

NTT (Nippon Telegraph & Telephone) / Equity Bottom-Up

<p>NTT senior management will not attend the Olympic opening ceremonies and with consumer-linked product demonstrations less relevant with no spectators, NTT’s promotional activity is winding down. On balance, Olympic sponsorship does not impact the valuation or investment case – any PR spend here would have went elsewhere – but we did enjoy following their participation in the torch relay on Twitter and their 2020 Olympic website is worth a look. We have tweaked our forecasts for FY21 based on management Q4 guidance and we remain at Buy with a ¥3,600 FY21-end target price.   </p>

NTT senior management will not attend the Olympic opening ceremonies and with consumer-linked product demonstrations less relevant with no spectators, NTT’s promotional activity is winding down. On balance, Olympic sponsorship does not impact the valuation or investment case – any PR spend here would have went elsewhere – but we did enjoy following their participation in the torch relay on Twitter and their 2020 Olympic website is worth a look. We have tweaked our forecasts for FY21 based on management Q4 guidance and we remain at Buy with a ¥3,600 FY21-end target price.   

NTT (Buy) - Olympic Promotions Almost Over; Meanwhile We Have Updated Numbers

<p>JTower will expand its infrastructure footprint with the acquisition of 71 telecom towers from NTT West. With a tenancy ratio of 2.8, it should be able to extract more value from these assets than NTT and this deal (and possibly others to follow) could provide potential revenue capacity equal to 50% of JTower’s FY20 sales. That is important because JTower trades at elevated levels (30x and 85x our FY21 forecasts for revenue and EBITDA respectively) on expectations of a larger addressable market and this deal is a step in that direction. We do not cover JTower but we track the company as part of our Japanese telecom coverage.</p>

JTower will expand its infrastructure footprint with the acquisition of 71 telecom towers from NTT West. With a tenancy ratio of 2.8, it should be able to extract more value from these assets than NTT and this deal (and possibly others to follow) could provide potential revenue capacity equal to 50% of JTower’s FY20 sales. That is important because JTower trades at elevated levels (30x and 85x our FY21 forecasts for revenue and EBITDA respectively) on expectations of a larger addressable market and this deal is a step in that direction. We do not cover JTower but we track the company as part of our Japanese telecom coverage.

JTower Inc - NTT Tower Deal a Key Step in Expanding Its Addressable Market

<p><a href="https://www.smartkarma.com/entities/sky-perfect-jsat-holdings" target="_blank" data-smartkarma-citation="entities:14097:1" rel="noopener">Sky Perfect Jsat (9412 JP)</a> reported video subscriptions of 3.1mn for Q1, down modestly v Q4 (-11K) but better than our expectations of a 20K loss. We have updated our forecasts for this and Q4 guidance including a change in J-GAAP accounting that has lowered headline revenue. Shares have drifted since Q4 results were announced in late April as concerns on the viability of the media business linger but we believe the long-term potential of the satellite operations is a more powerful story and can drive upside over time. Our ¥640 FY21-end target price and Buy rating remain unchanged.</p>

Sky Perfect Jsat (9412 JP) reported video subscriptions of 3.1mn for Q1, down modestly v Q4 (-11K) but better than our expectations of a 20K loss. We have updated our forecasts for this and Q4 guidance including a change in J-GAAP accounting that has lowered headline revenue. Shares have drifted since Q4 results were announced in late April as concerns on the viability of the media business linger but we believe the long-term potential of the satellite operations is a more powerful story and can drive upside over time. Our ¥640 FY21-end target price and Buy rating remain unchanged.

Sky Perfect JSAT - Media Subscriptions Steady; Updating Forecasts for Guidance

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Quantitative Analysis

<div><p>The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong Kong, Japan, Korea and Taiwan using the last available data published by the relevant authorities.</p></div><div><p>Hong Kong saw shorts rise on <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a>, <a href="https://www.smartkarma.com/entities/jd-health-international-inc" target="_blank" data-smartkarma-citation="entities:29677:1" rel="noopener">JD Health (6618 HK)</a>, <a href="https://www.smartkarma.com/entities/beijing-kuaishou-technology-co-ltd" target="_blank" data-smartkarma-citation="entities:29725:1" rel="noopener">Kuaishou Technology (1024 HK)</a>, <a href="https://www.smartkarma.com/entities/smoore-international" target="_blank" data-smartkarma-citation="entities:28241:1" rel="noopener">Smoore International (6969 HK)</a> and <a href="https://www.smartkarma.com/entities/microport-scientific-corp" target="_blank" data-smartkarma-citation="entities:4487:1" rel="noopener">Microport Scientific (853 HK)</a> while there was short covering on <a href="https://www.smartkarma.com/entities/ping-an-insurance-grp-co-of-china-ltd" target="_blank" data-smartkarma-citation="entities:12880:1" rel="noopener">Ping An Insurance (H) (2318 HK)</a>, <a href="https://www.smartkarma.com/entities/aia-group-ltd" target="_blank" data-smartkarma-citation="entities:14895:1" rel="noopener">AIA Group Ltd (1299 HK)</a>, <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a>, <a href="https://www.smartkarma.com/entities/sunny-optical-tech" target="_blank" data-smartkarma-citation="entities:13363:1" rel="noopener">Sunny Optical (2382 HK)</a> and <a href="https://www.smartkarma.com/entities/hsbc-holdings-plc" target="_blank" data-smartkarma-citation="entities:516:1" rel="noopener">HSBC Holdings (5 HK)</a>. Shorts increased in the Consumer Discretionary and Health Care sectors, while decreasing in Financials and Industrials sectors.</p></div><div><p>In Japan, stocks increased on <a href="https://www.smartkarma.com/entities/kirin-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:16977:1" rel="noopener">Kirin Holdings (2503 JP)</a>, <a href="https://www.smartkarma.com/entities/nippon-building-fund-inc" target="_blank" data-smartkarma-citation="entities:1900:1" rel="noopener">Nippon Building Fund (8951 JP)</a>, <a href="https://www.smartkarma.com/entities/nippon-telegraph-telephone-corporation" target="_blank" data-smartkarma-citation="entities:623:1" rel="noopener">NTT (Nippon Telegraph &amp; Telephone) (9432 JP)</a>, <a href="https://www.smartkarma.com/entities/hulic-co-ltd" target="_blank" data-smartkarma-citation="entities:388:1" rel="noopener">Hulic Co Ltd (3003 JP)</a> and <a href="https://www.smartkarma.com/entities/japan-prime-realty-investmen" target="_blank" data-smartkarma-citation="entities:495:1" rel="noopener">Japan Prime Realty Investmen (8955 JP)</a> while there was short covering on <a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1" rel="noopener">Toshiba Corp (6502 JP)</a>, <a href="https://www.smartkarma.com/entities/inpex-corp" target="_blank" data-smartkarma-citation="entities:20665:1" rel="noopener">Inpex Corp (1605 JP)</a>, <a href="https://www.smartkarma.com/entities/casio-computer-co-ltd" target="_blank" data-smartkarma-citation="entities:18338:1" rel="noopener">Casio Computer (6952 JP)</a>, <a href="https://www.smartkarma.com/entities/showa-denko-k-k" target="_blank" data-smartkarma-citation="entities:1496:1" rel="noopener">Showa Denko K.K. (4004 JP)</a> and <a href="https://www.smartkarma.com/entities/medley-inc" target="_blank" data-smartkarma-citation="entities:31041:1" rel="noopener">Medley (4480 JP)</a>. Shorts increased on Consumer Staples, Real Estate and Communication Services, while reducing on Industrials, Energy and Consumer Discretionary names.</p></div><div><p>In Korea, shorts increased on <a href="https://www.smartkarma.com/entities/hmm-co-ltd" target="_blank" data-smartkarma-citation="entities:13494:1" rel="noopener">HMM Co., Ltd. (011200 KS)</a>, <a href="https://www.smartkarma.com/entities/doosan-heavy-industries-construction" target="_blank" data-smartkarma-citation="entities:7389:1" rel="noopener">Doosan Heavy Industries &amp; Construction (034020 KS)</a>, <a href="https://www.smartkarma.com/entities/lg-display-co-ltd" target="_blank" data-smartkarma-citation="entities:7145:1" rel="noopener">LG Display (034220 KS)</a> and <a href="https://www.smartkarma.com/entities/hanwha-solutions" target="_blank" data-smartkarma-citation="entities:8656:1" rel="noopener">Hanwha Solutions (009830 KS)</a> while shorts were covered on <a href="https://www.smartkarma.com/entities/samsung-electronics-co-ltd" target="_blank" data-smartkarma-citation="entities:191:1" rel="noopener">Samsung Electronics (005930 KS)</a>, <a href="https://www.smartkarma.com/entities/naver-corp" target="_blank" data-smartkarma-citation="entities:16029:1" rel="noopener">Naver Corp (035420 KS)</a>, <a href="https://www.smartkarma.com/entities/sk-hynix-inc" target="_blank" data-smartkarma-citation="entities:16955:1" rel="noopener">SK Hynix (000660 KS)</a> and <a href="https://www.smartkarma.com/entities/lg-chem-ltd" target="_blank" data-smartkarma-citation="entities:3583:1" rel="noopener">LG Chem Ltd (051910 KS)</a>.</p></div><div><p>In Taiwan, shorts increased on <a href="https://www.smartkarma.com/entities/asustek-computer-inc" target="_blank" data-smartkarma-citation="entities:13002:1" rel="noopener">Asustek Computer (2357 TT)</a>, <a href="https://www.smartkarma.com/entities/unimicron-technology-corp" target="_blank" data-smartkarma-citation="entities:18778:1" rel="noopener">Unimicron Technology (3037 TT)</a>, <a href="https://www.smartkarma.com/entities/nanya-technology-corp" target="_blank" data-smartkarma-citation="entities:3269:1" rel="noopener">Nanya Technology (2408 TT)</a>, <a href="https://www.smartkarma.com/entities/innolux-corp" target="_blank" data-smartkarma-citation="entities:4509:1" rel="noopener">Innolux Corp (3481 TT)</a> and <a href="https://www.smartkarma.com/entities/hannstar-display-corp" target="_blank" data-smartkarma-citation="entities:13922:1" rel="noopener">Hannstar Display (6116 TT)</a> while shorts covered on <a href="https://www.smartkarma.com/entities/evergreen-marine-corp-ltd" target="_blank" data-smartkarma-citation="entities:15428:1" rel="noopener">Evergreen Marine Corp (2603 TT)</a>, <a href="https://www.smartkarma.com/entities/china-airlines-ltd" target="_blank" data-smartkarma-citation="entities:4591:1" rel="noopener">China Airlines (2610 TT)</a>, <a href="https://www.smartkarma.com/entities/fitipower-integrated-technology-inc" target="_blank" data-smartkarma-citation="entities:8712:1" rel="noopener">Fitipower Integrated Technology (4961 TT)</a>, <a href="https://www.smartkarma.com/entities/mediatek-inc" target="_blank" data-smartkarma-citation="entities:772:1" rel="noopener">Mediatek Inc (2454 TT)</a> and <a href="https://www.smartkarma.com/entities/ase-technology-holding-co-ltd" target="_blank" data-smartkarma-citation="entities:27270:1" rel="noopener">ASE Technology Holding Co Ltd (3711 TT)</a>.</p></div>

The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong Kong, Japan, Korea and Taiwan using the last available data published by the relevant authorities.Hong Kong saw shorts rise on Meituan (3690 HK), JD Health (6618 HK), Kuaishou Technology (1024 HK), Smoore International (6969 HK) and Microport Scientific (853 HK) while there was short covering on Ping An Insurance (H) (2318 HK), AIA Group Ltd (1299 HK), Tencent (700 HK), Sunny Optical (2382 HK) and HSBC Holdings (5 HK). Shorts increased in the Consumer Discretionary and Health Care sectors, while decreasing in Financials and Industrials sectors.In Japan, stocks increased on Kirin Holdings (2503 JP), Nippon Building Fund (8951 JP), NTT (Nippon Telegraph &amp; Telephone) (9432 JP), Hulic Co Ltd (3003 JP) and Japan Prime Realty Investmen (8955 JP) while there was short covering on Toshiba Corp (6502 JP), Inpex Corp (1605 JP), Casio Computer (6952 JP), Showa Denko K.K. (4004 JP) and Medley (4480 JP). Shorts increased on Consumer Staples, Real Estate and Communication Services, while reducing on Industrials, Energy and Consumer Discretionary names.In Korea, shorts increased on HMM Co., Ltd. (011200 KS), Doosan Heavy Industries &amp; Construction (034020 KS), LG Display (034220 KS) and Hanwha Solutions (009830 KS) while shorts were covered on Samsung Electronics (005930 KS), Naver Corp (035420 KS), SK Hynix (000660 KS) and LG Chem Ltd (051910 KS).In Taiwan, shorts increased on Asustek Computer (2357 TT), Unimicron Technology (3037 TT), Nanya Technology (2408 TT), Innolux Corp (3481 TT) and Hannstar Display (6116 TT) while shorts covered on Evergreen Marine Corp (2603 TT), China Airlines (2610 TT), Fitipower Integrated Technology (4961 TT), Mediatek Inc (2454 TT) and ASE Technology Holding Co Ltd (3711 TT).

Asia Shorts: Meituan, JDH, Smoore, Ping An, Kirin, NTT, Toshiba, HMM, Doosan, LGD, Hanwha, Evergreen

<p>NTT has finished a self-review “Special Investigations Committee” after meetings with Ministry of Industry Affairs and Communications (MIC, the regulator) officials were found to have violated government ethics rules. The key takeaways: over five years, the company found 29 instances where costs were not shared equally and 8 times when dining meetings were held but costs were shared. There were no material breaches of ethics rules (no improper requests, no influence of the regulator’s judgement) but four senior members of management including CEO Sawada Jun were fined and twelve board and executive officers were reprimanded. On that basis, there are no material impacts to the company or its finances and while we believe it gives its competitors like KDDI and Softbank Corp. modestly more leverage with the regulator it is probably not material.  We remain at Buy.</p>

NTT has finished a self-review “Special Investigations Committee” after meetings with Ministry of Industry Affairs and Communications (MIC, the regulator) officials were found to have violated government ethics rules. The key takeaways: over five years, the company found 29 instances where costs were not shared equally and 8 times when dining meetings were held but costs were shared. There were no material breaches of ethics rules (no improper requests, no influence of the regulator’s judgement) but four senior members of management including CEO Sawada Jun were fined and twelve board and executive officers were reprimanded. On that basis, there are no material impacts to the company or its finances and while we believe it gives its competitors like KDDI and Softbank Corp. modestly more leverage with the regulator it is probably not material.  We remain at Buy.

NTT - Ethics Violation Review Ends with Management Fines and Promise to Do Better

Japan

Nippon Telegraph and Telephone Corporation provides a variety of telecommunication services, including telephone, telegraph, leased circuits, data communication, terminal equipment sales, and related services. The Company provides both local and long distance telephone services within Japan.

NTT (Nippon Telegraph & Telephone) (9432 JP)

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NTT (Nippon Telegraph & Telephone) (9432 JP)

NTT (Buy) - Olympic Promotions Almost Over; Meanwhile We Have Updated Numbers

Despite being a top-tier sponsor, management will not attend the Olympic opening ceremonies but an Olympics-based ad campaign may still run....

Kirk Boodry

JTower Inc - NTT Tower Deal a Key Step in Expanding Its Addressable Market

The purchase of NTT towers provides revenue capacity equal to 50% of FY20 sales and confirms expansion plans highlighted at Q4. That is key for a...

Kirk Boodry

Sky Perfect JSAT - Media Subscriptions Steady; Updating Forecasts for Guidance

We have updated our forecasts after the report of Q1 video subscribers and also to adjust for guidance announced at Q4 results. We remain at Buy...

Kirk Boodry

Asia Shorts: Meituan, JDH, Smoore, Ping An, Kirin, NTT, Toshiba, HMM, Doosan, LGD, Hanwha, Evergreen

The Insight looks at large short interest movements across HK, Japan, Korea and Taiwan stocks and highlights large increases/decreases in shorts to...

Brian Freitas

NTT - Ethics Violation Review Ends with Management Fines and Promise to Do Better

NTT's self review on ethics violations with the regulator is over. Some senior managers including the CEO will have their pay docked but this...

Kirk Boodry

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