Asia Pac ECM and Index Rebal, DZT Research

Ke Yan, CFA, FRM

Asia Pac ECM and Index Rebal

Asia Pac IPO & Placement Research, China Biotech

DZT Research

DZT Research is an independent Asia Pacific equity specialist. Our quantitative research covers index rebalancing flows, alongside exchange data analytics accross Asia Pacific. On the equity capital markets side, we focus on Asia Pacific ECM, especially biotech and TMT. Our lead analyst is frequently cited by international media.

Quantitative Analysis

<ul>
<li>We analyzed the changes in margin trading positions of JPX stocks as of Jan 30th. The aggregated net margin trading position is USD24,095m.</li>
<li>We tabulate league tables for top/bottom net long/short of margin trading by value, net margin buy as multiple of ADT.</li>
<li>We highlight net margin buy/sell changes in Kioxia, Advantest, Lasertec, Fujikura, Disco, Tokyo Electron, Mitsubishi UFJ Financial, Nichirei, SoftBank, Mitsubishi Heavy Industries, Kioxia, Advantest, Lasertec, Fujikura, Disco, Tokyo Electron.</li>
</ul>


We analyzed the changes in margin trading positions of JPX stocks as of Jan 30th. The aggregated net margin trading position is USD24,095m.
We tabulate league tables for top/bottom net long/short of margin trading by value, net margin buy as multiple of ADT.
We highlight net margin buy/sell changes in Kioxia, Advantest, Lasertec, Fujikura, Disco, Tokyo Electron, Mitsubishi UFJ Financial, Nichirei, SoftBank, Mitsubishi Heavy Industries, Kioxia, Advantest, Lasertec, Fujikura, Disco, Tokyo Electron.


JPX Margin Trading Weekly (Jan 30th): Kioxia, Advantest, Lasertec, Fujikura, Disco, Tokyo Electron

Expert on Japan Retail and Consumer Markets, JapanConsuming

Michael Causton

Expert on Japan Retail and Consumer Markets

Real Insight on Japanese Consumer Markets

JapanConsuming

JapanConsuming is a specialist research firm producing intelligence on Japanese retail and consumer markets. Founded in 2000, JapanConsuming has become the leading provider of insights on Japanese retailers and consumer trends to retailers, brands, government agencies and investors. As well as a highly regarded monthly report on the market, JapanConsuming produces in-depth reports on retail sectors, seminars on key trends and telephone consulting to investors on trends and retailers.

JapanConsuming was founded by Michael Causton and Roy Larke. 

Thematic (Sector/Industry)

The following provides a snapshot guide to the performance of all the main retail sectors in Japan in 2018-19 sector by sector including winners and losers. <a href="https://www.smartkarma.com/insights/japan-retail-review-and-ranking-2018-19-profit-growth-slowing-as-competition-increases" target="_blank" rel="noopener">In an accompanying Insight, we provide an overview of retail performance for the entire sector in 2018-19 by sales, profits and margins.</a>

The following provides a snapshot guide to the performance of all the main retail sectors in Japan in 2018-19 sector by sector including winners and losers. In an accompanying Insight, we provide an overview of retail performance for the entire sector in 2018-19 by sales, profits and margins.

Japan Retail Highlights 2018-19: Sector by Sector and Winners in Each Sector

Signs of consolidation in the supermarket sector have come and gone over the past decade, but recent events suggest there will now be a sustained increase.
Traditionalists, and the wholesalers, who control the sector, point to the positives of greater variety and local food differentiation; yet these are what have kept the sector so fragmented and inefficient.
However, with falling populations and a shift to online buying gradually gaining momentum, as well as encroachment from other sectors such as drugstores, the time is ripe for bigger fish to start eating up the many, many tiddlers.

Signs of consolidation in the supermarket sector have come and gone over the past decade, but recent events suggest there will now be a sustained increase.
Traditionalists, and the wholesalers, who control the sector, point to the positives of greater variety and local food differentiation; yet these are what have kept the sector so fragmented and inefficient.
However, with falling populations and a shift to online buying gradually gaining momentum, as well as encroachment from other sectors such as drugstores, the time is ripe for bigger fish to start eating up the many, many tiddlers. 

Japanese Supermarket Consolidation Likely and Soon

Equity Bottom-Up

<ul>
<li>Deep discounter OK Super’s entry into the Kansai market is causing local competitors real headaches –one estimate says it has taken 10% share around its first store already. </li>
<li>OK has exposed just how derivative most existing chains have become and, with the introduction of genuine price competition at a time when consumers are increasingly price sensitive</li>
<li>While OK Super is a private company, some of the competitors are listed like Kansai Food Market who, without new ideas, will suffer in the next three years.</li>
</ul>


Deep discounter OK Super’s entry into the Kansai market is causing local competitors real headaches –one estimate says it has taken 10% share around its first store already. 
OK has exposed just how derivative most existing chains have become and, with the introduction of genuine price competition at a time when consumers are increasingly price sensitive
While OK Super is a private company, some of the competitors are listed like Kansai Food Market who, without new ideas, will suffer in the next three years.


OK Super: Disrupting Kansai Supermarket Sector

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

On 31 August, <a href="https://www.smartkarma.com/entities/kansai-super-market-ltd" target="_blank" data-smartkarma-citation="entities:15519:1" rel="noopener">Kansai Super Market (9919 JP)</a> and its top shareholder (10.02% of shares out) <a href="https://www.smartkarma.com/entities/h2o-retailing-corp" target="_blank" data-smartkarma-citation="entities:17562:1" rel="noopener">H2 O Retailing (8242 JP)</a> (the parent of Hanshin Department Store and related companies) <a href="https://data.swcms.net/file/h2o-retailing/ja/news/auto_20210830491858/pdfFile.pdf" target="_blank" rel="noopener">announced</a> a business merger whereby the H₂O would inject two supermarket businesses it owns - Izumiya and Hankyu Oasis - into a holding company with Kansai Super, receiving shares in a newly enlarged Kansai Super in exchange. H₂O would go from owning 10.66% to owning 58% of Kansai Super, and the 89.34% would own 42% of NEWCO. The merger was short-dated/accelerated, with the EGM to vote on this deal set for a Record Date on 15 September, the EGMs of all the related companies where an EGM was necessary (Kansai Super, Hankyu Oasis, and Izumiya (the latter two foregone conclusions because they are 100%-owned by H₂O) on 29 October, and the merger effective December 1st.The shares popped a bit, then fell back. At first glance, this seemed somewhat opportunistic for H₂O, and it meant that the 89.34% "minority" in Kansai Super would become a real minority without getting paid a premium or provided a chance to exit. Based on the net assets of the companies, it seemed like H₂O was getting a good deal. Based on the OP levels in the past year, it did not seem like H₂O was getting special treatment. A couple of days later, on 3 September, privately-held discount ("every day low price") supermarket chain OK Corp (primarily based in the Kanto area, but which had been aimed at expanding into the Kansai area), which was the second-largest single shareholder of Kansai Super (based originally in Osaka/Kansai) at 7.23%, stepped up and offered a <a href="https://ok-corporation.jp/media/001/202109/20210903_%E3%83%97%E3%83%AC%E3%82%B9%E3%83%AA%E3%83%AA%E3%83%BC%E3%82%B9.pdf" target="_blank" rel="noopener">press release</a> which said that it would vote against the merger and if the merger were not approved, it would be willing to launch a Tender Offer to buy the shares of Kansai Super at ¥2,250/share (the highest price since listing and nearly vs ¥1,374/share the day before, and more than double the market price of Kansai Super in June when the proposal was made). On 3 Sep OK complained about their treatment, and noted that from the perspective of shareholder interest, their bid should be considered, but OK also had no intention of launching a hostile bid.The shares popped, moving limit up. Then limit up another day, and then the shares traded at JPY 2,200/share in considerable volume before drifting lower.<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/229/527/original/Screenshot+2021-09-13+at+8.10.54+PM.png?1631535065" class="editor-image img-responsive" data-smartkarma-image-id="229527"></figure></section>Today the shares fell back 7+% to just below JPY 2,000/share. There is some very long history between the founder of OK and Yuji Kitano the founder of Kansai Super, and they once worked together, with OK seconding employees to Kansai Super to learn the business of fresh grocery sales. Mr Kitano passed away in 2013, and OK Supermarket started buying shares in 2016, getting to just under 5%, then it peaked its head above and by the end of the fiscal year in February, owned 7.23%. Of course, that year in October (2016), Kansai Super entered into a business and capital alliance with H₂O Retailing, and H₂O bought about 10% of the shares out. Fast forward five years and it turns out that OK approached Kansai Super in April 2021, and proposed a capital and business alliance on 9 June, in writing. Kansai Super put this to an Independent Committee which then took its time, setting its first meeting with OK some 11 weeks later on 26 August. The Kansai Super <a href="http://www.kansaisuper.co.jp/upimages/irinfo/irnews_629.pdf" target="_blank" rel="noopener">release</a> (Japanese only) on 31 August suggests there was a "third party tender offer approach" but then doesn't discuss it much while saying that intense discussions and due diligence was afforded to H₂O Retailing in the same timeframe.Five days after the first interview with OK, Kansai Super and H₂O announced their deal. This is a complicated deal and it begs the question of whether shareholder interests matter and how shareholders decide. More discussion below.

On 31 August, Kansai Super Market (9919 JP) and its top shareholder (10.02% of shares out) H2 O Retailing (8242 JP) (the parent of Hanshin Department Store and related companies) announced a business merger whereby the H₂O would inject two supermarket businesses it owns - Izumiya and Hankyu Oasis - into a holding company with Kansai Super, receiving shares in a newly enlarged Kansai Super in exchange. H₂O would go from owning 10.66% to owning 58% of Kansai Super, and the 89.34% would own 42% of NEWCO. The merger was short-dated/accelerated, with the EGM to vote on this deal set for a Record Date on 15 September, the EGMs of all the related companies where an EGM was necessary (Kansai Super, Hankyu Oasis, and Izumiya (the latter two foregone conclusions because they are 100%-owned by H₂O) on 29 October, and the merger effective December 1st.The shares popped a bit, then fell back. At first glance, this seemed somewhat opportunistic for H₂O, and it meant that the 89.34% "minority" in Kansai Super would become a real minority without getting paid a premium or provided a chance to exit. Based on the net assets of the companies, it seemed like H₂O was getting a good deal. Based on the OP levels in the past year, it did not seem like H₂O was getting special treatment. A couple of days later, on 3 September, privately-held discount ("every day low price") supermarket chain OK Corp (primarily based in the Kanto area, but which had been aimed at expanding into the Kansai area), which was the second-largest single shareholder of Kansai Super (based originally in Osaka/Kansai) at 7.23%, stepped up and offered a press release which said that it would vote against the merger and if the merger were not approved, it would be willing to launch a Tender Offer to buy the shares of Kansai Super at ¥2,250/share (the highest price since listing and nearly vs ¥1,374/share the day before, and more than double the market price of Kansai Super in June when the proposal was made). On 3 Sep OK complained about their treatment, and noted that from the perspective of shareholder interest, their bid should be considered, but OK also had no intention of launching a hostile bid.The shares popped, moving limit up. Then limit up another day, and then the shares traded at JPY 2,200/share in considerable volume before drifting lower.Today the shares fell back 7+% to just below JPY 2,000/share. There is some very long history between the founder of OK and Yuji Kitano the founder of Kansai Super, and they once worked together, with OK seconding employees to Kansai Super to learn the business of fresh grocery sales. Mr Kitano passed away in 2013, and OK Supermarket started buying shares in 2016, getting to just under 5%, then it peaked its head above and by the end of the fiscal year in February, owned 7.23%. Of course, that year in October (2016), Kansai Super entered into a business and capital alliance with H₂O Retailing, and H₂O bought about 10% of the shares out. Fast forward five years and it turns out that OK approached Kansai Super in April 2021, and proposed a capital and business alliance on 9 June, in writing. Kansai Super put this to an Independent Committee which then took its time, setting its first meeting with OK some 11 weeks later on 26 August. The Kansai Super release (Japanese only) on 31 August suggests there was a "third party tender offer approach" but then doesn't discuss it much while saying that intense discussions and due diligence was afforded to H₂O Retailing in the same timeframe.Five days after the first interview with OK, Kansai Super and H₂O announced their deal. This is a complicated deal and it begs the question of whether shareholder interests matter and how shareholders decide. More discussion below. 

Japan

OKUWA CO., LTD., a member of Nichiryu group, operates a supermarket chain based in Wakayama Prefecture and also in Southern Kinki region.  The Company sells food, household utensils, and clothing.

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Okuwa Co Ltd (8217 JP)

JPX Margin Trading Weekly (Jan 30th): Kioxia, Advantest, Lasertec, Fujikura, Disco, Tokyo Electron

We analyzed JPX margin trading positions report for the past week and highlighted Kioxia (285A JP), Advantest (6857 JP), Lasertec (6920 JP),...

Ke Yan, CFA, FRM

Japan Retail Highlights 2018-19: Sector by Sector and Winners in Each Sector

The following provides a snapshot guide to the performance of all the main retail sectors in Japan in 2018-19 sector by sector including winners...

Michael Causton

Japanese Supermarket Consolidation Likely and Soon

Signs of consolidation in the supermarket sector have come and gone over the past decade, but recent events suggest there will now be a sustained...

Michael Causton

OK Super: Disrupting Kansai Supermarket Sector

OK Super's entry into the Kansai market is shaking up local competitors with its deep discounts, posing a threat to existing chains lacking...

Michael Causton

The Kansai Super (9919) Conundrum

Kansai Super has Two Suitors - H2O Retailing and Kansai Super have ironed out a deal, and OK Corp objects. This creates a conundrum. But solving it...

Travis Lundy

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52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

JPX Margin Trading Weekly (Jan 30th): Kioxia, Advantest, Lasertec, Fujikura, Disco, Tokyo Electron

We analyzed JPX margin trading positions report for the past week and highlighted Kioxia (285A JP), Advantest (6857 JP), Lasertec (6920 JP),...

Ke Yan, CFA, FRM

Japan Retail Highlights 2018-19: Sector by Sector and Winners in Each Sector

The following provides a snapshot guide to the performance of all the main retail sectors in Japan in 2018-19 sector by sector including winners...

Michael Causton

Japanese Supermarket Consolidation Likely and Soon

Signs of consolidation in the supermarket sector have come and gone over the past decade, but recent events suggest there will now be a sustained...

Michael Causton

OK Super: Disrupting Kansai Supermarket Sector

​OK Super's entry into the Kansai market is shaking up local competitors with its deep discounts, posing a threat to existing chains lacking...

Michael Causton

The Kansai Super (9919) Conundrum

Kansai Super has Two Suitors - H2O Retailing and Kansai Super have ironed out a deal, and OK Corp objects. This creates a conundrum. But solving it...

Travis Lundy

OK Super's entry into the Kansai market is shaking up local competitors with its deep discounts, posing a threat to existing chains lacking...