Equity Analyst, LightStream Research

Shifara Samsudeen, ACMA, CGMA

Equity Analyst

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

<a href="https://www.smartkarma.com/entities/eguarantee-inc" target="_blank" data-smartkarma-citation="entities:6600:1" rel="noopener">eGuarantee, Inc. (8771 JP)</a> is engaged in the business of undertaking and transferring credit risks in Japan. The company offers guarantee services to about 70,000 businesses in Japan and the company transfers the credit risk of its portfolio across its several funds that are open to institutional investors. According to the company, it does not hold any risks associated with its credit portfolio and in the event of any bad debt, the fund will bear most of the costs.The company shares have rallied 58% since the beginning of this year driven by the ongoing Covid-19 pandemic that is expected to cause a large number of businesses to go bankrupt in the country. During economic downturns and market volatilities, the company raises its guarantee fee to reflect the increased risk associated with its guaranteed counterparties, and any delay in payments.

eGuarantee, Inc. (8771 JP) is engaged in the business of undertaking and transferring credit risks in Japan. The company offers guarantee services to about 70,000 businesses in Japan and the company transfers the credit risk of its portfolio across its several funds that are open to institutional investors. According to the company, it does not hold any risks associated with its credit portfolio and in the event of any bad debt, the fund will bear most of the costs.The company shares have rallied 58% since the beginning of this year driven by the ongoing Covid-19 pandemic that is expected to cause a large number of businesses to go bankrupt in the country. During economic downturns and market volatilities, the company raises its guarantee fee to reflect the increased risk associated with its guaranteed counterparties, and any delay in payments.

EGuarantee: A Resilient Business Model that Should Further Benefit from Pandemic Driven-Demand

Equity Capital Markets

Malaysian home improvement retailer Mr D.I.Y. has filed for an IPO which will raise approximately RM1.5bn (US$362m), the largest listing in three years in Malaysia. The company has set the pricing at RM1.60 per share and is expected to price the IPO on the 14th of October.The company is the largest home improvement retailer in the country with a store count of 640 as at the end of June 2020. The home improvement market in Malaysia is forecasted to grow over the next few years driven by the creation of new townships due to urbanisation and growing disposable income that should support growth in demand for home improvement goods and services in the country.In this insight, we examine the company’s business model, expansion plans and the company’s financials. We will be discussing the company’s valuation in a follow-up insight.

Malaysian home improvement retailer Mr D.I.Y. has filed for an IPO which will raise approximately RM1.5bn (US$362m), the largest listing in three years in Malaysia. The company has set the pricing at RM1.60 per share and is expected to price the IPO on the 14th of October.The company is the largest home improvement retailer in the country with a store count of 640 as at the end of June 2020. The home improvement market in Malaysia is forecasted to grow over the next few years driven by the creation of new townships due to urbanisation and growing disposable income that should support growth in demand for home improvement goods and services in the country.In this insight, we examine the company’s business model, expansion plans and the company’s financials. We will be discussing the company’s valuation in a follow-up insight.

oRo is a Japanese company which offers cloud and digital transformation solutions to corporates. The company was incorporated in Japan in 1999 and listed its shares in the year 2000.The company’s revenues have grown at double-digit rates over the past few years with increased adoption of cloud services in Japan alongside growth in e-commerce in the country. oRo’s revenues were negatively impacted during the first half of the year due to the Covid-19 outbreak and as a result, we expect a slowdown in revenue and margin growth in 2020E. According to the company, the business conditions have recovered since June, and we remain positive on the company’s future prospects driven by favourable growth in cloud services and e-commerce adoption in Japan.

oRo is a Japanese company which offers cloud and digital transformation solutions to corporates. The company was incorporated in Japan in 1999 and listed its shares in the year 2000.The company’s revenues have grown at double-digit rates over the past few years with increased adoption of cloud services in Japan alongside growth in e-commerce in the country. oRo’s revenues were negatively impacted during the first half of the year due to the Covid-19 outbreak and as a result, we expect a slowdown in revenue and margin growth in 2020E. According to the company, the business conditions have recovered since June, and we remain positive on the company’s future prospects driven by favourable growth in cloud services and e-commerce adoption in Japan.

oRo: Another Stock Capable of Making PM Suga’s Digitalisation Dream a Real

Quality-first, Business-perspective Strategy, Urbem (HK) Limited

Steven Chen

Quality-first, Business-perspective Strategy

Thematic (Sector/Industry)

<ul>
<li>The Japanese SME segment is filled with its unique structural challenges, which provides opportunities for "pick and shovel" suppliers;</li>
<li>Many of these SME backers (including oRo, which we covered previously) have generated tremendous shareholder value in the past and may continue to do so while addressing clients' key pain points alongside multiple long-term tailwinds.</li>
</ul>


The Japanese SME segment is filled with its unique structural challenges, which provides opportunities for "pick and shovel" suppliers;
Many of these SME backers (including oRo, which we covered previously) have generated tremendous shareholder value in the past and may continue to do so while addressing clients' key pain points alongside multiple long-term tailwinds.


<ul class="">
<li>We view Warren Buffett's move to invest in Japan's largest trading companies as being indicative of the lack of reasonably-valued opportunities in the US as well as the size disadvantage of Berkshire Hathaway;</li>
<li>While being in no place to judge the superinvestor's investment decision, we find better investment targets to "participate in the future of Japan," especially for those who manage a smaller AUM than Berkshire;</li>
<li>In this article, we list one superior-quality business that serves the backbone of Japan's economy (i.e., the SMEs);</li>
<li>Our investment strategy concentrates on quality from a business perspective and seeks long-term opportunities with a 10%-15% hurdle rate.</li>
</ul>


We view Warren Buffett's move to invest in Japan's largest trading companies as being indicative of the lack of reasonably-valued opportunities in the US as well as the size disadvantage of Berkshire Hathaway;
While being in no place to judge the superinvestor's investment decision, we find better investment targets to "participate in the future of Japan," especially for those who manage a smaller AUM than Berkshire;
In this article, we list one superior-quality business that serves the backbone of Japan's economy (i.e., the SMEs);
Our investment strategy concentrates on quality from a business perspective and seeks long-term opportunities with a 10%-15% hurdle rate.


One "Better" Quality Pick to Consider to Participate in the Future of Japan

Japan

oRo Co., Ltd. develops and provides enterprise planning software. The Company also offers web based marketing services.

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oRo Co Ltd (3983 JP)

EGuarantee: A Resilient Business Model that Should Further Benefit from Pandemic Driven-Demand

eGuarantee is engaged in the business of undertaking and transferring credit risks in Japan. In this insight, we deep dive into eGuarantee's...

Shifara Samsudeen, ACMA, CGMA

MR DIY IPO: Quality Homes

Malaysian home improvement retailer Mr D.I.Y. has filed for an IPO which will raise approximately RM1.5bn (US$362m), the largest listing in three...

Shifara Samsudeen, ACMA, CGMA

oRo: Another Stock Capable of Making PM Suga’s Digitalisation Dream a Real

oRo is a Japanese company which offers cloud and digital transformation solutions to corporates. The company was incorporated in Japan in 1999 and...

Shifara Samsudeen, ACMA, CGMA

Top Picks: Two More Japanese SME Backers

The Japanese SME segment is filled with its unique structural challenges, which provides opportunities for "pick and shovel" suppliers.

Steven Chen

One "Better" Quality Pick to Consider to Participate in the Future of Japan

Warren Buffett's Berkshire Hathaway

Steven Chen

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