Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<p>In a long-awaited move, today <a href="https://www.smartkarma.com/entities/j-front-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:8947:1" rel="noopener">J Front Retailing (3086 JP)</a> announced that it would buy out minorities in subsidiary <a href="https://www.smartkarma.com/entities/parco-co-ltd" target="_blank" data-smartkarma-citation="entities:8431:1" rel="noopener">PARCO Co Ltd (8251 JP)</a>. </p><p>PARCO started in the late 1950s as the Ikebukuro Station Building Company and only in late 1969 did it shut down its existence as Tokyo Marubutsu and open the first Parco store atop Ikebukuro Station. From 1973 to the mid 1980s the company opened more than a dozen new stores, starting in Shibuya - where it is still most famous - and moving to other places in Tokyo and in regional cities around Japan. The company continued opening new stores at a reasonably steady pace of one every few years until 2016 when the company announced the temporary closure of the Shibuya Parco store for redevelopment, and followed that with a couple other store closures in Otsu (opened 1976), Chiba (opened 1996), and Utsunomiya (1997).</p><p>The Shibuya PARCO re-opened on 22 November 2019 and averaged close to $3mm of revenue/day for the first ten days.</p><h2>The New News</h2><p>PARCO announced earnings to 30 November 2019 on Christmas Day, and on the next day J Front Retailing announced its takeover of Parco at ¥1850/share, which is a 34.3% premium to last (after nine straight months of stock price gains) and an all-time high price as far as I can tell. </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/112/019/original/Screenshot%202019-12-26%20at%204.18.27%20PM.png?1577348338" class="editor-image img-responsive" data-smartkarma-image-id="112019"></figure><div class="content-caption">source: tradingview.com, Quiddity</div><div class="content-caption"></div><p>This is not a surprise, and the results of a successful tender offer and minority squeezeout are a foregone conclusion because the minimum threshold for success is that 1.7% of shares outstanding tender, but 17.6% of shares have agreed to tender. </p><p>This should trade tight. More below.</p>

In a long-awaited move, today J Front Retailing (3086 JP) announced that it would buy out minorities in subsidiary PARCO Co Ltd (8251 JP). PARCO started in the late 1950s as the Ikebukuro Station Building Company and only in late 1969 did it shut down its existence as Tokyo Marubutsu and open the first Parco store atop Ikebukuro Station. From 1973 to the mid 1980s the company opened more than a dozen new stores, starting in Shibuya - where it is still most famous - and moving to other places in Tokyo and in regional cities around Japan. The company continued opening new stores at a reasonably steady pace of one every few years until 2016 when the company announced the temporary closure of the Shibuya Parco store for redevelopment, and followed that with a couple other store closures in Otsu (opened 1976), Chiba (opened 1996), and Utsunomiya (1997).The Shibuya PARCO re-opened on 22 November 2019 and averaged close to $3mm of revenue/day for the first ten days.The New NewsPARCO announced earnings to 30 November 2019 on Christmas Day, and on the next day J Front Retailing announced its takeover of Parco at ¥1850/share, which is a 34.3% premium to last (after nine straight months of stock price gains) and an all-time high price as far as I can tell. source: tradingview.com, QuiddityThis is not a surprise, and the results of a successful tender offer and minority squeezeout are a foregone conclusion because the minimum threshold for success is that 1.7% of shares outstanding tender, but 17.6% of shares have agreed to tender. This should trade tight. More below.

J Front Retailing to Buy Out PARCO (8251)

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. 

Equity Bottom-Up

<p><a href="https://www.smartkarma.com/entities/j-front-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:8947:1" rel="noopener">J Front Retailing (3086 JP)</a> is one of the few Japanese department store-centred retail groups that is not only willing to invest in new and upgraded facilities but, so far, is investing intelligently and with a clear understanding of who it is targeting.</p>
<p>Even so, the upcoming Parco Shibuya and Daimaru Shinsaibashi buildings come with a lot of new ideas that will make or break its reputation.</p>

J Front Retailing (3086 JP) is one of the few Japanese department store-centred retail groups that is not only willing to invest in new and upgraded facilities but, so far, is investing intelligently and with a clear understanding of who it is targeting.
Even so, the upcoming Parco Shibuya and Daimaru Shinsaibashi buildings come with a lot of new ideas that will make or break its reputation.

J Front Retailing Aims High with New Builds in Shibuya and Shinsaibashi

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

ja research

ja research is an independent research platform focused exclusively on Japanese equities. Leveraging data and graphic analysis provided by Japan Analytics, we provide insights on small and medium-sized companies that have been ignored by the sell-side as well as challenging conventional wisdom on larger companies. We also offer analyst and corporate access, the latter with translation if required. 

Quantitative Analysis

<p><strong>SPRING RESULTS &amp; REVISION SCORES</strong> - Better late than never, we Detail below lists the top and bottom-ranked companies measured by their Results &amp; Revision Scores as well as the top and bottom one-quarter changes and the Optimists (Forecasts &gt; TTM results) and Pessimists (TTM results &gt; Forecasts). </p><p>For newcomers to these Insights, our<strong> Results &amp; Revision Scores</strong>, <strong>Results Scores</strong>, and <strong>Forecast/Revisions Scores</strong> provide a standardised 'scoring' of the trend and momentum in both results and initial forecasts/revisions for every listed Japanese company. The data series, which starts in 2008, covers over 160,000 quarterly results and 120,000 initial forecasts and subsequent forecast revisions. </p><div class="content-remarks"><ul>
<li>
<strong>Results Scores</strong> are calculated using the most recent eight quarters of data for revenues, operating income and operating margin and, for each, measure the rate, degree, and consistency of change. The score has a maximum of +30 and a minimum of -30 for each period. In cases where the data is insufficient, incomplete or non-comparable data, the score defaults to zero. Usually, 25% of Japanese company quarterly earnings show losses, and therefore scoring methodology is more revealing of trends than percentage changes.</li>
<li>The <strong>Forecast/Revision Score</strong> is based on both Annual and Interim period forecasts and compares changes from previous forecasts as well as against the trailing twelve-month (TTM) or past first-half results, with annual forecasts being double-weighted. This score also has a maximum of +30 and a minimum of -30 for each period.</li>
<li>The<strong> Results &amp; Revision Score</strong> is an average of the <strong>Results Scores</strong> and the<strong> Forecasts/Revision Score</strong> and is used to sort the universe by score and change in score in the tables below.</li>
</ul></div>

SPRING RESULTS &amp; REVISION SCORES - Better late than never, we Detail below lists the top and bottom-ranked companies measured by their Results &amp; Revision Scores as well as the top and bottom one-quarter changes and the Optimists (Forecasts &gt; TTM results) and Pessimists (TTM results &gt; Forecasts). For newcomers to these Insights, our Results &amp; Revision Scores, Results Scores, and Forecast/Revisions Scores provide a standardised 'scoring' of the trend and momentum in both results and initial forecasts/revisions for every listed Japanese company. The data series, which starts in 2008, covers over 160,000 quarterly results and 120,000 initial forecasts and subsequent forecast revisions. 

Results Scores are calculated using the most recent eight quarters of data for revenues, operating income and operating margin and, for each, measure the rate, degree, and consistency of change. The score has a maximum of +30 and a minimum of -30 for each period. In cases where the data is insufficient, incomplete or non-comparable data, the score defaults to zero. Usually, 25% of Japanese company quarterly earnings show losses, and therefore scoring methodology is more revealing of trends than percentage changes.
The Forecast/Revision Score is based on both Annual and Interim period forecasts and compares changes from previous forecasts as well as against the trailing twelve-month (TTM) or past first-half results, with annual forecasts being double-weighted. This score also has a maximum of +30 and a minimum of -30 for each period.
The Results &amp; Revision Score is an average of the Results Scores and the Forecasts/Revision Score and is used to sort the universe by score and change in score in the tables below.


🇯🇵 Japan • Spring Large Cap Results & Revision Scores

<p>The Japanese department store sector is in decline overall but that doesn't mean that all department stores are failing equally. Some stores and some chains are performing well and will continue to prosper in the years ahead thanks to support from wealthy Japanese, inbound tourists and their own efforts to extract more sales and margins through investment in key locations.</p><p>One of the future winners is <a href="https://www.smartkarma.com/entities/8947" target="_blank" data-smartkarma-citation="entities:8947:1">J Front Retailing (3086 JP)</a> which, as well as one of the best plans for future proofing its department stores, has a big stake in <a href="https://www.smartkarma.com/entities/8431" target="_blank" data-smartkarma-citation="entities:8431:1">Parco (8251 JP)</a> which is about to see a big jump in sales on the back of new buildings coming online.</p><p>A good example of how J-Front Retailing is re-working its assets is its plan to turn over a large chunk of its rebuilt Daimaru Shinsaibashi store to tenants after it reopens this coming Autumn. It will also install Parco to manage the neighbouring annex building, which will reopen in 2021.</p><p>Together the two buildings aim to target a much broader set of customers than a standard department store. Where warranted, J-Front also plans new, standalone shopping buildings with local appeal. The first of these opened in Kyoto last month.</p>

The Japanese department store sector is in decline overall but that doesn't mean that all department stores are failing equally. Some stores and some chains are performing well and will continue to prosper in the years ahead thanks to support from wealthy Japanese, inbound tourists and their own efforts to extract more sales and margins through investment in key locations.One of the future winners is J Front Retailing (3086 JP) which, as well as one of the best plans for future proofing its department stores, has a big stake in Parco (8251 JP) which is about to see a big jump in sales on the back of new buildings coming online.A good example of how J-Front Retailing is re-working its assets is its plan to turn over a large chunk of its rebuilt Daimaru Shinsaibashi store to tenants after it reopens this coming Autumn. It will also install Parco to manage the neighbouring annex building, which will reopen in 2021.Together the two buildings aim to target a much broader set of customers than a standard department store. Where warranted, J-Front also plans new, standalone shopping buildings with local appeal. The first of these opened in Kyoto last month.

J-Front Retailing: One of the Few Winners in Japanese Department Stores

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/347/original/2019-04-20_09-59-40.png?1555722056" class="editor-image img-responsive" data-smartkarma-image-id="85347"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>UnCh</strong> - Japanese equities are unchanged in US dollar terms over both three and six months. The Bank of Japan has intervened on 42 of the 121 trading days since October 22nd or an average of 1.6 times a week as foreigners remain underweight. As corporate results and macro data continue to disappoint, the outlook for the market is muted ahead of the upcoming ten-day holiday which combines the traditional Golden Week holidays with the accession of the new Emperor and the beginning of the Reiwa era (令和時代).  </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/405/original/2019-04-21_07-28-03.png?1555799330" class="editor-image img-responsive" data-smartkarma-image-id="85405"></figure><div class="content-caption">Source: Investing.com</div><p><strong>CURRENCY RISK?</strong> - "UnCh" also applies to <a href="https://www.smartkarma.com/entities/22826" target="_blank" data-smartkarma-citation="entities:22826:1">JPY (USDJPY CURNCY)</a>  Implied volatility for 9-month USDJPY options reached a new 25-year low last week of 6.11. The previous two lows were in 2006 and 2015 and were followed by periods of sustained Yen strength. The equity market currently appears to be discounting precisely the opposite.   </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/350/original/2019-04-20_10-21-58.png?1555723331" class="editor-image img-responsive" data-smartkarma-image-id="85350"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>VTR</strong> - The ratio of the value of stocks traded to the total market value continues to decline. The average for 2019 is 11% below that for the same period last year and is unchanged at 39bps in each month year-to-date.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/381/original/2019-04-20_14-34-11.png?1555738458" class="editor-image img-responsive" data-smartkarma-image-id="85381"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>VOLUME SCORE TIMELINE</strong> - Volumes have been highest in the <strong>Internet</strong>, <strong>Retail</strong>, and<strong> Telecoms</strong> sectors, while the <strong>Materials</strong>,<strong> Transportation</strong>, <strong>Utilities</strong> and<strong> Real Estate</strong> Sectors have seen the lowest.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/352/original/2019-04-20_10-29-59.png?1555723806" class="editor-image img-responsive" data-smartkarma-image-id="85352"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>LOWS &gt; HIGHS</strong> - With a deficit of positive news at the individual company level, the number of new 52-week highs has exceeded the number of new 52-week lows on only one-third of the last 31 trading days. </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/363/original/2019-04-20_12-34-06.png?1555731278" class="editor-image img-responsive" data-smartkarma-image-id="85363"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>DRIFTING LOWER</strong> - TTM and Forecasts Aggregate Operating and Net Income continue to drift lower ahead of the full-year results for March year-end companies which are due in a more-concentrated-than-usual period either side of the long break.   </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/384/original/2019-04-20_17-30-47.png?1555749055" class="editor-image img-responsive" data-smartkarma-image-id="85384"></figure><div class="content-caption">Source: Japan Analytics <p></p>
</div><p><strong>MIND THE GAP</strong> - Based on our Scoring methodology for aggregate Results &amp; Revisions, the 'gap' between total market value and earnings momentum is now as wide as at the two previous 'peaks' in January 2018 and September 2018.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/435/original/File%202019-04-21%2015%2055%2018.jpeg?1555829876" class="editor-image img-responsive" data-smartkarma-image-id="85435"></figure><div class="content-caption">Source: Bank of America Merrill Lynch</div><p><strong>GLOBAL WAVE</strong> - The market is implying that the earnings cycle is close to a bottom which is in accord with BAML's Global Earnings Revision Ratio having ticked up last month for the first time in 14 months. BAML has yet to call a Trough in their Global Wave and, were they to do so, such a Trough would be the first above '50' since 2006.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/378/original/2019-04-20_14-00-43.png?1555736454" class="editor-image img-responsive" data-smartkarma-image-id="85378"></figure><p><strong>FORECASTS LEADING EARNINGS LOWER</strong> - Separating our the Results Score and the Forecast &amp; Revision Score, the latter is continuing to lead the former to the downside, although both Scores are in aggregate still positive. Reported earnings and forecasts are still growing year-on-year; however, the momentum is slowing rapidly.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/379/original/2019-04-20_14-04-23.png?1555736670" class="editor-image img-responsive" data-smartkarma-image-id="85379"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>INTERIM LEADING ANNUAL LOWER</strong> -  Between February and September in each year, there is a statistically significant number of Interim Forecasts that they can be compared to the Annual Forecasts with which they are combined to derive the score in the previous chart. Interim Forecasts are often prepared by the divisional heads are not accorded the same 'reverence' as the Annual Forecasts. As a result, the Interim numbers offer a good leading indicator of short-term trends. In recent weeks, the aggregate Interim Forecast/Revision Score has turned sharply lower and is now at the lowest point in almost two years.   </p><p>In the <strong>DETAIL</strong> section below, we will review Sector performance, company results, revisions and stock performance over the previous two weeks, as well as adding some brief comments on <a href="https://www.smartkarma.com/entities/14191" target="_blank" data-smartkarma-citation="entities:14191:1">Koshidaka (2157 JP)</a>, <a href="https://www.smartkarma.com/entities/2765" target="_blank" data-smartkarma-citation="entities:2765:1">Ryohin Keikaku (7453 JP)</a>, <strong>Drugstores</strong>, <a href="https://www.smartkarma.com/entities/237" target="_blank" data-smartkarma-citation="entities:237:1">Daiwa House (1925 JP)</a>, <strong>Toyota Parts companies</strong>, and <a href="https://www.smartkarma.com/entities/2" target="_blank" data-smartkarma-citation="entities:2:1">Yamato Holdings (9064 JP)</a>.</p>

Source: Japan AnalyticsUnCh - Japanese equities are unchanged in US dollar terms over both three and six months. The Bank of Japan has intervened on 42 of the 121 trading days since October 22nd or an average of 1.6 times a week as foreigners remain underweight. As corporate results and macro data continue to disappoint, the outlook for the market is muted ahead of the upcoming ten-day holiday which combines the traditional Golden Week holidays with the accession of the new Emperor and the beginning of the Reiwa era (令和時代).  Source: Investing.comCURRENCY RISK? - "UnCh" also applies to JPY (USDJPY CURNCY)  Implied volatility for 9-month USDJPY options reached a new 25-year low last week of 6.11. The previous two lows were in 2006 and 2015 and were followed by periods of sustained Yen strength. The equity market currently appears to be discounting precisely the opposite.   Source: Japan AnalyticsVTR - The ratio of the value of stocks traded to the total market value continues to decline. The average for 2019 is 11% below that for the same period last year and is unchanged at 39bps in each month year-to-date.Source: Japan AnalyticsVOLUME SCORE TIMELINE - Volumes have been highest in the Internet, Retail, and Telecoms sectors, while the Materials, Transportation, Utilities and Real Estate Sectors have seen the lowest.Source: Japan AnalyticsLOWS &gt; HIGHS - With a deficit of positive news at the individual company level, the number of new 52-week highs has exceeded the number of new 52-week lows on only one-third of the last 31 trading days. Source: Japan AnalyticsDRIFTING LOWER - TTM and Forecasts Aggregate Operating and Net Income continue to drift lower ahead of the full-year results for March year-end companies which are due in a more-concentrated-than-usual period either side of the long break.   Source: Japan Analytics 
MIND THE GAP - Based on our Scoring methodology for aggregate Results &amp; Revisions, the 'gap' between total market value and earnings momentum is now as wide as at the two previous 'peaks' in January 2018 and September 2018.Source: Bank of America Merrill LynchGLOBAL WAVE - The market is implying that the earnings cycle is close to a bottom which is in accord with BAML's Global Earnings Revision Ratio having ticked up last month for the first time in 14 months. BAML has yet to call a Trough in their Global Wave and, were they to do so, such a Trough would be the first above '50' since 2006.FORECASTS LEADING EARNINGS LOWER - Separating our the Results Score and the Forecast &amp; Revision Score, the latter is continuing to lead the former to the downside, although both Scores are in aggregate still positive. Reported earnings and forecasts are still growing year-on-year; however, the momentum is slowing rapidly.Source: Japan AnalyticsINTERIM LEADING ANNUAL LOWER -  Between February and September in each year, there is a statistically significant number of Interim Forecasts that they can be compared to the Annual Forecasts with which they are combined to derive the score in the previous chart. Interim Forecasts are often prepared by the divisional heads are not accorded the same 'reverence' as the Annual Forecasts. As a result, the Interim numbers offer a good leading indicator of short-term trends. In recent weeks, the aggregate Interim Forecast/Revision Score has turned sharply lower and is now at the lowest point in almost two years.   In the DETAIL section below, we will review Sector performance, company results, revisions and stock performance over the previous two weeks, as well as adding some brief comments on Koshidaka (2157 JP), Ryohin Keikaku (7453 JP), Drugstores, Daiwa House (1925 JP), Toyota Parts companies, and Yamato Holdings (9064 JP).

🇯🇵 Japan • Fortnightly Update - "UnCh"

Japan

PARCO CO., LTD. operates shopping centers specializing in fashion shops in Kanto, Chubu, Kansai, Hokkaido, and Kyushu area.  The Company also operates playhouses and theaters.

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Parco Co Ltd (8251 JP)

J Front Retailing to Buy Out PARCO (8251)

In a long-awaited move, today J Front Retailing (3086 JP) announced that it would buy out minorities in subsidiary PARCO Co Ltd (8251 JP). PARCO...

Travis Lundy

J Front Retailing Aims High with New Builds in Shibuya and Shinsaibashi

J Front Retailing (3086 JP) is one of the few Japanese department store-centred retail groups that is not only willing to invest in new and...

Michael Causton

🇯🇵 Japan • Spring Large Cap Results & Revision Scores

SPRING RESULTS & REVISION SCORES - Better late than never, we Detail below lists the top and bottom-ranked companies measured by their Results...

Campbell Gunn

J-Front Retailing: One of the Few Winners in Japanese Department Stores

The Japanese department store sector is in decline overall but that doesn't mean that all department stores are failing equally. Some stores and...

Michael Causton

🇯🇵 Japan • Fortnightly Update - "UnCh"

UnCh - Japanese equities are unchanged in US dollar terms over both three and six months. The Bank of Japan has intervened on 42 of the 121 trading...

Campbell Gunn

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