Telco/Internet specialist

Kirk Boodry

Redex Research

Equity Bottom-Up

NTT DoCoMo posted results ahead of consensus expectations boosted by steady improvement in mobile service revenue and record profits in its non-telco Smart Life business. The solid quarter provides some relief for parent NTT which is buying in minority shareholders at a premium although concerns on whether DoCoMo will need to aggressively respond to pressure for price reductions will linger.  Continued low churn rates read positively across to fellow incumbents Softbank and KDDI but less so for Rakuten whose impact on the industry has been muted so far.

NTT DoCoMo posted results ahead of consensus expectations boosted by steady improvement in mobile service revenue and record profits in its non-telco Smart Life business. The solid quarter provides some relief for parent NTT which is buying in minority shareholders at a premium although concerns on whether DoCoMo will need to aggressively respond to pressure for price reductions will linger.  Continued low churn rates read positively across to fellow incumbents Softbank and KDDI but less so for Rakuten whose impact on the industry has been muted so far.  

NTT DoCoMo Q2 20 Results: Last Public Report Ends on a Relative High Note

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. 

Another case of hubris in Japanese e-commerce? Shoplist operator, Crooz, made a big splash about its plans to build wa ¥100 billion fashion platform three years ago but made a thumping loss in 2018 and then sales actually fell last year, proving just how hard it is for smaller e-commerce platforms to shine in the shadow of the big three.

Another case of hubris in Japanese e-commerce? Shoplist operator, Crooz, made a big splash about its plans to build wa ¥100 billion fashion platform three years ago but made a thumping loss in 2018 and then sales actually fell last year, proving just how hard it is for smaller e-commerce platforms to shine in the shadow of the big three.

Thematic (Sector/Industry)

Regulatory concerns in Japan have returned as the new Prime Minister has made mobile pricing a key talking point. And it now appears likely that Softbank will carve out a new 20-30GB data tier at ¥5,000/month to address that. We expect that DoCoMo and KDDI (to a lesser degree) will have to follow. NTT is the most exposed as DoCoMo was late to the game in moving up to offering extra-large data bundles and its Gigaho 30GB plan is priced at ¥7,150/month. On the surface, this move gives the Prime Minister a win and should ease regulatory pressure and whilst mobile revenue erosion will accelerate, tiered pricing should help manage the downside. The main issue heading into reporting season is how much of a return to customers this is and whether the political and regulatory pressure will ease.

Regulatory concerns in Japan have returned as the new Prime Minister has made mobile pricing a key talking point. And it now appears likely that Softbank will carve out a new 20-30GB data tier at ¥5,000/month to address that. We expect that DoCoMo and KDDI (to a lesser degree) will have to follow. NTT is the most exposed as DoCoMo was late to the game in moving up to offering extra-large data bundles and its Gigaho 30GB plan is priced at ¥7,150/month. On the surface, this move gives the Prime Minister a win and should ease regulatory pressure and whilst mobile revenue erosion will accelerate, tiered pricing should help manage the downside. The main issue heading into reporting season is how much of a return to customers this is and whether the political and regulatory pressure will ease. 

Japan Telecom Sector: Softbank Moves First on Pricing

Equity Analyst, LightStream Research

Oshadhi Kumarasiri

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 Capital Markets

Benefiting from investor demand for COVID-resistant stocks, <a href="https://www.smartkarma.com/entities/base-inc" target="_blank" data-smartkarma-citation="entities:28353:1" rel="noopener">BASE Inc (4477 JP)</a> had an excellent run during the last six months, as share price increased more than 1,330% from the March 2020 low levels.BASE was listed on 25th October 2019 at ¥1,300 per share - the higher end of the proposed price range and currently trades at ¥11,000 per share.On 24th September 2020, the company’s board of directors resolved to raise around $125m via issuing 1.2m new shares to European and Asian institutional investors. The underwriters to this secondary offering are Daiwa Securities and Mizuho Securities. The book building period ends on 9th October 2020.The company plans to use secondary listing proceeds on advertising, recruitment, M&amp;A and working capital purposes.We feel this is an opportunistic move by BASE Inc to take full advantage of the currently inflated valuation multiples and therefore would avoid subscribing to the offer. Moreover, we would wait for a price reaction to the positive news flows such as BASE online store growth and consider arranging a short position at 20.0x consensus FY+2 EV/Sales – around ¥12,800 per share.

Benefiting from investor demand for COVID-resistant stocks, BASE Inc (4477 JP) had an excellent run during the last six months, as share price increased more than 1,330% from the March 2020 low levels.BASE was listed on 25th October 2019 at ¥1,300 per share - the higher end of the proposed price range and currently trades at ¥11,000 per share.On 24th September 2020, the company’s board of directors resolved to raise around $125m via issuing 1.2m new shares to European and Asian institutional investors. The underwriters to this secondary offering are Daiwa Securities and Mizuho Securities. The book building period ends on 9th October 2020.The company plans to use secondary listing proceeds on advertising, recruitment, M&amp;A and working capital purposes.We feel this is an opportunistic move by BASE Inc to take full advantage of the currently inflated valuation multiples and therefore would avoid subscribing to the offer. Moreover, we would wait for a price reaction to the positive news flows such as BASE online store growth and consider arranging a short position at 20.0x consensus FY+2 EV/Sales – around ¥12,800 per share.

BASE Inc Raising $125m Via an Overseas Secondary Offer Targeting European and Asian Investors

Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

Event-Driven

NTT (Nippon Telegraph & Telephone) / Event-Driven

The Nikkei article regarding NTT buying out Docomo comes out of the blue and seems to have blindsided almost everybody. This is the first really big move following Suga’s ascendance to the Prime Ministership and in our opinion, it signals that things are going to get increasingly tough for Softbank Corp and probably for KDDI. We discuss our reasoning below.

The Nikkei article regarding NTT buying out Docomo comes out of the blue and seems to have blindsided almost everybody. This is the first really big move following Suga’s ascendance to the Prime Ministership and in our opinion, it signals that things are going to get increasingly tough for Softbank Corp and probably for KDDI. We discuss our reasoning below.

NTT – Initial Thoughts Reading Through the Lines of the Shock News

Japan

Rakuten Group, Inc. provides Internet services. The Company offers Internet finance services which including "Rakuten Card" and "Rakuten Bank". Rakuten Group also provides digital content services including electronic book services.

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Rakuten (4755 JP)

NTT DoCoMo Q2 20 Results: Last Public Report Ends on a Relative High Note

DoCoMo results were ahead of expectations in its last report as a public company. That's good for NTT and there is a positive read across to...

Kirk Boodry

Shoplist Promise Withers on the Web

Crooz promised sales of ¥100 billion within a few years and a long-term target of a ¥1 trillion capitalisation. Its early promise has withered...

Michael Causton

Japan Telecom Sector: Softbank Moves First on Pricing

Softbank's response to regulatory pressure should be enough if sector follows suit. NTT is most exposed after announcing a premium bid for DoCoMo

Kirk Boodry

BASE Inc Raising $125m Via an Overseas Secondary Offer Targeting European and Asian Investors

Benefited from investor demand for COVID-resistant stocks, BASE Inc (4477 JP) had an excellent run during last six months, as share price increased...

Oshadhi Kumarasiri

NTT – Initial Thoughts Reading Through the Lines of the Shock News

The Nikkei article regarding NTT buying out Docomo comes out of the blue and seems to have blindsided almost everybody. This is the first really...

Mio Kato

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