Index Rebal/Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Index Rebal/Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Quantitative Analysis

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When Japanese small-cap stocks listed on JASDAQ, MOTHERS, and the Second Section of the Tokyo Stock Exchange aim at the big leagues and apply for reassignment to the First Section of the Tokyo Stock Exchange and are accepted, it causes significant events to occur. This triggers inclusion into the TOPIX Index which means passive funds tracking TOPIX need to buy on an inclusion event. This opens up several interesting trading opportunities for investors. 
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In this insight, I have provided performance updates for 7 "Live" event stocks which are expected to have Inclusion Events at the end of December 2020 or January 2021 and 8 "Post" event stocks that completed their Inclusion Events at the end of October 2020 and November 2020. Furthermore, I have also highlighted some interesting Pre-event situations involving stocks that are likely to become TSE1-promotion candidates in the near future. 
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When Japanese small-cap stocks listed on JASDAQ, MOTHERS, and the Second Section of the Tokyo Stock Exchange aim at the big leagues and apply for reassignment to the First Section of the Tokyo Stock Exchange and are accepted, it causes significant events to occur. This triggers inclusion into the TOPIX Index which means passive funds tracking TOPIX need to buy on an inclusion event. This opens up several interesting trading opportunities for investors. 


In this insight, I have provided performance updates for 7 "Live" event stocks which are expected to have Inclusion Events at the end of December 2020 or January 2021 and 8 "Post" event stocks that completed their Inclusion Events at the end of October 2020 and November 2020. Furthermore, I have also highlighted some interesting Pre-event situations involving stocks that are likely to become TSE1-promotion candidates in the near future. 


There are currently ~1,500 stocks listed in the Mothers, JASDAQ, and Second Sections of the Tokyo Stock Exchange. As time passes, some of these stocks will "graduate" to the First Section of the Tokyo Stock Exchange (TSE1), triggering inclusion into the TOPIX Index causing passive funds tracking TOPIX to buy them on an inclusion event. This presents various trading opportunities in several phases of this event timeline.  Being able to identify such candidates at a "Pre-event" phase (before the TSE reassignment is confirmed) can unlock great value for speculative bets as we recently witnessed in the case of <a href="https://www.smartkarma.com/insights/topix-inclusion-4931-jp-shinnihonseiyaku" target="_blank" data-smartkarma-citation="insights:45660" rel="noopener">TOPIX Inclusion (4931 JP): Shinnihonseiyaku</a> where the stock gained 90%+ in the ~5 months leading to the TSE1-reassignment announcement. However, in July 2020, TSE introduced more stringent new Section Transfer Requirements and TSE1 Listing Criteria adding a new layer of complexity to this prediction process, especially during the period of transition from the old rules to the new rules. In this insight, we take a look at how some of the potential TSE1 candidates will fare against these New Section Transfer Requirements and evaluate their attractiveness at the Pre-event phase. <hr><div class="content-remarks">This insight is an update to <a href="https://www.smartkarma.com/insights/topix-inclusion-pre-events-who-is-ready" target="_blank" data-smartkarma-citation="insights:41091" rel="noopener">TOPIX Inclusion Pre-Events: Who Is Ready?</a>. Please refer to that insight for more information on the approach used in the below analysis. Note that some assumptions used in the analysis have changed since then. </div>

There are currently ~1,500 stocks listed in the Mothers, JASDAQ, and Second Sections of the Tokyo Stock Exchange. As time passes, some of these stocks will "graduate" to the First Section of the Tokyo Stock Exchange (TSE1), triggering inclusion into the TOPIX Index causing passive funds tracking TOPIX to buy them on an inclusion event. This presents various trading opportunities in several phases of this event timeline.  Being able to identify such candidates at a "Pre-event" phase (before the TSE reassignment is confirmed) can unlock great value for speculative bets as we recently witnessed in the case of TOPIX Inclusion (4931 JP): Shinnihonseiyaku where the stock gained 90%+ in the ~5 months leading to the TSE1-reassignment announcement. However, in July 2020, TSE introduced more stringent new Section Transfer Requirements and TSE1 Listing Criteria adding a new layer of complexity to this prediction process, especially during the period of transition from the old rules to the new rules. In this insight, we take a look at how some of the potential TSE1 candidates will fare against these New Section Transfer Requirements and evaluate their attractiveness at the Pre-event phase. This insight is an update to TOPIX Inclusion Pre-Events: Who Is Ready?. Please refer to that insight for more information on the approach used in the below analysis. Note that some assumptions used in the analysis have changed since then. 

TOPIX Inclusions:  New Regulations! Who Is READY? 2.0

Equity Analyst, LightStream Research

Shifara Samsudeen, FCMA, 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

Sansan Inc, the business card digitisation company, reported its full-year FY05/2020 results early this week which saw strong growth in revenue and operating profits. At the same time, both revenue and OP beat consensus estimates by a significant margin and the results marked the company’s first full-year of operating profits despite being affected by the Covid-19 pandemic.

Sansan Inc, the business card digitisation company, reported its full-year FY05/2020 results early this week which saw strong growth in revenue and operating profits. At the same time, both revenue and OP beat consensus estimates by a significant margin and the results marked the company’s first full-year of operating profits despite being affected by the Covid-19 pandemic.

Sansan 4QFY05/20 Results: First Full-Year of Operating Profits Despite Covid-19 Impact

Equity Capital Markets

<a href="https://www.smartkarma.com/entities/sansan-inc/overview" target="_blank" rel="noopener">Sansan Inc. (4443 JP)</a>, the business card digitisation company reported its full-year FY05/2019 results on Friday (12th July 2019). The company was listed on the TSE Mothers Market on 19th June 2019 and these are the first results post the company’s IPO debut.
The full-year and the fourth quarter results for FY05/2019 saw strong growth in revenue while the company’s operating losses have declined significantly. For FY05/2020E, Sansan expects its topline growth to continue while it expects to report its first Operating Profits during the year as well as net profits.
Since the company shares started trading last month, the shares have gained nearly 30% to JPY5,810 per share at the end of Friday’s trade. However, based on our estimates, we believe the company shares are currently undervalued and deserve a premium to their current trading multiple. Furthermore, the company being able to generate positive returns in the near future should further boost share prices.
We discuss the details below.

Sansan Inc. (4443 JP), the business card digitisation company reported its full-year FY05/2019 results on Friday (12th July 2019). The company was listed on the TSE Mothers Market on 19th June 2019 and these are the first results post the company’s IPO debut.
The full-year and the fourth quarter results for FY05/2019 saw strong growth in revenue while the company’s operating losses have declined significantly. For FY05/2020E, Sansan expects its topline growth to continue while it expects to report its first Operating Profits during the year as well as net profits.
Since the company shares started trading last month, the shares have gained nearly 30% to JPY5,810 per share at the end of Friday’s trade. However, based on our estimates, we believe the company shares are currently undervalued and deserve a premium to their current trading multiple. Furthermore, the company being able to generate positive returns in the near future should further boost share prices.
We discuss the details below.

Sansan’s First Post IPO Results: Topline Grows, Losses Shrink and Expects Profit in FY05/2020E

<a href="https://www.smartkarma.com/entities/sansan-inc/overview" target="_blank">Sansan Inc.</a> offers business card digitisation services to customers in Japan, the US, Singapore and other Southeast Asian markets. It aims to help businesses bring business intelligence to companies through a system which helps build connections between users, and both internal employees and external contacts using business cards. Sansan is planning on listing its shares on the TSE Mothers Market on 19th June 2019. The company has set its IPO price in the range of JPY4,000-4,500 per share, which implies a valuation of JPY120-135bn.We expect the company’s core business, “Sansan” to continue its growth trajectory driven by double-digit growth in contracts coupled with continued increases in average revenue per contract. As Sansan continues to introduce new services alongside its existing offering for corporate customers, we expect this to help grow top line. Moreover, Sansan’s effort to monetise its freemium based offering, “Eight” through premium services will likely boost the company’s revenues further. The company is still not making any profits although the operating losses have significantly reduced during the first-nine months of the current fiscal year. We expect the company to start generating positive returns in the near future which would likely warrant a further upside to its trading price.That being said, investors should be wary of the key risks faced by the company such as over dependence on business cards, risks associated with handling of personal data and the domestic and international laws and regulations applicable to Sansan in its core markets, which could likely impact Sansan’s future performance.

Sansan Inc. offers business card digitisation services to customers in Japan, the US, Singapore and other Southeast Asian markets. It aims to help businesses bring business intelligence to companies through a system which helps build connections between users, and both internal employees and external contacts using business cards. Sansan is planning on listing its shares on the TSE Mothers Market on 19th June 2019. The company has set its IPO price in the range of JPY4,000-4,500 per share, which implies a valuation of JPY120-135bn.We expect the company’s core business, “Sansan” to continue its growth trajectory driven by double-digit growth in contracts coupled with continued increases in average revenue per contract. As Sansan continues to introduce new services alongside its existing offering for corporate customers, we expect this to help grow top line. Moreover, Sansan’s effort to monetise its freemium based offering, “Eight” through premium services will likely boost the company’s revenues further. The company is still not making any profits although the operating losses have significantly reduced during the first-nine months of the current fiscal year. We expect the company to start generating positive returns in the near future which would likely warrant a further upside to its trading price.That being said, investors should be wary of the key risks faced by the company such as over dependence on business cards, risks associated with handling of personal data and the domestic and international laws and regulations applicable to Sansan in its core markets, which could likely impact Sansan’s future performance.

Sansan IPO: Business Cards to Build Connections; We See Good Potential

Japan

Sansan, Inc. provides mobile application software solutions. The Company offers business card management service by scanning the cards from scanner and smartphone. Sansan provides its services throughout Japan.

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Sansan Inc (4443 JP)

TOPIX Inclusion Trade Summary: Nov 2020

November review of pre-events, live events, and post-events in the TOPIX Inclusion trade universe. There are a dozen pre-event recommendations...

Janaghan Jeyakumar, CFA

TOPIX Inclusions: New Regulations! Who Is READY? 2.0

The TSE has new Listing Rules and Criteria for TSE1 listing and promotion. That means new analysis on what pre-event trades. One TOP PICK to trade...

Janaghan Jeyakumar, CFA

Sansan 4QFY05/20 Results: First Full-Year of Operating Profits Despite Covid-19 Impact

Sansan Inc, the business card digitisation company, reported its full-year FY05/2020 results early this week which saw strong growth in revenue and...

Shifara Samsudeen, FCMA, CGMA

Sansan’s First Post IPO Results: Topline Grows, Losses Shrink and Expects Profit in FY05/2020E

Sansan Inc. (4443 JP), the business card digitisation company reported its full-year FY05/2019 results on Friday (12th July 2019). The company was...

Shifara Samsudeen, FCMA, CGMA

Sansan IPO: Business Cards to Build Connections; We See Good Potential

Sansan Inc. offers business card digitisation services to customers in Japan, the US, Singapore and other Southeast Asian markets. It aims to help...

Shifara Samsudeen, FCMA, CGMA

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