Japanese Turnaround Situations, Short-Ideas, Azabu Research

Michael Allen

Japanese Turnaround Situations, Short-Ideas

Azabu Research

Azabu Research is a publishing and consulting firm focused on distressed equities in the Japanese market. We specialize in turnaround strategies, corporate combinations, divestitures, and restructuring.

Publisher of the Tokyo Turnaround Letter, which conducts the most thorough research possible of publicly available information, including forensic tests for fraudulent overstatement of assets and understatement of liabilities, as well as rigorous market and industry analysis to assess the underlying strengths of the company’s products or services, the appropriateness of the company’s turnaround strategy, and the skill of its current management team. The average length of a report exceeds 25 pages of text and tables, excluding any disclosures or executive summaries.

We have more than 30 years of experience in applying this process to distressed equities in Japan. Additionally, subscribers have free access to detailed, yet easily navigated earnings models for the target company as well as the top five comparable companies, and unlimited access to the analyst for follow-up questions.

Azabu Research also conducts be-spoke research on a project basis, and provides consulting services to companies looking to restructure, divest, make acquisitions, go public, or improve investor sentiment toward their stock.

Independent Research and Consulting Firm

Equity Bottom-Up

<ul>
<li>Shift reported a 95% increase in OP, to ¥3.2bn, compared to consensus estimate of ¥2.6bn on January 14 after the close.</li>
<li>Just under 5 months ago, we suggested the stock was about 45% undervalued. It is up 40%.</li>
<li>We still expect 20% annual growth through 2030. This is no longer a turnaround stock, but now one of the most solid growth stocks in the market.</li>
</ul>


Shift reported a 95% increase in OP, to ¥3.2bn, compared to consensus estimate of ¥2.6bn on January 14 after the close.
Just under 5 months ago, we suggested the stock was about 45% undervalued. It is up 40%.
We still expect 20% annual growth through 2030. This is no longer a turnaround stock, but now one of the most solid growth stocks in the market.


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.

<ul>
<li>
<a href="https://www.smartkarma.com/entities/shift-inc" target="_blank" data-smartkarma-citation="entities:7266:1" rel="noopener">Shift Inc (3697 JP)</a> s share price has been down 65% YTD as the company’s aggressive investment on HR and system reinforcement led to fall in margins which concerned the market.</li>
<li>However, the company has adopted several measures to improve its margins, and we expect the investment in HR and others to generate results going forward.</li>
<li>Though share price has moved up slightly, valuation multiples are at a steep discount, and we would look for building a position.</li>
</ul>



Shift Inc (3697 JP) s share price has been down 65% YTD as the company’s aggressive investment on HR and system reinforcement led to fall in margins which concerned the market.
However, the company has adopted several measures to improve its margins, and we expect the investment in HR and others to generate results going forward.
Though share price has moved up slightly, valuation multiples are at a steep discount, and we would look for building a position.


Japan Specialist

Mark Chadwick

Thematic (Sector/Industry)

<ul>
<li>Earnings season may accelerate the rotation from AI momentum into quality compounders with earnings visibility.</li>
<li>Macro headwinds with oil above $100, yen at 40-year lows, BOJ tightening on the horizon</li>
<li>We expect this dynamic to persist through August reporting season.</li>
</ul>


Earnings season may accelerate the rotation from AI momentum into quality compounders with earnings visibility.
Macro headwinds with oil above $100, yen at 40-year lows, BOJ tightening on the horizon
We expect this dynamic to persist through August reporting season.


Japan Strategy Weekly | Bifurcation Season

Japanese Equity Specialist, Ortus Advisors

Andrew Jackson

Japanese Equity Specialist

Ortus Advisors

<ul>
<li>Can expect more from the likes of Rakus Co Ltd, Shift Inc, NEC Corp and Fujitsu Ltd which all traded well yesterday on the rotation away from frontline AI plays.</li>
<li>It would make sense to see interest in physical AI FA plays such as Yaskawa Electric, Mitsubishi Electric, Keyence Corp and Fanuc Corp as alternative exposure to the AI theme.</li>
<li>The power semis such as Fuji Electric, ROHM Co Ltd and Renesas Electronics should hold up after a strong day for the sector in the US.</li>
</ul>


Can expect more from the likes of Rakus Co Ltd, Shift Inc, NEC Corp and Fujitsu Ltd which all traded well yesterday on the rotation away from frontline AI plays.
It would make sense to see interest in physical AI FA plays such as Yaskawa Electric, Mitsubishi Electric, Keyence Corp and Fanuc Corp as alternative exposure to the AI theme.
The power semis such as Fuji Electric, ROHM Co Ltd and Renesas Electronics should hold up after a strong day for the sector in the US.


Japan Morning Connection: Physical AI FA Plays May Draw Fresh Interest as Alternative AI Exposure

<ul>
<li>
 For the week: Nikkei: -1.1%, TPX -0.8%, JPY 149.70 (-1.48¥), Gold +8.8%, Oil: -3.4%, BTC: -7.2%</li>
<li>A week remains a lifetime in financial markets. The exuberance that lifted Japanese equities to record highs only last week has given way to a more cautious tone</li>
<li>
Sector wise, Retail outperformed, suggesting defensive positioning, but also reflecting strong underlying business performance. Aeon, Ryohin and Fast all saw major gains. </li>
</ul>



 For the week: Nikkei: -1.1%, TPX -0.8%, JPY 149.70 (-1.48¥), Gold +8.8%, Oil: -3.4%, BTC: -7.2%
A week remains a lifetime in financial markets. The exuberance that lifted Japanese equities to record highs only last week has given way to a more cautious tone

Sector wise, Retail outperformed, suggesting defensive positioning, but also reflecting strong underlying business performance. Aeon, Ryohin and Fast all saw major gains. 


Japan Strategy Weekly | Global Jitters Spread

Japan

SHIFT Inc. offers information technology outsourcing services. The Company provides outsourcing software testing services to corporations and individual clients. SHIFT also provides software solutions and consulting services, as well as educational classes and programs.

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Shift Inc (3697 JP)

Shift Beats Q1 Consensus by 30%

Shift's impressive 95% increase in operating profit exceeded expectations, with the stock now up 40% and poised for continued 20% annual growth...

Michael Allen

Shift: Is It a Good Time to Buy?

Shift shares down 65% YTD as investment in aggressive hiring and system reinforcement dragged down margins. Measures are in place to revive...

Shifara Samsudeen, FCMA, CGMA

Japan Strategy Weekly | Bifurcation Season

Investors may shift from AI momentum to quality compounders amid macro headwinds, with this trend likely continuing through August earnings season.

Mark Chadwick

Japan Morning Connection: Physical AI FA Plays May Draw Fresh Interest as Alternative AI Exposure

Expect a continuation of the shift away from frontline AI plays. Interest in physical AI FA plays may see an increase as alternative exposure to...

Andrew Jackson

Japan Strategy Weekly | Global Jitters Spread

Japanese markets experienced a shift from exuberance to caution in just one week, with Retail sector outperforming and showing strong business...

Mark Chadwick

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Shift Beats Q1 Consensus by 30%

​Shift's impressive 95% increase in operating profit exceeded expectations, with the stock now up 40% and poised for continued 20% annual growth...

Michael Allen

Shift: Is It a Good Time to Buy?

​Shift shares down 65% YTD as investment in aggressive hiring and system reinforcement dragged down margins. Measures are in place to revive...

Shifara Samsudeen, FCMA, CGMA

Japan Strategy Weekly | Bifurcation Season

​Investors may shift from AI momentum to quality compounders amid macro headwinds, with this trend likely continuing through August earnings season.

Mark Chadwick

Japan Morning Connection: Physical AI FA Plays May Draw Fresh Interest as Alternative AI Exposure

Expect a continuation of the shift away from frontline AI plays. Interest in physical AI FA plays may see an increase as alternative exposure to...

Andrew Jackson

Japan Strategy Weekly | Global Jitters Spread

​Japanese markets experienced a shift from exuberance to caution in just one week, with Retail sector outperforming and showing strong business...

Mark Chadwick

Shift's impressive 95% increase in operating profit exceeded expectations, with the stock now up 40% and poised for continued 20% annual growth...

Shift shares down 65% YTD as investment in aggressive hiring and system reinforcement dragged down margins. Measures are in place to revive...

Investors may shift from AI momentum to quality compounders amid macro headwinds, with this trend likely continuing through August earnings season.

Japanese markets experienced a shift from exuberance to caution in just one week, with Retail sector outperforming and showing strong business...