Senior Credit Analyst, Lucror Analytics

Leonard Law, CFA

Senior Credit Analyst

High Yield Experts

Lucror Analytics

Lucror Analytics is a leading credit and ESG research specialist and a provider of technology solutions for differentiated fixed income strategies. Our roots are in bottom-up fundamental credit analysis with a specialization in high yield corporate credits from Europe, Asia and Latin America. We are one of few research specialists integrating ESG considerations with fundamental credit research through a dedicated ESG platform. Our ESG assessment covers five key criteria: Disclosure, E,S, & G Pillars, Controversies, ESG Impact on Credit and ESG Momentum.

Recognizing the importance and value-add of Factor Investing in fixed income, Lucror developed the Smart Quant Navigator (SQN), an intuitive platform that helps clients devise and implement factor-based strategies ranging from pure quant to active fundamental, with integrated ESG.

Our company has been at the forefront of developments in the fixed income markets, identifying opportunities and consistently delivering new products and value-adding solutions to clients. Lucror has close relationships with the largest and most reputable asset managers, family offices, hedge funds, investment and wealth managers globally.

Credit

The Asia HY Trade Recommendations report for March includes a summary of our recommendations, as well as our high-conviction ideas. We also provide relative-value charts and lists of the bonds in the Lucror Asia HY index.

   The Asia HY Trade Recommendations report for March includes a summary of our recommendations, as well as our high-conviction ideas. We also provide relative-value charts and lists of the bonds in the Lucror Asia HY index. 

Asia HY Trade Recommendations - March 2019 - Lucror Analytics

'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

<div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/081/407/original/2019-03-09_14-25-50.png?1552109168" class="editor-image img-responsive" data-smartkarma-image-id="81407"></figure>
Source: Japan Analytics
</div>
JAPAN CORPORATE CASH FLOW UPDATE - This insight updates our previous <a href="https://www.smartkarma.com/insights/japan-the-2018-q3-cash-flow-stakes-runners-riders-red-flags" target="_blank" data-smartkarma-citation="insights:26816">Insight</a> with data from all of the most recent quarterly reports. Our market composite cash flow model reformulates disclosed cash flows into four categories which sum to Change in Cash: -
<ul>
<li>Operating Cash Flow</li>
<li>
Investing Cash Flow (which includes Inventory Cash Flow) 
<ul>
<li>Free Cash Flow (Operating Cash Flow less Investing Cash Flow)</li>
</ul>
</li>
<li>Financing Cash Flow</li>
<li>Shareholder Cash Flow  (Equity Cash Flow and Dividend Cash Flow) </li>
</ul>
     =  Change in Cash (including Minorities Cash Flow)
OCF COLLAPSES - In the last three months, Japan's non-financial companies generated only ¥2.1t in Operating Cash Flow (OCF), ¥10.1t less than the previous quarter. ¥2.1t is the lowest quarterly OCF since 2016-Q2, and the quarter-on-quarter decline is the largest since 2009 and represents a substantial 'red flag' for the market.
FCF NEGATIVE - Aggregate spending on fixed assets shrunk by ¥4.5t qoq to ¥4.6t resulting in Free Cash Flow for the quarter of -¥2.5t, the first negative Free Cash Flow quarter since 2012-Q4. <a href="https://www.smartkarma.com/entities/315" target="_blank" data-smartkarma-citation="entities:315:1">Softbank Group (9984 JP)</a>, <a href="https://www.smartkarma.com/entities/1089" target="_blank" data-smartkarma-citation="entities:1089:1">NTT Docomo (9437 JP)</a> and <a href="https://www.smartkarma.com/entities/751" target="_blank" data-smartkarma-citation="entities:751:1">Fast Retailing (9983 JP)</a> together generated ¥3.3t in positive Free Cash Flow for the quarter. Excluding these three companies, the aggregate total quarterly FCF was -¥5.8t, equivalent to an annualised Free Cash Flow yield of -4.3% for the universe of listed non-financial companies.
BACK TO BORROWING - To finance ¥4.5t in dividend payments, Japanese non-financial companies borrowed ¥4.8t in new debt, sold investment securities worth ¥1.9t (the most significant reduction since 2016-Q2) and raised 0.28t in new equity net of share buybacks. This increase in financing cash flow was the largest in any quarter since 2009.
SECTORS &amp; STOCKS - In the DETAIL below, we also look at sector cash flow trends and provide brief comments on some of the most significant changes in individual cash flows over the last three months including <a href="https://www.smartkarma.com/entities/73" target="_blank" data-smartkarma-citation="entities:73:1">Toyota Motor (7203 JP)</a>, <a href="https://www.smartkarma.com/entities/315" target="_blank" data-smartkarma-citation="entities:315:1">Softbank Group (9984 JP)</a>, <a href="https://www.smartkarma.com/entities/13475" target="_blank" data-smartkarma-citation="entities:13475:1">Pan Pacific International (7532 JP)</a>,  <a href="https://www.smartkarma.com/entities/1040" target="_blank" data-smartkarma-citation="entities:1040:1">Lawson (2651 JP)</a>, and <a href="https://www.smartkarma.com/entities/6391" target="_blank" data-smartkarma-citation="entities:6391:1">I</a><a href="https://www.smartkarma.com/entities/6391" target="_blank" data-smartkarma-citation="entities:6391:1">DOM (7599 JP)</a>



Source: Japan Analytics

JAPAN CORPORATE CASH FLOW UPDATE - This insight updates our previous Insight with data from all of the most recent quarterly reports. Our market composite cash flow model reformulates disclosed cash flows into four categories which sum to Change in Cash: -

Operating Cash Flow

Investing Cash Flow (which includes Inventory Cash Flow) 

Free Cash Flow (Operating Cash Flow less Investing Cash Flow)


Financing Cash Flow
Shareholder Cash Flow  (Equity Cash Flow and Dividend Cash Flow) 

     =  Change in Cash (including Minorities Cash Flow)
OCF COLLAPSES - In the last three months, Japan's non-financial companies generated only ¥2.1t in Operating Cash Flow (OCF), ¥10.1t less than the previous quarter. ¥2.1t is the lowest quarterly OCF since 2016-Q2, and the quarter-on-quarter decline is the largest since 2009 and represents a substantial 'red flag' for the market.
FCF NEGATIVE - Aggregate spending on fixed assets shrunk by ¥4.5t qoq to ¥4.6t resulting in Free Cash Flow for the quarter of -¥2.5t, the first negative Free Cash Flow quarter since 2012-Q4. Softbank Group (9984 JP), NTT Docomo (9437 JP) and Fast Retailing (9983 JP) together generated ¥3.3t in positive Free Cash Flow for the quarter. Excluding these three companies, the aggregate total quarterly FCF was -¥5.8t, equivalent to an annualised Free Cash Flow yield of -4.3% for the universe of listed non-financial companies.
BACK TO BORROWING - To finance ¥4.5t in dividend payments, Japanese non-financial companies borrowed ¥4.8t in new debt, sold investment securities worth ¥1.9t (the most significant reduction since 2016-Q2) and raised 0.28t in new equity net of share buybacks. This increase in financing cash flow was the largest in any quarter since 2009.
SECTORS &amp; STOCKS - In the DETAIL below, we also look at sector cash flow trends and provide brief comments on some of the most significant changes in individual cash flows over the last three months including Toyota Motor (7203 JP), Softbank Group (9984 JP), Pan Pacific International (7532 JP),  Lawson (2651 JP), and IDOM (7599 JP)

🇯🇵 Japan • Largest QoQ Decline in Operating Cash Flow in a Decade - Free Cash Flow Turns Negative

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar. 

Lucror Analytics - Morning Views Asia - 08 Mar 2019

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

<a href="https://www.smartkarma.com/entities/24423" target="_blank" data-smartkarma-citation="entities:24423:1">Lyft Inc (0812823D US)</a> has kicked off its IPO by posting its S-1 filing last Friday. <a href="https://www.smartkarma.com/entities/31" target="_blank" data-smartkarma-citation="entities:31:1">Rakuten Inc (4755 JP)</a> is Lyft’s single largest shareholder with a 13.05% stake. Rakuten has invested around $700 million to acquire its current Lyft stake and stands to make 3-4 times its investment if Lyft achieves its rumoured IPO valuation range of $20-25 billion.<div class="content-highlight">Lyft’s IPO valuation range was first reported by Reuters on 20 February 2019. On the back of the news, Rakuten’s shares have so far risen around 10%. Notably, at the IPO valuation range, the Lyft stake would account for 20-25% of Rakuten’s current market cap. While the Lyft IPO will prove to be a big winner for Rakuten from an ROI perspective, we believe that from a valuation perspective, the upside is modest.</div>

Lyft Inc (0812823D US) has kicked off its IPO by posting its S-1 filing last Friday. Rakuten Inc (4755 JP) is Lyft’s single largest shareholder with a 13.05% stake. Rakuten has invested around $700 million to acquire its current Lyft stake and stands to make 3-4 times its investment if Lyft achieves its rumoured IPO valuation range of $20-25 billion.Lyft’s IPO valuation range was first reported by Reuters on 20 February 2019. On the back of the news, Rakuten’s shares have so far risen around 10%. Notably, at the IPO valuation range, the Lyft stake would account for 20-25% of Rakuten’s current market cap. While the Lyft IPO will prove to be a big winner for Rakuten from an ROI perspective, we believe that from a valuation perspective, the upside is modest.

Rakuten (4755 JP): Lyft IPO’s Big Lift Unlikely to Lead to a Sustained Re-Rating

In this month’s “In-Focus” section, we look at key developments in the global oil & gas markets in 2018 and consider the 2019 outlook. We also review recent performance and prospects for the O&G issuers under our coverage. The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks, and discussing specific areas of interest in the "In-Focus” section. The Asia Monthly is intended to broaden investors' understanding of the Asian USD high-yield market.

   In this month’s “In-Focus” section, we look at key developments in the global oil & gas markets in 2018 and consider the 2019 outlook. We also review recent performance and prospects for the O&G issuers under our coverage.    The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks, and discussing specific areas of interest in the "In-Focus” section. The Asia Monthly is intended to broaden investors' understanding of the Asian USD high-yield market. 

Asia HY Monthly - Oil & Gas Overview - Lucror Analytics

Japan

SoftBank Group Corp. provides telecommunication services. The Company also operates ADSL (Asymmetric Digital Subscriber Line) and fiber optic high-speed Internet connection, e-Commerce businesses, and Internet based advertising and auction businesses.

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Softbank Group (9984 JP)

Asia HY Trade Recommendations - March 2019 - Lucror Analytics

The Asia HY Trade Recommendations report for March includes a summary of our recommendations, as well as our high-conviction ideas. We also...

Lucror Analytics

🇯🇵 Japan • Largest QoQ Decline in Operating Cash Flow in a Decade - Free Cash Flow Turns Negative

JAPAN CORPORATE CASH FLOW UPDATE - This insight updates our previous Insight with data from all of the most recent quarterly reports. Our market...

Campbell Gunn

Lucror Analytics - Morning Views Asia - 08 Mar 2019

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region,...

Lucror Analytics

Rakuten (4755 JP): Lyft IPO’s Big Lift Unlikely to Lead to a Sustained Re-Rating

Lyft Inc (0812823D US) has kicked off its IPO by posting its S-1 filing last Friday. Rakuten Inc (4755 JP) is Lyft’s single largest shareholder...

Arun George

Asia HY Monthly - Oil & Gas Overview - Lucror Analytics

In this month’s “In-Focus” section, we look at key developments in the global oil & gas markets in 2018 and consider the 2019 outlook. We...

Lucror Analytics

Price Gauge

52-week Range

Market Cap (USDm)

P/E

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