Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<a href="https://www.smartkarma.com/entities/otsuka-kagu-ltd" target="_blank" data-smartkarma-citation="entities:5139:1" rel="noopener">Otsuka Kagu Ltd (8186 JP)</a> had cash problems in 2019 which required a saviour. <a href="https://www.smartkarma.com/entities/yamada-denki-co-ltd" target="_blank" data-smartkarma-citation="entities:641:1" rel="noopener">Yamada Denki (9831 JP)</a> stepped in as that saviour, injecting cash and buying shares, leaving Kumiko Otsuka in charge of the previous family battleground company.As <a href="https://www.smartkarma.com/profiles/michael-causton" target="_blank" data-smartkarma-citation="accounts:2415" rel="noopener">Michael Causton</a> wrote six months ago in <a href="https://www.smartkarma.com/insights/otsuka-kagu-to-be-absorbed-by-yamada-denki-as-family-ceo-departs" target="_blank" data-smartkarma-citation="insights:46202" rel="noopener">Otsuka Kagu to Be Absorbed by Yamada Denki as Family CEO Departs</a>, that family control did not last as the recovery and rebound did not work as well as it might have, despite the substantial rebound in furniture sales in the WFH era.  Back then, Michael said, <blockquote>The departure of the founding family signals that Otsuka will likely become a wholly owned subsidiary sooner rather than later. On acquisition, Yamada provided a large cash injection to help with the chain’s operations, but with Otsuka having sold off most of its major assets, reducing fixed assets to just ¥164 million compared to ¥3.1 billion in 2010, and with sales still only growing slowly, it now looks as if Yamada will need to inject even more. Delisting the company and taking over complete control of strategy and operations is the only option left.</blockquote>That was prescient. Today, Yamada Denki and Otsuka Kagu <a href="https://www.yamada-holdings.jp/lang-en/pdf/press/210609_1_en.pdf" target="_blank" rel="noopener">announced</a> plans to merge. The Otsuka Kagu shareholder meeting is in 7 weeks (record date was 30 April), and the merger is scheduled to be effective in 12 weeks. A foreshortened timeframe on an 'easy' smallcap deal.

Otsuka Kagu Ltd (8186 JP) had cash problems in 2019 which required a saviour. Yamada Denki (9831 JP) stepped in as that saviour, injecting cash and buying shares, leaving Kumiko Otsuka in charge of the previous family battleground company.As Michael Causton wrote six months ago in Otsuka Kagu to Be Absorbed by Yamada Denki as Family CEO Departs, that family control did not last as the recovery and rebound did not work as well as it might have, despite the substantial rebound in furniture sales in the WFH era.  Back then, Michael said, The departure of the founding family signals that Otsuka will likely become a wholly owned subsidiary sooner rather than later. On acquisition, Yamada provided a large cash injection to help with the chain’s operations, but with Otsuka having sold off most of its major assets, reducing fixed assets to just ¥164 million compared to ¥3.1 billion in 2010, and with sales still only growing slowly, it now looks as if Yamada will need to inject even more. Delisting the company and taking over complete control of strategy and operations is the only option left.That was prescient. Today, Yamada Denki and Otsuka Kagu announced plans to merge. The Otsuka Kagu shareholder meeting is in 7 weeks (record date was 30 April), and the merger is scheduled to be effective in 12 weeks. A foreshortened timeframe on an 'easy' smallcap deal. 

Yamada Denki and Otsuka Kagu Do The Deed - A Quick Merger

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. 

Thematic (Sector/Industry)

Penetration (the share of total retail sales) of e-commerce in Japan increased sharply in the past few years but still varies significantly by category.
The following insight looks at each consumer product category and how penetration has grown in the last few years and provides estimates of trends to 2025.
Even with these relatively cautious rates of growth, penetration rates are set to expand significantly in apparel, household &amp; interior, books &amp; media, and stationery but only retailers with form in successful online marketing will benefit from this with major negative implications for the many retailers that have failed to tackle the threat from online. This includes even major retailers like <a href="https://www.smartkarma.com/entities/seven-i-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:1041:1" rel="noopener">Seven &amp; I Holdings (3382 JP)</a> which lags behind <a href="https://www.smartkarma.com/entities/aeon-co-ltd" target="_blank" data-smartkarma-citation="entities:3:1" rel="noopener">Aeon Co Ltd (8267 JP), </a><a href="https://www.smartkarma.com/entities/rakuten-inc" target="_blank" data-smartkarma-citation="entities:31:1" rel="noopener">Rakuten Inc (4755 JP)</a><a href="https://www.smartkarma.com/entities/aeon-co-ltd" target="_blank" data-smartkarma-citation="entities:3:1" rel="noopener">  and </a><a href="https://www.smartkarma.com/entities/amazon-com-inc" target="_blank" data-smartkarma-citation="entities:409:1" rel="noopener">Amazon.com Inc (AMZN US)</a> in the race to lead the battle for leadership in online food retailing.

Penetration (the share of total retail sales) of e-commerce in Japan increased sharply in the past few years but still varies significantly by category.
The following insight looks at each consumer product category and how penetration has grown in the last few years and provides estimates of trends to 2025.
Even with these relatively cautious rates of growth, penetration rates are set to expand significantly in apparel, household &amp; interior, books &amp; media, and stationery but only retailers with form in successful online marketing will benefit from this with major negative implications for the many retailers that have failed to tackle the threat from online. This includes even major retailers like Seven &amp; I Holdings (3382 JP) which lags behind Aeon Co Ltd (8267 JP), Rakuten Inc (4755 JP)  and Amazon.com Inc (AMZN US) in the race to lead the battle for leadership in online food retailing.

E-Commerce Penetration Increasing in All Retail Categories

The following is an in-depth review of the retail sector by format with a brief overview of incomes and consumption trends and metrics before that. For any investor looking at the Japanese consumer/retail space, this insight will provide a rapid overview of all the major trends.2020 was a year to remember, although not for good reasons. While the news was overwhelmingly negative given the devastation that the pandemic caused to so many lives, for Japan as a country the experience could become a catalyst to spur positive change.No matter how much we might never wish to repeat the last 12 months, those governments and companies that learn from the experience will be better positioned whenever a new pandemic emerges.Department stores, convenience stores, and most fashion chains had a horrible year as so many people stayed away from major shopping areas, but many other retailers actually had stellar years, with further upside still to come.

The following is an in-depth review of the retail sector by format with a brief overview of incomes and consumption trends and metrics before that. For any investor looking at the Japanese consumer/retail space, this insight will provide a rapid overview of all the major trends.2020 was a year to remember, although not for good reasons. While the news was overwhelmingly negative given the devastation that the pandemic caused to so many lives, for Japan as a country the experience could become a catalyst to spur positive change.No matter how much we might never wish to repeat the last 12 months, those governments and companies that learn from the experience will be better positioned whenever a new pandemic emerges.Department stores, convenience stores, and most fashion chains had a horrible year as so many people stayed away from major shopping areas, but many other retailers actually had stellar years, with further upside still to come. 

Japan Retail Full Review 2020-2021: Some Retail Sectors Outperform in a Pandemic

It is almost a year since <a href="https://www.smartkarma.com/entities/yamada-denki-co-ltd" target="_blank" data-smartkarma-citation="entities:641:1" rel="noopener">Yamada Denki (9831 JP)</a> stepped in to save <a href="https://www.smartkarma.com/entities/otsuka-kagu-ltd" target="_blank" data-smartkarma-citation="entities:5139:1" rel="noopener">Otsuka Kagu Ltd (8186 JP)</a> from a choice of bankruptcy or acquisition by a major furniture rival. Yamada has made some improvement, but things have not gone nearly as well as hoped.As a result, Kumiko Otsuka will step down as CEO this month, ending the founding family’s direct involvement with the chain, and Yamada will probably delist the company and make it a wholly owned subsidiary.Then the real work begins as Otsuka will need an entirely new competitive position if it is to survive but should help Yamada take on <a href="https://www.smartkarma.com/entities/nitori-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:20386:1" rel="noopener">Nitori Holdings (9843 JP)</a> in the core furniture market.

It is almost a year since Yamada Denki (9831 JP) stepped in to save Otsuka Kagu Ltd (8186 JP) from a choice of bankruptcy or acquisition by a major furniture rival. Yamada has made some improvement, but things have not gone nearly as well as hoped.As a result, Kumiko Otsuka will step down as CEO this month, ending the founding family’s direct involvement with the chain, and Yamada will probably delist the company and make it a wholly owned subsidiary.Then the real work begins as Otsuka will need an entirely new competitive position if it is to survive but should help Yamada take on Nitori Holdings (9843 JP) in the core furniture market.

Otsuka Kagu to Be Absorbed by Yamada Denki as Family CEO Departs

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

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.

<div>• BEST &amp; WORST •</div>Our best and worst pair from Tuesday's announcements is consumer electronics retailer <a href="https://www.smartkarma.com/entities/bic-camera-inc" target="_blank" data-smartkarma-citation="entities:11328:1" rel="noopener">Bic Camera (3048 JP)</a> and Japan's largest mall operator <a href="https://www.smartkarma.com/entities/aeon-mall-co-ltd" target="_blank" data-smartkarma-citation="entities:5262:1" rel="noopener">AEON Mall (8905 JP)</a>.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/163/781/original/2020-10-07_06-18-08.png?1602019101" class="editor-image img-responsive" data-smartkarma-image-id="163781"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/163/782/original/2020-10-07_06-18-56.png?1602019156" class="editor-image img-responsive" data-smartkarma-image-id="163782"></figure><div class="content-caption">Source for all charts &amp; tables: Japan Analytics</div><div><hr></div><div>DAILY STATS</div><hr><div>16 Quarterly Results</div><div><ul style="list-style-type: disc;">
<li>Results Score: 63% Positive / 0% Neutral / 37% Negative</li>
<li>Average Results Score Change: +3.4 points</li>
<li>Average % Change in Revenue: +3.4% Quarter YoY / -0.5% Rolling TTM YoY </li>
<li>Average Operating Profit Margin Change: +0.3ppt</li>
<li>Percentage Making Quarterly Losses: 25%</li>
</ul></div><hr><div>11 Annual • 3 Interim Forecasts/Revisions</div><div><ul style="list-style-type: disc;">
<li>Annual Forecast/Revision Score: 45% Positive /18% Neutral / 37% Negative</li>
<li>Interim Forecast/Revision Score Change: 33% Positive / 0% Neutral / 67% Negative</li>
<li>Average Forecast/Revision Score Change: -0.3 point</li>
</ul></div>

• BEST &amp; WORST •Our best and worst pair from Tuesday's announcements is consumer electronics retailer Bic Camera (3048 JP) and Japan's largest mall operator AEON Mall (8905 JP).Source for all charts &amp; tables: Japan AnalyticsDAILY STATS16 Quarterly Results
Results Score: 63% Positive / 0% Neutral / 37% Negative
Average Results Score Change: +3.4 points
Average % Change in Revenue: +3.4% Quarter YoY / -0.5% Rolling TTM YoY 
Average Operating Profit Margin Change: +0.3ppt
Percentage Making Quarterly Losses: 25%
11 Annual • 3 Interim Forecasts/Revisions
Annual Forecast/Revision Score: 45% Positive /18% Neutral / 37% Negative
Interim Forecast/Revision Score Change: 33% Positive / 0% Neutral / 67% Negative
Average Forecast/Revision Score Change: -0.3 point


🇯🇵 JAPAN • Results & Revisions - 10/​​​​​​​06 -  SAN-A, AEON Mall, Consumer Electronics Retailers

Japan

YAMADA DENKI CO., LTD. operates consumer electronic mass sales stores throughout Japan.  The Company sells home appliances, audio & visual systems, office automation equipment, telecommunication equipment, software, and computers. The Company also provides repair services for its merchandises.

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Yamada Denki (9831 JP)

Yamada Denki and Otsuka Kagu Do The Deed - A Quick Merger

Yamada Denki and Otsuka Kagu was a marriage made in... Ariake? OK needed cash. YD provided it. Then provided management. Now taking it out. Safe...

Travis Lundy

E-Commerce Penetration Increasing in All Retail Categories

A review of online market share in all key consumer categories in Japan, with forecasts for e-commerce market share to 2025 –the sharp growth will...

Michael Causton

Japan Retail Full Review 2020-2021: Some Retail Sectors Outperform in a Pandemic

An in-depth update for investors in Japan's retail and consumer space on Japan's retail sector by retail type as well as a review of the impact of...

Michael Causton

Otsuka Kagu to Be Absorbed by Yamada Denki as Family CEO Departs

It makes sense that Yamada Denki is taking control of furniture retailer. Yamada is building a rival to Nitori and Otsuka will help with that. The...

Michael Causton

🇯🇵 JAPAN • Results & Revisions - 10/06 - SAN-A, AEON Mall, Consumer Electronics Retailers

• BEST WORST • Our best and worst pair from Tuesday's announcements is

Campbell Gunn

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52-week Range

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Yamada Denki and Otsuka Kagu Do The Deed - A Quick Merger

Yamada Denki and Otsuka Kagu was a marriage made in... Ariake? OK needed cash. YD provided it. Then provided management. Now taking it out. Safe...

Travis Lundy

E-Commerce Penetration Increasing in All Retail Categories

A review of online market share in all key consumer categories in Japan, with forecasts for e-commerce market share to 2025 –the sharp growth will...

Michael Causton

Japan Retail Full Review 2020-2021: Some Retail Sectors Outperform in a Pandemic

An in-depth update for investors in Japan's retail and consumer space on Japan's retail sector by retail type as well as a review of the impact of...

Michael Causton

Otsuka Kagu to Be Absorbed by Yamada Denki as Family CEO Departs

It makes sense that Yamada Denki is taking control of furniture retailer. Yamada is building a rival to Nitori and Otsuka will help with that. The...

Michael Causton

🇯🇵 JAPAN • Results & Revisions - 10/​​​​​​​06 - SAN-A, AEON Mall, Consumer Electronics Retailers

• BEST WORST • Our best and worst pair from Tuesday's announcements is

Campbell Gunn

🇯🇵 JAPAN • Results & Revisions - 10/06 - SAN-A, AEON Mall, Consumer Electronics Retailers