'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.

Thematic (Sector/Industry)

<p style="text-align: center;"><strong>• RELATIVE PRICE SCORE OUTLIERS •</strong></p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/183/304/original/2021-01-18_07-21-17.png?1611015356" class="editor-image img-responsive" data-smartkarma-image-id="183304"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/183/305/original/2021-01-19_09-18-35.png?1611015525" class="editor-image img-responsive" data-smartkarma-image-id="183305"></figure><div class="content-caption">Source for all charts &amp; tables: Japan Analytics</div></section><p><strong>POLES APART</strong><strong>&amp; ECHOES OF 2000</strong>- As the Japanese equity market continues to rise the 'spread' between the percentage of listed companies that are OverSold (Relative Price Score &lt;-2.0) and those that are OverBought (RPS &gt; 4.0) remains at extreme levels as does the spread in terms of market weight. 7.2% of listed companies are Oversold; while 2.2% are OverBought, but the latter account for 13.7% of market value; the former just 5.4%. The last time both pairs of metrics were at these levels was the 2000 technology bubble.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/183/321/original/2021-01-19_10-25-51.png?1611019564" class="editor-image img-responsive" data-smartkarma-image-id="183321"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/183/323/original/2021-01-19_10-27-10.png?1611019660" class="editor-image img-responsive" data-smartkarma-image-id="183323"></figure></section><p><strong>BLOW OUT</strong> - As was the case in 2000, the total number of Sectors either OverBought or Oversold is also at an extreme level having peaked at 13 in December. This number has been exceeded only twice in the last fifty years  - in December 1999 (16) and February 2000 (14).   </p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/183/363/original/2021-01-19_12-45-46.png?1611027961" class="editor-image img-responsive" data-smartkarma-image-id="183363"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/183/367/original/2021-01-19_13-09-06.png?1611029374" class="editor-image img-responsive" data-smartkarma-image-id="183367"></figure></section><div><p>In the<strong> DETAIL</strong> section below, we provide an update on  Sector, Peer Group and individual company Relative Price Score trends and outliers and make some stock-specific recommendations.</p></div><div><div><div class="content-highlight"><p><strong>THE JAPAN ANALYTICS RELATIVE PRICE SCORE</strong> -  The Relative Price Score (RPS) is a measure of price performance relative to TOPIX calculated by comparing the current deviation with the mean absolute deviation of monthly and daily relative share prices over the last 28 years and 24 months, respectively. As all companies on a comparable scale, 'Overbought' and 'Oversold' outliers and short-term changes in scoring can offer some trading opportunities. The data for all 3,919 currently-listed Companies is cap-weight-aggregated into Relative Price Scores for our 328 Peer Groups and 30 Sectors. The Overbought and Oversold outlier 'thresholds are set' at +4 &amp; -2 for Companies, +3 &amp; -1.5 for Peer Groups and +2 and -1 for Sectors, respectively. These thresholds equate with the top and bottom percentiles of over 3.2 million observations.</p></div></div></div>

• RELATIVE PRICE SCORE OUTLIERS •Source for all charts &amp; tables: Japan AnalyticsPOLES APART&amp; ECHOES OF 2000- As the Japanese equity market continues to rise the 'spread' between the percentage of listed companies that are OverSold (Relative Price Score &lt;-2.0) and those that are OverBought (RPS &gt; 4.0) remains at extreme levels as does the spread in terms of market weight. 7.2% of listed companies are Oversold; while 2.2% are OverBought, but the latter account for 13.7% of market value; the former just 5.4%. The last time both pairs of metrics were at these levels was the 2000 technology bubble.BLOW OUT - As was the case in 2000, the total number of Sectors either OverBought or Oversold is also at an extreme level having peaked at 13 in December. This number has been exceeded only twice in the last fifty years  - in December 1999 (16) and February 2000 (14).   In the DETAIL section below, we provide an update on  Sector, Peer Group and individual company Relative Price Score trends and outliers and make some stock-specific recommendations.THE JAPAN ANALYTICS RELATIVE PRICE SCORE -  The Relative Price Score (RPS) is a measure of price performance relative to TOPIX calculated by comparing the current deviation with the mean absolute deviation of monthly and daily relative share prices over the last 28 years and 24 months, respectively. As all companies on a comparable scale, 'Overbought' and 'Oversold' outliers and short-term changes in scoring can offer some trading opportunities. The data for all 3,919 currently-listed Companies is cap-weight-aggregated into Relative Price Scores for our 328 Peer Groups and 30 Sectors. The Overbought and Oversold outlier 'thresholds are set' at +4 &amp; -2 for Companies, +3 &amp; -1.5 for Peer Groups and +2 and -1 for Sectors, respectively. These thresholds equate with the top and bottom percentiles of over 3.2 million observations.

🇯🇵 JAPAN • January Relative Price Scores -  Actionable Mean Reversion Trades

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>Late night 1 July, <a href="https://www.smartkarma.com/entities/ly-corp" target="_blank" data-smartkarma-citation="entities:19603:1" rel="noopener">LY (4689 JP)</a> released a document showing their hand on the <a href="https://www.smartkarma.com/entities/kakaku-com-inc" target="_blank" data-smartkarma-citation="entities:7408:1" rel="noopener">Kakaku.com Inc (2371 JP)</a> TOB they proposed. It is astutely structured, in price and context.</li>
<li>It's complicated because it expects different possibilities with two headline numbers - ¥3,384/share if KDDI doesn't sign up, and ¥3,500/share if they do. That's a bit misleading.</li>
<li>They expect a Kakaku response within 4 weeks and a deal launch by end-Sep. The big question here is if EQT+DG stump up to match, or if they play hardball. </li>
</ul>


Late night 1 July, LY (4689 JP) released a document showing their hand on the Kakaku.com Inc (2371 JP) TOB they proposed. It is astutely structured, in price and context.
It's complicated because it expects different possibilities with two headline numbers - ¥3,384/share if KDDI doesn't sign up, and ¥3,500/share if they do. That's a bit misleading.
They expect a Kakaku response within 4 weeks and a deal launch by end-Sep. The big question here is if EQT+DG stump up to match, or if they play hardball. 


[Japan M&A] Bain/LY Show Their Cards on Kakaku.com (They're Good Cards Brent)

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.

<ul>
<li>Bain/<a href="https://www.smartkarma.com/entities/ly-corp" target="_blank" data-smartkarma-citation="entities:19603:1" rel="noopener">LY (4689 JP)</a>’s preconditional binding offer for <a href="https://www.smartkarma.com/entities/kakaku-com-inc" target="_blank" data-smartkarma-citation="entities:7408:1" rel="noopener">Kakaku.com Inc (2371 JP)</a> is at JPY3,384, a 12.8% premium to EQT’s JPY3,000 offer. If KDDI provides an irrevocable, it is JPY3,500.</li>
<li>Bain/LY expect the Board to decide whether to recommend the proposal around mid-to-late July. The Bain/LY offer will automatically trigger a 10-day extension of the EQT offer.</li>
<li>The probability of a bidding war is low, as the Bain/LY offer represents an all-time high and EQT lacks a strong partner to support one. </li>
</ul>


Bain/LY (4689 JP)’s preconditional binding offer for Kakaku.com Inc (2371 JP) is at JPY3,384, a 12.8% premium to EQT’s JPY3,000 offer. If KDDI provides an irrevocable, it is JPY3,500.
Bain/LY expect the Board to decide whether to recommend the proposal around mid-to-late July. The Bain/LY offer will automatically trigger a 10-day extension of the EQT offer.
The probability of a bidding war is low, as the Bain/LY offer represents an all-time high and EQT lacks a strong partner to support one. 


Kakaku.com (2371 JP): Bain/LY’s Binding Offer May Get the Job Done

Pan-Asia Tactical Market Calls (Quant-Driven), MRM Research

Nico Rosti

Pan-Asia Tactical Market Calls (Quant-Driven)

MRM Research

Quantitative Research

Equity Derivatives

<ul>
<li>While the bidding war for <a href="https://www.smartkarma.com/entities/kakaku-com-inc" target="_blank" data-smartkarma-citation="entities:7408:1" rel="noopener">Kakaku.com Inc (2371 JP)</a> goes towards the showdown, the stock remains semi-paralized since early June (right when EQT and Bain/LY started to compete).</li>
<li>In this insight we want to evaluate the next possible trend direction and targets, using our quantitative forecast model.</li>
<li>We have to say upfront that<strong> the upside looks limited</strong> (unless the bidders formally structure binding offers above current market levels).</li>
</ul>


While the bidding war for Kakaku.com Inc (2371 JP) goes towards the showdown, the stock remains semi-paralized since early June (right when EQT and Bain/LY started to compete).
In this insight we want to evaluate the next possible trend direction and targets, using our quantitative forecast model.
We have to say upfront that the upside looks limited (unless the bidders formally structure binding offers above current market levels).


Kakaku.com (2371 JP) Tactical Outlook Ahead of Bain/LY Counter-Offer: Pop or Drop?

<ul>
<li>On 4 June, the <a href="https://www.nikkei.com/article/DGXZQOUC04CCA0U6A600C2000000/" target="_blank" rel="noopener">Nikkei reported</a> that <a href="https://www.smartkarma.com/entities/digital-garage-inc" target="_blank" data-smartkarma-citation="entities:13747:1" rel="noopener">Digital Garage (4819 JP)</a> will not accept Bain/<a href="https://www.smartkarma.com/entities/ly-corp" target="_blank" data-smartkarma-citation="entities:19603:1" rel="noopener">LY (4689 JP)</a>'s higher offer for <a href="https://www.smartkarma.com/entities/kakaku-com-inc" target="_blank" data-smartkarma-citation="entities:7408:1" rel="noopener">Kakaku.com Inc (2371 JP)</a>, as it is not feasible.</li>
<li>Digital Garage’s reasoning is not credible. The most likely reason is that, unlike the EQT offer, Bain/LY are not allowing reinvestment to take a 20% stake in the offeror.</li>
<li>While a setback, Bain/LY can succeed if it secures support from <a href="https://www.smartkarma.com/entities/kddi-corp" target="_blank" data-smartkarma-citation="entities:639:1" rel="noopener">KDDI Corp (9433 JP)</a> and Oasis. Irrespective of Digital Garage’s stance, EQT will likely need to bump to succeed.</li>
</ul>


On 4 June, the Nikkei reported that Digital Garage (4819 JP) will not accept Bain/LY (4689 JP)'s higher offer for Kakaku.com Inc (2371 JP), as it is not feasible.
Digital Garage’s reasoning is not credible. The most likely reason is that, unlike the EQT offer, Bain/LY are not allowing reinvestment to take a 20% stake in the offeror.
While a setback, Bain/LY can succeed if it secures support from KDDI Corp (9433 JP) and Oasis. Irrespective of Digital Garage’s stance, EQT will likely need to bump to succeed.


Kakaku.com (2371 JP): Digital Garage Moves to Thwart Bain/LY

Japan

LY Corporation operates as an internet search engine "Yahoo! JAPAN". The Company provides electronic commerce and settlement finance services for small medium enterprises and individuals. LY also operates media business including search linked advertising and display advertising services.

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LY (4689 JP)

🇯🇵 JAPAN • January Relative Price Scores - Actionable Mean Reversion Trades

As the Japanese equity market continues to rise the 'spread' between the percentage of listed companies that are OverSold and those that are...

Campbell Gunn

[Japan M&A] Bain/LY Show Their Cards on Kakaku.com (They're Good Cards Brent)

Bain+LY have made a bid and Kakaku finds it is a "Qualified Competing Tender Offer Proposal" which means they have asked EQT to match Bain's bid....

Travis Lundy

Kakaku.com (2371 JP): Bain/LY’s Binding Offer May Get the Job Done

The probability of a bidding war is low, as the Bain/LY offer represents an all-time high and EQT lacks a strong partner to support one.

Arun George

Kakaku.com (2371 JP) Tactical Outlook Ahead of Bain/LY Counter-Offer: Pop or Drop?

The bidding war for Kakaku.com has left the price stagnant since June. We see limited short-term upside (unless the bidders increase their offers)....

Nico Rosti

Kakaku.com (2371 JP): Digital Garage Moves to Thwart Bain/LY

The Nikkei reports that Bain/LY’s binding offer is around JPY3,500, a 16.7% premium to EQT’s JPY3,000 offer and a 3.2% premium to the last close....

Arun George

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