Equity Analyst, LightStream Research

Supun Walpola

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

In our previous note, <a href="https://www.smartkarma.com/insights/zozo-nice-results-but-it-s-just-a-covid-bump" target="_blank" data-smartkarma-citation="insights:41718" rel="noopener">Zozo – Nice Results but It’s Just a COVID Bump</a>, we suggested that <a href="https://www.smartkarma.com/entities/zozo-inc" target="_blank" data-smartkarma-citation="entities:18379:1" rel="noopener">ZOZO Inc (3092 JP)</a>'s strong 1Q results could be a temporary bump due to the stay-at-home demand, and the company could quickly return to its decelerating growth post-lockdowns. ZOZO's 2Q results show early signs of this happening and we expect a correction over the next few quarters as the impact of the stay-at-home demand further subsides and potentially weak winter sales are booked.

In our previous note, Zozo – Nice Results but It’s Just a COVID Bump, we suggested that ZOZO Inc (3092 JP)'s strong 1Q results could be a temporary bump due to the stay-at-home demand, and the company could quickly return to its decelerating growth post-lockdowns. ZOZO's 2Q results show early signs of this happening and we expect a correction over the next few quarters as the impact of the stay-at-home demand further subsides and potentially weak winter sales are booked.

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. 

Another case of hubris in Japanese e-commerce? Shoplist operator, Crooz, made a big splash about its plans to build wa ¥100 billion fashion platform three years ago but made a thumping loss in 2018 and then sales actually fell last year, proving just how hard it is for smaller e-commerce platforms to shine in the shadow of the big three.

Another case of hubris in Japanese e-commerce? Shoplist operator, Crooz, made a big splash about its plans to build wa ¥100 billion fashion platform three years ago but made a thumping loss in 2018 and then sales actually fell last year, proving just how hard it is for smaller e-commerce platforms to shine in the shadow of the big three.

Only a marginal QoQ decrease in e-commerce web traffic suggests that similar to 1Q, <a href="https://www.smartkarma.com/entities/z-holdings-corp" target="_blank" data-smartkarma-citation="entities:19603:1" rel="noopener">Z Holdings (4689 JP)</a>’s 2Q results are also likely to be quite strong. Nevertheless, we do not believe this growth to be sustainable, and we continue to question Z’s aggressive growth strategy in a maturing Japanese e-commerce market.However, given the possibility of compelling near-term results, we do not expect an immediate correction, rather, we expect the correction to be more gradual over the next 12 months when the risks that we have highlighted below start materialising.

Only a marginal QoQ decrease in e-commerce web traffic suggests that similar to 1Q, Z Holdings (4689 JP)’s 2Q results are also likely to be quite strong. Nevertheless, we do not believe this growth to be sustainable, and we continue to question Z’s aggressive growth strategy in a maturing Japanese e-commerce market.However, given the possibility of compelling near-term results, we do not expect an immediate correction, rather, we expect the correction to be more gradual over the next 12 months when the risks that we have highlighted below start materialising.

Z Holdings [Alt Data]: Web Traffic Hints Strong 2Q Shopping Growth but Unlikely to Be Sustainable

Index Rebal Trades & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Index Rebal Trades & Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Event-Driven

<a href="https://www.smartkarma.com/entities/sre-holdings-corp" target="_blank" data-smartkarma-citation="entities:29672:1" rel="noopener">SRE Holdings Corp (2980 JP)</a> announced (<a href="https://ssl4.eir-parts.net/doc/2980/tdnet/1884363/00.pdf" target="_blank" rel="noopener">J-only</a>) today after market close, they have applied to move from the Mothers Section to the First Section of the Tokyo Stock Exchange. This company was formerly known as Sony Real Estate Corporation and was a consolidated subsidiary of <a href="https://www.smartkarma.com/entities/sony-corp" target="_blank" data-smartkarma-citation="entities:563:1" rel="noopener">Sony Corp (6758 JP)</a>. The stock has been listed since December 2019 in the Mothers Section and at present, <a href="https://www.smartkarma.com/entities/sony-corp" target="_blank" data-smartkarma-citation="entities:563:1" rel="noopener">Sony Corp (6758 JP)</a> and <a href="https://www.smartkarma.com/entities/z-holdings-corp" target="_blank" data-smartkarma-citation="entities:19603:1" rel="noopener">Z Holdings (4689 JP)</a> hold <a href="https://www2.tse.or.jp/disc/29800/140120200731471730.pdf" target="_blank" rel="noopener">42.8% and 24.3%</a> respectively.If the company qualifies for a TSE1 move that will trigger an Inclusion into the TOPIX Index. In this insight, we take a look at the indicative timeline of events and the trading opportunities between now and the potential Inclusion date.

SRE Holdings Corp (2980 JP) announced (J-only) today after market close, they have applied to move from the Mothers Section to the First Section of the Tokyo Stock Exchange. This company was formerly known as Sony Real Estate Corporation and was a consolidated subsidiary of Sony Corp (6758 JP). The stock has been listed since December 2019 in the Mothers Section and at present, Sony Corp (6758 JP) and Z Holdings (4689 JP) hold 42.8% and 24.3% respectively.If the company qualifies for a TSE1 move that will trigger an Inclusion into the TOPIX Index. In this insight, we take a look at the indicative timeline of events and the trading opportunities between now and the potential Inclusion date. 

TOPIX Inclusion Pre-Event Trade (2980 JP): SRE Holdings

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

Thematic (Sector/Industry)

• BEST &amp; WORST •Our 'best' and 'worst' pairing from Wednesday's announcements is E-commerce office supplies company <a href="https://www.smartkarma.com/entities/askul-corp" target="_blank" data-smartkarma-citation="entities:16807:1" rel="noopener">Askul (2678 JP)</a> and <a href="https://www.smartkarma.com/entities/east-japan-railway-co" target="_blank" data-smartkarma-citation="entities:14271:1" rel="noopener">East Japan Railway (9020 JP)</a>.  <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/159/492/original/2020-09-17_06-14-59.png?1600290917" class="editor-image img-responsive" data-smartkarma-image-id="159492"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/159/493/original/2020-09-17_06-15-48.png?1600290962" class="editor-image img-responsive" data-smartkarma-image-id="159493"></figure><div class="content-caption">Source for all charts &amp; tables: Japan Analytics</div>DAILY STATS - Only one company, <a href="https://www.smartkarma.com/entities/crossfor-co-ltd" target="_blank" data-smartkarma-citation="entities:29158:1" rel="noopener">Crossfor (7810 JP)</a> had a negative Results Score, while only four of fourteen Forecast/Revision Scores were positive. The average change in Forecast/Revision Score was -8.9 points.

• BEST &amp; WORST •Our 'best' and 'worst' pairing from Wednesday's announcements is E-commerce office supplies company Askul (2678 JP) and East Japan Railway (9020 JP).  Source for all charts &amp; tables: Japan AnalyticsDAILY STATS - Only one company, Crossfor (7810 JP) had a negative Results Score, while only four of fourteen Forecast/Revision Scores were positive. The average change in Forecast/Revision Score was -8.9 points.

🇯🇵 JAPAN • Results & Revisions 09/​​​​​​​​16 - Askul Begs a Question & East Japan [De]Rail[ed]way

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)

ZOZO: Return to Collapsing Growth

ZOZO's 2Q results show early signs of returning to decelerating growth. We expect a correction over the next few quarters as the impact of the stay...

Supun Walpola

Shoplist Promise Withers on the Web

Crooz promised sales of ¥100 billion within a few years and a long-term target of a ¥1 trillion capitalisation. Its early promise has withered...

Michael Causton

Z Holdings [Alt Data]: Web Traffic Hints Strong 2Q Shopping Growth but Unlikely to Be Sustainable

Only a marginal QoQ decrease in e-commerce web traffic suggests that similar to 1Q, Z Holdings' 2Q results are also likely to be quite strong, but...

Supun Walpola

TOPIX Inclusion Pre-Event Trade (2980 JP): SRE Holdings

$2980

Janaghan Jeyakumar, CFA

🇯🇵 JAPAN • Results & Revisions 09/16 - Askul Begs a Question & East Japan [De]Rail[ed]way

• BEST & WORST • Our 'best' and 'worst' pairing from Wedrday's announcements is food and drink retailer Life (8194 JP) and parking lot...

Campbell Gunn

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52-week Range

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ZOZO: Return to Collapsing Growth

ZOZO's 2Q results show early signs of returning to decelerating growth. We expect a correction over the next few quarters as the impact of the stay...

Supun Walpola

Shoplist Promise Withers on the Web

Crooz promised sales of ¥100 billion within a few years and a long-term target of a ¥1 trillion capitalisation. Its early promise has withered...

Michael Causton

Z Holdings [Alt Data]: Web Traffic Hints Strong 2Q Shopping Growth but Unlikely to Be Sustainable

Only a marginal QoQ decrease in e-commerce web traffic suggests that similar to 1Q, Z Holdings' 2Q results are also likely to be quite strong, but...

Supun Walpola

TOPIX Inclusion Pre-Event Trade (2980 JP): SRE Holdings

$2980

Janaghan Jeyakumar, CFA

🇯🇵 JAPAN • Results & Revisions 09/​​​​​​​​16 - Askul Begs a Question & East Japan [De]Rail[ed]way

• BEST & WORST • Our 'best' and 'worst' pairing from Wedrday's announcements is food and drink retailer Life (8194 JP) and parking lot...

Campbell Gunn

🇯🇵 JAPAN • Results & Revisions 09/16 - Askul Begs a Question & East Japan [De]Rail[ed]way