Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

NTT (Nippon Telegraph & Telephone) / Event-Driven

<ul>
<li>The April-June TSE FFW Methodology Revision moves favour certain sectors over others. There is nearly ¥500bn of telecom stocks to buy with 60+% of that in four names.</li>
<li>Other factors may support some of the names as well. </li>
<li>There is enough excess buying to warrant trading tilts and keeping fundamental positions even as forward earnings multiples have expanded to multi-year highs.</li>
</ul>


The April-June TSE FFW Methodology Revision moves favour certain sectors over others. There is nearly ¥500bn of telecom stocks to buy with 60+% of that in four names.
Other factors may support some of the names as well. 
There is enough excess buying to warrant trading tilts and keeping fundamental positions even as forward earnings multiples have expanded to multi-year highs.


Strong Telecom Flows in TOPIX FFW Transition Months

Equity Analyst, LightStream Research

Oshadhi Kumarasiri

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

<ul>
<li>Among many e-commerce names, <a href="https://www.smartkarma.com/entities/monotaro-co-ltd" target="_blank" data-smartkarma-citation="entities:15441:1" rel="noopener">MonotaRO Co Ltd (3064 JP)</a> is one of the most promising with operating profitability predicted to improve by 200 bps to 14.0% by 2023.</li>
<li>Unlike many e-commerce players, the company doesn’t strain itself financially while pursuing revenue growth through expansion.</li>
<li>At 35.8x OP, MonotaRo is not cheap to be outright bullish. However, it is a reasonable long hedge to allow you to short a lot of other names in e-commerce.</li>
</ul>


Among many e-commerce names, MonotaRO Co Ltd (3064 JP) is one of the most promising with operating profitability predicted to improve by 200 bps to 14.0% by 2023.
Unlike many e-commerce players, the company doesn’t strain itself financially while pursuing revenue growth through expansion.
At 35.8x OP, MonotaRo is not cheap to be outright bullish. However, it is a reasonable long hedge to allow you to short a lot of other names in e-commerce.


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. 

<ul>
<li>LINE Gift has doubled its user base to 20 million in a year, and added merchants like Seven Eleven, but isn’t content with this. </li>
<li>It has only just integrated with Zozo and Yahoo Shopping and expects these new partners, as well as new TV ad campaigns, to deliver a major increase in user numbers.</li>
<li>The collaboration with Z Holdings' through Yahoo Shopping and Zozo shows the potential for leveraging the groups' huge user base.</li>
</ul>


LINE Gift has doubled its user base to 20 million in a year, and added merchants like Seven Eleven, but isn’t content with this. 
It has only just integrated with Zozo and Yahoo Shopping and expects these new partners, as well as new TV ad campaigns, to deliver a major increase in user numbers.
The collaboration with Z Holdings' through Yahoo Shopping and Zozo shows the potential for leveraging the groups' huge user base.


<ul>
<li>LINE Gift is fast becoming the most popular way to send gifts of all kinds, even traditional gifts sent at mid-year and New Year. </li>
<li>This is good news for <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> and Softbank, as well as LINE, as the gifting platform acts as a unifying point for their disparate e-commerce platforms.</li>
<li>Although the corporate gift market is in decline, personal gift giving remains a growth market, offering further upside.</li>
</ul>


LINE Gift is fast becoming the most popular way to send gifts of all kinds, even traditional gifts sent at mid-year and New Year. 
This is good news for Z Holdings (4689 JP) and Softbank, as well as LINE, as the gifting platform acts as a unifying point for their disparate e-commerce platforms.
Although the corporate gift market is in decline, personal gift giving remains a growth market, offering further upside.


<ul>
<li>
<a href="https://www.smartkarma.com/entities/rakuten-inc" target="_blank" data-smartkarma-citation="entities:31:1" rel="noopener">Rakuten Inc (4755 JP)</a> is currently trading 20% below the bottom end of the long term trend channel.</li>
<li>With consensus FY+2 EBITDA at ¥309.8bn, Rakuten’s current EV/EBITDA is at an all-time low of 1.7x compared to the historical median and peak of 9.0x and 16.1x respectively.</li>
<li>Based on the consensus FY+2 EBITDA and EV trend, we feel the fair valuation of Rakuten could be somewhere around ¥3,000bn EV.</li>
</ul>



Rakuten Inc (4755 JP) is currently trading 20% below the bottom end of the long term trend channel.
With consensus FY+2 EBITDA at ¥309.8bn, Rakuten’s current EV/EBITDA is at an all-time low of 1.7x compared to the historical median and peak of 9.0x and 16.1x respectively.
Based on the consensus FY+2 EBITDA and EV trend, we feel the fair valuation of Rakuten could be somewhere around ¥3,000bn EV.


Rakuten: At a New Forward EV/EBITDA Bottom

Japan

ZOZO Inc operates internet shopping sites for apparel.  The Company also provides communication services relating to apparel such as blogs by fashion moguls and internet chat room for users.

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ZOZO Inc (3092 JP)

Strong Telecom Flows in TOPIX FFW Transition Months

The Telecom Sector is the biggest sector beneficiary of TOPIX FFW flows over the next few months. Still bullish NTT vs the others near-term. All...

Travis Lundy

MonotaRo: A Rare Winner in E-Commerce

While most e-commerce players are fighting each other and the e-commerce arms of traditional businesses, MonotaRo operates in a niche with very...

Oshadhi Kumarasiri

LINE Gift: The Next Stage

LINE Gift has doubled its user base to 20 million in a year but has plans to grow much bigger and is a great example of the potential to leverage...

Michael Causton

LINE Gift up 330% in 2021

LINE Gift is growing faster than any other e-commerce platform and is testament to the potential synergies across Z Holdings. Much more can be done...

Michael Causton

Rakuten: At a New Forward EV/EBITDA Bottom

After falling 6% following Q4 earnings and 39% since March 2021 to ¥945 per share, Rakuten seems an attractive bet on the long side in the Japanese...

Oshadhi Kumarasiri

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