Moving away from the sordid details on Vision Fund’s inner workings we tagged yesterday, we though there were a couple items out of the US worth mentioning. First, portfolio company DoorDash has confidentially filed for an IPO…we think the timing has more to do with last week’s bull market than this week’s Coronavirus reversal but the lackluster record of IPOs for loss-making companies likely means the chances of a valuation bump for Softbank as we saw before Uber and WeWork are less. Second, Vir Biotech shares surged another 72% today, enough to outpace erosion in the Uber value and keep Vision Fund performance flat in a day markets fell 3-4%. Monetisation of part or all of that stake would be positive for funding Vision Fund 2 and flattering to the P&L.
Despite the fanfare only one Chinese company listed (and raised money) in London after the announcement of the London Shanghai Connect. There have been no listing of Chinese Depository Receipts by companies listed in London. This is starting to look like a white elephant. We have reviewed the successful Depository Receipt programmes around the world and conclude that the pull to issue Chinese Depository Receipts is only weak at present. We do think that companies are reviewing the option of issuing CDRs but there is no intense pressure to do so. By following the factors we have identified, authorities and exchanges could build a more successful programme.
You are currently reading Executive Summaries of Smartkarma Insights.
Want to read on? Explore our tailored Smartkarma Solutions.
Moving away from the sordid details on Vision Fund’s inner workings we tagged yesterday, we though there were a couple items out of the US worth mentioning. First, portfolio company DoorDash has confidentially filed for an IPO…we think the timing has more to do with last week’s bull market than this week’s Coronavirus reversal but the lackluster record of IPOs for loss-making companies likely means the chances of a valuation bump for Softbank as we saw before Uber and WeWork are less. Second, Vir Biotech shares surged another 72% today, enough to outpace erosion in the Uber value and keep Vision Fund performance flat in a day markets fell 3-4%. Monetisation of part or all of that stake would be positive for funding Vision Fund 2 and flattering to the P&L.
Despite the fanfare only one Chinese company listed (and raised money) in London after the announcement of the London Shanghai Connect. There have been no listing of Chinese Depository Receipts by companies listed in London. This is starting to look like a white elephant. We have reviewed the successful Depository Receipt programmes around the world and conclude that the pull to issue Chinese Depository Receipts is only weak at present. We do think that companies are reviewing the option of issuing CDRs but there is no intense pressure to do so. By following the factors we have identified, authorities and exchanges could build a more successful programme.
It is a very hand-wave-y announcement with comments about cost pull, resource allocation, efficiencies, working towards the public good by constant improvement of social infrastructure, and then at the very end…
The two companies will proceed with the discussions on the specific terms of the alliance while complying with the antimonopoly law and other relevant laws and regulations.
The history here – the reason why that last line is needed – tells you something about what this announcement means.
You are currently reading Executive Summaries of Smartkarma Insights.
Want to read on? Explore our tailored Smartkarma Solutions.
The main subject of this report is as follows: “How Long Does It Take To Change One’s Behavior? Why Does This Matter in the Post COVID-19 World?” Certainly, COVID-19 will change the way people behave. The longer that COVID-19 lasts and the longer that millions of people are under lockdown, their behaviors will change further, potentially making them into a habit and this would have a tremendous impact on the global economy.
We are specifically interested in this topic because as millions of people around the world undergo “lockdown” for a period of one to three months, this could have an enormous behavior change once this lockdown period ends.
The change in behavior patterns (especially related to consumer spending) in the post COVID-19 world would also have a big impact on whether the global economy/stock market can turn around quickly (such as after the Great Financial Recession in 2008/2009) or whether the turnaround lasts longer (such as after the Internet tech/crash lasting for nearly 3 years from 2000 to 2002).
Friday 27 March, after the close, activist-targeted name Katakura Industries (3001 JP)announced, with its yuho and annual meeting, a buyback of up to 2.5mm shares (7.1% of shares out) for up to JPY 2 billion.
The buyback will be conducted between 1 April 2020 and 31 March 2021.
There is a minor detail unspecified in the announcement (which is often specified) and the combination of the shareholder structure and trading patterns tells you what you need to know.
We argued in Lack of US market & macro volatility both reassuring and troubling that “the market’s willingness to look through domestic political and geopolitical events suggests that only a significant exogenous or endogenous shock currently beyond markets’ radar screens (an “unknown unknown”) is likely to really move the needle”.
That unknown unknown, a “black swan” event, has turned out to be a global viral pandemic on a scale not seen since the Spanish influenza pandemic of 1918-1919.
The coronavirus outbreak is now three months old but governments, central banks, corporates and households still face a critical known unknown, in our view, namely the total number people who had the coronavirus, acquired immunity and are no longer contagious and who currently carry the coronavirus and are thus potentially infectious.
This includes people who have not been clinically tested – more than 99.9% of the world’s population. We estimate that only 3.3 million people (4 out of every 10,000) have been tested for coronavirus, although testing data are patchy and often released with a lag. The main reason so few people have been tested is the still limited capacity to rapidly and reliably test a very large number of people.
In econometric terms that is a very small sample from which to extrapolate country-wide trends. One implication is that the actual mortality rate may be far smaller than reported.
The high number of tests-per-capita conducted in countries such as South Korea has been posited as an explanation for their relatively low number of coronavirus-related deaths. However, other factors have likely been at play, including the timing of clinical tests, demographics, national health systems’ capacity to treat infected patients and the timing and efficacy of self-isolation and self-distancing policies, including country “lockdowns”.
For now what policy-makers know they don’t know will likely continue to influence country-specific containment plans, as well as domestic measures to support economic growth while ensuring the functioning of financial markets.
As the epicentre of the coronavirus pandemic shifts from Europe to the US and the number of deaths and infection cases reach new highs, the costs of the crisis are beginning to be revealed. In Singapore economic activity contracted in 1Q20 at a faster pace than at the worst point during the GFC while Chinese industrial profits were down 38% in the first two months of the year. Despite this we are cautiously optimistic that Asian economic activity led by China will pick-up in the second half of the year. We are much more worried about advanced economies where policy mis-management threatens to tip the world economy into recession.
Where are the weakest points in the global economy that could send activity into a tailspin and threaten the banking system? Italy would seem to be the prime candidate for collapse. The economy was already flirting with recession but will definitely enter one when first quarter 2020 data are published. Weak economies are always the most vulnerable when an external shock hits. Italy’s banks are bound to require a bailout from either the government or the ECB – neither of which are well placed to provide the capital.
You are currently reading Executive Summaries of Smartkarma Insights.
Want to read on? Explore our tailored Smartkarma Solutions.
Friday 27 March, after the close, activist-targeted name Katakura Industries (3001 JP)announced, with its yuho and annual meeting, a buyback of up to 2.5mm shares (7.1% of shares out) for up to JPY 2 billion.
The buyback will be conducted between 1 April 2020 and 31 March 2021.
There is a minor detail unspecified in the announcement (which is often specified) and the combination of the shareholder structure and trading patterns tells you what you need to know.
We argued in Lack of US market & macro volatility both reassuring and troubling that “the market’s willingness to look through domestic political and geopolitical events suggests that only a significant exogenous or endogenous shock currently beyond markets’ radar screens (an “unknown unknown”) is likely to really move the needle”.
That unknown unknown, a “black swan” event, has turned out to be a global viral pandemic on a scale not seen since the Spanish influenza pandemic of 1918-1919.
The coronavirus outbreak is now three months old but governments, central banks, corporates and households still face a critical known unknown, in our view, namely the total number people who had the coronavirus, acquired immunity and are no longer contagious and who currently carry the coronavirus and are thus potentially infectious.
This includes people who have not been clinically tested – more than 99.9% of the world’s population. We estimate that only 3.3 million people (4 out of every 10,000) have been tested for coronavirus, although testing data are patchy and often released with a lag. The main reason so few people have been tested is the still limited capacity to rapidly and reliably test a very large number of people.
In econometric terms that is a very small sample from which to extrapolate country-wide trends. One implication is that the actual mortality rate may be far smaller than reported.
The high number of tests-per-capita conducted in countries such as South Korea has been posited as an explanation for their relatively low number of coronavirus-related deaths. However, other factors have likely been at play, including the timing of clinical tests, demographics, national health systems’ capacity to treat infected patients and the timing and efficacy of self-isolation and self-distancing policies, including country “lockdowns”.
For now what policy-makers know they don’t know will likely continue to influence country-specific containment plans, as well as domestic measures to support economic growth while ensuring the functioning of financial markets.
As the epicentre of the coronavirus pandemic shifts from Europe to the US and the number of deaths and infection cases reach new highs, the costs of the crisis are beginning to be revealed. In Singapore economic activity contracted in 1Q20 at a faster pace than at the worst point during the GFC while Chinese industrial profits were down 38% in the first two months of the year. Despite this we are cautiously optimistic that Asian economic activity led by China will pick-up in the second half of the year. We are much more worried about advanced economies where policy mis-management threatens to tip the world economy into recession.
Where are the weakest points in the global economy that could send activity into a tailspin and threaten the banking system? Italy would seem to be the prime candidate for collapse. The economy was already flirting with recession but will definitely enter one when first quarter 2020 data are published. Weak economies are always the most vulnerable when an external shock hits. Italy’s banks are bound to require a bailout from either the government or the ECB – neither of which are well placed to provide the capital.
THURSDAY 26th MARCH – Yesterday saw six companies reporting results, of which only two –Optoelectronics (6664 JP) and Fukushima Printing (7870 JP) – has positive scores. Seventeen companies revised their forecasts, and one made initial forecasts. In terms of our scoring system, the ratio of positive to negative ‘scores’ was 5:11, with JXTG (5020 JP) being the largest negative-scoring company and Maxvalu Nishinihon (8287 JP) being unchanged. Of the six companies announcing results, only two had positive outcomes.
Source • NHK
GOOD NEWS • BAD NEWS – The good news is that the increase in disclosed cases of Covid-19 outside Tokyo has not increased significantly; Tokyo, however, has seen an alarming rise. Forty-seven new cases were confirmed yesterday, taking the total in the metropolis to 259. Tokyo will implement a ‘stay-at-home-policy’ this weekend. Surrounding prefectures have encouraged their residents not to travel into the city over the weekend. Amusement parks that had reopened last weekend will now close their doors.
ODD NEWS – In other ‘news’, the Sapporo Board of Education is debating whether to allow students to wear face masks that are not white. In the past, many schools have mandated that children can only have black hair, forcing some children whose hair is naturally lighter to dye their hair black to conform to the ‘norm’.
You are currently reading Executive Summaries of Smartkarma Insights.
Want to read on? Explore our tailored Smartkarma Solutions.
Despite the fanfare only one Chinese company listed (and raised money) in London after the announcement of the London Shanghai Connect. There have been no listing of Chinese Depository Receipts by companies listed in London. This is starting to look like a white elephant. We have reviewed the successful Depository Receipt programmes around the world and conclude that the pull to issue Chinese Depository Receipts is only weak at present. We do think that companies are reviewing the option of issuing CDRs but there is no intense pressure to do so. By following the factors we have identified, authorities and exchanges could build a more successful programme.
It is a very hand-wave-y announcement with comments about cost pull, resource allocation, efficiencies, working towards the public good by constant improvement of social infrastructure, and then at the very end…
The two companies will proceed with the discussions on the specific terms of the alliance while complying with the antimonopoly law and other relevant laws and regulations.
The history here – the reason why that last line is needed – tells you something about what this announcement means.
You are currently reading Executive Summaries of Smartkarma Insights.
Want to read on? Explore our tailored Smartkarma Solutions.
It is a very hand-wave-y announcement with comments about cost pull, resource allocation, efficiencies, working towards the public good by constant improvement of social infrastructure, and then at the very end…
The two companies will proceed with the discussions on the specific terms of the alliance while complying with the antimonopoly law and other relevant laws and regulations.
The history here – the reason why that last line is needed – tells you something about what this announcement means.
You are currently reading Executive Summaries of Smartkarma Insights.
Want to read on? Explore our tailored Smartkarma Solutions.
It is a very hand-wave-y announcement with comments about cost pull, resource allocation, efficiencies, working towards the public good by constant improvement of social infrastructure, and then at the very end…
The two companies will proceed with the discussions on the specific terms of the alliance while complying with the antimonopoly law and other relevant laws and regulations.
The history here – the reason why that last line is needed – tells you something about what this announcement means.
The Wall Street Journal has published an article saying Vision Fund head Rajeev Misra waged a frankly bizarre campaign to sabotage potential executive competitors in the run up to creation of Vision Fund. This is the second major negative story on the internal workings of Vision Fund this month and whilst Softbank and Mr. Misra have denied this and whether the stories are true or not, the added noise only makes it harder to attract outside investment for Vision Fund 2. This plays against market concerns on the coronavirus, which has knocked 7% off the value of the Vision Fund’s public portfolio since last week. Softbank shares trade at a 46% discount to the public value of its holdings and we don’t expect that to change very much without a share buyback announcement.
Yesterday on the 26th February, Mitsubishi Materials announced that it would be acquiring the remaining 49% stake in Mitsubishi Hitachi Tool Engineering from Hitachi Metals. The deal is set to complete on April 1st and value has not been disclosed but we wonder if this is a step towards a sale of Hitachi Metals by parent Hitachi.
You are currently reading Executive Summaries of Smartkarma Insights.
Want to read on? Explore our tailored Smartkarma Solutions.
We argued in Lack of US market & macro volatility both reassuring and troubling that “the market’s willingness to look through domestic political and geopolitical events suggests that only a significant exogenous or endogenous shock currently beyond markets’ radar screens (an “unknown unknown”) is likely to really move the needle”.
That unknown unknown, a “black swan” event, has turned out to be a global viral pandemic on a scale not seen since the Spanish influenza pandemic of 1918-1919.
The coronavirus outbreak is now three months old but governments, central banks, corporates and households still face a critical known unknown, in our view, namely the total number people who had the coronavirus, acquired immunity and are no longer contagious and who currently carry the coronavirus and are thus potentially infectious.
This includes people who have not been clinically tested – more than 99.9% of the world’s population. We estimate that only 3.3 million people (4 out of every 10,000) have been tested for coronavirus, although testing data are patchy and often released with a lag. The main reason so few people have been tested is the still limited capacity to rapidly and reliably test a very large number of people.
In econometric terms that is a very small sample from which to extrapolate country-wide trends. One implication is that the actual mortality rate may be far smaller than reported.
The high number of tests-per-capita conducted in countries such as South Korea has been posited as an explanation for their relatively low number of coronavirus-related deaths. However, other factors have likely been at play, including the timing of clinical tests, demographics, national health systems’ capacity to treat infected patients and the timing and efficacy of self-isolation and self-distancing policies, including country “lockdowns”.
For now what policy-makers know they don’t know will likely continue to influence country-specific containment plans, as well as domestic measures to support economic growth while ensuring the functioning of financial markets.
As the epicentre of the coronavirus pandemic shifts from Europe to the US and the number of deaths and infection cases reach new highs, the costs of the crisis are beginning to be revealed. In Singapore economic activity contracted in 1Q20 at a faster pace than at the worst point during the GFC while Chinese industrial profits were down 38% in the first two months of the year. Despite this we are cautiously optimistic that Asian economic activity led by China will pick-up in the second half of the year. We are much more worried about advanced economies where policy mis-management threatens to tip the world economy into recession.
Where are the weakest points in the global economy that could send activity into a tailspin and threaten the banking system? Italy would seem to be the prime candidate for collapse. The economy was already flirting with recession but will definitely enter one when first quarter 2020 data are published. Weak economies are always the most vulnerable when an external shock hits. Italy’s banks are bound to require a bailout from either the government or the ECB – neither of which are well placed to provide the capital.
THURSDAY 26th MARCH – Yesterday saw six companies reporting results, of which only two –Optoelectronics (6664 JP) and Fukushima Printing (7870 JP) – has positive scores. Seventeen companies revised their forecasts, and one made initial forecasts. In terms of our scoring system, the ratio of positive to negative ‘scores’ was 5:11, with JXTG (5020 JP) being the largest negative-scoring company and Maxvalu Nishinihon (8287 JP) being unchanged. Of the six companies announcing results, only two had positive outcomes.
Source • NHK
GOOD NEWS • BAD NEWS – The good news is that the increase in disclosed cases of Covid-19 outside Tokyo has not increased significantly; Tokyo, however, has seen an alarming rise. Forty-seven new cases were confirmed yesterday, taking the total in the metropolis to 259. Tokyo will implement a ‘stay-at-home-policy’ this weekend. Surrounding prefectures have encouraged their residents not to travel into the city over the weekend. Amusement parks that had reopened last weekend will now close their doors.
ODD NEWS – In other ‘news’, the Sapporo Board of Education is debating whether to allow students to wear face masks that are not white. In the past, many schools have mandated that children can only have black hair, forcing some children whose hair is naturally lighter to dye their hair black to conform to the ‘norm’.
m3 Inc. (TSE: 2413) provides various medical-related services to physicians and healthcare professionals in Japan and overseas. The company operates m3.com, its key platform alongside several other websites and platforms aimed at providing different services such as information provision, marketing services, medical health records and career solutions.
The company has grown its top line from JPY51bn in FY03/2015 to JPY113bn in FY03/2019 while its operating profits have more than doubled during this period
M3’s key segment, Medical Platform offers primarily marketing related services to its member physicians and we expect the segment to remain a key pillar of growth over the next couple of years for the company.
At the same time, the Overseas business has grown at the highest CAGR over the last five years and the company has grown its overseas business mostly through partnerships and acquisitions which have helped the company expand into new business verticals and markets.
The company has a strong balance sheet with zero debt which we believe will continue to support further M&A activity for the company.
You are currently reading Executive Summaries of Smartkarma Insights.
Want to read on? Explore our tailored Smartkarma Solutions.
The Wall Street Journal has published an article saying Vision Fund head Rajeev Misra waged a frankly bizarre campaign to sabotage potential executive competitors in the run up to creation of Vision Fund. This is the second major negative story on the internal workings of Vision Fund this month and whilst Softbank and Mr. Misra have denied this and whether the stories are true or not, the added noise only makes it harder to attract outside investment for Vision Fund 2. This plays against market concerns on the coronavirus, which has knocked 7% off the value of the Vision Fund’s public portfolio since last week. Softbank shares trade at a 46% discount to the public value of its holdings and we don’t expect that to change very much without a share buyback announcement.
Yesterday on the 26th February, Mitsubishi Materials announced that it would be acquiring the remaining 49% stake in Mitsubishi Hitachi Tool Engineering from Hitachi Metals. The deal is set to complete on April 1st and value has not been disclosed but we wonder if this is a step towards a sale of Hitachi Metals by parent Hitachi.
You are currently reading Executive Summaries of Smartkarma Insights.
Want to read on? Explore our tailored Smartkarma Solutions.
As the epicentre of the coronavirus pandemic shifts from Europe to the US and the number of deaths and infection cases reach new highs, the costs of the crisis are beginning to be revealed. In Singapore economic activity contracted in 1Q20 at a faster pace than at the worst point during the GFC while Chinese industrial profits were down 38% in the first two months of the year. Despite this we are cautiously optimistic that Asian economic activity led by China will pick-up in the second half of the year. We are much more worried about advanced economies where policy mis-management threatens to tip the world economy into recession.
Where are the weakest points in the global economy that could send activity into a tailspin and threaten the banking system? Italy would seem to be the prime candidate for collapse. The economy was already flirting with recession but will definitely enter one when first quarter 2020 data are published. Weak economies are always the most vulnerable when an external shock hits. Italy’s banks are bound to require a bailout from either the government or the ECB – neither of which are well placed to provide the capital.
THURSDAY 26th MARCH – Yesterday saw six companies reporting results, of which only two –Optoelectronics (6664 JP) and Fukushima Printing (7870 JP) – has positive scores. Seventeen companies revised their forecasts, and one made initial forecasts. In terms of our scoring system, the ratio of positive to negative ‘scores’ was 5:11, with JXTG (5020 JP) being the largest negative-scoring company and Maxvalu Nishinihon (8287 JP) being unchanged. Of the six companies announcing results, only two had positive outcomes.
Source • NHK
GOOD NEWS • BAD NEWS – The good news is that the increase in disclosed cases of Covid-19 outside Tokyo has not increased significantly; Tokyo, however, has seen an alarming rise. Forty-seven new cases were confirmed yesterday, taking the total in the metropolis to 259. Tokyo will implement a ‘stay-at-home-policy’ this weekend. Surrounding prefectures have encouraged their residents not to travel into the city over the weekend. Amusement parks that had reopened last weekend will now close their doors.
ODD NEWS – In other ‘news’, the Sapporo Board of Education is debating whether to allow students to wear face masks that are not white. In the past, many schools have mandated that children can only have black hair, forcing some children whose hair is naturally lighter to dye their hair black to conform to the ‘norm’.
m3 Inc. (TSE: 2413) provides various medical-related services to physicians and healthcare professionals in Japan and overseas. The company operates m3.com, its key platform alongside several other websites and platforms aimed at providing different services such as information provision, marketing services, medical health records and career solutions.
The company has grown its top line from JPY51bn in FY03/2015 to JPY113bn in FY03/2019 while its operating profits have more than doubled during this period
M3’s key segment, Medical Platform offers primarily marketing related services to its member physicians and we expect the segment to remain a key pillar of growth over the next couple of years for the company.
At the same time, the Overseas business has grown at the highest CAGR over the last five years and the company has grown its overseas business mostly through partnerships and acquisitions which have helped the company expand into new business verticals and markets.
The company has a strong balance sheet with zero debt which we believe will continue to support further M&A activity for the company.
It will repurchase up to 2,800,000 shares for up to JPY 8 billion tomorrow morning before the open at JPY 3,225/share. That’s 2.07% of shares outstanding, but the real number is actually capped at 2,480,600 shares, which is 1.83%.
There is a seller coming in with 2,017,000 shares of that.
It will happen once. There is no indication that there will be more buying in the market afterwards. It is not planned to reduce float, but it will have a small impact on EPS.
You too can participate tomorrow morning at today’s closing price. If the US market is down several percent from the close, what would you want to do? Tomorrow morning, you might look at yesterday’s (currently today’s) closing price and decide “Hmmm, that was a good price.” If you look at things before the Japan market opens, you will have that chance.
If this interests you at all, read on.
You are currently reading Executive Summaries of Smartkarma Insights.
Want to read on? Explore our tailored Smartkarma Solutions.
Alternatively, sign up for a free Investor Preview Pass to see how institutional investors engage with the research produced by Insight Providers in the Smartkarma network.
Sign up for a free Press Pass to deep-dive into independent and differentiated analysis, discover new ideas, and stay in touch with analysts for original commentary.
Sign up for a free Preview Pass to read unlimited Executive Summaries and create custom platform and email reading lists.
Sign up for a free Starter Account to read unlimited Executive Summaries and begin connecting with investors and analysts.
Sign up for a free Investor Preview Pass to see how institutional investors engage with the research produced by Insight Providers in the Smartkarma network.
Sign up for a free Press Pass to deep-dive into independent and differentiated analysis, discover new ideas, and stay in touch with analysts for original commentary.
Share Smartkarma Corporate Solutions Brochure with your Team
Share Smartkarma Corporate Solutions Brochure with your Team
