Brief TMT & Internet: Smartkarma’s Week that Was in 🇯🇵/🇰🇷 : Korea’s NPS, Samsung, Toshiba, Hitachi Hi-Tech, Payments and more

In this briefing:

  1. Smartkarma’s Week that Was in 🇯🇵/🇰🇷 : Korea’s NPS, Samsung, Toshiba, Hitachi Hi-Tech, Payments
  2. Samsung Electronics Share Class Trade: Common at +2σ, Expect Reversion After AGM This Week
  3. Tesla  – Now We Know The Y, But Not the How
  4. Koolearn (新东方在线) IPO Review – Yet to See Results from Increased Spending
  5. DoCoMo Company Visit: Brief Comments on Mobile Competition and Payment Efforts

1. Smartkarma’s Week that Was in 🇯🇵/🇰🇷 : Korea’s NPS, Samsung, Toshiba, Hitachi Hi-Tech, Payments

Something of a slower week on Smartkarma this week (I contributed to that slowness by being away and under the weather when back) with about 120 insights published. A list of the insights to do with Japan and Korea this week are listed below.

There will be a couple more shortly. 

JAPAN

DateIPTitle
3/10Travis LundyOmron into the Nikkei 225, Pioneer Out
3/11David RubensteinHitachi High Tech’s Ace in the Hole
3/11Oshadhi KumarasiriJapan Tobacco: No Dire Consequences Despite Late Entry to Heated Tobacco
3/12Nicholas TannerNsk (6471) Conditions Have Deteriorated Significantly but Given Valuations, This Is Now in the Price
3/12Mio Kato, CFAToshiba: King Street Round Two
3/12Mio Kato, CFAChiyoda: Minor Updates About the Major Capital Infusion, Cost Overruns and Upcoming Orders
3/13Travis LundyShinetsu Buyback – Maybe More Than It Appears
3/13Supun WalpolaCyberAgent (4751 JP): Key Takeaways from Our Discussion with the IR Team
3/13Mio Kato, CFAZozo: Looks Like There’s a Dead Cat in This Bouncy Zozosuit
3/13Pelham SmithersESport Prize Money in 2019 Running at 2x 2018 Levels
3/13Michael CaustonLoyalty Points In Japan: More Loyalty, More Points and the Conduit to Cashless Payments
3/13Michael CaustonWho Will Win the Cashless Wars in Japan?
3/14Scott FosterYokogawa Electric (6841 JP): A Less Risky Investment in LNG Engineering
3/14Shifara Samsudeen, ACMA, CGMAAdvantest (6857 JP): Memory Downturn Yet to Impact Advantest
3/14Michael CaustonDonki (7532 JP) Becomes Japan’s 4th Biggest Retailer
3/15Kirk BoodryYahoo Japan Company Visit: Profit Erosion Has Bottomed and Mobile Payments (PayPay) Starts Strong
3/15Kirk BoodryDoCoMo Company Visit: Brief Comments on Mobile Competition and Payment Efforts
3/15Michael CaustonIsetan-Mitsukoshi Unveils Digital Strategy
3/16Jim HandyMoore’s Law May Not Be Dead, After All

Korea

DateIPTitle
3/10Sanghyun ParkHHI – DSME Acquisition: Current Situation & Trade Approach
3/11Thomas SchroederLG Corp Daily Cycle Pivot and Re Test of Base Line Support
3/11Douglas KimHomeplus REIT IPO: A Key Landmark Deal in the History of the Korean REIT Market
3/12Sanghyun ParkNongshim Stub Trade: Sub Moving Up on New Hit Product, Now at Near -2σ
3/12Douglas KimKorean Stubs Spotlight: A Pair Trade Between Hyosung Corp and Hyosung TNC
3/13Douglas KimKorea National Pension Fund Announces a List of 11 Companies They Oppose in Upcoming AGMs
3/14Sanghyun ParkReason Why Amazon Canceled DRAM Order from Samsung: Short-Term Impact on Samsung

For more detail, read on below the fold…

For me, the MUST READS of this weak are the cashless payment-related pieces by Kirk Boodry and Michael Causton shown at the bottom. 

2. Samsung Electronics Share Class Trade: Common at +2σ, Expect Reversion After AGM This Week

7

  • SamE Common/1P reached a +2σ level. On a 120D horizon, price ratio is currently at the peak. Pref discount is at 21.04%. This of course is a 120D high. We are now right at the AGM phase (Mar 20). Common gets boosted around this time. It seems true that the recent M&A stories also helped Common move over 1P.
  • I don’t expect to see a continued upwardly divergence in favor of Common from this point. AGM factor should be gone this week. We still have M&A factor. This will likely be offset by shorter-term fundamentals factors such as further falling profits and DRAM design flaws.
  • Div yield difference on FY19e is 0.87%p. This is even higher than last year which was a record high in 3 years. I expect SamE 1P to make a move over Common from this point.

3. Tesla  – Now We Know The Y, But Not the How

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The eagerly awaited and long promised Model Y is out and it looks…like Model 3. That’s OK, just no shock and awe which Tesla really needed to jumpstart sales momentum–and a wave of sorely needed cash reservations.

Tesla Motors (TSLA US) unveiled Model Y on, perhaps not coincidentally, March 14th which also is Pi Day. Pi is the fundamental ratio which demonstrates that all circles are related–as Model Y is overwhelmingly related with the seminal Model 3 which contributes 75-80% of the newcomer’s platform and technology.

Which means Model Y may be originating with Model 3’s many inherent problems, as I discussed in Tesla’s Plan B 2.0; Y Not, just as Tesla also is juggling the ramp-up of the newly launched $35,000-base model of Model 3 along with sales expansion into Europe and China as well as building a new plant on a shoestring in Shanghai. All this just as the company also has lurched into a radical new online-only sales model with apparently little if any considered preparation (see Tesla’s New Plan: Buy Before You Try).

No wonder Tesla’s Vice President of Engineering Michael Schwekutsch just quit, an ominous signal.

Another is that Model Y won’t be available until late 2020–at best–which is much later than expected. It’s still not clear when or where Model Y will be in full production or, even more critical, when Tesla will make even a penny of profit on it. Model 3 only recently became marginally profitable, excluding the likely money-losing $35k version, and sales of more profitable but aging Models S and X are in accelerating decline.

And, as I observed last week, Tesla’s track record of long delays in delivering new models coupled with Model 3’s alarming quality and reliability may seriously diminish the hoped-for early bird reservation cash which the company sorely needs to ease its liquidity crunch. At the same time, the pending arrival of Model Y over the next year or so is likely to further dampen already waning demand for Model 3.

In any case, it’s too late for Tesla to preserve profitability in the calamitous first quarter, if not for the full year.

Continue reading for Bond Angle analysis.

4. Koolearn (新东方在线) IPO Review – Yet to See Results from Increased Spending

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Koolearn (1797 HK) is looking to raise up to US$S234m in its upcoming IPO.  We have previously covered the company in:

In this insight, we will look at the updates on financials and operating metrics, compare it to other listed online education companies, and run the deal through our framework.

The increase in spending on marketing has not yielded the intended results as the growth rates of student enrollment and gross billings slowing down. Furthermore, aggressive spending behavior is similar to that of STG and LAIX and both companies did not perform well post listing.

5. DoCoMo Company Visit: Brief Comments on Mobile Competition and Payment Efforts

We met NTT Docomo Inc (9437 JP) today for a quick chat. Markets are focused on FY19 guidance and the magnitude of price reductions that DoCoMo plans, neither of which were on the table for discussion. We did get a little bit of color on the Q4 competitive environment (not too intense), the mobile payments effort (strategically important but less need to invest heavily like PayPay) and the impending sale of its 34% stake in Sumitomo Mitsui Card.  

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