'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

ja research

ja research is an independent research platform focused exclusively on Japanese equities. Leveraging data and graphic analysis provided by Japan Analytics, we provide insights on small and medium-sized companies that have been ignored by the sell-side as well as challenging conventional wisdom on larger companies. We also offer analyst and corporate access, the latter with translation if required. 

Quantitative Analysis

<div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/086/182/original/2019-04-29_12-24-09.png?1556508262" class="editor-image img-responsive" data-smartkarma-image-id="86182"></figure><p>Source: Japan Analytics</p>
</div><p><strong>EARLY DAYS</strong> - In the last seven trading days, 473 Japanese companies have reported quarterly results, 11% of the 3,830 that are currently listed. Of this 76 % have been annual results for the fiscal year ended March 2019.  Also, there have been 328 initial forecasts for the year to March 2020, 227 initial interim forecasts and 228 intra-year revisions. With the long holiday break, there will be an avalanche of announcements from the 7th May onwards. In this Insight, we shall look at the trends apparent in the results so far released.  In the last month, our Market Composite trailing-twelve-month (TTM) data series is unchanged for Operating Income, while Net Income has increased by ¥0.2t. <strong>With 13% of March-year-end companies have issued FY2020 forecasts, aggregate forecast Operating Income is ¥0.7t lower and is in line with TTM Operating Income. Forecast Net Income is ¥0.6 lower and is 4% below TTM Net Income. </strong></p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/086/411/original/2019-04-30_13-26-24.png?1556598396" class="editor-image img-responsive" data-smartkarma-image-id="86411"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/086/412/original/File%202019-04-30%2013%2010%2017.jpeg?1556598417" class="editor-image img-responsive" data-smartkarma-image-id="86412"></figure><div class="content-caption">Source: Japan Analytics, Pictet Asset Management</div><p><strong>MARGIN SLIPPAGE</strong> -<strong> </strong>With revenues remaining relatively robust, margins are declining fast that at any time since 2016. The forecast operating margin is now 42 basis points below the 2018 peak level, while the slippage in net margins is 78 basis points. Although the sample is not the same, to IBES consensus estimates have current downtrend bottoming out in the second half of the year with net margins recovering to 6.6% in 2021. We consider this overly optimistic. </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/086/187/original/2019-04-29_12-32-53.png?1556508784" class="editor-image img-responsive" data-smartkarma-image-id="86187"></figure><div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/086/190/original/2019-04-29_12-51-24.png?1556509893" class="editor-image img-responsive" data-smartkarma-image-id="86190"></figure><p>Source: Japan Analytics</p>
</div><p style="text-align: left;"><strong>RESULTS &amp; REVISION SCORES</strong> - Our scoring methodology for results and forecasts/revisions incorporates rates of change and other momentum factors and has historically provided a better fit with changes in aggregate market value. Although the Market Composite Results Score has remained stable in the last week at 2.21, we expect the score to end this results 'season' closer to zero as indicated by the trend in the Forecast/Revision Score. The latter has declined for six quarters in a row and the current quarter will make it seven. <strong>Although our data series only covers the last forty quarters and is perhaps too short for generalisations, it would be unusual for the Forecasts/Revision Score series to have an eighth down quarter in a row. Perhaps the market's robust recovery from the Christmas Day low is anticipating such an outcome. </strong></p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/086/193/original/2019-04-29_13-17-03.png?1556511439" class="editor-image img-responsive" data-smartkarma-image-id="86193"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>USDJPY NEUTRAL</strong> - In the past, one of the principal drivers of both scores has been changes in the US dollar/Yen exchange rate. The chart above merges both scores to create a cleaner timeline, and key turning points in <a href="https://www.smartkarma.com/entities/22826" target="_blank" data-smartkarma-citation="entities:22826:1">JUSDJPY CURNCY</a> highlighted. With the currency cross trading in a narrow range, there is little support or stimulus in the next six months. However, any sustained weakness in the Yen, such as occurred from September 2016, will be another confirmation that a cycle low has been reached. </p><div class="content-highlight"><p>In the<strong> DETAIL</strong> section below, we update our  Sector Results &amp; Revision Scores and look at the best and worst large-cap company results over the seven trading days.</p></div>


Source: Japan Analytics
EARLY DAYS - In the last seven trading days, 473 Japanese companies have reported quarterly results, 11% of the 3,830 that are currently listed. Of this 76 % have been annual results for the fiscal year ended March 2019.  Also, there have been 328 initial forecasts for the year to March 2020, 227 initial interim forecasts and 228 intra-year revisions. With the long holiday break, there will be an avalanche of announcements from the 7th May onwards. In this Insight, we shall look at the trends apparent in the results so far released.  In the last month, our Market Composite trailing-twelve-month (TTM) data series is unchanged for Operating Income, while Net Income has increased by ¥0.2t. With 13% of March-year-end companies have issued FY2020 forecasts, aggregate forecast Operating Income is ¥0.7t lower and is in line with TTM Operating Income. Forecast Net Income is ¥0.6 lower and is 4% below TTM Net Income. Source: Japan Analytics, Pictet Asset ManagementMARGIN SLIPPAGE - With revenues remaining relatively robust, margins are declining fast that at any time since 2016. The forecast operating margin is now 42 basis points below the 2018 peak level, while the slippage in net margins is 78 basis points. Although the sample is not the same, to IBES consensus estimates have current downtrend bottoming out in the second half of the year with net margins recovering to 6.6% in 2021. We consider this overly optimistic. 
Source: Japan Analytics
RESULTS &amp; REVISION SCORES - Our scoring methodology for results and forecasts/revisions incorporates rates of change and other momentum factors and has historically provided a better fit with changes in aggregate market value. Although the Market Composite Results Score has remained stable in the last week at 2.21, we expect the score to end this results 'season' closer to zero as indicated by the trend in the Forecast/Revision Score. The latter has declined for six quarters in a row and the current quarter will make it seven. Although our data series only covers the last forty quarters and is perhaps too short for generalisations, it would be unusual for the Forecasts/Revision Score series to have an eighth down quarter in a row. Perhaps the market's robust recovery from the Christmas Day low is anticipating such an outcome. Source: Japan AnalyticsUSDJPY NEUTRAL - In the past, one of the principal drivers of both scores has been changes in the US dollar/Yen exchange rate. The chart above merges both scores to create a cleaner timeline, and key turning points in JUSDJPY CURNCY highlighted. With the currency cross trading in a narrow range, there is little support or stimulus in the next six months. However, any sustained weakness in the Yen, such as occurred from September 2016, will be another confirmation that a cycle low has been reached. In the DETAIL section below, we update our  Sector Results &amp; Revision Scores and look at the best and worst large-cap company results over the seven trading days.

🇯🇵 Japan • Spring Results & Revisions Flash - Early Days

LNG, Oil & Gas, M&A Market Intelligence Specialist

Massimo Bellino

Thematic (Sector/Industry)

<p>On the back of a growing LNG global trade volume, LNG producers have outperformed the US market and their E&amp;P peers including the oil majors over the last two years. As global LNG production reaches a record 316m tonnes in 2018, a 9.6% increase year on year, new capacity additions set to come online in the next three years will be dominated by the US. This insight will examine how the recent entry of US LNG in the market is transforming the LNG industry and which emerging players are driving the change.</p>
<h2><strong>Exhibit 1: LNG Producers Outperform the US Market</strong></h2>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/076/383/original/ex1.png?1548250163" class="editor-image img-responsive" data-smartkarma-image-id="76383"></figure>
<div class="content-caption">
<em>Source: Capital IQ. Prices as of 22 of January. Un-weighted indexed composites. Oil Majors: Exxon, Chevron, Shell, BP, Total and ENI. Australia LNG: Woodside Energy, Santos, Oil Search. </em><em>independent E&amp;Ps: oil and gas upstream companies with market value greater than $300m as of 18 April 2018.</em>
</div>

On the back of a growing LNG global trade volume, LNG producers have outperformed the US market and their E&amp;P peers including the oil majors over the last two years. As global LNG production reaches a record 316m tonnes in 2018, a 9.6% increase year on year, new capacity additions set to come online in the next three years will be dominated by the US. This insight will examine how the recent entry of US LNG in the market is transforming the LNG industry and which emerging players are driving the change.
Exhibit 1: LNG Producers Outperform the US Market


Source: Capital IQ. Prices as of 22 of January. Un-weighted indexed composites. Oil Majors: Exxon, Chevron, Shell, BP, Total and ENI. Australia LNG: Woodside Energy, Santos, Oil Search. independent E&amp;Ps: oil and gas upstream companies with market value greater than $300m as of 18 April 2018.


LNG Producers Outperform as More LNG from the US Is Coming into the Market

Diversified Industries

Avi Dalfen

Pennock Idea Hub

We are creators of independent equity research. The Pennock Idea Hub team are veterans of the investment industry. Much of our team has spent their careers at Merrill Lynch, Deutsche Bank, RBC Capital Markets and Wood Gundy. We have taken every aspect of research back to the studs and returned to first principles. The Pennock Idea Hub marries the interests of the sell and buy side. 

We offer the best research for institutional investors by:

-Only publishing research from veteran analysts
-Eliminate the inherent conflicts of the traditional sell and buy side relationship
-Ensure our team is always accessible; collaboration with clients nurtures our collective success

Cross-Asset & Quantitative Research

<p><strong>Highlights of significant recent happenings include:</strong></p>
<div>
<ol>
<li>
<strong>Feeding the Dragon </strong>- <a href="https://www.smartkarma.com/entities/5380" target="_blank" data-smartkarma-citation="entities:5380:1">Sumitomo Corp (8053 JP)</a> buying into massive Chile copper project; <a href="https://www.smartkarma.com/entities/20799" target="_blank" data-smartkarma-citation="entities:20799:1">Mitsui &amp; Co Ltd (8031 JP)</a> and <a href="https://www.smartkarma.com/entities/2332" target="_blank" data-smartkarma-citation="entities:2332:1">Tokyo Gas (9531 JP)</a> announced plans to be long-term buyers of Mexican LNG.</li>
<li> <strong>Local News on Global Companies </strong>– <a href="https://www.smartkarma.com/entities/8231" target="_blank" data-smartkarma-citation="entities:8231:1">Huawei Technology (40978Z CH)</a>'s to do "whatever is required" to meet Canada's 5G security standards; <a href="https://www.smartkarma.com/entities/24240" target="_blank" data-smartkarma-citation="entities:24240:1">Ant Financial (1051260D CH)</a>’s Sesame Credit be used to apply for Canadian visas;  <a href="https://www.smartkarma.com/entities/665" target="_blank" data-smartkarma-citation="entities:665:1">Facebook Inc A (FB US)</a> offered data to  <a href="https://www.smartkarma.com/entities/20451" target="_blank" data-smartkarma-citation="entities:20451:1">Netflix Inc (NFLX US)</a> and <a href="https://www.smartkarma.com/entities/586" target="_blank" data-smartkarma-citation="entities:586:1">Royal Bank Of Canada (RY CN)</a>; <a href="https://www.smartkarma.com/entities/25472" target="_blank" data-smartkarma-citation="entities:25472:1">BlackBerry Ltd (BB CN)</a>'s high-security reputation increasingly valuable; <a href="https://www.smartkarma.com/entities/14577" target="_blank" data-smartkarma-citation="entities:14577:1">Fedex Corp (FDX US)</a> and  <a href="https://www.smartkarma.com/entities/19984" target="_blank" data-smartkarma-citation="entities:19984:1">United Parcel Service Cl B (UPS US)</a> deny negative impact from  <a href="https://www.smartkarma.com/entities/409" target="_blank" data-smartkarma-citation="entities:409:1">Amazon.com Inc (AMZN US)</a>'s Amazon Air operations; and <a href="https://www.smartkarma.com/entities/864" target="_blank" data-smartkarma-citation="entities:864:1">Anheuser Busch Inbev Sa (Adr) (BUD US)</a> and <a href="https://www.smartkarma.com/entities/27402" target="_blank" data-smartkarma-citation="entities:27402:1">Tilray Inc (TLRY US)</a> are doing "joint" product development.</li>
<li>
<strong>Trade Deals &amp; No Deals </strong>– <a href="https://www.smartkarma.com/entities/6537" target="_blank" data-smartkarma-citation="entities:6537:1">Bosideng Intl Hldgs (3998 HK)</a> got an unexpected boost, while <a href="https://www.smartkarma.com/entities/25616" target="_blank" data-smartkarma-citation="entities:25616:1">Canada Goose Holdings (GOOS CN)</a> took an unexpected hit as a consequence of the U.S.A. Government's problems with <a href="https://www.smartkarma.com/entities/8231" target="_blank" data-smartkarma-citation="entities:8231:1">Huawei Technology (40978Z CH)</a> . </li>
<li>
<strong>Outliers </strong>- Another "silver lining" to global warming?  The Warming Arctic Opens the Northwest Passage as a Potential Maritime Superhighway</li>
</ol>
</div>

Highlights of significant recent happenings include:



Feeding the Dragon - Sumitomo Corp (8053 JP) buying into massive Chile copper project; Mitsui &amp; Co Ltd (8031 JP) and Tokyo Gas (9531 JP) announced plans to be long-term buyers of Mexican LNG.
 Local News on Global Companies – Huawei Technology (40978Z CH)'s to do "whatever is required" to meet Canada's 5G security standards; Ant Financial (1051260D CH)’s Sesame Credit be used to apply for Canadian visas;  Facebook Inc A (FB US) offered data to  Netflix Inc (NFLX US) and Royal Bank Of Canada (RY CN); BlackBerry Ltd (BB CN)'s high-security reputation increasingly valuable; Fedex Corp (FDX US) and  United Parcel Service Cl B (UPS US) deny negative impact from  Amazon.com Inc (AMZN US)'s Amazon Air operations; and Anheuser Busch Inbev Sa (Adr) (BUD US) and Tilray Inc (TLRY US) are doing "joint" product development.

Trade Deals &amp; No Deals – Bosideng Intl Hldgs (3998 HK) got an unexpected boost, while Canada Goose Holdings (GOOS CN) took an unexpected hit as a consequence of the U.S.A. Government's problems with Huawei Technology (40978Z CH) . 

Outliers - Another "silver lining" to global warming?  The Warming Arctic Opens the Northwest Passage as a Potential Maritime Superhighway



Business Happenings in the Americas that May Be “Below the Radar” - Week Ending December 22, 2018

<p><strong>Highlights of significant happenings this past week include:</strong></p>
<div>
<ol>
<li>
<strong>Feeding the Dragon</strong> -  <a href="https://www.smartkarma.com/entities/26044" target="_blank" data-smartkarma-citation="entities:26044:1">Weichai Power (000338 CH)</a> adds to its global stable of leading clean vehicle technologies; <a href="https://www.smartkarma.com/entities/2332" target="_blank" data-smartkarma-citation="entities:2332:1">Tokyo Gas (9531 JP)</a> and <a href="https://www.smartkarma.com/entities/12418" target="_blank" data-smartkarma-citation="entities:12418:1">Toho Gas Co Ltd (9533 JP)</a> are buying gas from <a href="https://www.smartkarma.com/entities/20668" target="_blank" data-smartkarma-citation="entities:20668:1">Mitsubishi Corp (8058 JP)</a>'s Canadian LNG project; and Korean fund managers are buying real estate accross the Pacific Ocean.</li>
<li>
<strong>Local News on Global Companies</strong> – <a href="https://www.smartkarma.com/entities/665" target="_blank" data-smartkarma-citation="entities:665:1">Facebook Inc A (FB US)</a> Dating making its debut; <a href="https://www.smartkarma.com/entities/20451" target="_blank" data-smartkarma-citation="entities:20451:1">Netflix Inc (NFLX US)</a>  is the latest technology company being accused of misusing private information; <a href="https://www.smartkarma.com/entities/20824" target="_blank" data-smartkarma-citation="entities:20824:1">Kroger Co (KR US)</a>, <a href="https://www.smartkarma.com/entities/11134" target="_blank" data-smartkarma-citation="entities:11134:1">Wal Mart Stores (WMT US)</a>, and Albertsons Cos. (ABS US), are each spending as much as is needed to stay "relevant"; <a href="https://www.smartkarma.com/entities/3593" target="_blank" data-smartkarma-citation="entities:3593:1">Prologis Inc (PLD US)</a> is starting to look for properties in Brazil; and <a href="https://www.smartkarma.com/entities/984" target="_blank" data-smartkarma-citation="entities:984:1">Yum! Brands Inc (YUM US)</a>'s Pizza Hut will bring a pizza oven to you.</li>
<li>
<strong>Trade Deals &amp; No Deals</strong> – <a href="https://www.smartkarma.com/entities/127" target="_blank" data-smartkarma-citation="entities:127:1">Geely Automobile Holdings (175 HK)</a>'s plans to export and import Swedish vehicles between the U.S. and China get knocked off the road; and America’s soybean farmers are taking a huge gamble.</li>
<li>
<strong>Outliers</strong> - What citizens of China, South Korea and Japan should not be photographed doing when they are in Canada.</li>
</ol>
</div>

Highlights of significant happenings this past week include:



Feeding the Dragon -  Weichai Power (000338 CH) adds to its global stable of leading clean vehicle technologies; Tokyo Gas (9531 JP) and Toho Gas Co Ltd (9533 JP) are buying gas from Mitsubishi Corp (8058 JP)'s Canadian LNG project; and Korean fund managers are buying real estate accross the Pacific Ocean.

Local News on Global Companies – Facebook Inc A (FB US) Dating making its debut; Netflix Inc (NFLX US)  is the latest technology company being accused of misusing private information; Kroger Co (KR US), Wal Mart Stores (WMT US), and Albertsons Cos. (ABS US), are each spending as much as is needed to stay "relevant"; Prologis Inc (PLD US) is starting to look for properties in Brazil; and Yum! Brands Inc (YUM US)'s Pizza Hut will bring a pizza oven to you.

Trade Deals &amp; No Deals – Geely Automobile Holdings (175 HK)'s plans to export and import Swedish vehicles between the U.S. and China get knocked off the road; and America’s soybean farmers are taking a huge gamble.

Outliers - What citizens of China, South Korea and Japan should not be photographed doing when they are in Canada.



Business Happenings in the Americas that May Be “Below the Radar” - Week Ending November 13, 2018

Pan-Asia Equity Bottom-up, Wickhams Hill

Lloyd Moffatt

Pan-Asia Equity Bottom-up

Research-Intensive Fundamental Value Advisor

Wickhams Hill

Wickhams Hill Capital is a research-intensive fundamental value advisor, on long and occasionally short investment opportunities concentrated in small and mid-cap public companies.

<p>If there’s one thing we bottom-up small-cap investors do poorly versus our large-cap mutual- and hedge-fund counterparts is overall market awareness. Many peers investing in this space were up more than 20% in 2017 but were labelled as underperforming the Index, which in the case of the MSCI Asia Ex.Japan was up 38.7%!</p><p>The purpose of this report is to dig beyond the headline figure and highlight pockets of over and underperformance, as-well-as opportunities for the upcoming year.</p><p>We have created…</p>

If there’s one thing we bottom-up small-cap investors do poorly versus our large-cap mutual- and hedge-fund counterparts is overall market awareness. Many peers investing in this space were up more than 20% in 2017 but were labelled as underperforming the Index, which in the case of the MSCI Asia Ex.Japan was up 38.7%!The purpose of this report is to dig beyond the headline figure and highlight pockets of over and underperformance, as-well-as opportunities for the upcoming year.We have created…

ASEAN Small-Micro Cap – Winners, Losers and Opportunities for 2018

Japan

TOKYO GAS CO., LTD. produces and supplies liquefied natural gas to Tokyo and the surrounding areas.  The Company maintains and manages gas supply equipment and sells air conditioning appliances.  Tokyo Gas operates power generation business as well.

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Tokyo Gas (9531 JP)

🇯🇵 Japan • Spring Results & Revisions Flash - Early Days

EARLY DAYS - In the last seven trading days, 473 Japanese companies have reported quarterly results, 11% of the 3,830 that are currently listed. Of...

Campbell Gunn

LNG Producers Outperform as More LNG from the US Is Coming into the Market

On the back of a growing LNG global trade volume, LNG producers have outperformed the US market and their E&P peers including the oil majors...

Massimo Bellino

Business Happenings in the Americas that May Be “Below the Radar” - Week Ending December 22, 2018

Highlights of significant recent happenings include: Feeding the Dragon - Sumitomo Corp (8053 JP) buying into massive Chile copper...

Avi Dalfen

Business Happenings in the Americas that May Be “Below the Radar” - Week Ending November 13, 2018

Highlights of significant happenings this past week include: Feeding the Dragon - Weichai Power (000338 CH) adds to its global stable of...

Avi Dalfen

ASEAN Small-Micro Cap – Winners, Losers and Opportunities for 2018

If there’s one thing we bottom-up small-cap investors do poorly versus our large-cap mutual- and hedge-fund counterparts is overall market...

Lloyd Moffatt

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