'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. 

Thematic (Sector/Industry)

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/115/369/original/2020-01-29_05-48-09.png?1580244521" class="editor-image img-responsive" data-smartkarma-image-id="115369"></figure><div class="content-caption">Source • Japan Analytics</div>28TH JANUARY ROUNDUP - Thre were 40 results and 14 forecasts or revisions announcements yesterday. Of the larger cap companies, five saw year-on-year declines in their quarterly OP of greater than 25%, while just two managed to grow profits by more than 10%. Revenue growth was strongest at <a href="https://www.smartkarma.com/entities/fujitsu-general-ltd" target="_blank" data-smartkarma-citation="entities:2025:1" rel="noopener">Fujitsu General (6755 JP)</a> at +23%, while <a href="https://www.smartkarma.com/entities/obic-business-consultants" target="_blank" data-smartkarma-citation="entities:17383:1" rel="noopener">Obic Business Consultants (4733 JP)</a> saw a decline in sales of 13%. The weakest outlook came from <a href="https://www.smartkarma.com/entities/canon-electronics-inc" target="_blank" data-smartkarma-citation="entities:20493:1" rel="noopener">Canon Electronics (7739 JP)</a> whose initial forecasts for FY2020 is for a 39% decline in OP to ¥4.9b. Overall our composite Results Score ticked down by 5bps to 1.07. The Forecast/REvision Score improved by 3bps to 0.21.In the DETAIL below, we review the announcements from <a href="https://www.smartkarma.com/entities/fujitsu-general-ltd" target="_blank" data-smartkarma-citation="entities:2025:1" rel="noopener">Fujitsu General (6755 JP),</a>  <a href="https://www.smartkarma.com/entities/shin-etsu-chemical-co-ltd" target="_blank" data-smartkarma-citation="entities:4481:1" rel="noopener">Shin Etsu Chemical (4063 JP)</a>, <a href="https://www.smartkarma.com/entities/m3-inc" target="_blank" data-smartkarma-citation="entities:13316:1" rel="noopener">M3 (2413 JP)</a>, and <a href="https://www.smartkarma.com/entities/obic-co-ltd" target="_blank" data-smartkarma-citation="entities:1273:1" rel="noopener">OBIC (4684 JP)</a>.

Source • Japan Analytics28TH JANUARY ROUNDUP - Thre were 40 results and 14 forecasts or revisions announcements yesterday. Of the larger cap companies, five saw year-on-year declines in their quarterly OP of greater than 25%, while just two managed to grow profits by more than 10%. Revenue growth was strongest at Fujitsu General (6755 JP) at +23%, while Obic Business Consultants (4733 JP) saw a decline in sales of 13%. The weakest outlook came from Canon Electronics (7739 JP) whose initial forecasts for FY2020 is for a 39% decline in OP to ¥4.9b. Overall our composite Results Score ticked down by 5bps to 1.07. The Forecast/REvision Score improved by 3bps to 0.21.In the DETAIL below, we review the announcements from Fujitsu General (6755 JP),  Shin Etsu Chemical (4063 JP), M3 (2413 JP), and OBIC (4684 JP).   

🇯🇵 JAPAN • Results & Revisions Daily Roundup - 28th January - 6755, 4603, 2413, 4684

Semiconductor & Technology Specialist, Ingenuity

William Keating

Semiconductor & Technology Specialist

Ingenuity

Our focus is exclusively on in-depth research & consulting in the broader semiconductor industry. We focus on the key players, namely Intel, Micron, Qualcomm, Apple, Samsung, NVIDIA, AMD, TSMC & Global Foundries - as well as some of the lesser known, but nonetheless critical, companies such as ASML (for EUV), Mellanox, Cavium, Xilinx etc. We specialise in their products, roadmaps, process technologies, competitive advantages & threats etc. We also help our clients understand the implications of new and emerging technologies, e.g. 3D X-Point, 3D NAND, Carbon Nanotubes, Autonomous Driving, Graphene, Silicon Photonics, Wafer-Level Optics, Artificial Intelligence, FPGA, GPU, ASIC etc. 

Semiconductor Analysis & Research

Long Term Agreements (LTAs) signed as silicon wafer shortages worsened back in late 2017 have thus far helped wafer manufacturers survive the worst of the current semiconductor downturn by largely maintaining shipment volumes at guaranteed pricing. The manufacturers with the largest percentages of product covered under LTA have fared best while <a href="https://www.smartkarma.com/entities/siltronic-ag" target="_blank" data-smartkarma-citation="entities:21741:1" rel="noopener">Siltronic</a>, with the lowest LTA coverage is faring worst. By the same token, joint investment in new capacity between the wafer manufacturers and their customers has helped reduce the risks historically associated with building capacity ahead of anticipated future demand, resulting in a roughly seven fold increase in annual capex since 2015. Now, in the wake of the latest quarterly results it is becoming obvious that in fixing one set of problems, those same LTAs &amp; joint investments have created a new set of problems which will prolong the current down cycle for the wafer manufacturers, put their operating profits under increasing pressure in the quarters ahead and likely change the nature of how future LTAs &amp; joint investment programs are crafted. These are the problems we are beginning to see...

Long Term Agreements (LTAs) signed as silicon wafer shortages worsened back in late 2017 have thus far helped wafer manufacturers survive the worst of the current semiconductor downturn by largely maintaining shipment volumes at guaranteed pricing. The manufacturers with the largest percentages of product covered under LTA have fared best while Siltronic, with the lowest LTA coverage is faring worst. By the same token, joint investment in new capacity between the wafer manufacturers and their customers has helped reduce the risks historically associated with building capacity ahead of anticipated future demand, resulting in a roughly seven fold increase in annual capex since 2015. Now, in the wake of the latest quarterly results it is becoming obvious that in fixing one set of problems, those same LTAs &amp; joint investments have created a new set of problems which will prolong the current down cycle for the wafer manufacturers, put their operating profits under increasing pressure in the quarters ahead and likely change the nature of how future LTAs &amp; joint investment programs are crafted. These are the problems we are beginning to see...

Silicon Wafers Q3 2019. LTAs & Joint Investments Are Fixing Some Problems But Creating Others

Equity Analyst, LightStream Research

Shifara Samsudeen, FCMA, CGMA

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

<a href="https://www.smartkarma.com/entities/sumco-corp" target="_blank" data-smartkarma-citation="entities:379:1" rel="noopener">Sumco Corp (3436 JP)</a>  reported its 3Q2019 results yesterday (06th November 2019) which saw revenue and operating income declining YoY as well as QoQ. However, the reported revenue and operating income beat company guidance as well as consensus estimates. The company is expecting 2019 revenue and EBIT to decline YoY while it expects earnings to recover from 2020.The current slowdown in the semiconductor silicon market follows two-years of strong growth in revenue and margins. The inventory adjustments in the memory segments are still continuing for 300mm wafers which accounts for a majority of 300mm wafer demand. That being said, the demand for logic/foundry remains solid.Sumco’s share price and valuation have significantly increased over the last 3-months with the recovery in the logic/foundry segment. However, the current FY2 PE multiple is at a significant discount to the multiple at the beginning of the semiconductor market recovery in 2016. With company earnings expected to recover in 2020, we believe the current multiple provides a good entry point.

Sumco Corp (3436 JP)  reported its 3Q2019 results yesterday (06th November 2019) which saw revenue and operating income declining YoY as well as QoQ. However, the reported revenue and operating income beat company guidance as well as consensus estimates. The company is expecting 2019 revenue and EBIT to decline YoY while it expects earnings to recover from 2020.The current slowdown in the semiconductor silicon market follows two-years of strong growth in revenue and margins. The inventory adjustments in the memory segments are still continuing for 300mm wafers which accounts for a majority of 300mm wafer demand. That being said, the demand for logic/foundry remains solid.Sumco’s share price and valuation have significantly increased over the last 3-months with the recovery in the logic/foundry segment. However, the current FY2 PE multiple is at a significant discount to the multiple at the beginning of the semiconductor market recovery in 2016. With company earnings expected to recover in 2020, we believe the current multiple provides a good entry point.

Sumco 3Q Results: Earnings Beat Consensus; Current Valuation Provides a Good Entry Point

Shin-Etsu reported its 2QFY03/2020 results on Friday (25th October) which saw both revenue and operating income declining YoY by 1.9% and 9.5% respectively. However, the reported revenue beat consensus estimates by 2.2% while operating income fell below consensus by 4.2%.The PVC/Chlor-Alkali segment’s revenues (the largest segment based on revenue) declined 6.1% YoY while its operating income declined at a much higher rate of 21% YoY during the quarter. However, compared to 1QFY03/20, the segment’s revenues and operating income increased 6.1% QoQ and 4.0% QoQ respectively indicating a rebound in the segment’s performance after seeing two quarters of consecutive declines in 4QFY03/19 and 1QFY03/20.On the other hand, the Semiconductor Silicon segment managed to clock a marginal 1% YoY growth in revenue after seeing strong YoY growth in revenues over the last 12 quarters due to weakness in the semiconductor memory market. Nevertheless, we continue to remain positive on the company’s two key segments, while we expect healthy growth in revenue from the company's other segments.We discuss the details below.

Shin-Etsu reported its 2QFY03/2020 results on Friday (25th October) which saw both revenue and operating income declining YoY by 1.9% and 9.5% respectively. However, the reported revenue beat consensus estimates by 2.2% while operating income fell below consensus by 4.2%.The PVC/Chlor-Alkali segment’s revenues (the largest segment based on revenue) declined 6.1% YoY while its operating income declined at a much higher rate of 21% YoY during the quarter. However, compared to 1QFY03/20, the segment’s revenues and operating income increased 6.1% QoQ and 4.0% QoQ respectively indicating a rebound in the segment’s performance after seeing two quarters of consecutive declines in 4QFY03/19 and 1QFY03/20.On the other hand, the Semiconductor Silicon segment managed to clock a marginal 1% YoY growth in revenue after seeing strong YoY growth in revenues over the last 12 quarters due to weakness in the semiconductor memory market. Nevertheless, we continue to remain positive on the company’s two key segments, while we expect healthy growth in revenue from the company's other segments.We discuss the details below.

Shin-Etsu: Semiconductor Silicon Segment Grows Marginally While PVC Segment Rebounds

Sumco reported 2Q2019 results on Tuesday (06th August 2019) which saw the company revenue and operating profit decline on a YoY as well as on a QoQ basis. The reported revenue and operating profit for the quarter were well below Sumco’s own guidance as well as consensus estimates. The drop-in earnings were mainly due to declining demand for 300mm wafers while 200mm wafer has started showing signs of softening. Going into the second half of the year, the management does not expect a material recovery in the global semiconductor demand and as such expects the earnings during third quarter 2019 to decline compared to last year as well as the second quarter results. That being said, a look at the company’s historical earnings trend and the performance during past semiconductor downturns, the current earnings are way above the earnings at the bottom of the previous semiconductor cycle in 2015 and early part of 2016. Sumco’s share price has started declining since May 2018 even before the company earnings started declining or the company provided negative earnings guidance. The market is expecting the semiconductor demand to start recovering towards the end of 2019 and we expect the company earnings to start moving up going into 2020.We discuss the details below.

Sumco reported 2Q2019 results on Tuesday (06th August 2019) which saw the company revenue and operating profit decline on a YoY as well as on a QoQ basis. The reported revenue and operating profit for the quarter were well below Sumco’s own guidance as well as consensus estimates. The drop-in earnings were mainly due to declining demand for 300mm wafers while 200mm wafer has started showing signs of softening. Going into the second half of the year, the management does not expect a material recovery in the global semiconductor demand and as such expects the earnings during third quarter 2019 to decline compared to last year as well as the second quarter results. That being said, a look at the company’s historical earnings trend and the performance during past semiconductor downturns, the current earnings are way above the earnings at the bottom of the previous semiconductor cycle in 2015 and early part of 2016. Sumco’s share price has started declining since May 2018 even before the company earnings started declining or the company provided negative earnings guidance. The market is expecting the semiconductor demand to start recovering towards the end of 2019 and we expect the company earnings to start moving up going into 2020.We discuss the details below.

Sumco: 2Q2019 Earnings Drop but the Decline Is Still Better Than Previous Downturns

Japan

Shin-Etsu Chemical Co., Ltd. produces and distributes synthetic resins and other chemical products such as fertilizers. The Company also manufactures electronic materials such as semiconductor silicon, synthetic, and rare earth quartz. Shin-Etsu Chemical operates in Japan and overseas.

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Shin Etsu Chemical (4063 JP)

🇯🇵 JAPAN • Results & Revisions Daily Roundup - 28th January - 6755, 4603, 2413, 4684

28TH JANUARY ROUNDUP - Thre were 40 results and 14 forecasts or revisions announcements yesterday. Of the larger cap companies, five saw...

Campbell Gunn

Silicon Wafers Q3 2019. LTAs & Joint Investments Are Fixing Some Problems But Creating Others

Long Term Agreements (LTAs) signed as silicon wafer shortages worsened back in late 2017 have thus far helped wafer manufacturers survive the worst...

William Keating

Sumco 3Q Results: Earnings Beat Consensus; Current Valuation Provides a Good Entry Point

Sumco Corp (3436 JP) reported its 3Q2019 results yesterday (06th November 2019) which saw revenue and operating income declining YoY as well as...

Shifara Samsudeen, FCMA, CGMA

Shin-Etsu: Semiconductor Silicon Segment Grows Marginally While PVC Segment Rebounds

Shin-Etsu reported its 2QFY03/2020 results on Friday (25th October) which saw both revenue and operating income declining YoY by 1.9% and 9.5%...

Shifara Samsudeen, FCMA, CGMA

Sumco: 2Q2019 Earnings Drop but the Decline Is Still Better Than Previous Downturns

Sumco reported 2Q2019 results on Tuesday (06th August 2019) which saw the company revenue and operating profit decline on a YoY as well as on a QoQ...

Shifara Samsudeen, FCMA, CGMA

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