'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/000/116/923/original/2020-02-08_18-15-45.png?1581196263" class="editor-image img-responsive" data-smartkarma-image-id="116923"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/116/924/original/2020-02-09_06-34-51.png?1581197706" class="editor-image img-responsive" data-smartkarma-image-id="116924"></figure><div class="content-caption">Source • Japan Analytics</div><div class="content-caption"></div><p><strong>OOOPS!</strong> - The 480 quarterly results announced on Friday subtracted a further 20 basis points from our Results Score. If the remaining 38% of companies continue this trend, the current quarter will equal CQ2019-1 and CQ2018-2 in seeing a 200 basis point Results Score decline. 169 forecasts or revision announcements added  5bps to the Forecast/Revision Score, supported by slight upward revisions from <a href="https://www.smartkarma.com/entities/softbank-corp" target="_blank" data-smartkarma-citation="entities:27445:1" rel="noopener">Softbank Corp (9434 JP)</a> and <a href="https://www.smartkarma.com/entities/honda-motor-co-ltd" target="_blank" data-smartkarma-citation="entities:154:1" rel="noopener">Honda Motor (7267 JP)</a>.  The Results Score has dipped below the Forecast/Revision Score for the first time since July 2016 and is a necessary precursor of the bottoming of the cycle. Japan is now in a recession and could see a decline in GDP for the calendar year. The market's current optimism (aided by the Bank of Japan's buy-the-dips support programme) is more appropriate to the middle of the cycle and, with two further poor earnings quarters ahead, suggests limited further upside. </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/116/925/original/2020-02-08_10-48-19.png?1581199859" class="editor-image img-responsive" data-smartkarma-image-id="116925"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>18x EARNINGS</strong> - Trailing-twelve-month (TTM) Operating Income for the composite of listed companies has declined to ¥57.4t, 10% below the peak of early 2019. TTM Net Income has declined by 20% over the same period, resulting in a 6.1 point increase in the market price-earnings ratio to 17.6 times.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/116/927/original/2020-02-08_10-55-21.png?1581200256" class="editor-image img-responsive" data-smartkarma-image-id="116927"></figure><div class="content-caption">Source • Japan Analytics</div><p style="text-align: left;"><strong>TTM RESULTS</strong> - TTM Operating Profits have been declining quarter-on-quarter for five straight quarters, and are 8.1% lower year-on-year. The Operating Margin has declined from 7.45% to 6.80%. TTM Revenues are now also falling and have only increased by 0.7% year-on-year.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/116/928/original/2020-02-08_10-59-00.png?1581200533" class="editor-image img-responsive" data-smartkarma-image-id="116928"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>FORECASTS</strong> - The year-on-year Operating Profit decline using current forecasts is 8.5%, while Revenues are flat. Revenue forecasts have been falling quarter-on-quarter for three quarters in a row. The 'uplift' from TTM to Forecast is just ¥3t for sales and ¥0.3t for OP. </p>

Source • Japan AnalyticsOOOPS! - The 480 quarterly results announced on Friday subtracted a further 20 basis points from our Results Score. If the remaining 38% of companies continue this trend, the current quarter will equal CQ2019-1 and CQ2018-2 in seeing a 200 basis point Results Score decline. 169 forecasts or revision announcements added  5bps to the Forecast/Revision Score, supported by slight upward revisions from Softbank Corp (9434 JP) and Honda Motor (7267 JP).  The Results Score has dipped below the Forecast/Revision Score for the first time since July 2016 and is a necessary precursor of the bottoming of the cycle. Japan is now in a recession and could see a decline in GDP for the calendar year. The market's current optimism (aided by the Bank of Japan's buy-the-dips support programme) is more appropriate to the middle of the cycle and, with two further poor earnings quarters ahead, suggests limited further upside. Source • Japan Analytics18x EARNINGS - Trailing-twelve-month (TTM) Operating Income for the composite of listed companies has declined to ¥57.4t, 10% below the peak of early 2019. TTM Net Income has declined by 20% over the same period, resulting in a 6.1 point increase in the market price-earnings ratio to 17.6 times.Source • Japan AnalyticsTTM RESULTS - TTM Operating Profits have been declining quarter-on-quarter for five straight quarters, and are 8.1% lower year-on-year. The Operating Margin has declined from 7.45% to 6.80%. TTM Revenues are now also falling and have only increased by 0.7% year-on-year.Source • Japan AnalyticsFORECASTS - The year-on-year Operating Profit decline using current forecasts is 8.5%, while Revenues are flat. Revenue forecasts have been falling quarter-on-quarter for three quarters in a row. The 'uplift' from TTM to Forecast is just ¥3t for sales and ¥0.3t for OP. 

🇯🇵 JAPAN • Results & Revisions Daily Roundup - 7th February ▲2121 7267 5713 ▼ 5401 9616 3407

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

<p>This is the <strong>Final</strong> of a series of reports on Pigeon Corp and in this insight, we will be taking a close look at the company’s Domestic Baby and Mother Care business alongside the company’s current valuations. Pigeon’s domestic baby and mother care business generated about 34% of revenues in FY01/2019 and is the second largest OP generator for the company. The domestic business is ranked the market leader in Japan for a majority of the products the company sells. The business still generates a large share of consolidated revenues and has grown at a CAGR of around 7.8% over the last five years, we expect the segment’s growth to slow down over the next couple of years due to declining birth rates in Japan. In spite of declining revenue growth, we believe the segment will continue to be the cash cow for the company.</p><p>Pigeon has been trading at premium to its peers, Unicharm and Kao over the last 3-4 years and we expect the company to continue to trade at higher multiples than peers. Both Unicharm and Kao are forecasted to grow at higher rates than peers despite the two companies trading at discounts to Pigeon.</p><p>As we discussed in our previous insight, we expect the company’s overseas business (excl. China) to drive the company’s next phase of growth. Though there seems a slight decline in the Chinese business, we believe increasing penetration into Tier 3 cities and below in China should drive growth in the segment’s top line. Though it will take couple of more years for the market to witness any meaningful growth from the overseas business, we believe the current drop in share price offers a good entry to own the company shares.</p>

This is the Final of a series of reports on Pigeon Corp and in this insight, we will be taking a close look at the company’s Domestic Baby and Mother Care business alongside the company’s current valuations. Pigeon’s domestic baby and mother care business generated about 34% of revenues in FY01/2019 and is the second largest OP generator for the company. The domestic business is ranked the market leader in Japan for a majority of the products the company sells. The business still generates a large share of consolidated revenues and has grown at a CAGR of around 7.8% over the last five years, we expect the segment’s growth to slow down over the next couple of years due to declining birth rates in Japan. In spite of declining revenue growth, we believe the segment will continue to be the cash cow for the company.Pigeon has been trading at premium to its peers, Unicharm and Kao over the last 3-4 years and we expect the company to continue to trade at higher multiples than peers. Both Unicharm and Kao are forecasted to grow at higher rates than peers despite the two companies trading at discounts to Pigeon.As we discussed in our previous insight, we expect the company’s overseas business (excl. China) to drive the company’s next phase of growth. Though there seems a slight decline in the Chinese business, we believe increasing penetration into Tier 3 cities and below in China should drive growth in the segment’s top line. Though it will take couple of more years for the market to witness any meaningful growth from the overseas business, we believe the current drop in share price offers a good entry to own the company shares.

Pigeon: Domestic Business Growth Slows Down but Remains a Cash Cow

<p>This is the <strong>SECOND</strong> of a series of reports on Pigeon Corp (7956 JP) and in this insight, we will be taking a closer look at the company’s China Business. As we discussed in our previous insight, the China business has grown rapidly over the last four years and contributed 34% of consolidated revenues in FY01/2019. At the same time, the China segment is the largest profit generator for the company over the last five years. The Chinese segment’s growth historically was aided by the company’s expansion into several regions within China and the introduction of new products supported by a growing domestic baby care market. We expect the segment’s revenues to grow due to expanding into Tier 3 cities and below. At the same time, a growing baby care market alongside the company’s plan to introduce a new skincare baby product range should help further grow the segment’s topline. The China business continues to generate a large proportion of revenue from e-commerce and as a result, we expect the segment’s margin to be impacted negatively. Moreover, we expect the introduction of the new skincare product range to strain the segment’s margin initially, however, we expect the margins to recover thereafter with the growth in topline.</p>

This is the SECOND of a series of reports on Pigeon Corp (7956 JP) and in this insight, we will be taking a closer look at the company’s China Business. As we discussed in our previous insight, the China business has grown rapidly over the last four years and contributed 34% of consolidated revenues in FY01/2019. At the same time, the China segment is the largest profit generator for the company over the last five years. The Chinese segment’s growth historically was aided by the company’s expansion into several regions within China and the introduction of new products supported by a growing domestic baby care market. We expect the segment’s revenues to grow due to expanding into Tier 3 cities and below. At the same time, a growing baby care market alongside the company’s plan to introduce a new skincare baby product range should help further grow the segment’s topline. The China business continues to generate a large proportion of revenue from e-commerce and as a result, we expect the segment’s margin to be impacted negatively. Moreover, we expect the introduction of the new skincare product range to strain the segment’s margin initially, however, we expect the margins to recover thereafter with the growth in topline.

Pigeon’s China Business to Grow Driven Mainly by Expanding into Tier 3 Cities and Below

<p>This is the <strong>FIRST</strong> of a series of reports on Pigeon Corp (7956 JP), where we will be taking a closer look at the company’s core business segments. This insight will mainly focus on the company’s Overseas Business (excluding China). Pigeon based in Japan is the market leader for baby care products in the country while the company also has operations in China, Southeast Asia, the Middle East, Oceania, North America and Europe. The domestic baby care market in Japan is currently going through a decline as a result of decreasing birth rates and as a result, companies such as Pigeon have been increasingly focusing on overseas markets to compensate for the decline in their domestic segments. Pigeon’s three largest business segments are Domestic Baby and Mother Care, China Business and the Overseas Business. The Overseas segment currently accounts for about 23% of consolidated revenues and has grown at a CAGR of about 1.6% over the past five years. Despite the Overseas Business growing at lower rates historically, we expect the segment to drive the company’s future growth. The company has been increasingly focusing on expanding its operations in markets such as Indonesia, India, Nigeria and Vietnam, the markets which will have the highest GDP growth over the next few years coupled with increasing birth rates. While some of these countries have declining birth rates, due to having a large population, even 1-2% birth rates result in several million newborn babies a year.</p><p>We discuss the details below.</p>

This is the FIRST of a series of reports on Pigeon Corp (7956 JP), where we will be taking a closer look at the company’s core business segments. This insight will mainly focus on the company’s Overseas Business (excluding China). Pigeon based in Japan is the market leader for baby care products in the country while the company also has operations in China, Southeast Asia, the Middle East, Oceania, North America and Europe. The domestic baby care market in Japan is currently going through a decline as a result of decreasing birth rates and as a result, companies such as Pigeon have been increasingly focusing on overseas markets to compensate for the decline in their domestic segments. Pigeon’s three largest business segments are Domestic Baby and Mother Care, China Business and the Overseas Business. The Overseas segment currently accounts for about 23% of consolidated revenues and has grown at a CAGR of about 1.6% over the past five years. Despite the Overseas Business growing at lower rates historically, we expect the segment to drive the company’s future growth. The company has been increasingly focusing on expanding its operations in markets such as Indonesia, India, Nigeria and Vietnam, the markets which will have the highest GDP growth over the next few years coupled with increasing birth rates. While some of these countries have declining birth rates, due to having a large population, even 1-2% birth rates result in several million newborn babies a year.We discuss the details below.

Pigeon (Part I): Overseas Segment (Excl. China) The Key Driver of Growth for the Company

Equity Capital Markets

Uni-Charm Indonesia Tbk PT / Equity Capital Markets

<p>Unicharm Indonesia, the subsidiary of Unicharm Japan manufactures baby diapers, sanitary napkins and adult diapers and is the market leader in the country for the above products. The company is currently majority owned by Unicharm Japan (74%) and Purinusa Ekapersada PT, a manufacturer of paper and paper products based in Indonesia (26%). The company is exposed to a growing market with positive demographic trends which should help the company grow its top line.</p><p>The company has filed for an IPO to list its shares on the Indonesia Stock Exchange. Unicharm will be listing 20% of its outstanding shares (approximately 831.3m shares) at an indicative price range of Rp1,400-1,800 per share. At the above price range, the company is expected to raise between Rp1.2-1.5trn (US$82-106m) making it the largest IPO of 2019 in Indonesia. Based on our analysis, we believe the company is fairly valued at the low-end of its IPO pricing.</p>

Unicharm Indonesia, the subsidiary of Unicharm Japan manufactures baby diapers, sanitary napkins and adult diapers and is the market leader in the country for the above products. The company is currently majority owned by Unicharm Japan (74%) and Purinusa Ekapersada PT, a manufacturer of paper and paper products based in Indonesia (26%). The company is exposed to a growing market with positive demographic trends which should help the company grow its top line.The company has filed for an IPO to list its shares on the Indonesia Stock Exchange. Unicharm will be listing 20% of its outstanding shares (approximately 831.3m shares) at an indicative price range of Rp1,400-1,800 per share. At the above price range, the company is expected to raise between Rp1.2-1.5trn (US$82-106m) making it the largest IPO of 2019 in Indonesia. Based on our analysis, we believe the company is fairly valued at the low-end of its IPO pricing.

Unicharm Indonesia IPO: A Charming Business Attractive at the Low-End of Pricing

Japan

UNICHARM CORPORATION is a manufacturer of sanitary napkins and baby products. Products include infant & adult diapers, household cleaning wipes, and feminine hygienic products.  The Company also produces pet food and pet toiletries as well as operates educational and finance businesses.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Unicharm Corp (8113 JP)

🇯🇵 JAPAN • Results & Revisions Daily Roundup - 7th February ▲2121 7267 5713 ▼ 5401 9616 3407

OOOPS! - The 480 quarterly results announced on Friday subtracted a further 20 basis points from our Results Score. If the remaining 38% of...

Campbell Gunn

Pigeon: Domestic Business Growth Slows Down but Remains a Cash Cow

This is the Final of a series of reports on Pigeon Corp and in this insight, we will be taking a close look at the company’s Domestic Baby and...

Shifara Samsudeen, FCMA, CGMA

Pigeon’s China Business to Grow Driven Mainly by Expanding into Tier 3 Cities and Below

This is the SECOND of a series of reports on Pigeon Corp (7956 JP) and in this insight, we will be taking a closer look at the company’s China...

Shifara Samsudeen, FCMA, CGMA

Pigeon (Part I): Overseas Segment (Excl. China) The Key Driver of Growth for the Company

This is the FIRST of a series of reports on Pigeon Corp (7956 JP), where we will be taking a closer look at the company’s core business segments....

Shifara Samsudeen, FCMA, CGMA

Unicharm Indonesia IPO: A Charming Business Attractive at the Low-End of Pricing

Unicharm Indonesia, the subsidiary of Unicharm Japan manufactures baby diapers, sanitary napkins and adult diapers and is the market leader in the...

Shifara Samsudeen, FCMA, CGMA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)