Equity Analyst, LightStream Research

Oshadhi Kumarasiri

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><a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:751:1" rel="noopener">Fast Retailing (9983 JP)</a> delivered its 1QFY21 results on 14<sup>th</sup> Thursday with operating profit surpassing consensus estimate by more than 11%. However, the company’s 1QFY21 consolidated revenue was 2.5% below consensus. Despite mixed Q1 results, Fast Retailing's flexibility and resilience in the time of COVID is highly commendable as YoY revenue decline narrowed to just 0.6% YoY in 1QFY21 while operating profit improved by 23.3% YoY. With the FY+2 EV/OP multiple at 28.5x, 43% above the past three-year average, the market has generously compensated Fast Retailing for its commendable performance amidst COVID-19.</p>
<p>Though the company has maintained FY21 revenue and OP guidance at ¥2,200bn (4% below pre-pandemic revenue) and ¥245bn (8% below pre-pandemic OP) respectively, consensus revenue estimate is 5.5% above guidance while OP estimate is 9.7% above guidance, indicating that the market expects FY21 revenue and profitability to be above the pre-pandemic level.</p>
<p>On the surface, 1QFY21 revenue and OP growth indicate that everything is on track to meet FY21 consensus. However, this may not be entirely accurate as 1QFY20 was affected by the Hong Kong protests and the South Korea Boycott. Thus, Fast Retailing could be vulnerable to downside risks, if it fails to return revenue and profitability to the pre-pandemic level in FY21.</p>

Fast Retailing (9983 JP) delivered its 1QFY21 results on 14th Thursday with operating profit surpassing consensus estimate by more than 11%. However, the company’s 1QFY21 consolidated revenue was 2.5% below consensus. Despite mixed Q1 results, Fast Retailing's flexibility and resilience in the time of COVID is highly commendable as YoY revenue decline narrowed to just 0.6% YoY in 1QFY21 while operating profit improved by 23.3% YoY. With the FY+2 EV/OP multiple at 28.5x, 43% above the past three-year average, the market has generously compensated Fast Retailing for its commendable performance amidst COVID-19.
Though the company has maintained FY21 revenue and OP guidance at ¥2,200bn (4% below pre-pandemic revenue) and ¥245bn (8% below pre-pandemic OP) respectively, consensus revenue estimate is 5.5% above guidance while OP estimate is 9.7% above guidance, indicating that the market expects FY21 revenue and profitability to be above the pre-pandemic level.
On the surface, 1QFY21 revenue and OP growth indicate that everything is on track to meet FY21 consensus. However, this may not be entirely accurate as 1QFY20 was affected by the Hong Kong protests and the South Korea Boycott. Thus, Fast Retailing could be vulnerable to downside risks, if it fails to return revenue and profitability to the pre-pandemic level in FY21.

Fast Retailing: Upbeat Consensus Unlikely to Be Met in 2QFY21

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

Thematic (Sector/Industry)

<p style="text-align: center;"><strong>• BEST &amp; WORST •</strong></p><p>Thursday was the disclosure 'peak' for the November/February/May/August year-end group of companies. One-quarter of the companies reporting results yesterday were in the red, and average revenues are margins are still declining. Half of the large caps are reporting losses for the trailing twelve-month period. On a brighter note,  <a href="https://www.smartkarma.com/entities/canon-inc" target="_blank" data-smartkarma-citation="entities:1:1" rel="noopener">Canon (7751 JP)</a>, <a href="https://www.smartkarma.com/entities/nachi-fujikoshi-corp" target="_blank" data-smartkarma-citation="entities:9817:1" rel="noopener">Nachi Fujikoshi (6474 JP)</a>, and <a href="https://www.smartkarma.com/entities/agc-inc" target="_blank" data-smartkarma-citation="entities:2167:1" rel="noopener">AGC (5201 JP) </a>continued the trend of industrial upward revisions ahead of their imminent full-year results. Our best and worst pairing from Thursday's announcements is <a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:751:1" rel="noopener">Fast Retailing (9983 JP)</a> and <a href="https://www.smartkarma.com/entities/create-restaurants-holdings-inc" target="_blank" data-smartkarma-citation="entities:11513:1" rel="noopener">create restaurants (3387 JP)</a>. </p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/182/603/original/2021-01-15_06-37-49.png?1610660282" class="editor-image img-responsive" data-smartkarma-image-id="182603"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/182/604/original/2021-01-15_06-38-33.png?1610660325" class="editor-image img-responsive" data-smartkarma-image-id="182604"></figure></section><div class="content-caption">Source for all charts &amp; tables: Japan Analytics.</div>

• BEST &amp; WORST •Thursday was the disclosure 'peak' for the November/February/May/August year-end group of companies. One-quarter of the companies reporting results yesterday were in the red, and average revenues are margins are still declining. Half of the large caps are reporting losses for the trailing twelve-month period. On a brighter note,  Canon (7751 JP), Nachi Fujikoshi (6474 JP), and AGC (5201 JP) continued the trend of industrial upward revisions ahead of their imminent full-year results. Our best and worst pairing from Thursday's announcements is Fast Retailing (9983 JP) and create restaurants (3387 JP). Source for all charts &amp; tables: Japan Analytics.

🇯🇵 JAPAN • Results & Revisions ​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​01/​​​​​​14 Fast, Create, Canon, AGC

<p style="text-align: center;"><strong>• BEST &amp; WORST • </strong></p><p style="text-align: left;">The retail theme continues in Monday's best and worst pairing - <a href="https://www.smartkarma.com/entities/shimamura-co-ltd" target="_blank" data-smartkarma-citation="entities:15213:1" rel="noopener">Shimamura (8227 JP)</a> and <a href="https://www.smartkarma.com/entities/j-front-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:8947:1" rel="noopener">J Front Retailing (3086 JP)</a>. The former is a 'sleeper' that has been unduly overlooked, while the latter's earnings momentum has turned negative again.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/180/324/original/2020-12-29_06-26-11.png?1609190783" class="editor-image img-responsive" data-smartkarma-image-id="180324"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/180/325/original/2020-12-29_06-27-27.png?1609190862" class="editor-image img-responsive" data-smartkarma-image-id="180325"></figure></section><div class="content-caption">Source for all charts &amp; tables: Japan Analytics</div>

• BEST &amp; WORST • The retail theme continues in Monday's best and worst pairing - Shimamura (8227 JP) and J Front Retailing (3086 JP). The former is a 'sleeper' that has been unduly overlooked, while the latter's earnings momentum has turned negative again.Source for all charts &amp; tables: Japan Analytics

🇯🇵 JAPAN • Results & Revisions 12/​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​28 -

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Quantitative Analysis

<div><p>The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong Kong, Japan, Korea and Taiwan using the last available data published by the relevant authorities.</p></div><div><p>Hong Kong saw shorts rise on <a href="https://www.smartkarma.com/entities/ping-an-insurance-grp-co-of-china-ltd" target="_blank" data-smartkarma-citation="entities:12880:1" rel="noopener">Ping An Insurance (H) (2318 HK)</a>, <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a>, <a href="https://www.smartkarma.com/entities/xiaomi-corp" target="_blank" data-smartkarma-citation="entities:24409:1" rel="noopener">Xiaomi Corp (1810 HK)</a> and <a href="https://www.smartkarma.com/entities/anta-sports-products-ltd" target="_blank" data-smartkarma-citation="entities:10261:1" rel="noopener">Anta Sports Products (2020 HK)</a> while there was short covering on <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a>, <a href="https://www.smartkarma.com/entities/china-construction-bank-h" target="_blank" data-smartkarma-citation="entities:45:1" rel="noopener">China Construction Bank H (939 HK)</a>, <a href="https://www.smartkarma.com/entities/sunac-china-holdings-ltd" target="_blank" data-smartkarma-citation="entities:240:1" rel="noopener">Sunac China Holdings (1918 HK)</a> and <a href="https://www.smartkarma.com/entities/hsbc-holdings-plc" target="_blank" data-smartkarma-citation="entities:516:1" rel="noopener">HSBC Holdings (5 HK)</a>. Shorts decreased in most sectors led by Communication Services, Financials, Industrials, Real Estate, Energy and Utilities.</p></div><div><p>In Japan, stocks that saw the most shorts were <a href="https://www.smartkarma.com/entities/ana-holdings-inc" target="_blank" data-smartkarma-citation="entities:5308:1" rel="noopener">Ana Holdings (9202 JP)</a>, <a href="https://www.smartkarma.com/entities/suzuki-motor-corp" target="_blank" data-smartkarma-citation="entities:732:1" rel="noopener">Suzuki Motor (7269 JP)</a>, <a href="https://www.smartkarma.com/entities/shionogi-co-ltd" target="_blank" data-smartkarma-citation="entities:19535:1" rel="noopener">Shionogi &amp; Co (4507 JP)</a> and <a href="https://www.smartkarma.com/entities/mitsubishi-ufj-financial-group" target="_blank" data-smartkarma-citation="entities:218:1" rel="noopener">Mitsubishi UFJ Financial (MUFG) (8306 JP)</a> while shorts decreased on <a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:751:1" rel="noopener">Fast Retailing (9983 JP)</a>, <a href="https://www.smartkarma.com/entities/tokyo-electron-ltd" target="_blank" data-smartkarma-citation="entities:280:1" rel="noopener">Tokyo Electron (8035 JP)</a>, <a href="https://www.smartkarma.com/entities/canon-inc" target="_blank" data-smartkarma-citation="entities:1:1" rel="noopener">Canon Inc (7751 JP)</a> and <a href="https://www.smartkarma.com/entities/tdk-corp" target="_blank" data-smartkarma-citation="entities:18847:1" rel="noopener">TDK Corp (6762 JP)</a>. Sectorally, shorts increased on Industrials, Health Care, Financials and Consumer Discretionary names.</p></div><div><p>In Korea, there was large short covering on <a href="https://www.smartkarma.com/entities/celltrion-inc" target="_blank" data-smartkarma-citation="entities:991:1" rel="noopener">Celltrion Inc (068270 KS)</a>, <a href="https://www.smartkarma.com/entities/samsung-biologics-co-ltd" target="_blank" data-smartkarma-citation="entities:22932:1" rel="noopener">Samsung Biologics Co., (207940 KS)</a>, <a href="https://www.smartkarma.com/entities/samsung-electronics-co-ltd" target="_blank" data-smartkarma-citation="entities:191:1" rel="noopener">Samsung Electronics (005930 KS)</a> and <a href="https://www.smartkarma.com/entities/sk-hynix-inc" target="_blank" data-smartkarma-citation="entities:16955:1" rel="noopener">SK Hynix (000660 KS)</a>. </p></div><div><p>Stocks in Taiwan that saw the highest increase in shorts were <a href="https://www.smartkarma.com/entities/evergreen-marine-corp-ltd" target="_blank" data-smartkarma-citation="entities:15428:1" rel="noopener">Evergreen Marine Corp (2603 TT)</a>, <a href="https://www.smartkarma.com/entities/largan-precision-co-ltd" target="_blank" data-smartkarma-citation="entities:9126:1" rel="noopener">Largan Precision (3008 TT)</a>, <a href="https://www.smartkarma.com/entities/united-microelectronics-corp" target="_blank" data-smartkarma-citation="entities:6450:1" rel="noopener">United Microelectronics Corp (2303 TT)</a> and <a href="https://www.smartkarma.com/entities/compeq-manufacturing-co-ltd" target="_blank" data-smartkarma-citation="entities:9306:1" rel="noopener">Compeq Manufacturing (2313 TT)</a> while shorts were covered on <a href="https://www.smartkarma.com/entities/taiwan-semiconductor-manufacturing-company" target="_blank" data-smartkarma-citation="entities:11230:1" rel="noopener">TSMC (2330 TT)</a>, <a href="https://www.smartkarma.com/entities/winbond-electronics-corp" target="_blank" data-smartkarma-citation="entities:9177:1" rel="noopener">Winbond Electronics (2344 TT)</a>, <a href="https://www.smartkarma.com/entities/unimicron-technology-corp" target="_blank" data-smartkarma-citation="entities:18778:1" rel="noopener">Unimicron Technology (3037 TT)</a> and <a href="https://www.smartkarma.com/entities/nanya-technology-corp" target="_blank" data-smartkarma-citation="entities:3269:1" rel="noopener">Nanya Technology (2408 TT)</a>. </p></div>

The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong Kong, Japan, Korea and Taiwan using the last available data published by the relevant authorities.Hong Kong saw shorts rise on Ping An Insurance (H) (2318 HK), Meituan (3690 HK), Xiaomi Corp (1810 HK) and Anta Sports Products (2020 HK) while there was short covering on Tencent Holdings (700 HK), China Construction Bank H (939 HK), Sunac China Holdings (1918 HK) and HSBC Holdings (5 HK). Shorts decreased in most sectors led by Communication Services, Financials, Industrials, Real Estate, Energy and Utilities.In Japan, stocks that saw the most shorts were Ana Holdings (9202 JP), Suzuki Motor (7269 JP), Shionogi &amp; Co (4507 JP) and Mitsubishi UFJ Financial (MUFG) (8306 JP) while shorts decreased on Fast Retailing (9983 JP), Tokyo Electron (8035 JP), Canon Inc (7751 JP) and TDK Corp (6762 JP). Sectorally, shorts increased on Industrials, Health Care, Financials and Consumer Discretionary names.In Korea, there was large short covering on Celltrion Inc (068270 KS), Samsung Biologics Co., (207940 KS), Samsung Electronics (005930 KS) and SK Hynix (000660 KS). Stocks in Taiwan that saw the highest increase in shorts were Evergreen Marine Corp (2603 TT), Largan Precision (3008 TT), United Microelectronics Corp (2303 TT) and Compeq Manufacturing (2313 TT) while shorts were covered on TSMC (2330 TT), Winbond Electronics (2344 TT), Unimicron Technology (3037 TT) and Nanya Technology (2408 TT). 

Asia Short Interest: BIG Covering in HK & Korea

Expert on Japan Retail and Consumer Markets, JapanConsuming

Michael Causton

Expert on Japan Retail and Consumer Markets

Real Insight on Japanese Consumer Markets

JapanConsuming

JapanConsuming is a specialist research firm producing intelligence on Japanese retail and consumer markets. Founded in 2000, JapanConsuming has become the leading provider of insights on Japanese retailers and consumer trends to retailers, brands, government agencies and investors. As well as a highly regarded monthly report on the market, JapanConsuming produces in-depth reports on retail sectors, seminars on key trends and telephone consulting to investors on trends and retailers.

JapanConsuming was founded by Michael Causton and Roy Larke. 

<p>Last year the Japanese fashion market contracted below ¥16 trillion for the first time in more than a decade and this year is proving much, much worse.</p><p>In the last big crises – the 2008 financial shock and 2011 triple disasters – demand also fell dramatically and then recovered. But <strong>this time is different: as well as a fall in demand, the Covid-19 crisis has also led to a marked fall in supply</strong>.</p><p>But there is some good news. Above all, Japanese are not travelling either at home or abroad and they are also eating out less.</p><p><strong>In the seven months to July, the average working household had cumulatively saved a net ¥1.25 million, more than 11 months in both 2018 and 2019 and more than an entire year before 2018.</strong></p><p><strong>Suddenly wallets are full</strong>, which could mean more money to spend on treats – good news for luxury but also any brand or retailing offering something fun to divert from the all bleak news.</p><p>While the short-term outlook remains dark, the medium-term should see both a return to a more stable trading environment and something of a splurge too as people express their relief that it’s all over.</p><p>The following is a complete review of the Japanese apparel/fashion sector including rankings of the top 100 retailers by sales, top by profit, sales growth, and store openings/closures.</p><p><em>This insight is labelled bullish because the Japanese apparel/fashion sector will rebound from the current crisis although the long-term outlook for this sector is stagnant stability rather than significant growth. However, within this, there are significant growth stocks as detailed below.</em></p>

Last year the Japanese fashion market contracted below ¥16 trillion for the first time in more than a decade and this year is proving much, much worse.In the last big crises – the 2008 financial shock and 2011 triple disasters – demand also fell dramatically and then recovered. But this time is different: as well as a fall in demand, the Covid-19 crisis has also led to a marked fall in supply.But there is some good news. Above all, Japanese are not travelling either at home or abroad and they are also eating out less.In the seven months to July, the average working household had cumulatively saved a net ¥1.25 million, more than 11 months in both 2018 and 2019 and more than an entire year before 2018.Suddenly wallets are full, which could mean more money to spend on treats – good news for luxury but also any brand or retailing offering something fun to divert from the all bleak news.While the short-term outlook remains dark, the medium-term should see both a return to a more stable trading environment and something of a splurge too as people express their relief that it’s all over.The following is a complete review of the Japanese apparel/fashion sector including rankings of the top 100 retailers by sales, top by profit, sales growth, and store openings/closures.This insight is labelled bullish because the Japanese apparel/fashion sector will rebound from the current crisis although the long-term outlook for this sector is stagnant stability rather than significant growth. However, within this, there are significant growth stocks as detailed below.

Japan Fashion Retailing Complete Review 2019-20: Pain Now but a Recovery Is Certain

Japan

FAST RETAILING CO., LTD. operates a chain of clothing stores, UNIQLO, throughout Japan and in other markets overseas including UK, China, Hong Kong, South Korea, US, France, Singapore and Russia.  The Company designs, manufactures, and retails its own line of casual clothing.

Price Gauge
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Fast Retailing (9983 JP)

Fast Retailing: Upbeat Consensus Unlikely to Be Met in 2QFY21

Implied consensus revenue and OP growth for December 2020 to August 2021 period seem excessive, making an earnings miss or downgrade very likely in...

Oshadhi Kumarasiri

🇯🇵 JAPAN • Results & Revisions 01/14 Fast, Create, Canon, AGC

Thursday was the disclosure 'peak' for the November/February/May/August year-end group of companies. One-quarter of the companies reporting results...

Campbell Gunn

🇯🇵 JAPAN • Results & Revisions 12/28 -

The retail theme continues in Monday's best and worst pairing - Shimamura (8227 JP) and J Front Retailing (3086 JP)._____

Campbell Gunn

Asia Short Interest: BIG Covering in HK & Korea

There was a big drop in short interest in Hong Kong and Korea while shorts rose in Japan mainly led by ANA on the back of the offering. Shorts in...

Brian Freitas

Japan Fashion Retailing Complete Review 2019-20: Pain Now but a Recovery Is Certain

The following is a complete, in-depth review of the Japanese apparel/fashion sector covering key trends, rankings of the top 100 by sales and top...

Michael Causton

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Fast Retailing: Upbeat Consensus Unlikely to Be Met in 2QFY21

Implied consensus revenue and OP growth for December 2020 to August 2021 period seem excessive, making an earnings miss or downgrade very likely in...

Oshadhi Kumarasiri

🇯🇵 JAPAN • Results & Revisions ​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​01/​​​​​​14 Fast, Create, Canon, AGC

Thursday was the disclosure 'peak' for the November/February/May/August year-end group of companies. One-quarter of the companies reporting results...

Campbell Gunn

🇯🇵 JAPAN • Results & Revisions 12/​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​28 -

The retail theme continues in Monday's best and worst pairing - Shimamura (8227 JP) and J Front Retailing (3086 JP)._____

Campbell Gunn

Asia Short Interest: BIG Covering in HK & Korea

There was a big drop in short interest in Hong Kong and Korea while shorts rose in Japan mainly led by ANA on the back of the offering. Shorts in...

Brian Freitas

Japan Fashion Retailing Complete Review 2019-20: Pain Now but a Recovery Is Certain

The following is a complete, in-depth review of the Japanese apparel/fashion sector covering key trends, rankings of the top 100 by sales and top...

Michael Causton

🇯🇵 JAPAN • Results & Revisions 01/14 Fast, Create, Canon, AGC

🇯🇵 JAPAN • Results & Revisions 12/28 -