'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

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.

Thematic (Sector/Industry)

<p style="text-align: center;"><strong>• EARNINGS MOMENTUM TURNS POSITIVE •</strong></p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/188/535/original/2021-02-14_09-01-24.png?1613260898" class="editor-image img-responsive" data-smartkarma-image-id="188535"></figure><div class="content-caption">Source for all charts &amp; tables: Japan Analytics</div></section><p><strong>POSITIVE EARNINGS MOMENTUM</strong> - For the first time in just over one year and driven by a strong recovery in the index-heavy <strong>Auto</strong> Sector, our Market Composite Results &amp; Revision Score - a measure of earnings momentum - has turned positive. Meanwhile, the Cabinet Office Leading Indicator of Business Conditions which is indexed to August 2015, has yet to rise above 100 and declined by 120 basis points for December.</p><section class="figure"><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/188/537/original/2021-02-14_08-23-29.png?1613262285" class="editor-image img-responsive" data-smartkarma-image-id="188537"></figure></section><p><strong>SECTOR BREAKDOWN</strong> - The leading Sectors, as measured by the change in Results &amp; Revision Score, are<strong> Other Commercial Products</strong>, <strong>Autos</strong>, <strong>Metals</strong>, <strong>Building Materials</strong>, and <strong>Other Consumer Products</strong>. The laggards are <strong>Utilities</strong>, <strong>Internet</strong>, <strong>Food</strong>, <strong>Beverages &amp; Tobacco</strong>, <strong>Retail</strong>, and <strong>Commercial Services</strong>. As in other markets, cyclicals leading the recovery, and, as a result, driving Japan's indices to new multi-decade highs.</p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/188/538/original/2021-02-14_08-22-44.png?1613262793" class="editor-image img-responsive" data-smartkarma-image-id="188538"></figure></section><p><strong>FORWARD VALUATIONS</strong> - While the trailing Market Composite PER remain above 30 times,  a ¥7.6 trillion increase in forecast Net Income from the low point if 2020, has reduced the forward multiple to 28.2 times. By the end of May, most March year-end companies will have made forecasts for the year to March 2022 - a decline to below 25 times is likely, assuming Total Market Value is at current levels.</p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/188/539/original/2021-02-14_08-14-17.png?1613262839" class="editor-image img-responsive" data-smartkarma-image-id="188539"></figure></section><p><strong>ALL-TIME US$ HIGH &lt;10% AWAY</strong> - While much is being written about the new thirty-year high for the TOPIX index, many will have missed the proximity of TOPIX in US dollars terms to a new all-time high, which would occur with a combined 9.5% increase in the equity market and the Yen. A 4.3% rise in TOPIX and a USDJPY rate of 100 is all that is required and would be a welcome feather in the cap of the recently beleaguered PM Suga's cap. </p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/188/540/original/2021-02-14_10-05-46.png?1613264814" class="editor-image img-responsive" data-smartkarma-image-id="188540"></figure></section><p><strong>RSI &gt;80</strong> - Tempering the current bullishness are the RSI of over 80 and a Toraku index close to 120. Both suggest near-term caution is warranted.</p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/188/541/original/2021-02-14_10-15-17.png?1613265332" class="editor-image img-responsive" data-smartkarma-image-id="188541"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/188/542/original/2021-02-14_10-20-42.png?1613265721" class="editor-image img-responsive" data-smartkarma-image-id="188542"></figure></section><hr></section><p style="text-align: center;"><br><strong>• RESULTS &amp; REVISIONS SUMMARY - 12th FEBRUARY •</strong></p><div><p>Of Friday's 723 results announcements, 64% scored positively for earnings momentum despite trailing revenues falling by 3% on average and a 3.9 point decline in operating margins. 17% of companies were in the red for the quarter.  63% of the 360 annual forecasts/revision announcements scored positively, and the average Forecast/Revision score was +10.3 points.</p></div><div><p style="text-align: center;"><strong>• BEST &amp; WORST •</strong></p></div><div>
<p>The 'best' larger-cap announcements came from <a href="https://www.smartkarma.com/entities/yamaha-motor-co-ltd" target="_blank" data-smartkarma-citation="entities:7411:1" rel="noopener">Yamaha Motor (7272 JP)</a>,  <a href="https://www.smartkarma.com/entities/japan-post-bank-co-ltd" target="_blank" data-smartkarma-citation="entities:838:1" rel="noopener">Japan Post Bank (7182 JP)</a>, and <a href="https://www.smartkarma.com/entities/toppan-printing-co-ltd" target="_blank" data-smartkarma-citation="entities:11875:1" rel="noopener">Toppan Printing (7911 JP)</a>; the 'worst' were from <a href="https://www.smartkarma.com/entities/otsuka-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:12292:1" rel="noopener">Otsuka Holdings (4578 JP)</a>, <a href="https://www.smartkarma.com/entities/sumitomo-dainippon-pharma-co" target="_blank" data-smartkarma-citation="entities:1935:1" rel="noopener">Sumitomo Dainippon Pharma (4506 JP)</a>, and <a href="https://www.smartkarma.com/entities/lion-corp" target="_blank" data-smartkarma-citation="entities:16576:1" rel="noopener">Lion (4912 JP)</a>.  <a href="https://www.smartkarma.com/entities/pola-orbis-holdings-inc" target="_blank" data-smartkarma-citation="entities:2287:1" rel="noopener">Pola Orbis (4927 JP)</a> and <a href="https://www.smartkarma.com/entities/asahi-group-holdings-ltd" target="_blank" data-smartkarma-citation="entities:10482:1" rel="noopener">Asahi Group (2502 JP)</a> take the prizes for optimism.  For more, see the <strong>DETAIL</strong> section below.</p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/188/605/original/2021-02-15_06-00-48.png?1613336460" class="editor-image img-responsive" data-smartkarma-image-id="188605"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/188/606/original/2021-02-15_06-01-37.png?1613336511" class="editor-image img-responsive" data-smartkarma-image-id="188606"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/188/608/original/2021-02-15_06-05-12.png?1613336726" class="editor-image img-responsive" data-smartkarma-image-id="188608"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/188/610/original/2021-02-15_06-05-57.png?1613336771" class="editor-image img-responsive" data-smartkarma-image-id="188610"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/188/611/original/2021-02-15_06-06-35.png?1613336808" class="editor-image img-responsive" data-smartkarma-image-id="188611"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/188/612/original/2021-02-15_06-07-12.png?1613336846" class="editor-image img-responsive" data-smartkarma-image-id="188612"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/188/613/original/2021-02-15_06-10-36.png?1613337047" class="editor-image img-responsive" data-smartkarma-image-id="188613"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/188/615/original/2021-02-15_06-11-21.png?1613337091" class="editor-image img-responsive" data-smartkarma-image-id="188615"></figure></section><p></p>
</div>

• EARNINGS MOMENTUM TURNS POSITIVE •Source for all charts &amp; tables: Japan AnalyticsPOSITIVE EARNINGS MOMENTUM - For the first time in just over one year and driven by a strong recovery in the index-heavy Auto Sector, our Market Composite Results &amp; Revision Score - a measure of earnings momentum - has turned positive. Meanwhile, the Cabinet Office Leading Indicator of Business Conditions which is indexed to August 2015, has yet to rise above 100 and declined by 120 basis points for December.SECTOR BREAKDOWN - The leading Sectors, as measured by the change in Results &amp; Revision Score, are Other Commercial Products, Autos, Metals, Building Materials, and Other Consumer Products. The laggards are Utilities, Internet, Food, Beverages &amp; Tobacco, Retail, and Commercial Services. As in other markets, cyclicals leading the recovery, and, as a result, driving Japan's indices to new multi-decade highs.
FORWARD VALUATIONS - While the trailing Market Composite PER remain above 30 times,  a ¥7.6 trillion increase in forecast Net Income from the low point if 2020, has reduced the forward multiple to 28.2 times. By the end of May, most March year-end companies will have made forecasts for the year to March 2022 - a decline to below 25 times is likely, assuming Total Market Value is at current levels.
ALL-TIME US$ HIGH &lt;10% AWAY - While much is being written about the new thirty-year high for the TOPIX index, many will have missed the proximity of TOPIX in US dollars terms to a new all-time high, which would occur with a combined 9.5% increase in the equity market and the Yen. A 4.3% rise in TOPIX and a USDJPY rate of 100 is all that is required and would be a welcome feather in the cap of the recently beleaguered PM Suga's cap. 
RSI &gt;80 - Tempering the current bullishness are the RSI of over 80 and a Toraku index close to 120. Both suggest near-term caution is warranted.
 • RESULTS &amp; REVISIONS SUMMARY - 12th FEBRUARY •Of Friday's 723 results announcements, 64% scored positively for earnings momentum despite trailing revenues falling by 3% on average and a 3.9 point decline in operating margins. 17% of companies were in the red for the quarter.  63% of the 360 annual forecasts/revision announcements scored positively, and the average Forecast/Revision score was +10.3 points.• BEST &amp; WORST •
The 'best' larger-cap announcements came from Yamaha Motor (7272 JP),  Japan Post Bank (7182 JP), and Toppan Printing (7911 JP); the 'worst' were from Otsuka Holdings (4578 JP), Sumitomo Dainippon Pharma (4506 JP), and Lion (4912 JP).  Pola Orbis (4927 JP) and Asahi Group (2502 JP) take the prizes for optimism.  For more, see the DETAIL section below.



🇯🇵 JAPAN • Market & Results & Revisions Update 02/12 • Yamaha Motor, J Post Bank, Otsuka & Lion

<div>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/139/997/original/2020-06-15_11-08-56.png?1592186965" class="editor-image img-responsive" data-smartkarma-image-id="139997"></figure><div class="content-caption">Source: Japan Analytics</div>
<p><strong>STRESS TESTS</strong> - This Insight is the second in our<strong> Japan Stress Test</strong> series in which we endeavour to assess where business risk is concentrated among larger Japanese companies. <strong><a href="https://www.smartkarma.com/insights/japan-stress-tests-part-1-altman-z-scores" target="_blank" data-smartkarma-citation="insights:40180" rel="noopener">Part 1</a></strong> looked at the time-worn <strong>Altman-Z Score</strong> for both manufacturing and non-manufacturing companies. In Part 2 will we turn our attention to the cash flow statement starting with the 'lifeblood' of all businesses - <strong>Operating Cash Flow</strong>.</p>
<p><strong>ACCRUAL ACCOUNTING</strong> - Despite the sacrosanctity in some quarters of discounted cash flow analysis, for valuation purposes, our preference is to use accrual accounting. As Professor Stephen Penman states, "<em>Accrual accounting brings the future forward in time and anticipates future cash flows.</em>"  Nevertheless, cash flow accounting, and the level of accounting accruals, can provide early insights into periodic stress. <a href="https://www.smartkarma.com/entities/nissan-motor-co-ltd" target="_blank" data-smartkarma-citation="entities:72:1" rel="noopener">Nissan Motor (7201 JP)'s</a> Accruals (Operating Income less Operating Cash Flow) as a percentage of period-end market capitalisation correlate with the company's Relative Price Score over the last thirty years. Further Insights in this series will continue to 'mine'  the Cash Flow statement by exploring <strong>Financing Cash Flows</strong> and the <strong>Working Capital Cycle</strong>.</p>
<p><strong>REFORMULATED CASH FLOW</strong><strong>STATEMENTS</strong> - Our <strong>Operating Cash Flow</strong> calculation is derived from each company's<strong> Balance Sheet</strong> and<strong> Income Statement</strong> for periods of up to twenty-eight years. Cash Flow items relating to operating activities are divided into <strong>Operating Cash Flow</strong> and <strong>Investing Cash Flow</strong>, which includes Fixed Asset and Inventory Cash Flows.  Cash flows relating to financing activities are divided into <strong>Financing Cash Flow</strong> and<strong> Shareholder Cash Flow</strong>. The reformulated Balance Sheets, Income and Cash Flow Statements follow a clean-surplus relationship. All three Statements are fully articulated to include items of <strong>Other Comprehensive Income</strong> which are added to or subtracted from Shareholders' Equity. </p>
</div><p><strong>UNIVERSE</strong> - The universe for this Insight comprises the <strong>614</strong> Japanese companies with a market capitalisation excluding Treasury Stock over <strong>¥100 million</strong> and for which we have at least two years of cash flow data.  Five non-financial companies, which have significant financial subsidiaries<strong> (</strong><strong><a href="https://www.smartkarma.com/entities/rakuten-inc" target="_blank" data-smartkarma-citation="entities:31:1" rel="noopener">Rakuten (4755 JP)</a>, <a href="https://www.smartkarma.com/entities/z-holdings-corp" target="_blank" data-smartkarma-citation="entities:19603:1" rel="noopener">Z Holdings (4689 JP)</a>, <a href="https://www.smartkarma.com/entities/japan-post-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:359:1" rel="noopener">Japan Post (6178 JP)</a>, <a href="https://www.smartkarma.com/entities/softbank-group-corp" target="_blank" data-smartkarma-citation="entities:315:1" rel="noopener">Softbank Group (9984 JP)</a> and <a href="https://www.smartkarma.com/entities/sony-corp" target="_blank" data-smartkarma-citation="entities:563:1" rel="noopener">Sony (6758 JP)</a>)</strong>, have been excluded from this analysis. </p>


Source: Japan Analytics
STRESS TESTS - This Insight is the second in our Japan Stress Test series in which we endeavour to assess where business risk is concentrated among larger Japanese companies. Part 1 looked at the time-worn Altman-Z Score for both manufacturing and non-manufacturing companies. In Part 2 will we turn our attention to the cash flow statement starting with the 'lifeblood' of all businesses - Operating Cash Flow.
ACCRUAL ACCOUNTING - Despite the sacrosanctity in some quarters of discounted cash flow analysis, for valuation purposes, our preference is to use accrual accounting. As Professor Stephen Penman states, "Accrual accounting brings the future forward in time and anticipates future cash flows."  Nevertheless, cash flow accounting, and the level of accounting accruals, can provide early insights into periodic stress. Nissan Motor (7201 JP)'s Accruals (Operating Income less Operating Cash Flow) as a percentage of period-end market capitalisation correlate with the company's Relative Price Score over the last thirty years. Further Insights in this series will continue to 'mine'  the Cash Flow statement by exploring Financing Cash Flows and the Working Capital Cycle.
REFORMULATED CASH FLOWSTATEMENTS - Our Operating Cash Flow calculation is derived from each company's Balance Sheet and Income Statement for periods of up to twenty-eight years. Cash Flow items relating to operating activities are divided into Operating Cash Flow and Investing Cash Flow, which includes Fixed Asset and Inventory Cash Flows.  Cash flows relating to financing activities are divided into Financing Cash Flow and Shareholder Cash Flow. The reformulated Balance Sheets, Income and Cash Flow Statements follow a clean-surplus relationship. All three Statements are fully articulated to include items of Other Comprehensive Income which are added to or subtracted from Shareholders' Equity. 
UNIVERSE - The universe for this Insight comprises the 614 Japanese companies with a market capitalisation excluding Treasury Stock over ¥100 million and for which we have at least two years of cash flow data.  Five non-financial companies, which have significant financial subsidiaries (Rakuten (4755 JP), Z Holdings (4689 JP), Japan Post (6178 JP), Softbank Group (9984 JP) and Sony (6758 JP)), have been excluded from this analysis. 

🇯🇵 JAPAN - Stress Tests Part 2 - Operating Cash Flow & Accruals

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/132/848/original/2020-05-12_05-39-47.png?1589229610" class="editor-image img-responsive" data-smartkarma-image-id="132848"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>NEW INTERIM LOW</strong> - As we have noted in earlier Insights in this series, only half of the companies with March year-ends are issuing forecasts for the current year. Of those that do, two-thirds are also providing forecasts for the six months to September 2020. As was the case in 2019, our Interim data series is a clear signal of the depth of this recession.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/132/853/original/2020-05-12_06-49-09.png?1589233760" class="editor-image img-responsive" data-smartkarma-image-id="132853"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/132/854/original/2020-05-12_06-49-50.png?1589233810" class="editor-image img-responsive" data-smartkarma-image-id="132854"></figure><div class="content-caption">Source • Japan Analytics</div><p>In the <strong>DETAIL</strong> below, we shall review the results, revisions and initial forecast announcements made by larger-cap (¥75b+) companies yesterday:-</p><ul>
<li>The balance between positive/neutral/negative of the <strong>238</strong> results announcements was <strong>103:17:118</strong>. The average change in Results Score was <strong>-0.8</strong>.</li>
<li>For the <strong>137</strong> revisions/initial forecasts, the split was <strong>46:12:79, </strong>and the average Revision Score was<strong> -5.4</strong>. Of the <strong>183</strong> companies declaring full-year results, <strong>52%</strong> made forecasts for the current year.</li>
<li>263 will announce on Monday, the largest of which by market capitalisation will be <a href="https://www.smartkarma.com/entities/toyota-motor-corp" target="_blank" data-smartkarma-citation="entities:73:1" rel="noopener">Toyota Motor (7203 JP)</a>, <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>, and <a href="https://www.smartkarma.com/entities/daikin-industries-ltd" target="_blank" data-smartkarma-citation="entities:16696:1" rel="noopener">Daikin (6367 JP)</a>.</li>
<li>Monday's 'best' and 'worst' scoring results were from  <a href="https://www.smartkarma.com/entities/nissin-foods-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:12548:1" rel="noopener">Nissin Foods (2897 JP)</a>  and amusement centre operator <a href="https://www.smartkarma.com/entities/round-one-corp" target="_blank" data-smartkarma-citation="entities:7057:1" rel="noopener">Round One (4680 JP)</a>, respectively. </li>
</ul>

Source • Japan AnalyticsNEW INTERIM LOW - As we have noted in earlier Insights in this series, only half of the companies with March year-ends are issuing forecasts for the current year. Of those that do, two-thirds are also providing forecasts for the six months to September 2020. As was the case in 2019, our Interim data series is a clear signal of the depth of this recession.Source • Japan AnalyticsIn the DETAIL below, we shall review the results, revisions and initial forecast announcements made by larger-cap (¥75b+) companies yesterday:-
The balance between positive/neutral/negative of the 238 results announcements was 103:17:118. The average change in Results Score was -0.8.
For the 137 revisions/initial forecasts, the split was 46:12:79, and the average Revision Score was -5.4. Of the 183 companies declaring full-year results, 52% made forecasts for the current year.
263 will announce on Monday, the largest of which by market capitalisation will be Toyota Motor (7203 JP), Honda Motor (7267 JP), and Daikin (6367 JP).
Monday's 'best' and 'worst' scoring results were from  Nissin Foods (2897 JP)  and amusement centre operator Round One (4680 JP), respectively. 


🇯🇵 JAPAN • Results & Revisions 11th May - Nissin, Seria, Mitsubishi Electric, Asahi Group

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. 

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/118/403/original/2020-02-18_08-44-22.png?1581983074" class="editor-image img-responsive" data-smartkarma-image-id="118403"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/118/404/original/2020-02-18_08-42-56.png?1581983098" class="editor-image img-responsive" data-smartkarma-image-id="118404"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>THREE-YEAR LOW</strong> - With <a href="https://www.smartkarma.com/entities/bridgestone-corp" target="_blank" data-smartkarma-citation="entities:8914:1" rel="noopener">Bridgestone (5108 JP)</a>'s results and revision now added, our final tally for this season is a 196 basis point decline in our <strong>Results Sore</strong> - the lowest since March 2017.  In contrast, the Forecast/Revision Score reached a three-month high as the 470 companies with December year-ends put an optimistic gloss on their medium-term outlook. As we have noted in our recent daily roundups, a normal precondition for a cycle low is for the <strong>Forecast/Revision Score</strong> to rise above the <strong>Results Score</strong>. <strong>Forecast/Revision Score</strong> peaks and troughs usually occur one to two quarters ahead of those for the <strong>Results Score</strong>.  Covid-19's impact will likely see the 2016 'playbook' repeated next quarter with a lower Results Score and a 'sideways' Forecast/Results Score. The <strong>Results Score</strong> cycle low point will be reached with the mostly-interim results to be released in six months. </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/118/405/original/2020-02-18_09-29-28.png?1581985792" class="editor-image img-responsive" data-smartkarma-image-id="118405"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>LEADING INDICATOR</strong> - By including several momentum factors into our Scoring (see below), we can provide a better indication of future business conditions. Indeed there is a 0.83 correlation between the Cabinet Office's Business Condition Leading Indicator and the<strong> Forecast/Revision Score</strong>. Reported earnings, as well as company forecasts, are <em>lagging</em> indicators and, as shown in Part 1 of this Insight. Both data series peaked one year after our Scores and the market peaked in early 2018. </p><p><strong>SCORING METHODOLOGY</strong> - For those new to these Insights, we briefly recap our scoring methodology below:-</p><ul>
<li><p><strong>Results Scores</strong> are calculated using the most recent eight quarters of company data for Revenues, Operating Income and Operating Margin and, for each, measure the rate, degree and consistency of change. The Results Score has a maximum of +30 and a minimum of -30 for each period. Our data series commences from the time a particular company issues quarterly results. The sample size becomes significant from March 2005.</p></li>
<li><p>The <strong>Forecast/Revision Score</strong> is based on both Annual and Interim period company forecasts and compares changes from previous forecasts as well as against the trailing twelve-month (TTM) or previous first-half results, with annual forecasts being double-weighted. This Score also has a maximum of +30 and a minimum of -30 for each period.  For this series, our data samples start from August 2008.</p></li>
<li><p>The combined <strong>Results &amp; Revision Score (RRS)</strong> is the average of the <strong>Results Score</strong> and the<strong> Forecasts/Revision Score</strong>.</p></li>
<li>
<p>All company Scores are then cap-weight-aggregated into <strong>Sector</strong>, <strong>Peer Group</strong> and <strong>Market Composite</strong> Scores for which the seventeen-year monthly and two-year daily track records are shown above. Only currently listed-companies are covered in the aggregate Scores, and the Total Market Capitalisation excludes delisted entities. REITs are not included.</p>
<hr>
<p style="text-align: center;"><strong>• SECTOR SCORES •</strong></p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/118/410/original/2020-02-18_09-55-29.png?1581987489" class="editor-image img-responsive" data-smartkarma-image-id="118410"></figure><div class="content-caption">Source • Japan Analytics</div>
<p>In the <strong>DETAIL</strong> Section below, we provide a detailed breakdown of our RRS Scoring for Sectors, Peer Groups and individual companies, highlighting this quarter's 'winners' and 'losers'. The chart above shows a  seventeen-year 'timeline' of the cap-weight-aggregated Sector RRS Scores and the ebbs and flows around the business cycles. The <strong>Metals</strong> Sector is the most volatile on the downside and has yet to 'bottom' this cycle. <strong>Technology Hardware</strong> appears to have already rebounded; however, Covid-19 suggests this Sector may relapse. On the upside, the<strong> Information Technology</strong> Sector has replaced the <strong>Internet</strong> and <strong>Telecoms</strong> Sectors as the contra-cyclical 'champion'. </p>
</li>
</ul>

Source • Japan AnalyticsTHREE-YEAR LOW - With Bridgestone (5108 JP)'s results and revision now added, our final tally for this season is a 196 basis point decline in our Results Sore - the lowest since March 2017.  In contrast, the Forecast/Revision Score reached a three-month high as the 470 companies with December year-ends put an optimistic gloss on their medium-term outlook. As we have noted in our recent daily roundups, a normal precondition for a cycle low is for the Forecast/Revision Score to rise above the Results Score. Forecast/Revision Score peaks and troughs usually occur one to two quarters ahead of those for the Results Score.  Covid-19's impact will likely see the 2016 'playbook' repeated next quarter with a lower Results Score and a 'sideways' Forecast/Results Score. The Results Score cycle low point will be reached with the mostly-interim results to be released in six months. Source • Japan AnalyticsLEADING INDICATOR - By including several momentum factors into our Scoring (see below), we can provide a better indication of future business conditions. Indeed there is a 0.83 correlation between the Cabinet Office's Business Condition Leading Indicator and the Forecast/Revision Score. Reported earnings, as well as company forecasts, are lagging indicators and, as shown in Part 1 of this Insight. Both data series peaked one year after our Scores and the market peaked in early 2018. SCORING METHODOLOGY - For those new to these Insights, we briefly recap our scoring methodology below:-
Results Scores are calculated using the most recent eight quarters of company data for Revenues, Operating Income and Operating Margin and, for each, measure the rate, degree and consistency of change. The Results Score has a maximum of +30 and a minimum of -30 for each period. Our data series commences from the time a particular company issues quarterly results. The sample size becomes significant from March 2005.
The Forecast/Revision Score is based on both Annual and Interim period company forecasts and compares changes from previous forecasts as well as against the trailing twelve-month (TTM) or previous first-half results, with annual forecasts being double-weighted. This Score also has a maximum of +30 and a minimum of -30 for each period.  For this series, our data samples start from August 2008.
The combined Results &amp; Revision Score (RRS) is the average of the Results Score and the Forecasts/Revision Score.

All company Scores are then cap-weight-aggregated into Sector, Peer Group and Market Composite Scores for which the seventeen-year monthly and two-year daily track records are shown above. Only currently listed-companies are covered in the aggregate Scores, and the Total Market Capitalisation excludes delisted entities. REITs are not included.

• SECTOR SCORES •
Source • Japan Analytics
In the DETAIL Section below, we provide a detailed breakdown of our RRS Scoring for Sectors, Peer Groups and individual companies, highlighting this quarter's 'winners' and 'losers'. The chart above shows a  seventeen-year 'timeline' of the cap-weight-aggregated Sector RRS Scores and the ebbs and flows around the business cycles. The Metals Sector is the most volatile on the downside and has yet to 'bottom' this cycle. Technology Hardware appears to have already rebounded; however, Covid-19 suggests this Sector may relapse. On the upside, the Information Technology Sector has replaced the Internet and Telecoms Sectors as the contra-cyclical 'champion'. 



🇯🇵 JAPAN • IT’S A WRAP! Part 2: 2020-Q1 Results & Revision Scores

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/117/756/original/2020-02-14_05-11-41.png?1581624901" class="editor-image img-responsive" data-smartkarma-image-id="117756"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/117/760/original/2020-02-14_05-38-10.png?1581626321" class="editor-image img-responsive" data-smartkarma-image-id="117760"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>13TH FEBRUARY ROUNDUP</strong> - The penultimate day of this results 'season' saw 402 results and 224 forecast or revision announcements.  Our results Score lost another 7 basis points; however, positive initial annual forecasts from several December year-end companies including <a href="https://www.smartkarma.com/entities/dentsu-inc" target="_blank" data-smartkarma-citation="entities:12434:1" rel="noopener">Dentsu  (4324 JP)</a>, <a href="https://www.smartkarma.com/entities/unicharm-corp" target="_blank" data-smartkarma-citation="entities:6246:1" rel="noopener">Unicharm (8113 JP)</a>, <a href="https://www.smartkarma.com/entities/asahi-group-holdings-ltd" target="_blank" data-smartkarma-citation="entities:10482:1" rel="noopener">Asahi Group (2502 JP)</a>, <a href="https://www.smartkarma.com/entities/coca-cola-bottlers-japan" target="_blank" data-smartkarma-citation="entities:20051:1" rel="noopener">Coca Cola Bottlers Japan (2579 JP)</a>, <a href="https://www.smartkarma.com/entities/suntory-beverage-food-ltd" target="_blank" data-smartkarma-citation="entities:8218:1" rel="noopener">Suntory Beverage &amp; Food (2587 JP)</a>, and <a href="https://www.smartkarma.com/entities/mcdonald-s-holdings-co-japan" target="_blank" data-smartkarma-citation="entities:985:1" rel="noopener">Mcdonald's Japan (2702 JP)</a> added 34 bps to the Forecast/Revision Score. <strong>The 'gap' between the two Scores is the largest since mid-2016, and a large gap is a precondition for setting a cycle low. </strong></p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/117/757/original/2020-02-14_05-14-40.png?1581625349" class="editor-image img-responsive" data-smartkarma-image-id="117757"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>SECTOR TIMELINE</strong> - These initial forecasts were the prime driver of the on-day changes in our Sector Timeline, which saw gains for <strong>Restaurants,</strong><strong>Media</strong>, <strong>Food, Beverages &amp; Tobacco</strong>, and <strong>Other Consumer Products</strong>. Time will tell if this optimism is well-founded or not.</p>

Source • Japan Analytics13TH FEBRUARY ROUNDUP - The penultimate day of this results 'season' saw 402 results and 224 forecast or revision announcements.  Our results Score lost another 7 basis points; however, positive initial annual forecasts from several December year-end companies including Dentsu  (4324 JP), Unicharm (8113 JP), Asahi Group (2502 JP), Coca Cola Bottlers Japan (2579 JP), Suntory Beverage &amp; Food (2587 JP), and Mcdonald's Japan (2702 JP) added 34 bps to the Forecast/Revision Score. The 'gap' between the two Scores is the largest since mid-2016, and a large gap is a precondition for setting a cycle low. Source • Japan AnalyticsSECTOR TIMELINE - These initial forecasts were the prime driver of the on-day changes in our Sector Timeline, which saw gains for Restaurants,Media, Food, Beverages &amp; Tobacco, and Other Consumer Products. Time will tell if this optimism is well-founded or not.

🇯🇵 JAPAN • Results & Revisions Daily Roundup - 13th February ▲2587 4612 8113 ▼ 7201 4004 4912

Japan

Asahi Group Holdings, Ltd. produces beer and other beverages including non-alcoholic drinks. The Company sells its products in Japan and overseas.

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Asahi Group Holdings (2502 JP)

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