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>Japanese sporting goods company <a href="https://www.smartkarma.com/entities/asics-corp" target="_blank" data-smartkarma-citation="entities:16287:1" rel="noopener">ASICS Corp (7936 JP)</a>’s share price and consensus FY+2 EV/OP has declined by 2.8% and 8.4% respectively, since our previous insight on 12<sup>th</sup> June 2020: <a href="https://www.smartkarma.com/insights/asics-at-a-20-year-forward-ev-op-peak" target="_blank" rel="noopener">ASICS: At a 20-Year Forward EV/​OP Peak</a>. However, the company is still trading at <a target="_blank">23.9x </a>FY+2 EV/OP, 28% higher than the 52-week average.</p><p>The company posts sales trends for its direct retail outlets in chart format every two weeks and according to the latest charts, sales trends in Japan, Europe, and the U.S have materially weakened over the last 3-4 weeks. However, the consensus FY+2 OP estimate was increased 6% during that time, possibly due to the positive news flows about the progress of the COVID-19 vaccine trials and the postponement of the Tokyo Olympics till July 2021.</p><p>The economic impact of COVID-19 is expected to outlast the health impact, and we believe the recent upward revision of the consensus FY+2 OP is untimely, especially given the weakening own store retail sales trend.</p>

Japanese sporting goods company ASICS Corp (7936 JP)’s share price and consensus FY+2 EV/OP has declined by 2.8% and 8.4% respectively, since our previous insight on 12th June 2020: ASICS: At a 20-Year Forward EV/​OP Peak. However, the company is still trading at 23.9x FY+2 EV/OP, 28% higher than the 52-week average.The company posts sales trends for its direct retail outlets in chart format every two weeks and according to the latest charts, sales trends in Japan, Europe, and the U.S have materially weakened over the last 3-4 weeks. However, the consensus FY+2 OP estimate was increased 6% during that time, possibly due to the positive news flows about the progress of the COVID-19 vaccine trials and the postponement of the Tokyo Olympics till July 2021.The economic impact of COVID-19 is expected to outlast the health impact, and we believe the recent upward revision of the consensus FY+2 OP is untimely, especially given the weakening own store retail sales trend.

ASICS: Near 20-Year Forward EV/​OP Peak

<p>Japanese sporting goods company <a href="https://www.smartkarma.com/entities/asics-corp" target="_blank" data-smartkarma-citation="entities:16287:1" rel="noopener">ASICS Corp (7936 JP) </a>has started posting sales trends for its direct retail outlets in chart format every two weeks and will continue to do so for the rest of the year. No sales data is provided, however, sales trends in Japan, Europe and the US remained weak until the end of May. Asics China, however, recorded positive year-on-year sales growth over the last four weeks.</p>
<p>Asics is currently trading at a twenty-year peak FY+2 EV/OP multiple of 26.1x. Our target price of ¥783, based on the 5-year average for this ratio, implies a 41.9% downside from the current price.</p>
<h3>EV/EBIT- FY+2</h3>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/139/405/original/image_11376073521591862142863.png?1591862144" class="editor-image img-responsive" data-smartkarma-image-id="139405"></figure>
<div class="content-caption">Source: Cap IQ</div>

Japanese sporting goods company ASICS Corp (7936 JP) has started posting sales trends for its direct retail outlets in chart format every two weeks and will continue to do so for the rest of the year. No sales data is provided, however, sales trends in Japan, Europe and the US remained weak until the end of May. Asics China, however, recorded positive year-on-year sales growth over the last four weeks.
Asics is currently trading at a twenty-year peak FY+2 EV/OP multiple of 26.1x. Our target price of ¥783, based on the 5-year average for this ratio, implies a 41.9% downside from the current price.
EV/EBIT- FY+2

Source: Cap IQ

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

Thematic (Sector/Industry)

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/139/255/original/2020-06-11_08-36-54.png?1591832240" class="editor-image img-responsive" data-smartkarma-image-id="139255"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>STRESS TESTS</strong> - This Insight is the first in a series that will use a variety of standard and less-frequently used 'stress-tests' to look through the current euphoria and assess where business risk is concentrated among larger Japanese companies. According to Tokyo Shoko Research, 171 listed Japanese firms have raised nearly ¥10 trillion in new funds to weather COVID-19.</p><p><strong>ALTMAN Z-SCORES</strong> - The first Insight will update our earlier Who's<a href="https://www.smartkarma.com/insights/japan-who-s-swimming-naked-part-2-altman-z-score" target="_blank" data-smartkarma-citation="insights:37316" rel="noopener"> Swimming Naked?</a> Insight and focus on the Altman Z-Score as updated for the most recent quarterly results for both manufacturing and non-manufacturing companies.  In each category, ee will look at both the companies that are below Altman's 'distress' levels and those companies that have the most significant negative deviation from their seven-year average score. Only six of the bottom-thirty manufacturing and five of the bottom-thirty manufacturing companies have outperformed over one year. Many are already Oversold and offer potential value opportunities -as with <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)</a> which is now as distressed as when Carlos Ghosn first arrived.  </p><p><strong>QUASI-FINANCIAL FIRMS</strong> - The Z-Score methodology does not work for financial firms. Accordingly, five non-financial companies which have significant financial subsidiaries - <strong> <a href="https://www.smartkarma.com/entities/rakuten-inc" target="_blank" data-smartkarma-citation="entities:31:1" rel="noopener">Rakuten (4755 JP)</a></strong>,<strong> <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></strong>, <strong><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></strong>, <strong><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></strong> and <strong><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 AnalyticsSTRESS TESTS - This Insight is the first in a series that will use a variety of standard and less-frequently used 'stress-tests' to look through the current euphoria and assess where business risk is concentrated among larger Japanese companies. According to Tokyo Shoko Research, 171 listed Japanese firms have raised nearly ¥10 trillion in new funds to weather COVID-19.ALTMAN Z-SCORES - The first Insight will update our earlier Who's Swimming Naked? Insight and focus on the Altman Z-Score as updated for the most recent quarterly results for both manufacturing and non-manufacturing companies.  In each category, ee will look at both the companies that are below Altman's 'distress' levels and those companies that have the most significant negative deviation from their seven-year average score. Only six of the bottom-thirty manufacturing and five of the bottom-thirty manufacturing companies have outperformed over one year. Many are already Oversold and offer potential value opportunities -as with Nissan Motor (7201 JP) which is now as distressed as when Carlos Ghosn first arrived.  QUASI-FINANCIAL FIRMS - The Z-Score methodology does not work for financial firms. Accordingly, 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 1 - Altman Z-Scores

<ul class="">
<li>Japanese sporting goods company <a href="https://www.smartkarma.com/entities/asics-corp" target="_blank" rel="noopener">Asics (7936 JP)</a> released its first-quarter results on Friday, May 22nd after a two-week delay due to COVID-19.</li>
<li>Revenue declined by 13.5% year-on-year due to store closures in multiple regions.</li>
</ul>
<table class="table table-striped">
<tbody>
<tr>
<td style="width: 112.25pt;"></td>
<td style="width: 99.45pt;">
<p>Share of Total Revenue</p>
</td>
<td style="width: 103.5pt;">
<p>Revenue Growth/Decline</p>
</td>
</tr>
<tr>
<td style="width: 112.25pt;">
<p>Japan</p>
</td>
<td style="width: 99.45pt;">
<p style="text-align: right;">36%</p>
</td>
<td style="width: 103.5pt;">
<p style="text-align: right;">-8.3%</p>
</td>
</tr>
<tr>
<td style="width: 112.25pt;">
<p>North America</p>
</td>
<td style="width: 99.45pt;">
<p style="text-align: right;">18%</p>
</td>
<td style="width: 103.5pt;">
<p style="text-align: right;">-21.1%</p>
</td>
</tr>
<tr>
<td style="width: 112.25pt;">
<p>Europe</p>
</td>
<td style="width: 99.45pt;">
<p style="text-align: right;">25%</p>
</td>
<td style="width: 103.5pt;">
<p style="text-align: right;">-12.1%</p>
</td>
</tr>
<tr>
<td style="width: 112.25pt;">
<p>Greater China</p>
</td>
<td style="width: 99.45pt;">
<p style="text-align: right;">8%</p>
</td>
<td style="width: 103.5pt;">
<p style="text-align: right;">-17.2%</p>
</td>
</tr>
<tr>
<td style="width: 112.25pt;">
<p>Oceanian Region</p>
</td>
<td style="width: 99.45pt;">
<p style="text-align: right;">6%</p>
</td>
<td style="width: 103.5pt;">
<p style="text-align: right;">4.9%</p>
</td>
</tr>
<tr>
<td style="width: 112.25pt;">
<p>Southeast and South Asia</p>
</td>
<td style="width: 99.45pt;">
<p style="text-align: right;">3%</p>
</td>
<td style="width: 103.5pt;">
<p style="text-align: right;">-8.4%</p>
</td>
</tr>
<tr>
<td style="width: 112.25pt;">
<p>Others</p>
</td>
<td style="width: 99.45pt;">
<p style="text-align: right;">4%</p>
</td>
<td style="width: 103.5pt;">
<p style="text-align: right;">-29.0%</p>
</td>
</tr>
</tbody>
</table>
<div class="content-caption">Source: Company Disclosures</div>
<div>
<div>
<ul>
<li>Q1 Operating Income fell by ¥7 billion year-on-year to an operating loss of ¥882 million. The first quarter has been Asics’s most profitable quarter over the past five years, generated 65% of the annual OP.</li>
<li>The company withdrew its initial forecasts for the year which were made in February which called for sales of ¥400 billion and operating profits of ¥9 billion.</li>
<li>ASICS also withdrew its previously-issued forecast of a ¥30 per share dividend.</li>
</ul>
</div>
</div>


Japanese sporting goods company Asics (7936 JP) released its first-quarter results on Friday, May 22nd after a two-week delay due to COVID-19.
Revenue declined by 13.5% year-on-year due to store closures in multiple regions.






Share of Total Revenue


Revenue Growth/Decline




Japan


36%


-8.3%




North America


18%


-21.1%




Europe


25%


-12.1%




Greater China


8%


-17.2%




Oceanian Region


6%


4.9%




Southeast and South Asia


3%


-8.4%




Others


4%


-29.0%




Source: Company Disclosures



Q1 Operating Income fell by ¥7 billion year-on-year to an operating loss of ¥882 million. The first quarter has been Asics’s most profitable quarter over the past five years, generated 65% of the annual OP.
The company withdrew its initial forecasts for the year which were made in February which called for sales of ¥400 billion and operating profits of ¥9 billion.
ASICS also withdrew its previously-issued forecast of a ¥30 per share dividend.




ASICS Withholds Guidance: Possibility of Full-Term Loss

<div>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/135/544/original/2020-05-25_05-06-24.png?1590350813" class="editor-image img-responsive" data-smartkarma-image-id="135544"></figure><div class="content-caption">Source • Japan Analytics</div>
</div><p><strong>CLOSURE</strong> - As the fashion amongst Japanese companies is not to make any full-year forecasts, there has been little change in our forecast-based metrics over the last week. Trailing-twelve-month (TTM) profits declined by ¥3 trillion and ¥2.5 trillion at the operating and net levels, respectively, over the week - closing the 'gap' to forecast considerably. There is still some upside to the market multiple from the numerator. For the time being, however, liquidity rules.</p><div><p>In the <strong>DETAIL </strong>section below, we shall review Friday's announcements:-</p></div><div><ul>
<li>The balance between positive/neutral/negative of the 106 results announcements was 52:4:50. The average change in Results Score was -1.2.</li>
<li>For the 49 revisions/initial forecasts, the split was 10:1:38, and the average Forecast/Revision Score was -10.0. Again, only one-third of companies reporting full-year results chose to make current year forecasts. </li>
<li>As this highly-unusual disclosure period slowly winds down (7% of market cap has yet to report almost two months after books closed), 57 companies will announce results on Monday. The largest of these by market cap will be <a href="https://www.smartkarma.com/entities/ajinomoto-co-inc" target="_blank" data-smartkarma-citation="entities:8911:1" rel="noopener">Ajinomoto (2802 JP)</a>, <a href="https://www.smartkarma.com/entities/hitachi-ltd" target="_blank" data-smartkarma-citation="entities:7797:1" rel="noopener">Hitachi (6501 JP)</a>, and <a href="https://www.smartkarma.com/entities/shimizu-corp" target="_blank" data-smartkarma-citation="entities:8530:1" rel="noopener">Shimizu (1803 JP)</a>. <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)</a> and <a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1" rel="noopener">Toshiba (6502 JP)</a> will, hopefully, follow later in the week but may well be the 'sting in the trail'. </li>
</ul></div>


Source • Japan Analytics
CLOSURE - As the fashion amongst Japanese companies is not to make any full-year forecasts, there has been little change in our forecast-based metrics over the last week. Trailing-twelve-month (TTM) profits declined by ¥3 trillion and ¥2.5 trillion at the operating and net levels, respectively, over the week - closing the 'gap' to forecast considerably. There is still some upside to the market multiple from the numerator. For the time being, however, liquidity rules.In the DETAIL section below, we shall review Friday's announcements:-
The balance between positive/neutral/negative of the 106 results announcements was 52:4:50. The average change in Results Score was -1.2.
For the 49 revisions/initial forecasts, the split was 10:1:38, and the average Forecast/Revision Score was -10.0. Again, only one-third of companies reporting full-year results chose to make current year forecasts. 
As this highly-unusual disclosure period slowly winds down (7% of market cap has yet to report almost two months after books closed), 57 companies will announce results on Monday. The largest of these by market cap will be Ajinomoto (2802 JP), Hitachi (6501 JP), and Shimizu (1803 JP). Nissan Motor (7201 JP) and Toshiba (6502 JP) will, hopefully, follow later in the week but may well be the 'sting in the trail'. 


🇯🇵 JAPAN • Results & Revisions 22nd May - FUJIFILM, ASICS, Benesse

Japan

ASICS CORPORATION manufactures general sporting goods and equipment.  The Company's products, such as athletic shoes and sportswear, are distributed in the United States, Europe, Australia, and Asia.

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ASICS Corp (7936 JP)

ASICS: Near 20-Year Forward EV/OP Peak

Japanese sporting goods company ASICS Corp (7936 JP)’s share price and consensus FY+2 EV/OP has declined by 2.8% and 8.4% respectively, since our...

Oshadhi Kumarasiri

ASICS: At a 20-Year Forward EV/OP Peak

Japanese sporting goods company ASICS Corp (7936 JP) has started posting sales trends for its direct retail outlets in chart format every two weeks...

Oshadhi Kumarasiri

🇯🇵 JAPAN - Stress Tests Part 1 - Altman Z-Scores

STRESS TESTS - This Insight is the first in a series that will use a variety of standard and less-frequently used 'stress-tests' to look through...

Campbell Gunn

ASICS Withholds Guidance: Possibility of Full-Term Loss

Japanese sporting goods company Asics (7936 JP) released its first-quarter results on Friday, May 22nd after a two-week delay due to...

Oshadhi Kumarasiri

🇯🇵 JAPAN • Results & Revisions 22nd May - FUJIFILM, ASICS, Benesse

CLOSURE - As the fashion amongst Japanese companies is not to make any full-year forecasts, there has been little change in our forecast-based...

Campbell Gunn

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

ASICS: Near 20-Year Forward EV/​OP Peak

Japanese sporting goods company ASICS Corp (7936 JP)’s share price and consensus FY+2 EV/OP has declined by 2.8% and 8.4% respectively, since our...

Oshadhi Kumarasiri

ASICS: At a 20-Year Forward EV/OP Peak

Japanese sporting goods company ASICS Corp (7936 JP) has started posting sales trends for its direct retail outlets in chart format every two weeks...

Oshadhi Kumarasiri

🇯🇵 JAPAN - Stress Tests Part 1 - Altman Z-Scores

STRESS TESTS - This Insight is the first in a series that will use a variety of standard and less-frequently used 'stress-tests' to look through...

Campbell Gunn

ASICS Withholds Guidance: Possibility of Full-Term Loss

Japanese sporting goods company Asics (7936 JP) released its first-quarter results on Friday, May 22nd after a two-week delay due to...

Oshadhi Kumarasiri

🇯🇵 JAPAN • Results & Revisions 22nd May - FUJIFILM, ASICS, Benesse

CLOSURE - As the fashion amongst Japanese companies is not to make any full-year forecasts, there has been little change in our forecast-based...

Campbell Gunn

ASICS: Near 20-Year Forward EV/OP Peak