'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)

<div>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/119/968/original/2020-02-26_03-36-31.png?1582661261" class="editor-image img-responsive" data-smartkarma-image-id="119968"></figure><div class="content-caption">Source: Japan Analytics</div>
DELAYED ONSET - The Japanese market's response to the growing number of Covid-19 cases outside China and Yokohama docks was delayed by the Monday holiday for the new Emperor's birthday. Tuesday's 3.3% decline will be followed by another substantial decline today following Wall Street's overnight 3% decline and the Yen's breach of ¥110 against the US Dollar.
ILL-EQUIPPED -  Japan is as ill-equipped as the US to handle large-scale outbreaks of infectious diseases. The country's greater reliance on public transportation and preference for overcrowded open-plan offices, however, makes containment more of challenge. For security reasons, most Japanese companies do not permit employees to work from home or use personal computing devices for work. Many companies require employees to lock their office PCs when they take a bathroom break. For cultural and practical reasons, Chinese or Italian-style cordoning off of infected communities will prove impossible to implement to here.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/119/981/original/2020-01-30_06-58-37.png?1582667889" class="editor-image img-responsive" data-smartkarma-image-id="119981"></figure><div class="content-caption">Source • NHK World</div>
<a href="https://www3.nhk.or.jp/nhkworld/en/news/20200225_31/" target="_blank" rel="noopener">'BASIC' POLICY</a> - The government's 'basic policy' announced <a href="https://www3.nhk.or.jp/nhkworld/en/news/20200225_31/" target="_blank" rel="noopener">yesterday</a> relies on post-symptomatic self-isolation and delegates the decision-making on the holding of large public gatherings or home working to the organisers or companies affected. These measures are already proving to be insufficient, and the IOC has mooted the possibility of a cancellation of the cherished summer Olympic Games - an outcome the government appear desperate to avoid, but may well have encouraged by their laxity. Japan's Covid-19 'policy' could best be described, with apologies to the 'The Flying Tigers" as being 'on a wing and a prayer'.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/119/980/original/2020-02-26_06-55-08.png?1582667752" class="editor-image img-responsive" data-smartkarma-image-id="119980"></figure><div class="content-caption">Source • Dentsu</div>
FROM 'TEAMWORK' TO 'HOMEWORK' - Following the confirmation of an employees' infection last night, <a href="https://www.smartkarma.com/entities/dentsu-inc" target="_blank" data-smartkarma-citation="entities:12434:1" rel="noopener">Dentsu (4324 JP)</a> is requiring all employees in their head office to work from home from today until further notice. This decision will prove to be an interesting challenge for a company that prides itself on 'teamwork'. Many more Japanese companies will be forced to adopt similar working practices. 
TESTING THE LOWS - Our All-Market Composite has declined by 7% from the recent peak of 20th January. Yesterday's decline was the steepest one-day decline since December 2018, although a further 13% decline is required to match the low reached on Christmas Day that year. In the DETAIL section below, we will look at several market indicators to determine test if the conditions for a bear-market rally have been met. 
</div>


Source: Japan Analytics
DELAYED ONSET - The Japanese market's response to the growing number of Covid-19 cases outside China and Yokohama docks was delayed by the Monday holiday for the new Emperor's birthday. Tuesday's 3.3% decline will be followed by another substantial decline today following Wall Street's overnight 3% decline and the Yen's breach of ¥110 against the US Dollar.
ILL-EQUIPPED -  Japan is as ill-equipped as the US to handle large-scale outbreaks of infectious diseases. The country's greater reliance on public transportation and preference for overcrowded open-plan offices, however, makes containment more of challenge. For security reasons, most Japanese companies do not permit employees to work from home or use personal computing devices for work. Many companies require employees to lock their office PCs when they take a bathroom break. For cultural and practical reasons, Chinese or Italian-style cordoning off of infected communities will prove impossible to implement to here.
Source • NHK World
'BASIC' POLICY - The government's 'basic policy' announced yesterday relies on post-symptomatic self-isolation and delegates the decision-making on the holding of large public gatherings or home working to the organisers or companies affected. These measures are already proving to be insufficient, and the IOC has mooted the possibility of a cancellation of the cherished summer Olympic Games - an outcome the government appear desperate to avoid, but may well have encouraged by their laxity. Japan's Covid-19 'policy' could best be described, with apologies to the 'The Flying Tigers" as being 'on a wing and a prayer'.
Source • Dentsu
FROM 'TEAMWORK' TO 'HOMEWORK' - Following the confirmation of an employees' infection last night, Dentsu (4324 JP) is requiring all employees in their head office to work from home from today until further notice. This decision will prove to be an interesting challenge for a company that prides itself on 'teamwork'. Many more Japanese companies will be forced to adopt similar working practices. 
TESTING THE LOWS - Our All-Market Composite has declined by 7% from the recent peak of 20th January. Yesterday's decline was the steepest one-day decline since December 2018, although a further 13% decline is required to match the low reached on Christmas Day that year. In the DETAIL section below, we will look at several market indicators to determine test if the conditions for a bear-market rally have been met. 


🇯🇵 JAPAN MARKET UPDATE • On a Wing and a Prayer

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

<ul>
<li>The three key catalysts of <a href="https://www.smartkarma.com/entities/cheil-worldwide-inc" target="_blank" data-smartkarma-citation="entities:506:1" rel="noopener">Cheil Worldwide (030000 KS)</a> include a) Samsung's Roll-Out of New 5G Smartphones; b) Tokyo Summer Olympics and National Assembly General Election in Korea; and c) Excellent growth of digital ad spend. 
</li>
<li>
<a href="https://www.smartkarma.com/entities/506" target="_blank" data-smartkarma-citation="entities:506:1" rel="noopener">Cheil Worldwide Inc (030000 KS)</a> is the advertising agency of the Samsung Group. Cheil Worldwide is the largest advertising agency in Korea and the 19th largest advertising agency globally in terms of 2018 revenues. Its major customers include the Samsung Group, Adidas, Coca-Cola, GE, General Motors, and Microsoft.</li>
<li>The consensus net profit estimate in 2021 is 171 billion won. Using the average historical P/E multiple in the past four years (17.5x) applying to the estimated net profit of 171 billion won in 2021, this would suggest an implied market cap of 3.0 trillion won (26,020 won per share), which would represent a 22% upside from current levels. Therefore, given the reasonably attractive upside, we have a positive view of <a href="https://www.smartkarma.com/entities/cheil-worldwide-inc" target="_blank" data-smartkarma-citation="entities:506:1" rel="noopener">Cheil Worldwide (030000 KS)</a>. </li>
</ul>


The three key catalysts of Cheil Worldwide (030000 KS) include a) Samsung's Roll-Out of New 5G Smartphones; b) Tokyo Summer Olympics and National Assembly General Election in Korea; and c) Excellent growth of digital ad spend. 


Cheil Worldwide Inc (030000 KS) is the advertising agency of the Samsung Group. Cheil Worldwide is the largest advertising agency in Korea and the 19th largest advertising agency globally in terms of 2018 revenues. Its major customers include the Samsung Group, Adidas, Coca-Cola, GE, General Motors, and Microsoft.
The consensus net profit estimate in 2021 is 171 billion won. Using the average historical P/E multiple in the past four years (17.5x) applying to the estimated net profit of 171 billion won in 2021, this would suggest an implied market cap of 3.0 trillion won (26,020 won per share), which would represent a 22% upside from current levels. Therefore, given the reasonably attractive upside, we have a positive view of Cheil Worldwide (030000 KS). 


<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/118/966/original/2020-02-20_07-38-18.png?1582151941" class="editor-image img-responsive" data-smartkarma-image-id="118966"></figure>
<div class="content-caption">Source • Japan Analytics</div>
MINISTRY OF INFORMATION - <a href="https://www.smartkarma.com/entities/dentsu-inc" target="_blank" data-smartkarma-citation="entities:12434:1" rel="noopener">Dentsu (4324 JP)</a>, which was founded in 1901, had a long and less-than-illustrious history as a government propaganda outlet before 1945, which has been airbrushed out of the corporate history. Since the formation in 1955 of the Liberal Democratic Party, the LDP has been Dentsu's most important client. This close relationship has continued into the Internet era with the establishment of the party's 'Team Truth' initiative.  Dentsu has long held a virtual lock on advertising on broadcast media in Japan and plays a key role as a promoter/ organiser of major sporting and social events.
TAINTED - In recent years, Dentsu's image has been tainted with allegations of bribery in connection with the awarding of the 2020 Olympic Games to Tokyo and the unfortunate suicide of a 24-year old female employee driven to 'death by overwork' which forced the LDP to change some of the labour laws that allowed the excessive unpaid 'overtime' practices that are rife in this industry in Japan.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/118/968/original/2020-02-20_07-44-21.png?1582152290" class="editor-image img-responsive" data-smartkarma-image-id="118968"></figure>
<div class="content-caption">Source • worldatlas.com</div>
GLOBAL FOOTPRINT - Following the acquisition of the Aegis Group in 2012 and numerous other blot-on deals, Dentsu is now the world's fifth-largest advertising company and boasts fo operating in over 145 countries and regions with 60% of revenues generated outside Japan and 44,069 employees based overseas - 70% of total headcount. The new digital era has been less than kind to Dentsu's business model, which focuses heavily on traditional media formats, especially free-to-air television broadcasting in Japan. At the same time, the newly-acquired businesses have less secure positions in their core markets compared to that of Dentsu in Japan. With the industry facing several existential challenges, the timing of Dentsu's global expansion was far from optimal. It will require considerable management flexibility to transition to a model more appropriate for the mobile age.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/118/970/original/2020-02-20_08-07-28.png?1582153678" class="editor-image img-responsive" data-smartkarma-image-id="118970"></figure>
<div class="content-caption">Source • Company</div>
TEAMING COMPANY - To meet these challenges Dentsu aims to transform itself into a new 'dentsu group' - a 'Teaming Company' with three strategic priorities:- 
<ul>
<li>
Growth in new markets utilising the groups 'diverse capabilities' to create 'integrated growth solutions'</li>
<li>Offering 'socially-driven Value' to society and consumers in response to 'social challenges'</li>
<li>Creating a 'Teaming Platform' based on development collaboration and integration to allow employees to gain a 'deeper understanding'. </li>
</ul>
STRATEGY REVIEW - Dentsu has been acquiring a myriad of digital media companies in the hope that one or more of them might offer a 'magic bullet'. As a result, they are becoming increasingly dependent on data and data suppliers that will come under increasing regulatory scrutiny base on concerns over privacy. Terrestrial broadcasting still accounts for almost half of revenue and this 'bread-and-butter' business is rapidly becoming 'toast'. Similarly, their dependence on shiny creative best-guess intuition is increasingly outdated. Significant cultural gaps remain between the lifetime-employment-oriented domestic operation and the international business, which has only one board representative and one other Executive Officer. Dentsu has an exciting future as a consulting and marketing communications hybrid. At present, much of the former is given away for free, while the latter is spread over hundreds of business units. Perhaps the model of <a href="https://www.smartkarma.com/entities/japan-tobacco-inc" target="_blank" data-smartkarma-citation="entities:13498:1" rel="noopener">Japan Tobacco (2914 JP)</a> where JTI is a separate business run by no-Japanese executives based outside Japan might be a solution; however, the implied loss of 'control' would be a step too far given the company's antecedents.  
BELOW BOOK - It remains to be seen if these platitudes will be enough to improve Dentsu's current business model. In the short-term, the company is retrenching in several formerly key markets such as China and has implemented draconian cost-cutting in its domestic operations. Although the stock is now trading below book value and has been on od the worst-performing large caps in Japan since peaking in July 2015, we find little reason for optimism. 
<div class="content-highlight">
In the DETAIL section below, we review Dentsu's business and financial performance, returns and cash flow and suggest an appropriate valuation using a residual income valuation model. We also offer some suggestions as to how the company might finally address its 21st-century challenges.
</div>


Source • Japan Analytics
MINISTRY OF INFORMATION - Dentsu (4324 JP), which was founded in 1901, had a long and less-than-illustrious history as a government propaganda outlet before 1945, which has been airbrushed out of the corporate history. Since the formation in 1955 of the Liberal Democratic Party, the LDP has been Dentsu's most important client. This close relationship has continued into the Internet era with the establishment of the party's 'Team Truth' initiative.  Dentsu has long held a virtual lock on advertising on broadcast media in Japan and plays a key role as a promoter/ organiser of major sporting and social events.
TAINTED - In recent years, Dentsu's image has been tainted with allegations of bribery in connection with the awarding of the 2020 Olympic Games to Tokyo and the unfortunate suicide of a 24-year old female employee driven to 'death by overwork' which forced the LDP to change some of the labour laws that allowed the excessive unpaid 'overtime' practices that are rife in this industry in Japan.

Source • worldatlas.com
GLOBAL FOOTPRINT - Following the acquisition of the Aegis Group in 2012 and numerous other blot-on deals, Dentsu is now the world's fifth-largest advertising company and boasts fo operating in over 145 countries and regions with 60% of revenues generated outside Japan and 44,069 employees based overseas - 70% of total headcount. The new digital era has been less than kind to Dentsu's business model, which focuses heavily on traditional media formats, especially free-to-air television broadcasting in Japan. At the same time, the newly-acquired businesses have less secure positions in their core markets compared to that of Dentsu in Japan. With the industry facing several existential challenges, the timing of Dentsu's global expansion was far from optimal. It will require considerable management flexibility to transition to a model more appropriate for the mobile age.

Source • Company
TEAMING COMPANY - To meet these challenges Dentsu aims to transform itself into a new 'dentsu group' - a 'Teaming Company' with three strategic priorities:- 


Growth in new markets utilising the groups 'diverse capabilities' to create 'integrated growth solutions'
Offering 'socially-driven Value' to society and consumers in response to 'social challenges'
Creating a 'Teaming Platform' based on development collaboration and integration to allow employees to gain a 'deeper understanding'. 

STRATEGY REVIEW - Dentsu has been acquiring a myriad of digital media companies in the hope that one or more of them might offer a 'magic bullet'. As a result, they are becoming increasingly dependent on data and data suppliers that will come under increasing regulatory scrutiny base on concerns over privacy. Terrestrial broadcasting still accounts for almost half of revenue and this 'bread-and-butter' business is rapidly becoming 'toast'. Similarly, their dependence on shiny creative best-guess intuition is increasingly outdated. Significant cultural gaps remain between the lifetime-employment-oriented domestic operation and the international business, which has only one board representative and one other Executive Officer. Dentsu has an exciting future as a consulting and marketing communications hybrid. At present, much of the former is given away for free, while the latter is spread over hundreds of business units. Perhaps the model of Japan Tobacco (2914 JP) where JTI is a separate business run by no-Japanese executives based outside Japan might be a solution; however, the implied loss of 'control' would be a step too far given the company's antecedents.  
BELOW BOOK - It remains to be seen if these platitudes will be enough to improve Dentsu's current business model. In the short-term, the company is retrenching in several formerly key markets such as China and has implemented draconian cost-cutting in its domestic operations. Although the stock is now trading below book value and has been on od the worst-performing large caps in Japan since peaking in July 2015, we find little reason for optimism. 

In the DETAIL section below, we review Dentsu's business and financial performance, returns and cash flow and suggest an appropriate valuation using a residual income valuation model. We also offer some suggestions as to how the company might finally address its 21st-century challenges.


4324 🇯🇵 Dentsu - The Teaming Company

<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>THREE-YEAR LOW - 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 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. <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>LEADING 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:-<ul>
<li>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.</li>
<li>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.</li>
<li>The combined Results &amp; Revision Score (RRS) is the average of the Results Score and the Forecasts/Revision Score.</li>
<li>
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.
<hr>
• SECTOR SCORES •
<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>
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'. 
</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/000/117/963/original/2020-02-15_09-46-55.png?1581796265" class="editor-image img-responsive" data-smartkarma-image-id="117963"></figure><div class="content-caption">Source • Japan Analytics</div>A YEAR TO FORGET - The aggregate earnings of Japanese listed companies peaked on December 26th 2018 and, over the last five quarters, have declined by ¥10.5 trillion or by 22%. Net margins have declined by 135 basis points over this period to 4.5%, 224 bps below the current operating margin. Whatever the uncertainties over the impact of Covid-19, the current quarter will see a further decline. A base-case outlook for aggregate Net Income is ¥30 trillion by May 2020, which, if the total market cap were to remain at current levels, would take the  PE to a ten-year high of 22.4 times. The decline in Operating Income has been more moderate at 11%, illustrating the still all-too-frequent write-offs that Japanse corporate routinely require as penance for their mostly-overseas capital misallocations.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/117/966/original/2020-02-16_05-32-51.png?1581798783" class="editor-image img-responsive" data-smartkarma-image-id="117966"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/117/967/original/2020-02-16_05-28-20.png?1581798803" class="editor-image img-responsive" data-smartkarma-image-id="117967"></figure><div class="content-caption">Source • Japan Analytics</div>ACCELERATING DOWNTREND -  Trailing-twelve-month (TTM) Revenues are now declining quarter-on-quarter, and the pace of decline in Operating Income has accelerated for the fourth quarter in a row. The aggregate one year forward forecasts have seen falling QoQ revenues and OP since TTM-2. With only one month to go before the end of FY2020 for the majority of companies and with many December year-end companies looking forward ten months, a degree of optimism has slowed the pace of decline in the current quarter. We expect Covid-19 to result in many of these forecasts to be revised down at the interim results to be released in August. RECESSION - With GDP shrinking by an annualised 6.3% in the fourth quarter and Covid-19 having at least a similar impact in the current quarter, Japan will be in an, albeit 'technical', recession by the spring.<div class="content-highlight">In the DETAIL below, we shall review the actual results and initial and revised forecasts by Sector and highlight the best and worst-performing companies by one-quarter revenue and margin changes. Part 2 will update our Results and Revision Scoring for the market, Sectors, Peer Groups and Companies.</div>

Source • Japan AnalyticsA YEAR TO FORGET - The aggregate earnings of Japanese listed companies peaked on December 26th 2018 and, over the last five quarters, have declined by ¥10.5 trillion or by 22%. Net margins have declined by 135 basis points over this period to 4.5%, 224 bps below the current operating margin. Whatever the uncertainties over the impact of Covid-19, the current quarter will see a further decline. A base-case outlook for aggregate Net Income is ¥30 trillion by May 2020, which, if the total market cap were to remain at current levels, would take the  PE to a ten-year high of 22.4 times. The decline in Operating Income has been more moderate at 11%, illustrating the still all-too-frequent write-offs that Japanse corporate routinely require as penance for their mostly-overseas capital misallocations.Source • Japan AnalyticsACCELERATING DOWNTREND -  Trailing-twelve-month (TTM) Revenues are now declining quarter-on-quarter, and the pace of decline in Operating Income has accelerated for the fourth quarter in a row. The aggregate one year forward forecasts have seen falling QoQ revenues and OP since TTM-2. With only one month to go before the end of FY2020 for the majority of companies and with many December year-end companies looking forward ten months, a degree of optimism has slowed the pace of decline in the current quarter. We expect Covid-19 to result in many of these forecasts to be revised down at the interim results to be released in August. RECESSION - With GDP shrinking by an annualised 6.3% in the fourth quarter and Covid-19 having at least a similar impact in the current quarter, Japan will be in an, albeit 'technical', recession by the spring.In the DETAIL below, we shall review the actual results and initial and revised forecasts by Sector and highlight the best and worst-performing companies by one-quarter revenue and margin changes. Part 2 will update our Results and Revision Scoring for the market, Sectors, Peer Groups and Companies.

🇯🇵 JAPAN • IT'S A WRAP! Part 1 - 2020-Q1 Earnings Results & Forecasts

Japan

DENTSU INC. mainly provides comprehensive advertising services.  The Company also provides marketing and event planning & promotion services.  Dentsu has associated companies in the US, Europe, and Asia.

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

Dentsu Inc (4324 JP)

🇯🇵 JAPAN MARKET UPDATE • On a Wing and a Prayer

DELAYED ONSET - The Japanese market's response to the growing number of Covid-19 cases outside China and Yokohama docks was delayed by the Monday...

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The three key catalysts of Cheil Worldwide (030000 KS) include a) Samsung's Roll-Out of New 5G Smartphones; b) Tokyo Summer Olympics and National...

Douglas Kim

4324 🇯🇵 Dentsu - The Teaming Company

MINISTRY OF INFORMATION - Dentsu (4324 JP), which was founded in 1901, had a long and less-than-illustrious history as a government propaganda...

Campbell Gunn

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

THREE-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...

Campbell Gunn

🇯🇵 JAPAN • IT'S A WRAP! Part 1 - 2020-Q1 Earnings Results & Forecasts

A YEAR TO FORGET - The aggregate earnings of Japanese listed companies peaked on December 26th 2018 and, over the last five quarters, have declined...

Campbell Gunn

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