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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Index Rebalance

The results of the JPX Nikkei 400 review have been announced. There are 32 inclusions and 27 deletions to bring the number of constituents back to 400 and the changes will be effective after the close of trading on 27 November.The index review is normally effective after the close of trading on  the second last trading day in August, but was postponed by 3 months this year because of the extension given to companies to file their annual reports and quarterly reports to 30 September owing to COVID-19.These are the stocks that have been included and excluded from the index.<table class="table table-striped">
<colgroup>
<col>
<col>
<col>
<col>
</colgroup>
<tbody>
<tr>
<td colspan="2" style="text-align: center; width: 181pt;"><h3>Inclusions</h3></td>
<td colspan="2" style="text-align: center; width: 197pt;"><h3>Exclusions</h3></td>
</tr>
<tr>
<td>Name</td>
<td>Code</td>
<td>Name</td>
<td>Code</td>
</tr>
<tr>
<td>1766.T</td>
<td>Token Corp</td>
<td>2124.T</td>
<td>Jac Recruitment Co Ltd</td>
</tr>
<tr>
<td>2222.T</td>
<td>Kotobuki Spirits Co Ltd</td>
<td>2206.T</td>
<td>Ezaki Glico Co Ltd</td>
</tr>
<tr>
<td>2264.T</td>
<td>Morinaga Milk Industry Co Ltd</td>
<td>2432.T</td>
<td>DeNA Co Ltd</td>
</tr>
<tr>
<td>2317.T</td>
<td>Systena Corp</td>
<td>3254.T</td>
<td>Pressance Corp</td>
</tr>
<tr>
<td>2593.T</td>
<td>Ito En Ltd</td>
<td>3668.T</td>
<td>Colopl Inc</td>
</tr>
<tr>
<td>2811.T</td>
<td>Kagome Co Ltd</td>
<td>4246.T</td>
<td>DaikyoNishikawa Corp</td>
</tr>
<tr>
<td>3563.T</td>
<td>Sushiro Global Holdings Ltd</td>
<td>4587.T</td>
<td>PeptiDream Inc</td>
</tr>
<tr>
<td>3635.T</td>
<td>Koei Tecmo Holdings Co Ltd</td>
<td>4681.T</td>
<td>Resorttrust Inc</td>
</tr>
<tr>
<td>4189.T</td>
<td>KH Neochem Co Ltd</td>
<td>4751.T</td>
<td>CyberAgent Inc</td>
</tr>
<tr>
<td>4348.T</td>
<td>Infocom Corp</td>
<td>4902.T</td>
<td>Konica Minolta Inc</td>
</tr>
<tr>
<td>4527.T</td>
<td>Rohto Pharmaceutical Co Ltd</td>
<td>5486.T</td>
<td>Hitachi Metals Ltd</td>
</tr>
<tr>
<td>4686.T</td>
<td>Justsystems Corp</td>
<td>5703.T</td>
<td>Nippon Light Metal Holdings Co Ltd</td>
</tr>
<tr>
<td>4816.T</td>
<td>Toei Animation Co Ltd</td>
<td>5714.T</td>
<td>DOWA Holdings Co Ltd</td>
</tr>
<tr>
<td>4921.T</td>
<td>Fancl Corp</td>
<td>5975.T</td>
<td>Topre Corp</td>
</tr>
<tr>
<td>5105.T</td>
<td>Toyo Tire Corp</td>
<td>6269.T</td>
<td>Modec Inc</td>
</tr>
<tr>
<td>5631.T</td>
<td>Japan Steel Works Ltd</td>
<td>6324.T</td>
<td>Harmonic Drive Systems Inc</td>
</tr>
<tr>
<td>5857.T</td>
<td>Asahi Holdings Inc</td>
<td>6463.T</td>
<td>TPR Co Ltd</td>
</tr>
<tr>
<td>6005.T</td>
<td>Miura Co Ltd</td>
<td>6473.T</td>
<td>Jtekt Corp</td>
</tr>
<tr>
<td>6035.T</td>
<td>IR Japan Holdings Ltd</td>
<td>6641.T</td>
<td>Nissin Electric Co Ltd</td>
</tr>
<tr>
<td>6134.T</td>
<td>Fuji Corp (Aichi)</td>
<td>6755.T</td>
<td>Fujitsu General Ltd</td>
</tr>
<tr>
<td>6465.T</td>
<td>Hoshizaki Corp</td>
<td>6806.T</td>
<td>Hirose Electric Co Ltd</td>
</tr>
<tr>
<td>6532.T</td>
<td>BayCurrent Consulting Inc</td>
<td>7012.T</td>
<td>Kawasaki Heavy Industries Ltd</td>
</tr>
<tr>
<td>6670.T</td>
<td>MCJ Co Ltd</td>
<td>7606.T</td>
<td>United Arrows Ltd</td>
</tr>
<tr>
<td>6753.T</td>
<td>Sharp Corp</td>
<td>7867.T</td>
<td>Tomy Co Ltd</td>
</tr>
<tr>
<td>6754.T</td>
<td>Anritsu Corp</td>
<td>8227.T</td>
<td>Shimamura Co Ltd</td>
</tr>
<tr>
<td>8354.T</td>
<td>Fukuoka Financial Group Inc</td>
<td>8628.T</td>
<td>Matsui Securities Co Ltd</td>
</tr>
<tr>
<td>8572.T</td>
<td>Acom Co Ltd</td>
<td>9404.T</td>
<td>Nippon Television Holdings Inc</td>
</tr>
<tr>
<td>9044.T</td>
<td>Nankai Electric Railway Co Ltd</td>
<td></td>
<td></td>
</tr>
<tr>
<td>9142.T</td>
<td>Kyushu Railway Co</td>
<td></td>
<td></td>
</tr>
<tr>
<td>9504.T</td>
<td>Chugoku Electric Power Co Inc</td>
<td></td>
<td></td>
</tr>
<tr>
<td>9509.T</td>
<td>Hokkaido Electric Power Co Inc</td>
<td></td>
<td></td>
</tr>
<tr>
<td>9603.T</td>
<td>H.I.S. Co Ltd</td>
<td></td>
<td></td>
</tr>
</tbody>
</table>

The results of the JPX Nikkei 400 review have been announced. There are 32 inclusions and 27 deletions to bring the number of constituents back to 400 and the changes will be effective after the close of trading on 27 November.The index review is normally effective after the close of trading on  the second last trading day in August, but was postponed by 3 months this year because of the extension given to companies to file their annual reports and quarterly reports to 30 September owing to COVID-19.These are the stocks that have been included and excluded from the index.








Inclusions
Exclusions


Name
Code
Name
Code


1766.T
Token Corp
2124.T
Jac Recruitment Co Ltd


2222.T
Kotobuki Spirits Co Ltd
2206.T
Ezaki Glico Co Ltd


2264.T
Morinaga Milk Industry Co Ltd
2432.T
DeNA Co Ltd


2317.T
Systena Corp
3254.T
Pressance Corp


2593.T
Ito En Ltd
3668.T
Colopl Inc


2811.T
Kagome Co Ltd
4246.T
DaikyoNishikawa Corp


3563.T
Sushiro Global Holdings Ltd
4587.T
PeptiDream Inc


3635.T
Koei Tecmo Holdings Co Ltd
4681.T
Resorttrust Inc


4189.T
KH Neochem Co Ltd
4751.T
CyberAgent Inc


4348.T
Infocom Corp
4902.T
Konica Minolta Inc


4527.T
Rohto Pharmaceutical Co Ltd
5486.T
Hitachi Metals Ltd


4686.T
Justsystems Corp
5703.T
Nippon Light Metal Holdings Co Ltd


4816.T
Toei Animation Co Ltd
5714.T
DOWA Holdings Co Ltd


4921.T
Fancl Corp
5975.T
Topre Corp


5105.T
Toyo Tire Corp
6269.T
Modec Inc


5631.T
Japan Steel Works Ltd
6324.T
Harmonic Drive Systems Inc


5857.T
Asahi Holdings Inc
6463.T
TPR Co Ltd


6005.T
Miura Co Ltd
6473.T
Jtekt Corp


6035.T
IR Japan Holdings Ltd
6641.T
Nissin Electric Co Ltd


6134.T
Fuji Corp (Aichi)
6755.T
Fujitsu General Ltd


6465.T
Hoshizaki Corp
6806.T
Hirose Electric Co Ltd


6532.T
BayCurrent Consulting Inc
7012.T
Kawasaki Heavy Industries Ltd


6670.T
MCJ Co Ltd
7606.T
United Arrows Ltd


6753.T
Sharp Corp
7867.T
Tomy Co Ltd


6754.T
Anritsu Corp
8227.T
Shimamura Co Ltd


8354.T
Fukuoka Financial Group Inc
8628.T
Matsui Securities Co Ltd


8572.T
Acom Co Ltd
9404.T
Nippon Television Holdings Inc


9044.T
Nankai Electric Railway Co Ltd




9142.T
Kyushu Railway Co




9504.T
Chugoku Electric Power Co Inc




9509.T
Hokkaido Electric Power Co Inc




9603.T
H.I.S. Co Ltd






JPX Nikkei 400 Index Rebalance: Better Late Than Never (32 Adds; 27 Deletes)

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

<a href="https://www.smartkarma.com/entities/fancl-corp" target="_blank" data-smartkarma-citation="entities:15862:1" rel="noopener">Fancl Corp (4921 JP)</a>’s second-quarter revenue and operating income fell short of consensus estimates by 0.3% and 14.5%, respectively, but 1HFY21 revenue was broadly in line with the interim revenue guidance, while 1HFY21 OP beat guidance by 13.5%. Cosmetics revenue and operating profit declined by 23.3% and 58.7%, while the Nutritional Supplements segment saw revenue declined 10.4%, but operating profit grew by 3.4% year-on-year.Fancl eventually admitted that inbound demand is unlikely to recover in the second half of the year. Therefore, the company decided to lower its full-year revenue and OP guidance by ¥7.0 billion and ¥1.5 billion, respectively. However, the revised full-year revenue guidance is just 5.4% lower than the previous year, which is significantly lower compared to 15.8% and 12.5% for <a href="https://www.smartkarma.com/entities/shiseido-company-limited" target="_blank" data-smartkarma-citation="entities:5718:1" rel="noopener">Shiseido Company (4911 JP)</a> and <a href="https://www.smartkarma.com/entities/kose-corp" target="_blank" data-smartkarma-citation="entities:18009:1" rel="noopener">Kose Corp (4922 JP)</a> respectively. The relative performance difference of Fancl was substantially better at the OP level.

Fancl Corp (4921 JP)’s second-quarter revenue and operating income fell short of consensus estimates by 0.3% and 14.5%, respectively, but 1HFY21 revenue was broadly in line with the interim revenue guidance, while 1HFY21 OP beat guidance by 13.5%. Cosmetics revenue and operating profit declined by 23.3% and 58.7%, while the Nutritional Supplements segment saw revenue declined 10.4%, but operating profit grew by 3.4% year-on-year.Fancl eventually admitted that inbound demand is unlikely to recover in the second half of the year. Therefore, the company decided to lower its full-year revenue and OP guidance by ¥7.0 billion and ¥1.5 billion, respectively. However, the revised full-year revenue guidance is just 5.4% lower than the previous year, which is significantly lower compared to 15.8% and 12.5% for Shiseido Company (4911 JP) and Kose Corp (4922 JP) respectively. The relative performance difference of Fancl was substantially better at the OP level.

The Market Is Yet to Price Fancl’s China Expansion

Event-Driven

In <a href="https://www.smartkarma.com/insights/japan-cosmetics-pair-trade-long-fancl-short-kose" target="_blank" rel="noopener">Japan Cosmetics Pair Trade: Long Fancl/​Short Kose</a>, we suggested setting up a long/short pair trade between <a href="https://www.smartkarma.com/entities/fancl-corp" target="_blank" data-smartkarma-citation="entities:15862:1" rel="noopener">Fancl Corp (4921 JP)</a> and <a href="https://www.smartkarma.com/entities/kose-corp" target="_blank" data-smartkarma-citation="entities:18009:1" rel="noopener">Kose Corp (4922 JP)</a> before Kose’s Q2 earnings release on 30th October 2020. Kose released its 2QFY21 results last Friday and results were underwhelming as expected.The main catalyst for our long/short trade idea was the quarterly earnings. Part one of the catalyst (Kose’s earnings) yielded 10.6% as Kose’s share price has underperformed Fancl by the same percentage since our previous insight. We believe Part two (Fancl’s earnings) could realise an extra 5-6% in market-neutral returns and therefore suggests investors wait until Fancl’s quarterly results on 4th November 2020 before closing the trade.

In Japan Cosmetics Pair Trade: Long Fancl/​Short Kose, we suggested setting up a long/short pair trade between Fancl Corp (4921 JP) and Kose Corp (4922 JP) before Kose’s Q2 earnings release on 30th October 2020. Kose released its 2QFY21 results last Friday and results were underwhelming as expected.The main catalyst for our long/short trade idea was the quarterly earnings. Part one of the catalyst (Kose’s earnings) yielded 10.6% as Kose’s share price has underperformed Fancl by the same percentage since our previous insight. We believe Part two (Fancl’s earnings) could realise an extra 5-6% in market-neutral returns and therefore suggests investors wait until Fancl’s quarterly results on 4th November 2020 before closing the trade.

Long Fancl/Short Kose: Kose’s Q2 Results As Expected, Now Waiting For Fancl to Come Through

In <a href="https://www.smartkarma.com/insights/japan-cosmetics-pair-trade-long-kose-short-shiseido" target="_blank" rel="noopener">Japan Cosmetics Pair Trade: Long Kose/​​Short Shiseido</a>, we suggested that <a href="https://www.smartkarma.com/entities/kose-corp" target="_blank" data-smartkarma-citation="entities:18009:1" rel="noopener">Kose Corp (4922 JP)</a> could outperform <a href="https://www.smartkarma.com/entities/shiseido-company-limited" target="_blank" data-smartkarma-citation="entities:5718:1" rel="noopener">Shiseido Company (4911 JP)</a> and the rest of the Japanese cosmetics peers. Since then, Kose’s share price increased by 20.2%, while Shiseido’s price decreased by 2.3%.
As the earnings season approaches, we suggest that investors consider closing the Long Kose/Short Shiseido trade and reversing the same, but this time with <a href="https://www.smartkarma.com/entities/fancl-corp" target="_blank" data-smartkarma-citation="entities:15862:1" rel="noopener">Fancl Corp (4921 JP)</a> as the hedge.

In Japan Cosmetics Pair Trade: Long Kose/​​Short Shiseido, we suggested that Kose Corp (4922 JP) could outperform Shiseido Company (4911 JP) and the rest of the Japanese cosmetics peers. Since then, Kose’s share price increased by 20.2%, while Shiseido’s price decreased by 2.3%.
As the earnings season approaches, we suggest that investors consider closing the Long Kose/Short Shiseido trade and reversing the same, but this time with Fancl Corp (4921 JP) as the hedge.

Japan Cosmetics Pair Trade: Long Fancl/Short Kose

As lockdowns and restrictions eased towards the end of the second quarter and into the third quarter, Japanese cosmetics companies are expected to stage a comeback in 3Q2020. As a result, all major Japanese cosmetics companies (excluding Pola Orbis, who is struggling to regain its mojo) are trading near their historical high FY+2 EV/EBIT multiples.Main overseas markets have performed exceptionally well during the July and August 2020 months. Japan’s cosmetics exports to main countries grew 23% year-on-year during the July-August period compared to 4.5% in 2Q20.However, domestic sales during July and August 2020 remained 25-30% lower than the pre-pandemic level. We believe the immediate domestic cosmetics sales recovery could be over. The 25-30% loss of domestic demand is predominantly a result of non-existent inbound sales while behavioural changes due to COVID-19 may have also had a small impact. We expect the behavioural changes to have a lasting impact on domestic demand. However, as travel restrictions are lifted inbound demand could return and warrant a sharp increase in domestic sales.In this insight, we analyse Japan’s cosmetic industry using the monthly data released by the Ministry of Economy, Trade and Industry (METI) and the Ministry of Finance.

As lockdowns and restrictions eased towards the end of the second quarter and into the third quarter, Japanese cosmetics companies are expected to stage a comeback in 3Q2020. As a result, all major Japanese cosmetics companies (excluding Pola Orbis, who is struggling to regain its mojo) are trading near their historical high FY+2 EV/EBIT multiples.Main overseas markets have performed exceptionally well during the July and August 2020 months. Japan’s cosmetics exports to main countries grew 23% year-on-year during the July-August period compared to 4.5% in 2Q20.However, domestic sales during July and August 2020 remained 25-30% lower than the pre-pandemic level. We believe the immediate domestic cosmetics sales recovery could be over. The 25-30% loss of domestic demand is predominantly a result of non-existent inbound sales while behavioural changes due to COVID-19 may have also had a small impact. We expect the behavioural changes to have a lasting impact on domestic demand. However, as travel restrictions are lifted inbound demand could return and warrant a sharp increase in domestic sales.In this insight, we analyse Japan’s cosmetic industry using the monthly data released by the Ministry of Economy, Trade and Industry (METI) and the Ministry of Finance.

Japanese Cosmetics Stats: Absent Inbound Demand Pauses Domestic Recovery, Exports Grow Double-Digits

Japan

FANCL CORPORATION produces and sells additive-free skin care cosmetics for both women and men.  The Company's products include cleansing creams, hair care goods such as shampoos and conditioners, and facial make up products.  Fancl also makes and distributes dietary supplements including royal jelly and various tablets with extracted essence from mushrooms, garlic, ginseng, and soy beans.

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

Fancl Corp (4921 JP)

JPX Nikkei 400 Index Rebalance: Better Late Than Never (32 Adds; 27 Deletes)

There are 32 inclusions and 27 exclusions from the JPX Nikkei 400. The changes will be effective after the close of trading on 27 November and the...

Brian Freitas

The Market Is Yet to Price Fancl’s China Expansion

Fancl’s second-quarter revenue and operating income fell short of consensus estimates by 0.3% and 14.5%, respectively, but 1HFY21 revenue was...

Oshadhi Kumarasiri

Long Fancl/Short Kose: Kose’s Q2 Results As Expected, Now Waiting For Fancl to Come Through

As lockdowns and restrictions were eased towards the end of the quarter ended June 2020, investors expected the domestic cosmetics sector to make a...

Oshadhi Kumarasiri

Japan Cosmetics Pair Trade: Long Fancl/Short Kose

As the earnings season approaches, we suggest that investors consider closing the Long Kose/Short Shiseido trade and reversing the same, but this...

Oshadhi Kumarasiri

Japanese Cosmetics Stats: Absent Inbound Demand Pauses Domestic Recovery, Exports Grow Double-Digits

Japan’s cosmetics exports to main countries grew 23% year-on-year during the July-August period compared to 4.5% in 2Q20.

Oshadhi Kumarasiri

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)