'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)

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/116/923/original/2020-02-08_18-15-45.png?1581196263" class="editor-image img-responsive" data-smartkarma-image-id="116923"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/116/924/original/2020-02-09_06-34-51.png?1581197706" class="editor-image img-responsive" data-smartkarma-image-id="116924"></figure><div class="content-caption">Source • Japan Analytics</div><div class="content-caption"></div><p><strong>OOOPS!</strong> - The 480 quarterly results announced on Friday subtracted a further 20 basis points from our Results Score. If the remaining 38% of companies continue this trend, the current quarter will equal CQ2019-1 and CQ2018-2 in seeing a 200 basis point Results Score decline. 169 forecasts or revision announcements added  5bps to the Forecast/Revision Score, supported by slight upward revisions from <a href="https://www.smartkarma.com/entities/softbank-corp" target="_blank" data-smartkarma-citation="entities:27445:1" rel="noopener">Softbank Corp (9434 JP)</a> and <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>.  The Results Score has dipped below the Forecast/Revision Score for the first time since July 2016 and is a necessary precursor of the bottoming of the cycle. Japan is now in a recession and could see a decline in GDP for the calendar year. The market's current optimism (aided by the Bank of Japan's buy-the-dips support programme) is more appropriate to the middle of the cycle and, with two further poor earnings quarters ahead, suggests limited further upside. </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/116/925/original/2020-02-08_10-48-19.png?1581199859" class="editor-image img-responsive" data-smartkarma-image-id="116925"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>18x EARNINGS</strong> - Trailing-twelve-month (TTM) Operating Income for the composite of listed companies has declined to ¥57.4t, 10% below the peak of early 2019. TTM Net Income has declined by 20% over the same period, resulting in a 6.1 point increase in the market price-earnings ratio to 17.6 times.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/116/927/original/2020-02-08_10-55-21.png?1581200256" class="editor-image img-responsive" data-smartkarma-image-id="116927"></figure><div class="content-caption">Source • Japan Analytics</div><p style="text-align: left;"><strong>TTM RESULTS</strong> - TTM Operating Profits have been declining quarter-on-quarter for five straight quarters, and are 8.1% lower year-on-year. The Operating Margin has declined from 7.45% to 6.80%. TTM Revenues are now also falling and have only increased by 0.7% year-on-year.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/116/928/original/2020-02-08_10-59-00.png?1581200533" class="editor-image img-responsive" data-smartkarma-image-id="116928"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>FORECASTS</strong> - The year-on-year Operating Profit decline using current forecasts is 8.5%, while Revenues are flat. Revenue forecasts have been falling quarter-on-quarter for three quarters in a row. The 'uplift' from TTM to Forecast is just ¥3t for sales and ¥0.3t for OP. </p>

Source • Japan AnalyticsOOOPS! - The 480 quarterly results announced on Friday subtracted a further 20 basis points from our Results Score. If the remaining 38% of companies continue this trend, the current quarter will equal CQ2019-1 and CQ2018-2 in seeing a 200 basis point Results Score decline. 169 forecasts or revision announcements added  5bps to the Forecast/Revision Score, supported by slight upward revisions from Softbank Corp (9434 JP) and Honda Motor (7267 JP).  The Results Score has dipped below the Forecast/Revision Score for the first time since July 2016 and is a necessary precursor of the bottoming of the cycle. Japan is now in a recession and could see a decline in GDP for the calendar year. The market's current optimism (aided by the Bank of Japan's buy-the-dips support programme) is more appropriate to the middle of the cycle and, with two further poor earnings quarters ahead, suggests limited further upside. Source • Japan Analytics18x EARNINGS - Trailing-twelve-month (TTM) Operating Income for the composite of listed companies has declined to ¥57.4t, 10% below the peak of early 2019. TTM Net Income has declined by 20% over the same period, resulting in a 6.1 point increase in the market price-earnings ratio to 17.6 times.Source • Japan AnalyticsTTM RESULTS - TTM Operating Profits have been declining quarter-on-quarter for five straight quarters, and are 8.1% lower year-on-year. The Operating Margin has declined from 7.45% to 6.80%. TTM Revenues are now also falling and have only increased by 0.7% year-on-year.Source • Japan AnalyticsFORECASTS - The year-on-year Operating Profit decline using current forecasts is 8.5%, while Revenues are flat. Revenue forecasts have been falling quarter-on-quarter for three quarters in a row. The 'uplift' from TTM to Forecast is just ¥3t for sales and ¥0.3t for OP. 

🇯🇵 JAPAN • Results & Revisions Daily Roundup - 7th February ▲2121 7267 5713 ▼ 5401 9616 3407

Senior Bank Analyst - Japanese Banks, Windamee Research

J. Brian Waterhouse

Senior Bank Analyst - Japanese Banks

Windamee Research

Japanese Banks

Equity Bottom-Up

<p><a href="https://www.smartkarma.com/entities/chugoku-bank-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:11177:1">Chugoku Bank (8382 JP)</a>, based in Okayama Prefecture in the Chugoku region of western Japan, is the 10<sup>th</sup>-largest Japanese regional bank in terms of market capitalisation.  It has a long-standing reputation for solid earnings thanks to conservative management and a strong financial position.  But, as the old Japanese proverb goes, even monkeys fall out of trees sometimes.  At first glance, things look fine: the bank is well-capitalised with a CAR of 13.62%, and interim results beat guidance convincingly.  Yet the bank has lowered its full-year forecast: one of only a handful of regional banks to do so when interim results were announced earlier this month.  Why?  Probably because interim results were still down 11% YoY, core earnings are down 24% YoY, the bank’s key net return on domestic funds deployed is now in negative territory, and credit costs are rising sharply.  Oh dear.  That reputation is looking distinctly undeserved these days.</p><p>Make no mistake: not long ago, Chugoku Bank was an exceptionally strong bank. It may again be one some day.  Right now, however, the long-standing premium rating on its stock price (PER of 15.4x against a peer average of 10.9x) is unjustifiable given the deterioration in its core profitability.</p><p>Foreign investors in aggregate continue to own just short of 17% of outstanding shares.  With Chugoku Bank’s performance ratios continuing to decline, its reputation for solid earnings in question, and in light of the recent profit warning for FY3/20 earnings from the bank, one wonders how long it will be before more foreign investors in Chugoku Bank head for the exits.  For those considering investing in this bank, perhaps unaware of the worrying deterioration in the bank’s basic domestic business but attracted by the disarmingly tantalising combination of strong capitalisation, high market share in its home prefecture, and a long history of conservative management, our advice is:  <em>Caveat emptor!</em>  (May the buyer beware!)</p>

Chugoku Bank (8382 JP), based in Okayama Prefecture in the Chugoku region of western Japan, is the 10th-largest Japanese regional bank in terms of market capitalisation.  It has a long-standing reputation for solid earnings thanks to conservative management and a strong financial position.  But, as the old Japanese proverb goes, even monkeys fall out of trees sometimes.  At first glance, things look fine: the bank is well-capitalised with a CAR of 13.62%, and interim results beat guidance convincingly.  Yet the bank has lowered its full-year forecast: one of only a handful of regional banks to do so when interim results were announced earlier this month.  Why?  Probably because interim results were still down 11% YoY, core earnings are down 24% YoY, the bank’s key net return on domestic funds deployed is now in negative territory, and credit costs are rising sharply.  Oh dear.  That reputation is looking distinctly undeserved these days.Make no mistake: not long ago, Chugoku Bank was an exceptionally strong bank. It may again be one some day.  Right now, however, the long-standing premium rating on its stock price (PER of 15.4x against a peer average of 10.9x) is unjustifiable given the deterioration in its core profitability.Foreign investors in aggregate continue to own just short of 17% of outstanding shares.  With Chugoku Bank’s performance ratios continuing to decline, its reputation for solid earnings in question, and in light of the recent profit warning for FY3/20 earnings from the bank, one wonders how long it will be before more foreign investors in Chugoku Bank head for the exits.  For those considering investing in this bank, perhaps unaware of the worrying deterioration in the bank’s basic domestic business but attracted by the disarmingly tantalising combination of strong capitalisation, high market share in its home prefecture, and a long history of conservative management, our advice is:  Caveat emptor!  (May the buyer beware!)

<p>Strategically located in the heart of Japan’s wealthiest region, namely the Kanto Region that surrounds the nation’s capital Tokyo, with an asset base in excess of ¥14.57 trillion (US$129.8 billion), <a href="https://www.smartkarma.com/entities/1048" target="_blank" data-smartkarma-citation="entities:1048:1">Chiba Bank (8331 JP)</a> is Japan’s 4<sup>th</sup>-largest regional bank whether measured by assets, deposits or loans.  The bank’s home base is in Chiba Prefecture: one of the few prefectures to see an annual net increase in population thanks to its geographic location next to Tokyo, combined with continuous investment in infrastructure and housing by the prefectural government, and an abundance of job opportunities.  On a forward-looking PER of 10.8x, an historic PBR of 0.61x, a market capitalisation of ¥586.01 billion (US$5.22 billion), and with a daily average turnover of around 3.8 million shares over the last 3 months, Chiba Bank continues to attract investors seeking reasonably-priced alternatives to the ‘crowded trade’ of simply buying the megabanks for Japanese bank sector exposure.</p>

Strategically located in the heart of Japan’s wealthiest region, namely the Kanto Region that surrounds the nation’s capital Tokyo, with an asset base in excess of ¥14.57 trillion (US$129.8 billion), Chiba Bank (8331 JP) is Japan’s 4th-largest regional bank whether measured by assets, deposits or loans.  The bank’s home base is in Chiba Prefecture: one of the few prefectures to see an annual net increase in population thanks to its geographic location next to Tokyo, combined with continuous investment in infrastructure and housing by the prefectural government, and an abundance of job opportunities.  On a forward-looking PER of 10.8x, an historic PBR of 0.61x, a market capitalisation of ¥586.01 billion (US$5.22 billion), and with a daily average turnover of around 3.8 million shares over the last 3 months, Chiba Bank continues to attract investors seeking reasonably-priced alternatives to the ‘crowded trade’ of simply buying the megabanks for Japanese bank sector exposure.

Chiba Bank (8331 JP):  Chiba 'n Cheerful

<p>Headquartered in Kyoto, the ancient imperial capital of Japan for over a thousand years, Bank of Kyoto is Japan’s 12<sup>th</sup>-largest regional bank if ranked by assets or deposits, but its 6<sup>th</sup>-largest bank in terms of market capitalization which is now around ¥397.2 billion (US$3.58 billion).  As a stock investment, it’s not simply a liquid regional bank stock: it is also both a hi-tech play and a Topix-related momentum play.  If you already have in your portfolio hi-tech stocks such as <a href="https://www.smartkarma.com/entities/5415" target="_blank" data-smartkarma-citation="entities:5415:1">Nintendo Co Ltd (7974 JP)</a>, <a href="https://www.smartkarma.com/entities/753" target="_blank" data-smartkarma-citation="entities:753:1">Kyocera Corp (6971 JP)</a>, <a href="https://www.smartkarma.com/entities/7245" target="_blank" data-smartkarma-citation="entities:7245:1">Nidec Corp (6594 JP)</a>, <a href="https://www.smartkarma.com/entities/11649" target="_blank" data-smartkarma-citation="entities:11649:1">Murata Manufacturing (6981 JP)</a>, <a href="https://www.smartkarma.com/entities/2953" target="_blank" data-smartkarma-citation="entities:2953:1">Rohm Co Ltd (6963 JP)</a> or <a href="https://www.smartkarma.com/entities/15904" target="_blank" data-smartkarma-citation="entities:15904:1">Omron Corp (6645 JP)</a>, you should seriously consider including Bank of Kyoto for added leverage.  Bank of Kyoto is currently trading on a misleadingly demanding FY3/2019 PER of 20.9x (using the bank’s own FY3/2019 guidance for consolidated net profits of ¥20.0 billion, but guidance is habitually initially lowballed) but on a low historic PBR of just 0.45x.  Foreign investors in aggregate own 25.37% of the bank’s total outstanding shares, and this percentage has been rising over the years; perhaps it is time to think about joining them?</p>

Headquartered in Kyoto, the ancient imperial capital of Japan for over a thousand years, Bank of Kyoto is Japan’s 12th-largest regional bank if ranked by assets or deposits, but its 6th-largest bank in terms of market capitalization which is now around ¥397.2 billion (US$3.58 billion).  As a stock investment, it’s not simply a liquid regional bank stock: it is also both a hi-tech play and a Topix-related momentum play.  If you already have in your portfolio hi-tech stocks such as Nintendo Co Ltd (7974 JP), Kyocera Corp (6971 JP), Nidec Corp (6594 JP), Murata Manufacturing (6981 JP), Rohm Co Ltd (6963 JP) or Omron Corp (6645 JP), you should seriously consider including Bank of Kyoto for added leverage.  Bank of Kyoto is currently trading on a misleadingly demanding FY3/2019 PER of 20.9x (using the bank’s own FY3/2019 guidance for consolidated net profits of ¥20.0 billion, but guidance is habitually initially lowballed) but on a low historic PBR of just 0.45x.  Foreign investors in aggregate own 25.37% of the bank’s total outstanding shares, and this percentage has been rising over the years; perhaps it is time to think about joining them?

Doing bespoke work since 2002....., Custom Products Group

Patrick Hansen

Doing bespoke work since 2002.....

Custom Products Group

Custom Products was started 14 years ago at Lehman Brothers by current co-founder Patrick Hansen, CFA. After 3 years at Lehman, Patrick moved the team to Macquarie Securities where Simon Rigney (co-founder) joined. 3 years ago we took Custom Products independent. 

Our core strength can be summed up three words. 1- Customization - we have very little off the shelf products and most work is done on a one on one bespoke basis. 2- Speed - We pride ourselves in our ability to get requests back to the client very quickly. 3- Confidentiality - We do not redistribute. There is no grace period where we wait a week and then mass blast. Any request stops with that client.

Fukuoka Financial Group / Equity Bottom-Up

<p>We were looking for oversold names that are bouncing on volume and found that the majority of names that met the criteria were in the Financial Sector. Out of the 27 names that made the screen, 18 were in the Financial Sector and 5 were in the Producer Manufacturing Sector.</p><h2>Screen Criteria</h2><ol>
<li>Universe is TOPIX 500</li>
<li>1-month Stochastic Oscillator is less than 20</li>
<li>Price is up over the last week</li>
<li>1-week average volume is greater than 0.5 standard deviations above the 65-day average</li>
</ol><h2> Screen Results</h2><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/024/088/original/2.png?1491930253" class="editor-image img-responsive" data-smartkarma-image-id="24088"></figure><div class="content-caption">
<strong>Source: Custom</strong>…</div>

We were looking for oversold names that are bouncing on volume and found that the majority of names that met the criteria were in the Financial Sector. Out of the 27 names that made the screen, 18 were in the Financial Sector and 5 were in the Producer Manufacturing Sector.Screen Criteria
Universe is TOPIX 500
1-month Stochastic Oscillator is less than 20
Price is up over the last week
1-week average volume is greater than 0.5 standard deviations above the 65-day average
 Screen Results
Source: Custom…

Oversold Financial Sector Moving on Volume in Japan....

Japan

The Iyo Bank, Ltd. is a regional bank based in Shikoku area.  The Bank provides banking services such as deposits, loans, and exchange transactions.  Iyo Bank also provides other financial services including securities brokerage, credit cards, leasing, and letter of credit.

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Iyo Bank (8385 JP)

🇯🇵 JAPAN • Results & Revisions Daily Roundup - 7th February ▲2121 7267 5713 ▼ 5401 9616 3407

OOOPS! - The 480 quarterly results announced on Friday subtracted a further 20 basis points from our Results Score. If the remaining 38% of...

Campbell Gunn

Chugoku Bank (8382 JP): Even Monkeys

Chugoku Bank (8382 JP), based in Okayama Prefecture in the Chugoku region of western Japan, is the 10th-largest Japanese regional bank in terms of...

J. Brian Waterhouse

Chiba Bank (8331 JP): Chiba 'n Cheerful

Strategically located in the heart of Japan’s wealthiest region, namely the Kanto Region that surrounds the nation’s capital Tokyo, with an asset...

J. Brian Waterhouse

Bank of Kyoto (8369 JP): Temple Belle

Headquartered in Kyoto, the ancient imperial capital of Japan for over a thousand years, Bank of Kyoto is Japan’s 12th-largest regional bank if...

J. Brian Waterhouse

Oversold Financial Sector Moving on Volume in Japan....

We were looking for oversold names that are bouncing on volume and found that the majority of names that met the criteria were in the Financial...

Custom Products Group

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