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.

Event-Driven

<p>Last week, the Nihon Keizai Shimbun reported that the US private equity firm Carlyle Group intends to invest over ¥1.0 trillion in Japan over the next five years. <a href="https://www.smartkarma.com/profiles/mio-kato" target="_blank" rel="noopener">Mio Kato</a> has suggested three potential candidates based on Carlyle’s previous investments in Japan - <a href="https://www.smartkarma.com/entities/a-d-company-ltd" target="_blank" rel="noopener">A&amp;D (7745 JP)</a>, <a href="https://www.smartkarma.com/entities/fujio-food-system-co-ltd" target="_blank" data-smartkarma-citation="entities:12242:1" rel="noopener">Fujio Food System (2752 JP)</a>, and <a href="https://www.smartkarma.com/entities/fuji-oil-holdings-inc" target="_blank" data-smartkarma-citation="entities:4035:1" rel="noopener">Fuji Oil (2607 JP)</a>. In this Insight, we review Fuji Oil, a food materials company, in which <a href="https://www.smartkarma.com/entities/itochu-corp" target="_blank" data-smartkarma-citation="entities:18448:1" rel="noopener">Itochu (8001 JP)</a> has a 38.5% stake (an increase from 33.2% in March 2020).</p>

Last week, the Nihon Keizai Shimbun reported that the US private equity firm Carlyle Group intends to invest over ¥1.0 trillion in Japan over the next five years. Mio Kato has suggested three potential candidates based on Carlyle’s previous investments in Japan - A&amp;D (7745 JP), Fujio Food System (2752 JP), and Fuji Oil (2607 JP). In this Insight, we review Fuji Oil, a food materials company, in which Itochu (8001 JP) has a 38.5% stake (an increase from 33.2% in March 2020).

Fuji Oil In Itochu's Industry Consolidation Plans?

'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/000/146/891/original/2020-07-20_11-11-13.png?1595211104" class="editor-image img-responsive" data-smartkarma-image-id="146891"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>THE 'HUNDRED DAYS WAR'</strong> - It is almost one hundred days since the equity markets began to discount the onset of COVID-19. Since the TOPIX closing low of 1,236.34 on 16th March, the index has recovered by 27%. However, it has only been in the last ten trading days that the number of new two-year share price highs and lows has consistently been in double-digits.  This month has seen 136 new two-year lows and 214 new two-year highs. Whatever the impact of COVID-19 on earnings, the market is very clearly signalling its preferences for COVID 'Heroes &amp; Villains'. In the <strong>DETAIL</strong> section below, we shall look at the leading large caps in both categories and suggest opportunities in each.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/146/894/original/2020-07-20_11-42-42.png?1595213322" class="editor-image img-responsive" data-smartkarma-image-id="146894"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>RELATIVE PRICE</strong> - We shall also conduct the same analysis using our Relative Price Score methodology. The July numbers are 469 Relative Price Score new lows and 229 new highs suggesting a high degree of market polarity as confirmed by the percentages of market value in Overbought and Oversold Stocks - which are both at twenty-year highs.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/146/895/original/2020-07-20_11-58-18.png?1595214235" class="editor-image img-responsive" data-smartkarma-image-id="146895"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>RESULTS DRIVER</strong> - We expect the number of absolute 'heroes and villains' to increase in the next two months as the COVID fallout on earnings is revealed, and will provide further updates as we progress. </p>

Source • Japan AnalyticsTHE 'HUNDRED DAYS WAR' - It is almost one hundred days since the equity markets began to discount the onset of COVID-19. Since the TOPIX closing low of 1,236.34 on 16th March, the index has recovered by 27%. However, it has only been in the last ten trading days that the number of new two-year share price highs and lows has consistently been in double-digits.  This month has seen 136 new two-year lows and 214 new two-year highs. Whatever the impact of COVID-19 on earnings, the market is very clearly signalling its preferences for COVID 'Heroes &amp; Villains'. In the DETAIL section below, we shall look at the leading large caps in both categories and suggest opportunities in each.Source • Japan AnalyticsRELATIVE PRICE - We shall also conduct the same analysis using our Relative Price Score methodology. The July numbers are 469 Relative Price Score new lows and 229 new highs suggesting a high degree of market polarity as confirmed by the percentages of market value in Overbought and Oversold Stocks - which are both at twenty-year highs.Source • Japan AnalyticsRESULTS DRIVER - We expect the number of absolute 'heroes and villains' to increase in the next two months as the COVID fallout on earnings is revealed, and will provide further updates as we progress. 

🇯🇵 JAPAN • The Hundred Days War - COVID Heroes & Villains

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/126/218/original/2020-04-03_05-20-38.png?1585862586" class="editor-image img-responsive" data-smartkarma-image-id="126218"></figure><div class="content-caption">Source • @punxjk</div><p><strong>ABE-NO-MASKS</strong> - Japan's 'softly-softly' approach to COVID-19 continues despite Tokyo recording its highest number of daily new cases to date. PM Abe's two-masks-per-household policy has been widely-derided as in the viral mashup above of the TV-anime Sazae-san's seven-member family plus pet cat. The Tokyo healthcare system is close to a tipping point or '<em>overshoot</em>' in '<em>gairaigo'</em>. The national government is caught between wanting to avoid the economic consequences of a proper lockdown and the difficulty of enforcing such a measure even under the new emergency powers. Local governments are limited to closing high schools and publically-owned facilities.</p><p><strong>SOCIAL PRESSURE</strong> - Two Osaka hostess bars have become centres of infection, but cannot be named as the owners have refused consent fearing a loss of business. Social pressure is, however,  resulting in voluntary closures of some restaurants as well as Maruhan's 16 Tokyo pachinko parlours. Other parlours have just turned down their garish lighting to 'attract fewer customers'.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/126/219/original/2020-04-03_06-44-57.png?1585863904" class="editor-image img-responsive" data-smartkarma-image-id="126219"></figure><div class="content-caption">Source • The Economist</div><p><strong>NECESSARY PRECAUTIONS</strong> -  A new <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3561560" target="_blank" rel="noopener">study </a>by economists at the Fed and MIT Sloan of US cities during and after the 1918 flu pandemic has found that <em>cities that intervened earlier and more aggressively did not perform worse and, if anything, grow faster after the pandemic is over. Our ﬁndings thus indicate that non-pharmaceutical interventions not only lower mortality; they also mitigate the adverse economic consequences of a pandemic</em>. While some of this effect may be due to shifts in population to the then less-populous West Coast, the difference between San Francisco and Omaha is stark. As was the case after the 1980s stock market bubble, the 2008 Financial Crisis and the events of 3/11, efforts to smooth the decline in the economy only serve to prolong the recovery.</p><p><strong>THURSDAY 2ND APRIL</strong> - A relatively quiet day saw nine quarterly results, with four of the nine companies also making revisions or initial forecasts. All but one of the results scored negatively, and none had a positive change. Of the eight forecasts, only two were positive.  </p>

Source • @punxjkABE-NO-MASKS - Japan's 'softly-softly' approach to COVID-19 continues despite Tokyo recording its highest number of daily new cases to date. PM Abe's two-masks-per-household policy has been widely-derided as in the viral mashup above of the TV-anime Sazae-san's seven-member family plus pet cat. The Tokyo healthcare system is close to a tipping point or 'overshoot' in 'gairaigo'. The national government is caught between wanting to avoid the economic consequences of a proper lockdown and the difficulty of enforcing such a measure even under the new emergency powers. Local governments are limited to closing high schools and publically-owned facilities.SOCIAL PRESSURE - Two Osaka hostess bars have become centres of infection, but cannot be named as the owners have refused consent fearing a loss of business. Social pressure is, however,  resulting in voluntary closures of some restaurants as well as Maruhan's 16 Tokyo pachinko parlours. Other parlours have just turned down their garish lighting to 'attract fewer customers'.Source • The EconomistNECESSARY PRECAUTIONS -  A new study by economists at the Fed and MIT Sloan of US cities during and after the 1918 flu pandemic has found that cities that intervened earlier and more aggressively did not perform worse and, if anything, grow faster after the pandemic is over. Our ﬁndings thus indicate that non-pharmaceutical interventions not only lower mortality; they also mitigate the adverse economic consequences of a pandemic. While some of this effect may be due to shifts in population to the then less-populous West Coast, the difference between San Francisco and Omaha is stark. As was the case after the 1980s stock market bubble, the 2008 Financial Crisis and the events of 3/11, efforts to smooth the decline in the economy only serve to prolong the recovery.THURSDAY 2ND APRIL - A relatively quiet day saw nine quarterly results, with four of the nine companies also making revisions or initial forecasts. All but one of the results scored negatively, and none had a positive change. Of the eight forecasts, only two were positive.  

🇯🇵 JAPAN • Revisions & Results Update 2nd April - Necessary Precautions

Making sense of the Global Market, Euromonitor International Ltd.

Yu Mitsuhashi

Making sense of the Global Market

Euromonitor International Ltd.

We are a global market research company focused on industries, countries, economies and consumers worldwide. Our cross-country comparable research helps your organisation identify opportunities and develop growth strategies in countries and regions across the globe. With offices around the world, 1,200 analysts in 100 countries and market research on every key trend and driver, we give you powerful access to the real story behind consumer change.

<ul><li>In 2017 baby food increases by 2% in retail current value terms to reach JPY111.4 billion and increases by 1% in retail volume terms to reach 44,000 tonnes</li><li>Despite the declining number of births, prepared baby food and milk formula perform well due to the rising number of working mothers</li><li>Prepared baby food sees the strongest retail current value growth within baby food in 2017, with an increase of 3% to reach JPY23.0 billion</li><li>The average unit price of baby food increases by 1% in current terms in 2017</li><li>Meiji remains the leading player in baby food in Japan in 2017, accounting for a retail value share of 24%</li><li>Baby food in Japan will continue to register growth over the forecast period with a value CAGR of 2% at constant 2017 prices to reach JPY119.8 billion in 2022</li></ul>

In 2017 baby food increases by 2% in retail current value terms to reach JPY111.4 billion and increases by 1% in retail volume terms to reach 44,000 tonnesDespite the declining number of births, prepared baby food and milk formula perform well due to the rising number of working mothersPrepared baby food sees the strongest retail current value growth within baby food in 2017, with an increase of 3% to reach JPY23.0 billionThe average unit price of baby food increases by 1% in current terms in 2017Meiji remains the leading player in baby food in Japan in 2017, accounting for a retail value share of 24%Baby food in Japan will continue to register growth over the forecast period with a value CAGR of 2% at constant 2017 prices to reach JPY119.8 billion in 2022

<h2><span lang="EN-US">Headlines</span></h2><ul>
<li>Better for you packaged food sees 3% value growth to reach JPY344.4 billion in 2016</li>
<li>Increased health awareness drives sales</li>
<li>Reduced sugar spreads excl honey continues to see double-digit value growth in 2016</li>
<li>Kewpie Corp remains the leader in better for you packaged food with an 11% value share in 2016</li>
<li>Better for you packaged food is expected to have a CAGR of 2% at constant 2016 prices over the forecast period</li>
</ul><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/026/157/original/market%20size%20better%20for%20you%20packaged%20food%20japan%2011-16.png?1494919317" class="editor-image img-responsive" data-smartkarma-image-id="26157"></figure><h2>Competitive Landscape</h2><ul><li>Kewpie Corp leads better for you packaged food with an 11%…</li></ul>

Headlines
Better for you packaged food sees 3% value growth to reach JPY344.4 billion in 2016
Increased health awareness drives sales
Reduced sugar spreads excl honey continues to see double-digit value growth in 2016
Kewpie Corp remains the leader in better for you packaged food with an 11% value share in 2016
Better for you packaged food is expected to have a CAGR of 2% at constant 2016 prices over the forecast period
Competitive LandscapeKewpie Corp leads better for you packaged food with an 11%…

Sector Capsule: Better for You Packaged Food in Japan

Japan

Kewpie Corporation mainly produces and sells mayonnaise, salad dressing, egg products, and health foods.  The Company also purchases and sells jam, sauce, canned and frozen foods.  Kewpie sells canned foods under Aohata brand.

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Kewpie Corp (2809 JP)

Fuji Oil In Itochu's Industry Consolidation Plans?

Last week, the Nihon Keizai Shimbun reported that the US private equity firm Carlyle Group intends to invest over ¥1.0 trillion in Japan over the...

Oshadhi Kumarasiri

🇯🇵 JAPAN • The Hundred Days War - COVID Heroes & Villains

THE 'HUNDRED DAYS WAR' - It is almost one hundred days since the equity markets began to discount the onset of COVID-19. Since the TOPIX closing...

Campbell Gunn

🇯🇵 JAPAN • Revisions & Results Update 2nd April - Necessary Precautions

ABE-NO-MASKS - Japan's 'softly-softly' approach to COVID-19 continues despite Tokyo recording its highest number of daily new cases to date. PM...

Campbell Gunn

Sector Capsule: Baby Food in Japan

In 2017 baby food increases by 2% in retail current value terms to reach JPY111.4 billion and increases by 1% in retail volume terms to reach...

Euromonitor International Ltd.

Sector Capsule: Better for You Packaged Food in Japan

Headlines Better for you packaged food sees 3% value growth to reach JPY344.4 billion in 2016 Increased health awareness drives sales Reduced sugar...

Euromonitor International Ltd.

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