'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

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.

Thematic (Sector/Industry)

<div style="text-align: center;"><strong>• NET GAIN • </strong></div><div><div class="content-caption">
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/189/590/original/2021-02-19_07-20-52.png?1613686864" class="editor-image img-responsive" data-smartkarma-image-id="189590"></figure><p></p></section> Source for all charts &amp; tables: Japan Analytics</div></div><div>
<p><strong>NET GAIN</strong> - Forecast Aggregate Net Income for the universe of  Japanese listed companies ended the quarter 23.8%  higher than three months ago - an increase of  ¥5.2 trillion. As a result, the market's forward earnings multiple has declined to 28 times following a 10% increase in total market value (ex REITs). The increase in forecast operating income is a more modest 10.2% reflecting the degree of previously-projected COVID-related extraordinary losses.</p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/189/591/original/2021-02-19_07-29-59.png?1613687413" class="editor-image img-responsive" data-smartkarma-image-id="189591"></figure></section><p><strong>TRAILING TWELVE MONTHS (TTM)</strong> - Trailing revenues and operating profits are still falling by 9.9% and 26.3%, respectively; however, operating income rose by 4.1% quarter-on-quarter as margins improved by 30 basis points. Despite a reasonable effort at cost-cutting, aggregate operating margins are still  228 bps below their mid-2018 peak, and it will take at least another eight quarters for that gap to be closed.</p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/189/595/original/2021-02-19_07-38-34.png?1613687927" class="editor-image img-responsive" data-smartkarma-image-id="189595"></figure></section><p><strong>FORECASTS</strong> - The majority of companies are forecasting for the year ending next month. Despite no change in the aggregate revenue forecast, the outlook for operating income increased by ¥3.7 trillion during the quarter resulting in a 50 bps operating margin uplift. </p>
</div><section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/189/596/original/2021-02-19_07-40-09.png?1613688021" class="editor-image img-responsive" data-smartkarma-image-id="189596"></figure><hr></section><p><strong>POSITIVE MOMENTUM</strong> - Both our forward-looking Results Score and Results &amp; Revision Score have returned to the positive after less than one year. Whether this merits a new thirty-year high in TOPIX is, however, a moot point. We would note that the Cabinet Office Leading Indicator of Business Conditions for December turned down for the first time since April 2020.   </p></section><div></div><div>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/189/597/original/2021-02-19_08-02-24.png?1613689355" class="editor-image img-responsive" data-smartkarma-image-id="189597"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/189/694/original/2021-02-19_16-02-06.png?1613718138" class="editor-image img-responsive" data-smartkarma-image-id="189694"></figure><hr></section><p><strong>SECTOR BREAKDOWN</strong> - The leading sectors in terms of one-month change in Results &amp; Revision Score are <strong>Other Commercial Products</strong>, <strong>Autos</strong>,<strong> Other Consumer Products</strong>, <strong>Metals</strong>, and <strong>Building Materials.</strong> The RRS 'losers' are <strong>Utilities</strong>, <strong>Internet Content &amp; Services</strong>, <strong>Food, Beverages &amp; Tobacco,</strong><strong>Retail</strong>, and <strong>Healthcare</strong>.  </p>
</div><div>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/189/700/original/2021-02-19_16-05-32.png?1613718344" class="editor-image img-responsive" data-smartkarma-image-id="189700"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/189/701/original/2021-02-19_16-06-12.png?1613718383" class="editor-image img-responsive" data-smartkarma-image-id="189701"></figure></section><hr>
</div><section></section><div><div>
<p>In the <strong>DETAIL</strong> section 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.</p>
<hr>
<p></p>
</div></div>

• NET GAIN • 
 Source for all charts &amp; tables: Japan Analytics
NET GAIN - Forecast Aggregate Net Income for the universe of  Japanese listed companies ended the quarter 23.8%  higher than three months ago - an increase of  ¥5.2 trillion. As a result, the market's forward earnings multiple has declined to 28 times following a 10% increase in total market value (ex REITs). The increase in forecast operating income is a more modest 10.2% reflecting the degree of previously-projected COVID-related extraordinary losses.
TRAILING TWELVE MONTHS (TTM) - Trailing revenues and operating profits are still falling by 9.9% and 26.3%, respectively; however, operating income rose by 4.1% quarter-on-quarter as margins improved by 30 basis points. Despite a reasonable effort at cost-cutting, aggregate operating margins are still  228 bps below their mid-2018 peak, and it will take at least another eight quarters for that gap to be closed.
FORECASTS - The majority of companies are forecasting for the year ending next month. Despite no change in the aggregate revenue forecast, the outlook for operating income increased by ¥3.7 trillion during the quarter resulting in a 50 bps operating margin uplift. 
POSITIVE MOMENTUM - Both our forward-looking Results Score and Results &amp; Revision Score have returned to the positive after less than one year. Whether this merits a new thirty-year high in TOPIX is, however, a moot point. We would note that the Cabinet Office Leading Indicator of Business Conditions for December turned down for the first time since April 2020.   
SECTOR BREAKDOWN - The leading sectors in terms of one-month change in Results &amp; Revision Score are Other Commercial Products, Autos, Other Consumer Products, Metals, and Building Materials. The RRS 'losers' are Utilities, Internet Content &amp; Services, Food, Beverages &amp; Tobacco,Retail, and Healthcare.  



In the DETAIL section 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.




🇯🇵 JAPAN • IT’S A WRAP - Winter 2020 Results & Revisions Review

Expert on Japan Retail and Consumer Markets, JapanConsuming

Michael Causton

Expert on Japan Retail and Consumer Markets

Real Insight on Japanese Consumer Markets

JapanConsuming

JapanConsuming is a specialist research firm producing intelligence on Japanese retail and consumer markets. Founded in 2000, JapanConsuming has become the leading provider of insights on Japanese retailers and consumer trends to retailers, brands, government agencies and investors. As well as a highly regarded monthly report on the market, JapanConsuming produces in-depth reports on retail sectors, seminars on key trends and telephone consulting to investors on trends and retailers.

JapanConsuming was founded by Michael Causton and Roy Larke. 

<p>By 2019, many retailers and brands were already introducing new technology solutions to make up for labour shortages. Despite the crisis, shortages continue to be a major headache in the service sector and the downturn in trading since March has only accelerated efforts to replace staff with tech.</p><p>This could create new problems as older employees lose their jobs although will also reduce pressure on the labour market and lessen labour shortages in retailing.</p>

By 2019, many retailers and brands were already introducing new technology solutions to make up for labour shortages. Despite the crisis, shortages continue to be a major headache in the service sector and the downturn in trading since March has only accelerated efforts to replace staff with tech.This could create new problems as older employees lose their jobs although will also reduce pressure on the labour market and lessen labour shortages in retailing.

Surge in Calls for Retail Voluntary Redundancies Likely to Continue

<section class="figure"><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/175/629/original/2020-12-01_06-32-57.png?1606771992" class="editor-image img-responsive" data-smartkarma-image-id="175629"></figure></section><p><strong>FOUR QUADRANTS </strong>- By combining our two scoring methodologies - the Relative Price Score (RPS) and the Results &amp; Revision Score (RRS), we can assign companies into four quadrants:-</p></section><div><ul style="list-style-type: disc;">
<li>
<strong>CONTRARIAN BUYS </strong>- Low Results &amp; Revision and Relative Price Scores</li>
<li>
<strong>CONTRARIAN SELLS </strong>- High Results &amp; Revision and Relative Price Scores</li>
<li>
<strong>TURNAROUND BUYS </strong>- High Results &amp; Revision Scores &amp; low Relative Price Scores</li>
<li>
<strong>EX-GROWTH</strong><strong>SELLS</strong> - Low Results &amp; Revision Scores &amp; high Relative Price Scores</li>
</ul></div><div>
<p>Turnaround Buys are quite rare but tend to offer reasonable upside for relatively low risk. Examples from 2020 include <a href="https://www.smartkarma.com/entities/lixil-group-corp" target="_blank" data-smartkarma-citation="entities:454:1" rel="noopener">Lixil (5938 JP)</a> and <a href="https://www.smartkarma.com/entities/nec-corp" target="_blank" data-smartkarma-citation="entities:17084:1" rel="noopener">NEC (6701 JP)</a>.</p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/175/110/original/2020-11-30_09-39-21.png?1606696981" class="editor-image img-responsive" data-smartkarma-image-id="175110"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/175/111/original/2020-11-30_09-43-17.png?1606697029" class="editor-image img-responsive" data-smartkarma-image-id="175111"></figure></section><p><strong><a href="https://www.dropbox.com/s/7b61jl02dh0pzno/2020-11-25_12-43-55.png?dl=0" target="_blank" rel="noopener">TURNAROUND BUYS</a> -</strong> In the<strong> DETAIL </strong>section below, we shall review the current 'crop' of Turnaround Buys. The last Insight in this mini-series will look at Ex-Growth Sells before concluding with one '2021 High Conviction' recommendation. The first two Insights in the Series can be found at - <a href="https://www.smartkarma.com/insights/japan-four-quadrants-contrarian-buys" target="_blank" data-smartkarma-citation="insights:45688" rel="noopener">Contrarian Buys </a>and <a href="https://www.smartkarma.com/insights/japan-four-quadrants-contrarian-sells" target="_blank" data-smartkarma-citation="insights:45725" rel="noopener">Contrarian Sells</a>.  </p>
</div>

FOUR QUADRANTS - By combining our two scoring methodologies - the Relative Price Score (RPS) and the Results &amp; Revision Score (RRS), we can assign companies into four quadrants:-

CONTRARIAN BUYS - Low Results &amp; Revision and Relative Price Scores

CONTRARIAN SELLS - High Results &amp; Revision and Relative Price Scores

TURNAROUND BUYS - High Results &amp; Revision Scores &amp; low Relative Price Scores

EX-GROWTHSELLS - Low Results &amp; Revision Scores &amp; high Relative Price Scores

Turnaround Buys are quite rare but tend to offer reasonable upside for relatively low risk. Examples from 2020 include Lixil (5938 JP) and NEC (6701 JP).
TURNAROUND BUYS - In the DETAIL section below, we shall review the current 'crop' of Turnaround Buys. The last Insight in this mini-series will look at Ex-Growth Sells before concluding with one '2021 High Conviction' recommendation. The first two Insights in the Series can be found at - Contrarian Buys and Contrarian Sells.  


🇯🇵 JAPAN • Four Quadrants - Turnaround Buys

<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/173/867/original/2020-11-25_11-14-58.png?1606270511" class="editor-image img-responsive" data-smartkarma-image-id="173867"></figure></section><div class="content-caption">Source for all charts &amp; tables: Japan Analytics</div><p><strong>FOUR QUADRANTS</strong> - By combining our two scoring methodologies - the Relative Price Score (RPS) and the Results &amp; Revision Score (RRS), we can assign companies into four quadrants:-</p><ul>
<li>
<strong>CONTRARIAN BUYS</strong> - Companies with<strong> low</strong> Results &amp; Revision and Relative Price Scores</li>
<li>
<strong>CONTRARIAN SELLS</strong> - Companies with <strong>high</strong> Results &amp; Revision and Relative Price Scores</li>
<li>
<strong>TURNAROUNDS</strong> - Companies with<strong> high</strong> Results &amp; Revision Scores &amp; <strong>low</strong> Relative Price Scores</li>
<li>
<strong>EX-GROWTH</strong> - Companies with <strong>low</strong> Results &amp; Revision Scores &amp; <strong>high</strong> Relative Price Scores</li>
</ul><p>In the two <strong>Contrarian</strong> quadrants, companies can remain outliers for extended periods, such as <a href="https://www.smartkarma.com/entities/jfe-holdings-inc" target="_blank" data-smartkarma-citation="entities:210:1" rel="noopener">JFE (5411 JP)</a>  in Buys, <a href="https://www.smartkarma.com/entities/lasertec-corp" target="_blank" data-smartkarma-citation="entities:4126:1" rel="noopener">Lasertec (6920 JP)</a> in Sells. The other quadrants see much more 'turnover' and van can offer profitable trading opportunities such as <a href="https://www.smartkarma.com/entities/lixil-group-corp" target="_blank" data-smartkarma-citation="entities:454:1" rel="noopener">Lixil(5938 JP)</a> in <strong>Turnarounds,</strong> and <a href="https://www.smartkarma.com/entities/ariake-japan-co-ltd" target="_blank" data-smartkarma-citation="entities:4908:1" rel="noopener">Ariake Japan (2815 JP)</a> in the <strong>Ex-Growth</strong> quadrant.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/173/896/original/2020-11-25_12-25-57.png?1606274769" class="editor-image img-responsive" data-smartkarma-image-id="173896"></figure><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/173/903/original/2020-11-25_12-56-49.png?1606276623" class="editor-image img-responsive" data-smartkarma-image-id="173903"></figure></section><p><strong><a href="https://www.dropbox.com/s/7b61jl02dh0pzno/2020-11-25_12-43-55.png?dl=0" target="_blank" rel="noopener">CONTRARIAN BUYS</a> -</strong> In the <strong>DETAIL</strong> below, we shall review the current 'crop' of Contrarian Buys for potential opportunities. Subsequent Insights in this mini-series will look into the other three quadrants before concluding with one '<em><strong>2021 High Conviction</strong></em>' recommendation. </p></section>

Source for all charts &amp; tables: Japan AnalyticsFOUR QUADRANTS - By combining our two scoring methodologies - the Relative Price Score (RPS) and the Results &amp; Revision Score (RRS), we can assign companies into four quadrants:-

CONTRARIAN BUYS - Companies with low Results &amp; Revision and Relative Price Scores

CONTRARIAN SELLS - Companies with high Results &amp; Revision and Relative Price Scores

TURNAROUNDS - Companies with high Results &amp; Revision Scores &amp; low Relative Price Scores

EX-GROWTH - Companies with low Results &amp; Revision Scores &amp; high Relative Price Scores
In the two Contrarian quadrants, companies can remain outliers for extended periods, such as JFE (5411 JP)  in Buys, Lasertec (6920 JP) in Sells. The other quadrants see much more 'turnover' and van can offer profitable trading opportunities such as Lixil(5938 JP) in Turnarounds, and Ariake Japan (2815 JP) in the Ex-Growth quadrant.CONTRARIAN BUYS - In the DETAIL below, we shall review the current 'crop' of Contrarian Buys for potential opportunities. Subsequent Insights in this mini-series will look into the other three quadrants before concluding with one '2021 High Conviction' recommendation. 

🇯🇵 JAPAN • Four Quadrants - Contrarian Buys

<p style="text-align: center;"><strong>• FORWARD NET INCOME &lt;¥20 TRILLION •</strong></p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/168/639/original/2020-11-01_11-41-42.png?1604198522" class="editor-image img-responsive" data-smartkarma-image-id="168639"></figure><div class="content-caption">Source for all charts &amp; tables: Japan Analytics</div></section><p><strong>&lt;¥20T</strong> - Aggregate earnings for Japan's listed companies are in their eighth successive quarter of decline. Forecast net income for the year ended December-to-March is now below ¥20 trillion and 60% lower than the 2019 peak of ¥48.5 trillion.  Despite the recent correction, the forward market multiple is at a new post-GFC high. On a more optimistic note, for many larger capitalisation companies, there has been a quarter-on-quarter improvement in sales and operating income although the year-on-year changes are still negative. As a result, our momentum-based Results Score and Forecast/Revision Score have both turned upwards.</p><section class="figure"><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/168/640/original/2020-11-01_13-06-28.png?1604203602" class="editor-image img-responsive" data-smartkarma-image-id="168640"></figure></section><p><strong>CAVEATS</strong> - Curbing any enthusiasm embedded in the previous sentence, would however note:-</p>
<ul>
<li>The upturn in momentum is concentrated mainly in large-cap companies which are over-represented in our data series due to cap-weighting. Significant cost-cutting has helped improve margins but has also reduced the revenues of smaller companies further down the supply chain. This divergence will be covered in an upcoming Insight.</li>
<li>The resurgence of COVID-19 and the daily new peaks in confirmed cases has not yet spread to Japan. However, with much of Europe re-entering 'lockdown', we expect the current quarter will not repeat the upturn seen in the second, and therefore, many companies will not meet their full-year targets many of which were recently revised up.</li>
<li>As a result of central bank liquidity creation, much of the recovery in earning that will occur over the next several years has already been discounted in share prices. Although the policy prescriptions that we noted in<a href="https://www.smartkarma.com/insights/japan-in-the-suga-era-policy-priorities-suga-stocks" target="_blank" data-smartkarma-citation="insights:43773" rel="noopener"> Japan in the Suga Era</a> will benefit many areas of the economy, Japan remains overweighted in industries that face significant disruption and disintermediation.</li>
</ul>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/168/670/original/2020-11-01_14-52-47.png?1604209987" class="editor-image img-responsive" data-smartkarma-image-id="168670"></figure></section><section class="figure"></section><p><strong>BoJ</strong> -  Although the amounts are 30% smaller, this week was the first time since the second week of May that the Bank of Japan has purchased ETFs three days in a row. Despite growing <a href="http://www.asahi.com/ajw/articles/13863217" target="_blank" rel="noopener">attention</a> being paid to the scale and breadth of public sector ownership of Japanese equities, BoJ Governor Kuroda has PM Suga's support for continued interventions. We expect the cumulative total purchases to reach 6% of Total Market Value before the end of the fiscal year. </p></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/168/672/original/2020-11-01_15-05-07.png?1604210720" class="editor-image img-responsive" data-smartkarma-image-id="168672"></figure></section><hr><p style="text-align: center;"><strong>• MARKET TECHNICALS •</strong></p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/168/678/original/2020-11-01_15-15-20.png?1604211336" class="editor-image img-responsive" data-smartkarma-image-id="168678"></figure></section><p><strong>14-DAY RSI</strong> - The Relative Strength Index is close to a new eight-month low but is yet to reach the 'buying-zone' of less than 25.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/168/681/original/2020-11-01_15-58-15.png?1604213912" class="editor-image img-responsive" data-smartkarma-image-id="168681"></figure></section><p><strong>25-DAY TORAKU</strong> - This advance/decline indicator is suggesting that a selling climax is likely to occur this month. Panic lows are at levels below 70 - the COVID-19 low of 45 was the lowest level in over twenty years.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/168/682/original/2020-11-01_16-09-21.png?1604214610" class="editor-image img-responsive" data-smartkarma-image-id="168682"></figure></section><p><strong>HIGH-LOW %</strong> - Having only just turned negative, this ratio is a long way from the 10-15% level needed to form a buy signal.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/168/683/original/2020-11-01_16-12-30.png?1604214765" class="editor-image img-responsive" data-smartkarma-image-id="168683"></figure></section><p><strong>MCCLELLAN SUMMATION</strong> - Similarly, the McClellan A/D Summation is neutral and well above the -4,000 buying zone.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/168/684/original/2020-11-01_16-15-15.png?1604214933" class="editor-image img-responsive" data-smartkarma-image-id="168684"></figure></section><p><a href="https://www.dropbox.com/s/kwe54zk9yrxmtan/2020-11-01_16-15-15.png?dl=0" target="_blank" rel="noopener">MOVING AVERAGES</a> -  Lastly, the Total Market Value is approaching the support level of the 200-Day moving average. If breached, a 50-Day/200-Day negative crossover is likely, extending this correction to below ¥600 trillion.</p><hr><p style="text-align: center;"><strong>• SECTOR RESULTS &amp; REVISION SCORES TIMELINE •</strong></p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/168/686/original/2020-11-01_16-26-10.png?1604215582" class="editor-image img-responsive" data-smartkarma-image-id="168686"></figure></section><section class="figure"></section><p><strong>TIMELINE</strong> - The results 'season' is now in full 'swing'. To date, the Sectors with the strongest earnings momentum are <strong>Machinery</strong>, <strong>Retail</strong>,<strong> Electrical Equipmen</strong>t, and <strong>Other Materials</strong>. The weakest are <strong>Other Commerical Products</strong>,<strong> Information Technology</strong>, <strong>Real Estate</strong>, and <strong>Energy</strong>. Only four Sectors have a positive Score, lead by<strong> Internet Content &amp; Services</strong>. </p><hr><p style="text-align: center;"><strong>• BEST &amp; WORST •</strong></p><div><p>Our best and worst pairings from Friday's announcements are <a href="https://www.smartkarma.com/entities/m3-inc" target="_blank" data-smartkarma-citation="entities:13316:1" rel="noopener">M3 Inc (2413 JP)</a> and <a href="https://www.smartkarma.com/entities/lasertec-corp" target="_blank" data-smartkarma-citation="entities:4126:1" rel="noopener">Lasertec (6920 JP)</a> for the best and <a href="https://www.smartkarma.com/entities/pola-orbis-holdings-inc" target="_blank" data-smartkarma-citation="entities:2287:1" rel="noopener">Pola Orbis (4927 JP)</a> and <a href="https://www.smartkarma.com/entities/mitsui-co-ltd" target="_blank" data-smartkarma-citation="entities:20799:1" rel="noopener">Mitsui (8031 JP)</a> for the worst. </p></div><section class="figure"><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/168/688/original/2020-11-01_16-47-56.png?1604216889" class="editor-image img-responsive" data-smartkarma-image-id="168688"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/168/689/original/2020-11-01_16-53-04.png?1604217196" class="editor-image img-responsive" data-smartkarma-image-id="168689"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/168/690/original/2020-11-01_16-58-22.png?1604217564" class="editor-image img-responsive" data-smartkarma-image-id="168690"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/168/691/original/2020-11-01_16-59-54.png?1604217609" class="editor-image img-responsive" data-smartkarma-image-id="168691"></figure></section><div>
<hr>
<p style="text-align: center;"><strong>DAILY STATS</strong></p>
<p style="text-align: left;">Results are evenly split between positive and neutral, however, TTM revenues are still falling by 5% and operating margins are on average 1.5 points lower. 60% of annual revisions are negative and the average change in score is a decline of 4 points.</p>
</div>
<hr>
<div><p style="text-align: center;"><strong>407 Quarterly Results</strong></p></div>
<div><ul style="list-style-type: disc;">
<li><p><strong>Results Score:</strong> 42% Positive / 6% Neutral / 42% Negative</p></li>
<li><p><strong>Average Results Score Change:</strong> -1.2 points</p></li>
<li><p><strong>Average % Change in Revenue:</strong> -7.9% Quarter YoY / -5.2% Rolling TTM YoY </p></li>
<li><p><strong>Average Operating Profit Margin Change</strong>: -1.5ppt</p></li>
<li><p><strong>Percentage Making Quarterly Losses:</strong> 20%</p></li>
</ul></div>
<hr>
<div><p style="text-align: center;"><strong>197 Annual • 45 Interim Forecasts/Revisions</strong></p></div>
<div><ul style="list-style-type: disc;">
<li><p><strong>Annual Forecast/Revision Score:</strong> 31% Positive / 9% Neutral / 59% Negative</p></li>
<li><p><strong>Interim Forecast/Revision Score Change:</strong> 47% Positive / 11% Neutral / 42% Negative</p></li>
<li><p><strong>Average Forecast/Revision Score Change:</strong> -4.0 points</p></li>
</ul></div></section>

• FORWARD NET INCOME &lt;¥20 TRILLION •Source for all charts &amp; tables: Japan Analytics&lt;¥20T - Aggregate earnings for Japan's listed companies are in their eighth successive quarter of decline. Forecast net income for the year ended December-to-March is now below ¥20 trillion and 60% lower than the 2019 peak of ¥48.5 trillion.  Despite the recent correction, the forward market multiple is at a new post-GFC high. On a more optimistic note, for many larger capitalisation companies, there has been a quarter-on-quarter improvement in sales and operating income although the year-on-year changes are still negative. As a result, our momentum-based Results Score and Forecast/Revision Score have both turned upwards.CAVEATS - Curbing any enthusiasm embedded in the previous sentence, would however note:-

The upturn in momentum is concentrated mainly in large-cap companies which are over-represented in our data series due to cap-weighting. Significant cost-cutting has helped improve margins but has also reduced the revenues of smaller companies further down the supply chain. This divergence will be covered in an upcoming Insight.
The resurgence of COVID-19 and the daily new peaks in confirmed cases has not yet spread to Japan. However, with much of Europe re-entering 'lockdown', we expect the current quarter will not repeat the upturn seen in the second, and therefore, many companies will not meet their full-year targets many of which were recently revised up.
As a result of central bank liquidity creation, much of the recovery in earning that will occur over the next several years has already been discounted in share prices. Although the policy prescriptions that we noted in Japan in the Suga Era will benefit many areas of the economy, Japan remains overweighted in industries that face significant disruption and disintermediation.

BoJ -  Although the amounts are 30% smaller, this week was the first time since the second week of May that the Bank of Japan has purchased ETFs three days in a row. Despite growing attention being paid to the scale and breadth of public sector ownership of Japanese equities, BoJ Governor Kuroda has PM Suga's support for continued interventions. We expect the cumulative total purchases to reach 6% of Total Market Value before the end of the fiscal year. • MARKET TECHNICALS •14-DAY RSI - The Relative Strength Index is close to a new eight-month low but is yet to reach the 'buying-zone' of less than 25.25-DAY TORAKU - This advance/decline indicator is suggesting that a selling climax is likely to occur this month. Panic lows are at levels below 70 - the COVID-19 low of 45 was the lowest level in over twenty years.HIGH-LOW % - Having only just turned negative, this ratio is a long way from the 10-15% level needed to form a buy signal.MCCLELLAN SUMMATION - Similarly, the McClellan A/D Summation is neutral and well above the -4,000 buying zone.MOVING AVERAGES -  Lastly, the Total Market Value is approaching the support level of the 200-Day moving average. If breached, a 50-Day/200-Day negative crossover is likely, extending this correction to below ¥600 trillion.• SECTOR RESULTS &amp; REVISION SCORES TIMELINE •TIMELINE - The results 'season' is now in full 'swing'. To date, the Sectors with the strongest earnings momentum are Machinery, Retail, Electrical Equipment, and Other Materials. The weakest are Other Commerical Products, Information Technology, Real Estate, and Energy. Only four Sectors have a positive Score, lead by Internet Content &amp; Services. • BEST &amp; WORST •Our best and worst pairings from Friday's announcements are M3 Inc (2413 JP) and Lasertec (6920 JP) for the best and Pola Orbis (4927 JP) and Mitsui (8031 JP) for the worst. 

DAILY STATS
Results are evenly split between positive and neutral, however, TTM revenues are still falling by 5% and operating margins are on average 1.5 points lower. 60% of annual revisions are negative and the average change in score is a decline of 4 points.


407 Quarterly Results

Results Score: 42% Positive / 6% Neutral / 42% Negative
Average Results Score Change: -1.2 points
Average % Change in Revenue: -7.9% Quarter YoY / -5.2% Rolling TTM YoY 
Average Operating Profit Margin Change: -1.5ppt
Percentage Making Quarterly Losses: 20%


197 Annual • 45 Interim Forecasts/Revisions

Annual Forecast/Revision Score: 31% Positive / 9% Neutral / 59% Negative
Interim Forecast/Revision Score Change: 47% Positive / 11% Neutral / 42% Negative
Average Forecast/Revision Score Change: -4.0 points


🇯🇵 JAPAN • Market Update & Results & Revisions 10/​​​​​​​​​​​​​​​​​​​​​30

Japan

LIXIL Group Corporation produces aluminum housing materials such as doors, windows,curtain walls, and screens.  The Company also sells interior materials and a variety of housing equipment.

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

Lixil Group (5938 JP)

🇯🇵 JAPAN • IT’S A WRAP - Winter 2020 Results & Revisions Review

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<¥20T - Aggregate earnings for Japan's listed companies are in their eighth successive quarter of decline. Forecast net income for the year ended...

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Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

🇯🇵 JAPAN • IT’S A WRAP - Winter 2020 Results & Revisions Review

NET GAIN - Forecast Aggregate Net Income for the universe of Japanese listed companies ended the quarter 23.8% higher than three months ago - an...

Campbell Gunn

Surge in Calls for Retail Voluntary Redundancies Likely to Continue

Japan's retail industry has been hit by labour shortages in the last 5 years but layoffs in the industry in the last year could end that, at least...

Michael Causton

🇯🇵 JAPAN • Four Quadrants - Turnaround Buys

Turnaround Buys are quite rare but tend to offer reasonable upside for relatively low risk. Examples from 2020 include Lixil (5938 JP) and NEC...

Campbell Gunn

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FOUR QUADRANTS - By combining our two scoring methodologies - the Relative Price Score (RPS) and the Results & Revision Score (RRS), we can assign...

Campbell Gunn

🇯🇵 JAPAN • Market Update & Results & Revisions 10/​​​​​​​​​​​​​​​​​​​​​30

<¥20T - Aggregate earnings for Japan's listed companies are in their eighth successive quarter of decline. Forecast net income for the year ended...

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