'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/000/116/367/original/2020-02-05_03-43-39.png?1580847984" class="editor-image img-responsive" data-smartkarma-image-id="116367"></figure><div class="content-caption">Source • Japan Analytics</div>4TH FEBRUARY ROUNDUP - As expected the 121 Results and 41 Forecast/Revision announcements yesterday took our Results Score 16bps lower to a new three-year low, although the Score is still positive. The Forecast/REvision Score added 13bps helped by <a href="https://www.smartkarma.com/entities/takeda-pharmaceutical-co-ltd" target="_blank" data-smartkarma-citation="entities:11747:1" rel="noopener">Takeda Pharmaceutical (4502 JP)</a> and <a href="https://www.smartkarma.com/entities/kao-corp" target="_blank" data-smartkarma-citation="entities:12933:1" rel="noopener">Kao (4452 JP)</a> although the latter's forecast is optimistic as we discuss in the DETAIL below.<hr>• SECTOR TIMELINE •<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/116/368/original/2020-02-05_03-47-58.png?1580848469" class="editor-image img-responsive" data-smartkarma-image-id="116368"></figure><div class="content-caption">Source • Japan Analytics</div>SECTOR TIMELINE - <a href="https://www.smartkarma.com/entities/hoya-corp" target="_blank" data-smartkarma-citation="entities:8990:1" rel="noopener">Hoya (7741 JP)</a>'s results were the largest factor in the decline in the Other Commerical Products Sector. <a href="https://www.smartkarma.com/entities/takeda-pharmaceutical-co-ltd" target="_blank" data-smartkarma-citation="entities:11747:1" rel="noopener">Takeda Pharmaceutical (4502 JP)</a> helped Healthcare tick up, while <a href="https://www.smartkarma.com/entities/mitsubishi-ufj-financial-gro" target="_blank" data-smartkarma-citation="entities:218:1" rel="noopener">Mitsubishi UFJ Financial (MUFG) (8306 JP)</a> fuelled the strong recovery in the Banks Sector.  <a href="https://www.smartkarma.com/entities/systena-corp" target="_blank" data-smartkarma-citation="entities:20438:1" rel="noopener">Systena (2317 JP)</a> and <a href="https://www.smartkarma.com/entities/ntt-data-corp" target="_blank" data-smartkarma-citation="entities:11232:1" rel="noopener">NTT Data (9613 JP)</a> added to the erosion of the Information Technology Sector's lead, although partially offset by <a href="https://www.smartkarma.com/entities/itochu-techno-solutions-corp" target="_blank" data-smartkarma-citation="entities:2431:1" rel="noopener">Itochu Techno Solutions (4739 JP)</a>.  <a href="https://www.smartkarma.com/entities/mitsui-co-ltd" target="_blank" data-smartkarma-citation="entities:20799:1" rel="noopener">Mitsui (8031 JP)</a> 21% yoy decline in Q3 Net Income continued to downtrend in the Wholesale Sector's Score.

Source • Japan Analytics4TH FEBRUARY ROUNDUP - As expected the 121 Results and 41 Forecast/Revision announcements yesterday took our Results Score 16bps lower to a new three-year low, although the Score is still positive. The Forecast/REvision Score added 13bps helped by Takeda Pharmaceutical (4502 JP) and Kao (4452 JP) although the latter's forecast is optimistic as we discuss in the DETAIL below.• SECTOR TIMELINE •Source • Japan AnalyticsSECTOR TIMELINE - Hoya (7741 JP)'s results were the largest factor in the decline in the Other Commerical Products Sector. Takeda Pharmaceutical (4502 JP) helped Healthcare tick up, while Mitsubishi UFJ Financial (MUFG) (8306 JP) fuelled the strong recovery in the Banks Sector.  Systena (2317 JP) and NTT Data (9613 JP) added to the erosion of the Information Technology Sector's lead, although partially offset by Itochu Techno Solutions (4739 JP).  Mitsui (8031 JP) 21% yoy decline in Q3 Net Income continued to downtrend in the Wholesale Sector's Score.   

🇯🇵 JAPAN • Results & Revisions Daily Roundup - 4th February ▲2371 4502 4739 ▼7741 4452 2317

Silver Point

Thomas J. Monaco

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

<ul>
<li>Aozora Bank (8304.JP) [Aozora] reported FY 3Q19 results of JPY 29.8 bn, up just 0.1% YOY - representing 81.5% of progress toward management's full-year guidance - led largely by strong sales of derivative products and structured bonds.</li>
<li>On January 8, 2020, Aozora announced a capital and business alliance with one of the zero bill banks in Vietnam, called Orient Commercial JSB. We are hopeful that management fully understands the risks in Vietnam, as this current Aozora team is far from the distressed specialists when it was initially formed.    </li>
</ul>


Aozora Bank (8304.JP) [Aozora] reported FY 3Q19 results of JPY 29.8 bn, up just 0.1% YOY - representing 81.5% of progress toward management's full-year guidance - led largely by strong sales of derivative products and structured bonds.
On January 8, 2020, Aozora announced a capital and business alliance with one of the zero bill banks in Vietnam, called Orient Commercial JSB. We are hopeful that management fully understands the risks in Vietnam, as this current Aozora team is far from the distressed specialists when it was initially formed.    


<ul>
<li>Shinsei Bank (8303.JP) [Shinsei] reported that FY 3Q19 cumulative consolidated net earnings increased 8.5% YOY to JPY 45.1 bn, primarily as a result of the FY 3Q19 tax rate of 2.9% during the quarter.</li>
<li>Aplus released a statement on possible irregularities in documentation for investment condominium loans that were introduced by Aruhi, which appear to be concentrated. Further,  Aruhi introduced loans amount to only 14% of Aplus receivables or just 1.5% of Shinsei receivables.   </li>
</ul>


Shinsei Bank (8303.JP) [Shinsei] reported that FY 3Q19 cumulative consolidated net earnings increased 8.5% YOY to JPY 45.1 bn, primarily as a result of the FY 3Q19 tax rate of 2.9% during the quarter.
Aplus released a statement on possible irregularities in documentation for investment condominium loans that were introduced by Aruhi, which appear to be concentrated. Further,  Aruhi introduced loans amount to only 14% of Aplus receivables or just 1.5% of Shinsei receivables.   


Shinsei Bank - Use of Tax Loss Carryforwards Aid Results

Senior Bank Analyst - Japanese Banks, Windamee Research

J. Brian Waterhouse

Senior Bank Analyst - Japanese Banks

Windamee Research

Japanese Banks

As we await the imminent release of 3Q FY3/2020 results for the banks for the 9 months to end-December 2019, we look back at the banks’ recent ‘track record’ against the broader Topix index for guidance on likely future performance.  We find little to change our fundamentally negative view of the sector.  Japanese bank stocks have underperformed the broader Topix index virtually unabated since the beginning of CY2017.  We expect this trend to continue over the next one to two years.
The fundamental outlook for Japan’s banks remains challenging, both at home and overseas.  Even the mighty megabanks are finding it harder to fully offset dwindling domestic revenues with profits from overseas operations.  Investment risks are rising, margins remain under downward pressure generally, many regional banks remain underwater on their core domestic businesses and credit costs are rising across the board for all banks.  This is likely to severely limit upside potential in Japanese bank share prices as the year progresses.
In the absence of fresh incentives to support share prices and mindful of the underwhelming outlook for FY3/2021, the sector is no better than a trade between now and the end of March 2020.  For the rest of CY2020 and for the longer term, our advice to would-be investors in Japanese bank stocks remains “Caveat Emptor!”  (May the Buyer Beware) .

As we await the imminent release of 3Q FY3/2020 results for the banks for the 9 months to end-December 2019, we look back at the banks’ recent ‘track record’ against the broader Topix index for guidance on likely future performance.  We find little to change our fundamentally negative view of the sector.  Japanese bank stocks have underperformed the broader Topix index virtually unabated since the beginning of CY2017.  We expect this trend to continue over the next one to two years.
The fundamental outlook for Japan’s banks remains challenging, both at home and overseas.  Even the mighty megabanks are finding it harder to fully offset dwindling domestic revenues with profits from overseas operations.  Investment risks are rising, margins remain under downward pressure generally, many regional banks remain underwater on their core domestic businesses and credit costs are rising across the board for all banks.  This is likely to severely limit upside potential in Japanese bank share prices as the year progresses.
In the absence of fresh incentives to support share prices and mindful of the underwhelming outlook for FY3/2021, the sector is no better than a trade between now and the end of March 2020.  For the rest of CY2020 and for the longer term, our advice to would-be investors in Japanese bank stocks remains “Caveat Emptor!”  (May the Buyer Beware) .

<ul>
<li>Massive central bank liquidity and fiscal stimulus came rushing in to stabilize the global economy in 2019, and should continue in 2020. However, asset bubbles continue to grow. </li>
<li>Risk concentrations are increasing. </li>
</ul>


Massive central bank liquidity and fiscal stimulus came rushing in to stabilize the global economy in 2019, and should continue in 2020. However, asset bubbles continue to grow. 
Risk concentrations are increasing. 


Japan

Mitsubishi UFJ Financial Group, Inc. (MUFG) is a holding company established through the merger of Mitsubishi Tokyo Financial Group and UFJ Holdings. As a financial group, the Company provides a variety of financial and investment services including commercial banking, trust banking, international finance, and assets management services.

Mitsubishi UFJ Financial (MUFG) (8306 JP)

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Mitsubishi UFJ Financial (MUFG) (8306 JP)

🇯🇵 JAPAN • Results & Revisions Daily Roundup - 4th February ▲2371 4502 4739 ▼7741 4452 2317

4TH FEBRUARY ROUNDUP - As expected the 121 Results and 41 Forecast/Revision announcements yesterday took our Results Score 16bps lower to a new...

Campbell Gunn

Aozora Bank - No Surprises

Aozora Bank (8304.JP) [Aozora] reported FY 3Q19 results of JPY 29.8 bn, up just 0.1% YOY - representing 81.5% of progress toward management's...

Thomas J. Monaco

Shinsei Bank - Use of Tax Loss Carryforwards Aid Results

Shinsei Bank (8303.JP) [Shinsei] reported that FY 3Q19 cumulative consolidated net earnings increased 8.5% YOY to JPY 45.1 bn, primarily as a...

Thomas J. Monaco

Japanese Banks: A Backward Glance

As we await the imminent release of 3Q FY3/2020 results for the banks for the 9 months to end-December 2019, we look back at the banks’ recent...

J. Brian Waterhouse

Global Stall Speed Growth

Massive central bank liquidity and fiscal stimulus came rushing in to stabilize the global economy in 2019, and should continue in 2020. However,...

Thomas J. Monaco

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