'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)

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/158/456/original/2020-09-12_13-08-43.png?1599883751" class="editor-image img-responsive" data-smartkarma-image-id="158456"></figure><div class="content-caption">Source for all Charts: Japan Analytics</div>YET TO BOTTOM OUT - As we finish the first batch of results covering the period from May to July, our scoring of Results, Annual, and Interim Revisions has yet to see a bottoming out in momentum. Nevertheless, the market, aided by ample liquidity, has already discounted the first six months of a potential recovery. The market's optimism is supported by the Cabinet Office Leading Indicator of Business Conditions which, as of July, had seen two months of recovery.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/158/458/original/2020-09-12_13-20-58.png?1599884472" class="editor-image img-responsive" data-smartkarma-image-id="158458"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/158/459/original/2020-09-12_13-31-24.png?1599885118" class="editor-image img-responsive" data-smartkarma-image-id="158459"></figure><hr>• BEST &amp; WORST •<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/158/449/original/2020-09-12_10-38-08.png?1599874697" class="editor-image img-responsive" data-smartkarma-image-id="158449"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/158/451/original/2020-09-12_10-40-00.png?1599874819" class="editor-image img-responsive" data-smartkarma-image-id="158451"></figure>Our picks of the 'best' from Friday's announcements are logistics infrastructure company <a href="https://www.smartkarma.com/entities/cre-inc-japan" target="_blank" data-smartkarma-citation="entities:25924:1" rel="noopener">CRE (3458 JP)</a> and personal products provider <a href="https://www.smartkarma.com/entities/ya-man-ltd" target="_blank" data-smartkarma-citation="entities:16129:1" rel="noopener">Ya Man (6630 JP)</a>. The 'worst' results were from Ai gaming company <a href="https://www.smartkarma.com/entities/heroz-inc" target="_blank" data-smartkarma-citation="entities:27106:1" rel="noopener">Heroz (4382 JP)</a> and commercial design and display specialist <a href="https://www.smartkarma.com/entities/tanseisha-co-ltd" target="_blank" data-smartkarma-citation="entities:10898:1" rel="noopener">Tanseisha (9743 JP)</a>, the latter due to a severe downward revision for the full year. <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/158/452/original/2020-09-12_10-41-46.png?1599874918" class="editor-image img-responsive" data-smartkarma-image-id="158452"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/158/453/original/2020-09-12_10-43-21.png?1599875013" class="editor-image img-responsive" data-smartkarma-image-id="158453"></figure><div>
<hr>
DAILY STATS
</div><hr><div><div class="content-highlight">PERCENTAGES -50% of quarterly results, 66% of annual forecasts/revisions and 69% of interim forecasts have negative Scores. 29% of companies reporting lost money for the quarter.</div></div><hr><div>48 Quarterly Results</div><div><ul style="list-style-type: disc;">
<li>
Results Score: 46% Positive / 4% Neutral / 50% Negative</li>
<li>
Average Results Score Change: +0.9 points</li>
<li>
Average % Change in Revenue: -5.8% Quarter YoY / -3.7% Rolling TTM YoY </li>
<li>Average Operating Profit Margin Change: -4.1ppt</li>
<li>Percentage Making Quarterly Losses: 29%</li>
</ul></div><hr><div>29 Annual • 13 Interim Forecasts/Revisions</div><div><ul style="list-style-type: disc;">
<li>
Annual Forecast/Revision Score: 31% Positive / 3% Neutral / 66% Negative</li>
<li>
Interim Forecast/Revision Score Change: 23% Positive / 8% Neutral / 69% Negative</li>
<li>
Average Forecast/Revision Score Change: -6.9 points</li>
</ul></div>

Source for all Charts: Japan AnalyticsYET TO BOTTOM OUT - As we finish the first batch of results covering the period from May to July, our scoring of Results, Annual, and Interim Revisions has yet to see a bottoming out in momentum. Nevertheless, the market, aided by ample liquidity, has already discounted the first six months of a potential recovery. The market's optimism is supported by the Cabinet Office Leading Indicator of Business Conditions which, as of July, had seen two months of recovery.• BEST &amp; WORST •Our picks of the 'best' from Friday's announcements are logistics infrastructure company CRE (3458 JP) and personal products provider Ya Man (6630 JP). The 'worst' results were from Ai gaming company Heroz (4382 JP) and commercial design and display specialist Tanseisha (9743 JP), the latter due to a severe downward revision for the full year. 

DAILY STATS
PERCENTAGES -50% of quarterly results, 66% of annual forecasts/revisions and 69% of interim forecasts have negative Scores. 29% of companies reporting lost money for the quarter.48 Quarterly Results

Results Score: 46% Positive / 4% Neutral / 50% Negative

Average Results Score Change: +0.9 points

Average % Change in Revenue: -5.8% Quarter YoY / -3.7% Rolling TTM YoY 
Average Operating Profit Margin Change: -4.1ppt
Percentage Making Quarterly Losses: 29%
29 Annual • 13 Interim Forecasts/Revisions

Annual Forecast/Revision Score: 31% Positive / 3% Neutral / 66% Negative

Interim Forecast/Revision Score Change: 23% Positive / 8% Neutral / 69% Negative

Average Forecast/Revision Score Change: -6.9 points


🇯🇵 JAPAN • Results & Revisions 09/​​​​​11 - CRE, Ya-Man, JM, Halows, Tanseisha

<div>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/139/997/original/2020-06-15_11-08-56.png?1592186965" class="editor-image img-responsive" data-smartkarma-image-id="139997"></figure><div class="content-caption">Source: Japan Analytics</div>
STRESS TESTS - This Insight is the second in our Japan Stress Test series in which we endeavour to assess where business risk is concentrated among larger Japanese companies. <a href="https://www.smartkarma.com/insights/japan-stress-tests-part-1-altman-z-scores" target="_blank" data-smartkarma-citation="insights:40180" rel="noopener">Part 1</a> looked at the time-worn Altman-Z Score for both manufacturing and non-manufacturing companies. In Part 2 will we turn our attention to the cash flow statement starting with the 'lifeblood' of all businesses - Operating Cash Flow.
ACCRUAL ACCOUNTING - Despite the sacrosanctity in some quarters of discounted cash flow analysis, for valuation purposes, our preference is to use accrual accounting. As Professor Stephen Penman states, "Accrual accounting brings the future forward in time and anticipates future cash flows."  Nevertheless, cash flow accounting, and the level of accounting accruals, can provide early insights into periodic stress. <a href="https://www.smartkarma.com/entities/nissan-motor-co-ltd" target="_blank" data-smartkarma-citation="entities:72:1" rel="noopener">Nissan Motor (7201 JP)'s</a> Accruals (Operating Income less Operating Cash Flow) as a percentage of period-end market capitalisation correlate with the company's Relative Price Score over the last thirty years. Further Insights in this series will continue to 'mine'  the Cash Flow statement by exploring Financing Cash Flows and the Working Capital Cycle.
REFORMULATED CASH FLOWSTATEMENTS - Our Operating Cash Flow calculation is derived from each company's Balance Sheet and Income Statement for periods of up to twenty-eight years. Cash Flow items relating to operating activities are divided into Operating Cash Flow and Investing Cash Flow, which includes Fixed Asset and Inventory Cash Flows.  Cash flows relating to financing activities are divided into Financing Cash Flow and Shareholder Cash Flow. The reformulated Balance Sheets, Income and Cash Flow Statements follow a clean-surplus relationship. All three Statements are fully articulated to include items of Other Comprehensive Income which are added to or subtracted from Shareholders' Equity. 
</div>UNIVERSE - The universe for this Insight comprises the 614 Japanese companies with a market capitalisation excluding Treasury Stock over ¥100 million and for which we have at least two years of cash flow data.  Five non-financial companies, which have significant financial subsidiaries (<a href="https://www.smartkarma.com/entities/rakuten-inc" target="_blank" data-smartkarma-citation="entities:31:1" rel="noopener">Rakuten (4755 JP)</a>, <a href="https://www.smartkarma.com/entities/z-holdings-corp" target="_blank" data-smartkarma-citation="entities:19603:1" rel="noopener">Z Holdings (4689 JP)</a>, <a href="https://www.smartkarma.com/entities/japan-post-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:359:1" rel="noopener">Japan Post (6178 JP)</a>, <a href="https://www.smartkarma.com/entities/softbank-group-corp" target="_blank" data-smartkarma-citation="entities:315:1" rel="noopener">Softbank Group (9984 JP)</a> and <a href="https://www.smartkarma.com/entities/sony-corp" target="_blank" data-smartkarma-citation="entities:563:1" rel="noopener">Sony (6758 JP)</a>), have been excluded from this analysis.


Source: Japan Analytics
STRESS TESTS - This Insight is the second in our Japan Stress Test series in which we endeavour to assess where business risk is concentrated among larger Japanese companies. Part 1 looked at the time-worn Altman-Z Score for both manufacturing and non-manufacturing companies. In Part 2 will we turn our attention to the cash flow statement starting with the 'lifeblood' of all businesses - Operating Cash Flow.
ACCRUAL ACCOUNTING - Despite the sacrosanctity in some quarters of discounted cash flow analysis, for valuation purposes, our preference is to use accrual accounting. As Professor Stephen Penman states, "Accrual accounting brings the future forward in time and anticipates future cash flows."  Nevertheless, cash flow accounting, and the level of accounting accruals, can provide early insights into periodic stress. Nissan Motor (7201 JP)'s Accruals (Operating Income less Operating Cash Flow) as a percentage of period-end market capitalisation correlate with the company's Relative Price Score over the last thirty years. Further Insights in this series will continue to 'mine'  the Cash Flow statement by exploring Financing Cash Flows and the Working Capital Cycle.
REFORMULATED CASH FLOWSTATEMENTS - Our Operating Cash Flow calculation is derived from each company's Balance Sheet and Income Statement for periods of up to twenty-eight years. Cash Flow items relating to operating activities are divided into Operating Cash Flow and Investing Cash Flow, which includes Fixed Asset and Inventory Cash Flows.  Cash flows relating to financing activities are divided into Financing Cash Flow and Shareholder Cash Flow. The reformulated Balance Sheets, Income and Cash Flow Statements follow a clean-surplus relationship. All three Statements are fully articulated to include items of Other Comprehensive Income which are added to or subtracted from Shareholders' Equity. 
UNIVERSE - The universe for this Insight comprises the 614 Japanese companies with a market capitalisation excluding Treasury Stock over ¥100 million and for which we have at least two years of cash flow data.  Five non-financial companies, which have significant financial subsidiaries (Rakuten (4755 JP), Z Holdings (4689 JP), Japan Post (6178 JP), Softbank Group (9984 JP) and Sony (6758 JP)), have been excluded from this analysis. 

🇯🇵 JAPAN - Stress Tests Part 2 - Operating Cash Flow & Accruals

Equity Analyst, LightStream Research

Oshadhi Kumarasiri

Equity Analyst

<ul>
<li>Japanese cosmetic companies showed a bit of concern in January when the inbound sales, which had been growing steadily over the past few years turned red all of a sudden.</li>
<li>Tourist arrivals kept their growth momentum going into January, However per capita spend by tourists has been on the decline for a couple of years</li>
<li>Chinese e-commerce legislation did have an impact on Japanese cosmetic companies, however, the impact wasn’t as significant for cosmetic companies as it was for some of the other retailers</li>
<li>Inbound and travel retail sales: back on track from February onwards</li>
</ul>


Japanese cosmetic companies showed a bit of concern in January when the inbound sales, which had been growing steadily over the past few years turned red all of a sudden.
Tourist arrivals kept their growth momentum going into January, However per capita spend by tourists has been on the decline for a couple of years
Chinese e-commerce legislation did have an impact on Japanese cosmetic companies, however, the impact wasn’t as significant for cosmetic companies as it was for some of the other retailers
Inbound and travel retail sales: back on track from February onwards


Japanese Cosmetics Sector: Weak Inbound Sales in January Was Merely a One-Off Glitch

Quantamental Researcher, JD Finance Quantamental Research

Ben Li

Quantamental Researcher

JD Finance Quantamental Research

JD Finance Big Data Quantamental Research is a data and insight provider of proprietary online eCommerce data, under the arm of big data analytics team in JD Finance. JD Finance is an affiliate of US listed JD, a leading eCommerce player in China. It is one of the largest fintech companies in China, with business spanning across consumer loans, fund distribution, and quantitative strategy research. 

<ul>
<li>Online sales of the overall Personal Care Devices sector further slowed down in 2Q18, y/y growth decelerated to 44%.</li>
<li>Massage Chair and Beauty Device are the sector growth drivers.</li>
<li>Both Massage Chair and Beauty Device categories are seeing a clear devide in ASPs among key brands. </li>
</ul>Related Tickers:  <a href="https://www.smartkarma.com/entities/16129" target="_blank" data-smartkarma-citation="entities:16129:1">Ya Man Ltd (6630 JP)</a>, <a href="https://www.smartkarma.com/entities/27159" target="_blank" data-smartkarma-citation="entities:27159:1">MTG Co Ltd (7806 JP)</a>,  <a href="https://www.smartkarma.com/entities/15719" target="_blank" data-smartkarma-citation="entities:15719:1">Xiamen Comfort Science&amp;Technology (002614 CH)</a>Please feel free to contact us for specific data requests.


Online sales of the overall Personal Care Devices sector further slowed down in 2Q18, y/y growth decelerated to 44%.
Massage Chair and Beauty Device are the sector growth drivers.
Both Massage Chair and Beauty Device categories are seeing a clear devide in ASPs among key brands. 
Related Tickers:  Ya Man Ltd (6630 JP), MTG Co Ltd (7806 JP),  Xiamen Comfort Science&amp;Technology (002614 CH)Please feel free to contact us for specific data requests.

Online Sales of Personal Care Devices in China

Equity Bottom-Up

<ul>
<li>MTG revised their original targets for FY2019 and issued revised targets which were significantly below the original targets</li>
<li>The share price has already been on the decline even prior to the notice of revised targets</li>
<li>Declining inbound sales of its flagship brand ReFa is the main culprit for guidance reversion</li>
<li>The impact of Chinese e-commerce legislation was significant due to limited exposure to pure inbound sales</li>
<li>Parallel buyers, those who buy products to resell them in China: dominates MTG’s inbound sales</li>
<li>MTG’s price difference in Japan duty-free purchases vs official sales channels in China</li>
<li>The Troubles of MTG, Causing Panic Among Consensus</li>
<li>Insider ownership and lack of free float keeping the share price above its fair value</li>
<li>Price to book approaching 1.0x; limits the immediate downside risk</li>
</ul>


MTG revised their original targets for FY2019 and issued revised targets which were significantly below the original targets
The share price has already been on the decline even prior to the notice of revised targets
Declining inbound sales of its flagship brand ReFa is the main culprit for guidance reversion
The impact of Chinese e-commerce legislation was significant due to limited exposure to pure inbound sales
Parallel buyers, those who buy products to resell them in China: dominates MTG’s inbound sales
MTG’s price difference in Japan duty-free purchases vs official sales channels in China
The Troubles of MTG, Causing Panic Among Consensus
Insider ownership and lack of free float keeping the share price above its fair value
Price to book approaching 1.0x; limits the immediate downside risk


MTG Co Ltd; Problems Stretch Far Beyond the New Chinese E-Commerce Legislation

Japan

MTG Co., Ltd. manufactures personal care products. The Company mainly develops, produces, and sells beauty devices, cosmetics, fitness equipment, and more. MTG offers services in Japan.

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MTG Co Ltd (7806 JP)

🇯🇵 JAPAN • Results & Revisions 09/11 - CRE, Ya-Man, JM, Halows, Tanseisha

• BEST & WORST • DAILY STATS PERCENTAGES -53% of quarterly results, 53% of annual forecasts/revisions and only 29% of interim forecasts...

Campbell Gunn

🇯🇵 JAPAN - Stress Tests Part 2 - Operating Cash Flow & Accruals

STRESS TESTS - This Insight is the second in our Japan Stress Test series in which we endeavour to assess where business risk is concentrated...

Campbell Gunn

Japanese Cosmetics Sector: Weak Inbound Sales in January Was Merely a One-Off Glitch

Japanese cosmetic companies showed a bit of concern in January when the inbound sales, which had been growing steadily over the past few years...

Oshadhi Kumarasiri

Online Sales of Personal Care Devices in China

Online sales of the overall Personal Care Devices sector further slowed down in 2Q18, y/y growth decelerated to 44%. Massage Chair and Beauty...

Ben Li

MTG Co Ltd; Problems Stretch Far Beyond the New Chinese E-Commerce Legislation

MTG revised their original targets for FY2019 and issued revised targets which were significantly below the original targets The share price has...

Oshadhi Kumarasiri

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🇯🇵 JAPAN • Results & Revisions 09/​​​​​11 - CRE, Ya-Man, JM, Halows, Tanseisha

• BEST & WORST • DAILY STATS PERCENTAGES -53% of quarterly results, 53% of annual forecasts/revisions and only 29% of interim forecasts...

Campbell Gunn

🇯🇵 JAPAN - Stress Tests Part 2 - Operating Cash Flow & Accruals

STRESS TESTS - This Insight is the second in our Japan Stress Test series in which we endeavour to assess where business risk is concentrated...

Campbell Gunn

Japanese Cosmetics Sector: Weak Inbound Sales in January Was Merely a One-Off Glitch

Japanese cosmetic companies showed a bit of concern in January when the inbound sales, which had been growing steadily over the past few years...

Oshadhi Kumarasiri

Online Sales of Personal Care Devices in China

Online sales of the overall Personal Care Devices sector further slowed down in 2Q18, y/y growth decelerated to 44%. Massage Chair and Beauty...

Ben Li

MTG Co Ltd; Problems Stretch Far Beyond the New Chinese E-Commerce Legislation

MTG revised their original targets for FY2019 and issued revised targets which were significantly below the original targets The share price has...

Oshadhi Kumarasiri

🇯🇵 JAPAN • Results & Revisions 09/11 - CRE, Ya-Man, JM, Halows, Tanseisha