Quality-first, Business-perspective, Long-term, Urbem (HK) Limited

Urbem Capital

Quality-first, Business-perspective, Long-term

Thematic (Sector/Industry)

<ul>
<li>The market has been so diligently hitting new highs this year, which may surprise many investors and annoy some like us;</li>
<li>Of course, there is nothing we can do about this, while, on the positive side, we do know what to buy in case of a more favorable market condition;</li>
<li>We put together our wish list for the new year containing top picks that we dream of buying a lot of when their valuations have turned south vastly.</li>
</ul>


The market has been so diligently hitting new highs this year, which may surprise many investors and annoy some like us;
Of course, there is nothing we can do about this, while, on the positive side, we do know what to buy in case of a more favorable market condition;
We put together our wish list for the new year containing top picks that we dream of buying a lot of when their valuations have turned south vastly.


'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.

<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

<ul>
<li>One of our previous articles briefly touched upon the M&amp;A market for Japanese SMEs;</li>
<li>Given the promising prospect of the space, we would like to explore and compare the top three players;</li>
<li>Our evaluation is conducted from both business fundamentals and share valuation perspectives.</li>
</ul>


One of our previous articles briefly touched upon the M&amp;A market for Japanese SMEs;
Given the promising prospect of the space, we would like to explore and compare the top three players;
Our evaluation is conducted from both business fundamentals and share valuation perspectives.


A Deeper Look into Japan's SME M&A Advisory Boutiques

<ul>
<li>The Japanese SME segment is filled with its unique structural challenges, which provides opportunities for "pick and shovel" suppliers;</li>
<li>Many of these SME backers (including oRo, which we covered previously) have generated tremendous shareholder value in the past and may continue to do so while addressing clients' key pain points alongside multiple long-term tailwinds.</li>
</ul>


The Japanese SME segment is filled with its unique structural challenges, which provides opportunities for "pick and shovel" suppliers;
Many of these SME backers (including oRo, which we covered previously) have generated tremendous shareholder value in the past and may continue to do so while addressing clients' key pain points alongside multiple long-term tailwinds.


<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/149/206/original/2020-07-31_06-20-27.png?1596144054" class="editor-image img-responsive" data-smartkarma-image-id="149206"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>NEW LOWS</strong> - As more quarterly results &amp; forecasts come out, both our Results and Forecast/Revisions Scores reached new ten-year lows yesterday. We expect at least half of the gap to the 2009 lows to be closed by the end of August. The market continues to rest in the comfort of the central banks' 'cotton wool'. Our picks of the best and worst results of the day are <a href="https://www.smartkarma.com/entities/anritsu-corp" target="_blank" data-smartkarma-citation="entities:3700:1" rel="noopener">Anritsu (6754 JP) </a>and <a href="https://www.smartkarma.com/entities/oriental-land-co-ltd" target="_blank" data-smartkarma-citation="entities:13517:1" rel="noopener">Oriental Land (4661 JP)</a>, respectively. There was also an interesting divergence between the two 'M&amp;A' specialists, as we reveal in the<strong> DETAIL</strong> below.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/149/208/original/2020-07-31_06-31-18.png?1596144693" class="editor-image img-responsive" data-smartkarma-image-id="149208"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/149/209/original/2020-07-31_06-30-54.png?1596144708" class="editor-image img-responsive" data-smartkarma-image-id="149209"></figure><div class="content-caption">Source • Japan Analytics<hr>
</div><p></p><p style="text-align: center;"><strong>DAILY STATS</strong></p><hr><div><p style="text-align: center;"><strong>189 Quarterly Results</strong></p></div><div><ul>
<li>
<strong>Results Score</strong>: 56 Positive / 8 Neutral / 125 Negative</li>
<li>
<strong>Average Results Score Change:</strong> -2.8</li>
<li>
<strong>Average % Change in Revenue:</strong> -10.2% Quarter YoY / -2.7% Rolling TTM YoY </li>
<li>
<strong>Average Operating Profit Margin Change:</strong> -1.2ppt <em>(ex AnGes)</em>
</li>
<li>
<strong>Percentage Making Quarterly Losses</strong>: 29%</li>
</ul></div><hr><div><p style="text-align: center;"><br><strong>75 Annual • 43 Interim Forecasts/Revisions</strong></p></div><div><ul>
<li>
<strong>Annual Forecast/Revision Score:</strong> 21 Positive / 3 Neutral / 51 Negative</li>
<li>
<strong>Interim Forecast/Revision Score Change:</strong> 9 Positive / 0 Neutral / 34 Negative</li>
<li>
<strong>Average Forecast/Revision Score Change:</strong> -9.0</li>
</ul></div>

Source • Japan AnalyticsNEW LOWS - As more quarterly results &amp; forecasts come out, both our Results and Forecast/Revisions Scores reached new ten-year lows yesterday. We expect at least half of the gap to the 2009 lows to be closed by the end of August. The market continues to rest in the comfort of the central banks' 'cotton wool'. Our picks of the best and worst results of the day are Anritsu (6754 JP) and Oriental Land (4661 JP), respectively. There was also an interesting divergence between the two 'M&amp;A' specialists, as we reveal in the DETAIL below.Source • Japan Analytics
DAILY STATS189 Quarterly Results

Results Score: 56 Positive / 8 Neutral / 125 Negative

Average Results Score Change: -2.8

Average % Change in Revenue: -10.2% Quarter YoY / -2.7% Rolling TTM YoY 

Average Operating Profit Margin Change: -1.2ppt (ex AnGes)


Percentage Making Quarterly Losses: 29%
 75 Annual • 43 Interim Forecasts/Revisions

Annual Forecast/Revision Score: 21 Positive / 3 Neutral / 51 Negative

Interim Forecast/Revision Score Change: 9 Positive / 0 Neutral / 34 Negative

Average Forecast/Revision Score Change: -9.0


🇯🇵 JAPAN • Results & Revisions 30th July - Anritsu, ZOZO, M&As, O-Land, MELCO, Advantest

Japan

Nihon M&A Center Inc. provides M&A advisory services to small and medium-sized enterprises. The Company, established by certified public accountants and tax accountants, offers M&A related services such as reorganization and MBO (Management Buy-Out) as well.

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

Nihon M&A Center (2127 JP)

Our Wish List for 2021

We put together our wish list for 2021 containing top picks that we dream of buying a lot of when their valuations can turn south vastly.

Urbem Capital

🇯🇵 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...

Campbell Gunn

A Deeper Look into Japan's SME M&A Advisory Boutiques

It is not difficult to understand the promising prospect of the space, driven by a combination of multiple structural shifts in the country: e.g.,...

Urbem Capital

Top Picks: Two More Japanese SME Backers

The Japanese SME segment is filled with its unique structural challenges, which provides opportunities for "pick and shovel" suppliers.

Urbem Capital

🇯🇵 JAPAN • Results & Revisions 30th July - Anritsu, ZOZO, M&As, O-Land, MELCO, Advantest

NEW LOWS - As more quarterly results & forecasts come out, both our Results and Forecast/Revisions Scores reached new ten-year lows yesterday....

Campbell Gunn

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Our Wish List for 2021

We put together our wish list for 2021 containing top picks that we dream of buying a lot of when their valuations can turn south vastly.

Urbem Capital

🇯🇵 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...

Campbell Gunn

A Deeper Look into Japan's SME M&A Advisory Boutiques

It is not difficult to understand the promising prospect of the space, driven by a combination of multiple structural shifts in the country: e.g.,...

Urbem Capital

Top Picks: Two More Japanese SME Backers

The Japanese SME segment is filled with its unique structural challenges, which provides opportunities for "pick and shovel" suppliers.

Urbem Capital

🇯🇵 JAPAN • Results & Revisions 30th July - Anritsu, ZOZO, M&As, O-Land, MELCO, Advantest

NEW LOWS - As more quarterly results & forecasts come out, both our Results and Forecast/Revisions Scores reached new ten-year lows yesterday....

Campbell Gunn

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