Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

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.

Equity Bottom-Up

<p>Capcom handily beat consensus estimates at 1Q with revenue of ¥48.4bn (+27.8%) and OP of ¥23.6bn (+37.4%). Consensus had been as low as ¥13.4bn in early May so the beat is significant. Yet, it failed to meet our ¥25-30bn on account of a write-off of some game assets (“several billion yen”) and deferring revenue for RE8 due to free DLC which we had not expected. Without those factors we believe OP would have come extremely close to ¥30bn. We remain confident that ¥60bn in OP is on the cards for the full year though it is plausible that Capcom could push out sales into next FY and come in slightly below that.</p>

Capcom handily beat consensus estimates at 1Q with revenue of ¥48.4bn (+27.8%) and OP of ¥23.6bn (+37.4%). Consensus had been as low as ¥13.4bn in early May so the beat is significant. Yet, it failed to meet our ¥25-30bn on account of a write-off of some game assets (“several billion yen”) and deferring revenue for RE8 due to free DLC which we had not expected. Without those factors we believe OP would have come extremely close to ¥30bn. We remain confident that ¥60bn in OP is on the cards for the full year though it is plausible that Capcom could push out sales into next FY and come in slightly below that.

Capcom – On Track for ¥60bn in OP This Year

Latest News from the World’s Leading Innovators

Granite Bay Capital

An innovation focussed investment company

Granite Bay Capital is an innovation focussed investment company with a deep focus on the companies at the leading edge of innovation across major themes such as AI, ubiquitous computing, sustainability, automation and longevity.

Thematic (Sector/Industry)

<h2><strong>Headline Developments</strong></h2><p>Steam, the video game distribution platform owned by Valve (private) , has released the long-rumoured handheld gaming device the Steam Deck; available from December (although big delays are expected with the premium $649 512GB version not available until 3Q22!).</p>

Headline DevelopmentsSteam, the video game distribution platform owned by Valve (private) , has released the long-rumoured handheld gaming device the Steam Deck; available from December (although big delays are expected with the premium $649 512GB version not available until 3Q22!).

Research from Asian Century Stocks, Asian Century Stocks

Michael Fritzell

Research from Asian Century Stocks

Providing financial journalism in the Asia-Pacific

Asian Century Stocks

Asian Century Stocks is a newsletter providing financial journalism for companies and stocks in the Asia-Pacific. 
The Asian Century Stocks logotype “百” stands for “one hundred” or a “century”. The economic centre of gravity is moving towards Asia. Yet most global investors are missing out.

<h2>Nintendo: Weighing the bull &amp; bear case</h2>
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<p>This week, I’ve decided to do something a little bit different. I asked Asian Century Stocks members on <a href="https://twitter.com/AsianCenturyStx/status/1411533672088412162" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://twitter.com/AsianCenturyStx/status/1411533672088412162&amp;source=gmail&amp;ust=1625792906595000&amp;usg=AFQjCNGkMC2C1bavo3fptA_UJy0enUFHfQ" rel="noopener">Twitter</a> to suggest a stock for me to review.</p>
<p>There was an overwhelming demand for me to review <a href="https://sg.finance.yahoo.com/quote/7974.T/" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://sg.finance.yahoo.com/quote/7974.T/&amp;source=gmail&amp;ust=1625792906595000&amp;usg=AFQjCNGgNPwG1jzFXWg2YNGBB4U7Zu5i_Q" rel="noopener">Nintendo</a> (7974 JP / NTDOY US). So here we go:</p>
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Nintendo: Weighing the bull &amp; bear case



This week, I’ve decided to do something a little bit different. I asked Asian Century Stocks members on Twitter to suggest a stock for me to review.
There was an overwhelming demand for me to review Nintendo (7974 JP / NTDOY US). So here we go:




<p>We had previously expected an upgraded Nintendo Switch to feature some form of 4K support through Nvidia’s DLSS technology and for this to rejuvenate hardware sales going into next fiscal year. The announcement of the OLED Switch does not meet this criterion and we thus expect hardware sales to decline going forward, albeit in a gentler fashion than in prior cycles.</p>

We had previously expected an upgraded Nintendo Switch to feature some form of 4K support through Nvidia’s DLSS technology and for this to rejuvenate hardware sales going into next fiscal year. The announcement of the OLED Switch does not meet this criterion and we thus expect hardware sales to decline going forward, albeit in a gentler fashion than in prior cycles.

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

<p>On Friday 11 June, the TSE published its final revisions to the Corporate Governance Code which had been undergoing review by the <em>Council of Experts Concerning the Follow-up of Japan’s Stewardship Code and Japan’s Corporate Governance Code</em> and subsequently comment for the past many months. The new Code went into effect as of 11 June. The first revision to the <em>Guidelines for Investor and Company Engagement</em> were published as well. </p><p>The new version of Japan's Corporate Governance Code is <a href="https://www.jpx.co.jp/english/news/1020/b5b4pj0000046kxj-att/b5b4pj0000046l07.pdf" target="_blank" rel="noopener">here</a> with the tracked change version <a href="https://www.jpx.co.jp/english/news/1020/b5b4pj0000046kxj-att/b5b4pj0000046l0c.pdf" target="_blank" rel="noopener">here</a>. This is the second revision of the Code (the first revision was in 2018).</p><p>The revisions to the JFSA Guidelines for Investor and Company Engagement are <a href="https://www.jpx.co.jp/english/news/1020/b5b4pj0000046kxj-att/b5b4pj0000046l3e.pdf" target="_blank" rel="noopener">here</a>. Tracked changes are <a href="https://www.jpx.co.jp/english/news/1020/b5b4pj0000046kxj-att/b5b4pj0000046l50.pdf" target="_blank" rel="noopener">here</a>.</p><p>The major changes to the Code recommend enhancements to Board independence, diversity, Sustainability and ESG, and also recommend improvements to investor accessibility and voting and a small change to listed parent-listed subsidiary relationships which unfortunately will not do much to counter abuse by companies of listed sub minority shareholders. </p><p>Below is more discussion of the changes and what they mean.</p><p>But I remind investors, these changes are almost all box-ticking exercises. They will not improve governance for shareholders except at the margins. </p><p>Companies which "get" good governance are still rare. And those which don't get it seem to abuse shareholders on a regular basis. And for that, investors still need more cowbell.</p>

On Friday 11 June, the TSE published its final revisions to the Corporate Governance Code which had been undergoing review by the Council of Experts Concerning the Follow-up of Japan’s Stewardship Code and Japan’s Corporate Governance Code and subsequently comment for the past many months. The new Code went into effect as of 11 June. The first revision to the Guidelines for Investor and Company Engagement were published as well. The new version of Japan's Corporate Governance Code is here with the tracked change version here. This is the second revision of the Code (the first revision was in 2018).The revisions to the JFSA Guidelines for Investor and Company Engagement are here. Tracked changes are here.The major changes to the Code recommend enhancements to Board independence, diversity, Sustainability and ESG, and also recommend improvements to investor accessibility and voting and a small change to listed parent-listed subsidiary relationships which unfortunately will not do much to counter abuse by companies of listed sub minority shareholders. Below is more discussion of the changes and what they mean.But I remind investors, these changes are almost all box-ticking exercises. They will not improve governance for shareholders except at the margins. Companies which "get" good governance are still rare. And those which don't get it seem to abuse shareholders on a regular basis. And for that, investors still need more cowbell.

TSE Prime: Japan's Corporate Governance Code Finalized So Boxes Will Be Furiously Ticked

Japan

Nintendo Co., Ltd. develops, manufactures, and sells household leisure equipment. The Company produces home use video game hardware and software products. Nintendo markets its products throughout Japan.

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Nintendo (NTDOY US)

Capcom – On Track for ¥60bn in OP This Year

Capcom posted blowout numbers in 1Q and looks on course to hit ¥60bn in OP barring profit hiding even as its cash pile approaches ¥100bn.

Mio Kato

Weekly Innovation Review (WIRE) #41

Headline Developments: Steam , the video game distribution platform owned by Valve (private), has released the long-rumoured handheld gaming device...

Granite Bay Capital

Nintendo: Weighing the Bull & Bear Case

I will go through the main bullish and main bearish arguments for Nintendo and then wrap up with an expected earnings trajectory and how the stock...

Asian Century Stocks

Nintendo – Busted Catalyst

Nintendo's OLED Switch does not meet the criterion for a strong upside catalyst and we expect hardware sales to decline going forward, albeit in a...

Mio Kato

TSE Prime: Japan's Corporate Governance Code Finalized So Boxes Will Be Furiously Ticked

The TSE on Friday announced the revisions to the Governance Code. This codifies the "governance thresholds" required to join TSE Prime next year....

Travis Lundy

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