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 Capital Markets

<ul>
<li>ExaWizards’ financial disclosures and track record are relatively limited making it difficult to create high-confidence forecasts. </li>
<li>However, what little information there is points to explosive growth potential. </li>
<li>Whether that potential will be realised is a question but our analysis suggests that the company’s execution potential is good.</li>
</ul>


ExaWizards’ financial disclosures and track record are relatively limited making it difficult to create high-confidence forecasts. 
However, what little information there is points to explosive growth potential. 
Whether that potential will be realised is a question but our analysis suggests that the company’s execution potential is good.


ExaWizards IPO – Latent Potential Abound

Thematic (Sector/Industry)

<h3>What’s Original?</h3>
<p>In this original, we have discussed some of the key aspects highlighted in Kishida’s policy statements along with the current status of these policies and companies that are likely to benefit.</p>

What’s Original?
In this original, we have discussed some of the key aspects highlighted in Kishida’s policy statements along with the current status of these policies and companies that are likely to benefit.

Kishida as Prime Minister: The Path Ahead

Palantir Technologies  / Equity Capital Markets

<p>Much has been made in the press of Palantir’s history of losses. Unfortunately, in its S-1 Palantir only disclosed six quarters of operating history making a deep analysis difficult, but nevertheless, based on our analysis of those financials we believe that the company’s underlying profitability potential is high, very high. Leaving valuations aside, from an operational standpoint this is one of the most attractive looking tech stocks we have seen among the new wave and we do not consider it impossible for the company to become one of the biggest companies in the world as the data revolution gathers steam.</p>

Much has been made in the press of Palantir’s history of losses. Unfortunately, in its S-1 Palantir only disclosed six quarters of operating history making a deep analysis difficult, but nevertheless, based on our analysis of those financials we believe that the company’s underlying profitability potential is high, very high. Leaving valuations aside, from an operational standpoint this is one of the most attractive looking tech stocks we have seen among the new wave and we do not consider it impossible for the company to become one of the biggest companies in the world as the data revolution gathers steam.

Palantir – Quantamentals Suggest Profitability Could Surge with Revenue Growth

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/152/640/original/2020-08-15_16-13-14.png?1597475614" class="editor-image img-responsive" data-smartkarma-image-id="152640"></figure><p><strong>DAMP THE TORPEDOES</strong> - After four additional days of results and revisions announcements, our aggregate trailing and forecast profit data are mainly unchanged. In the spirit of the admirable Admiral Farragut at Mobile Bay in 1864, this <a href="https://www.smartkarma.com/insights/japan-market-update-tired" target="_blank" data-smartkarma-citation="insights:41562" rel="noopener">'tired</a>' summer market ploughed upwards, adding another 4.7% and confounding many short positions. For moving average aficionados, a 50/200 gross is near. The previous two such crosses were buying opportunities, although the last proved to be short-lived.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/152/692/original/2020-08-16_13-17-04.png?1597551458" class="editor-image img-responsive" data-smartkarma-image-id="152692"></figure><p><strong>-30%</strong> - For those still keeping 'score', trailing aggregate earnings are 29% below August 2019, and the pace of the decline in both revenues and earnings is accelerating. Net Income is 42% lower year-on-year and has declined 25% since March.  With no additional restrictions on social activity, the current quarter should see a recovery in quarter-on-quarter trends, at least for domestic companies. For export-orientated industries, the slump in export volumes and the rise in inventories is continuing. Industrial output has reached levels last seen briefly in 2009 and before that in the 1980s. Companies are responding by cutting SG&amp;A expenses, capex (especially overseas), and even staff. Households are following suit in anticipation of lower levels of income and direct financial support from the government. Japan needs a much weaker yen; however, the Bank of Japan has run out of ammunition. The economic recovery will not live up to the market's current level of enthusiasm.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/152/641/original/2020-08-15_16-13-54.png?1597475653" class="editor-image img-responsive" data-smartkarma-image-id="152641"></figure><figure class="editor-figure mceNonEditable"></figure><p><strong>SECTOR TTM RESULTS</strong> - Three service Sectors - <strong>Transport</strong>, <strong>Restaurants</strong>, and <strong>Consumer Services</strong> have borne the brunt of the COVID-recession, while <strong>Autos</strong>,<strong> Metals</strong>, and<strong> Machinery</strong> have fared the worst amongst manufacturers. For the first time since compiling this data, some Sectors are loss-making in aggregate. At the other 'end' the <strong>Telecoms</strong>,<strong> Internet</strong>, <strong>IT</strong> and <strong>Electrical Equipment</strong> Sectors have all seen improving margins, as well as <strong>Healthcare</strong>,<strong> Non-Bank Finance</strong> (mainly Insurance), and<strong> Building Materials</strong>. </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/152/642/original/2020-08-15_16-15-40.png?1597475766" class="editor-image img-responsive" data-smartkarma-image-id="152642"></figure><p><strong>SECTOR RESULTS &amp; REVISION SCORES</strong> - Ourscoring methodology incorporates both results and revision and adds a momentum factor. Accordingly, only three Sectors have positive scores - <strong>Internet</strong>, <strong>IT</strong>, and <strong>Non-Bank Finance</strong>. For contrarians, the momentum recovery in the<strong> Energy</strong> Sector is of particular note.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/152/643/original/2020-08-15_16-20-10.png?1597476030" class="editor-image img-responsive" data-smartkarma-image-id="152643"></figure><div></div><div>
<hr>
<p style="text-align: center;"><strong>•BEST &amp; WORST 14th AUGUST •</strong></p>
</div><div>
<p>The 'best' of Friday's large-cap announcements came from <a href="https://www.smartkarma.com/entities/optim-corp" target="_blank" data-smartkarma-citation="entities:7737:1" rel="noopener">OPTiM Corp (3694 JP)</a> and <a href="https://www.smartkarma.com/entities/oisix-ra-daichi-inc" target="_blank" data-smartkarma-citation="entities:10145:1" rel="noopener">Oisix ra daichi (3182 JP)</a>; the 'worst' were from <a href="https://www.smartkarma.com/entities/citizen-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:8571:1" rel="noopener">Citizen (7762 JP)</a> and <a href="https://www.smartkarma.com/entities/asahi-intecc-co-ltd" target="_blank" data-smartkarma-citation="entities:15915:1" rel="noopener">Asahi Intecc (7747 JP)</a>.  More extensive coverage follows in the DETAIL section below.</p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/152/711/original/2020-08-16_15-56-45.png?1597561030" class="editor-image img-responsive" data-smartkarma-image-id="152711"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/152/712/original/2020-08-16_15-59-19.png?1597561169" class="editor-image img-responsive" data-smartkarma-image-id="152712"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/152/713/original/2020-08-16_16-00-11.png?1597561221" class="editor-image img-responsive" data-smartkarma-image-id="152713"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/152/714/original/2020-08-16_16-01-14.png?1597561301" class="editor-image img-responsive" data-smartkarma-image-id="152714"></figure><div></div>
</div><div>
<hr>
<p style="text-align: center;"><strong>DAILY STATS</strong></p>
</div><hr><div><p><strong>PERCENTAGES</strong> -<strong> 54%</strong> of quarterly results, <strong>46%</strong> of annual forecasts/revisions and 59<strong>%</strong> of interim forecasts have negative Scores. <strong>35%</strong> of companies reporting lost money for the quarter.</p></div><hr><div><p style="text-align: center;"><strong>217 Quarterly Results</strong></p></div><div><ul>
<li>
<strong>Results Score:</strong> 31% Positive / 14% Neutral / 54% Negative</li>
<li>
<strong>Average Results Score Change:</strong> -2.3 points</li>
<li>
<strong>Average % Change in Revenue:</strong> -10.3% Quarter YoY / +0.2% Rolling TTM YoY </li>
<li>
<strong>Average Operating Profit Margin Change: </strong>-1.2 ppt</li>
<li>
<strong>Percentage Making Quarterly Losses:</strong> 35%</li>
</ul></div><hr><div><p style="text-align: center;"><strong>61 Annual • 17 Interim Forecasts/Revisions</strong></p></div><div><ul>
<li>
<strong>Annual Forecast/Revision Score:</strong> 39% Positive / 15% Neutral / 46% Negative</li>
<li>
<strong>Interim Forecast/Revision Score Change:</strong> 41% Positive / 0% Neutral / 59% Negative</li>
<li>
<strong>Average Forecast/Revision Score Change:</strong> -2.8 points</li>
</ul></div>

DAMP THE TORPEDOES - After four additional days of results and revisions announcements, our aggregate trailing and forecast profit data are mainly unchanged. In the spirit of the admirable Admiral Farragut at Mobile Bay in 1864, this 'tired' summer market ploughed upwards, adding another 4.7% and confounding many short positions. For moving average aficionados, a 50/200 gross is near. The previous two such crosses were buying opportunities, although the last proved to be short-lived.-30% - For those still keeping 'score', trailing aggregate earnings are 29% below August 2019, and the pace of the decline in both revenues and earnings is accelerating. Net Income is 42% lower year-on-year and has declined 25% since March.  With no additional restrictions on social activity, the current quarter should see a recovery in quarter-on-quarter trends, at least for domestic companies. For export-orientated industries, the slump in export volumes and the rise in inventories is continuing. Industrial output has reached levels last seen briefly in 2009 and before that in the 1980s. Companies are responding by cutting SG&amp;A expenses, capex (especially overseas), and even staff. Households are following suit in anticipation of lower levels of income and direct financial support from the government. Japan needs a much weaker yen; however, the Bank of Japan has run out of ammunition. The economic recovery will not live up to the market's current level of enthusiasm.SECTOR TTM RESULTS - Three service Sectors - Transport, Restaurants, and Consumer Services have borne the brunt of the COVID-recession, while Autos, Metals, and Machinery have fared the worst amongst manufacturers. For the first time since compiling this data, some Sectors are loss-making in aggregate. At the other 'end' the Telecoms, Internet, IT and Electrical Equipment Sectors have all seen improving margins, as well as Healthcare, Non-Bank Finance (mainly Insurance), and Building Materials. SECTOR RESULTS &amp; REVISION SCORES - Ourscoring methodology incorporates both results and revision and adds a momentum factor. Accordingly, only three Sectors have positive scores - Internet, IT, and Non-Bank Finance. For contrarians, the momentum recovery in the Energy Sector is of particular note.

•BEST &amp; WORST 14th AUGUST •

The 'best' of Friday's large-cap announcements came from OPTiM Corp (3694 JP) and Oisix ra daichi (3182 JP); the 'worst' were from Citizen (7762 JP) and Asahi Intecc (7747 JP).  More extensive coverage follows in the DETAIL section below.



DAILY STATS
PERCENTAGES - 54% of quarterly results, 46% of annual forecasts/revisions and 59% of interim forecasts have negative Scores. 35% of companies reporting lost money for the quarter.217 Quarterly Results

Results Score: 31% Positive / 14% Neutral / 54% Negative

Average Results Score Change: -2.3 points

Average % Change in Revenue: -10.3% Quarter YoY / +0.2% Rolling TTM YoY 

Average Operating Profit Margin Change: -1.2 ppt

Percentage Making Quarterly Losses: 35%
61 Annual • 17 Interim Forecasts/Revisions

Annual Forecast/Revision Score: 39% Positive / 15% Neutral / 46% Negative

Interim Forecast/Revision Score Change: 41% Positive / 0% Neutral / 59% Negative

Average Forecast/Revision Score Change: -2.8 points


🇯🇵 JAPAN • Results & Revisions 14th August -  Damn the Torpedoes

Japan

OPTIM CORPORATION develops and licenses infrastructure and security software for electronic devices such as computers, smartphones and eBooks. The Company also provides services and solution in Cloud Device management, remote management support and consumer device management.

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