'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)

<div class="content-highlight"><p style="text-align: center;"><strong><em>"Beware of geeks bearing formulas." - Warren Buffett </em></strong></p></div><p>Enterprise Value multiples have become common parlance in the investment world, both <strong>Enterprise Value/Operating Profit</strong> (EV/OP or EV/EBIT) and it's flawed 'bastard' cousin EV/EBITDA which we will leave well alone for this Insight. With markets supported on a cloud of central bank's liquidity and corporate trailing earnings distorted by COVID-19, many valuation ratios appear meaningless. To inject a dose of reality into the analysis of Japanese corporate valuations, we have created a new metric -<strong> Enterprise Value/Peak Operating Profit (EV/POP).</strong></p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/155/071/original/2020-08-26_10-36-07.png?1598405812" class="editor-image img-responsive" data-smartkarma-image-id="155071"></figure><div class="content-caption">Source: Japan Analytics (applies to all charts below)</div><p><strong>EV &amp; OP TIMELINE</strong> - Using currently-listed non-financial companies (with the four exceptions noted in the legend above), the correlation between Enterprise Value (here divided by 10) and Operating Income has increased since 2013. However, the current positive EV&lt;&gt;OP 'spread' is now larger than at any time since 2002. While non-financial Operating Profits have declined by 22% since peaking in the first quarter of FY2019, Enterprise Value is just ¥2.9 trillion, or 5% below its <a href="mailto:FY18-@Q" target="_blank" rel="noopener">FY18-</a>2Q peak level. Where the lines converge, the EV/OP multiple is 10 times, which is close to the sixteen-year average and the arbitrary line we shall use to distinguish the overvalued from the undervalued. </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/155/075/original/2020-08-26_10-56-07.png?1598406979" class="editor-image img-responsive" data-smartkarma-image-id="155075"></figure><p><strong>EV/OP &amp; EV/POP</strong> - Aggregate EV/OP is now 11.6 times, breaking out of a narrow range to reach a  new a ten-year high. EV/POP reached a five-year low in March of 7.9 times but is now 20 basis points above the seven-year average of 8.8 times. By neither measure could the market be considered cheap; however, in EV/POP terms, aggregate valuations are only just above average.  For several favoured companies for which the market is prepared to pay any price for their perceived quality EV/POP multiple are far from average as in the examples below. At the other end of the valuation spectrum, EV/POP reveals some clear bargain-hunting opportunities.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/155/100/original/2020-08-26_13-12-11.png?1598415140" class="editor-image img-responsive" data-smartkarma-image-id="155100"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/155/102/original/2020-08-26_13-12-39.png?1598415169" class="editor-image img-responsive" data-smartkarma-image-id="155102"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/155/104/original/2020-08-26_13-15-58.png?1598415375" class="editor-image img-responsive" data-smartkarma-image-id="155104"></figure><p>In the <strong>DETAIL</strong> section, we look at the non-financial companies at more examples from both extremes of this metric, in an attempt to pick potential winners and losers as the world slowly normalises and liquidity begins to ebb.  We have purposely excluded companies with negative Enterprise Values, which we shall cover in a upcoming Insight. We have also excluded companies that have listed only in the last four years.</p>

"Beware of geeks bearing formulas." - Warren Buffett Enterprise Value multiples have become common parlance in the investment world, both Enterprise Value/Operating Profit (EV/OP or EV/EBIT) and it's flawed 'bastard' cousin EV/EBITDA which we will leave well alone for this Insight. With markets supported on a cloud of central bank's liquidity and corporate trailing earnings distorted by COVID-19, many valuation ratios appear meaningless. To inject a dose of reality into the analysis of Japanese corporate valuations, we have created a new metric - Enterprise Value/Peak Operating Profit (EV/POP).Source: Japan Analytics (applies to all charts below)EV &amp; OP TIMELINE - Using currently-listed non-financial companies (with the four exceptions noted in the legend above), the correlation between Enterprise Value (here divided by 10) and Operating Income has increased since 2013. However, the current positive EV&lt;&gt;OP 'spread' is now larger than at any time since 2002. While non-financial Operating Profits have declined by 22% since peaking in the first quarter of FY2019, Enterprise Value is just ¥2.9 trillion, or 5% below its FY18-2Q peak level. Where the lines converge, the EV/OP multiple is 10 times, which is close to the sixteen-year average and the arbitrary line we shall use to distinguish the overvalued from the undervalued. EV/OP &amp; EV/POP - Aggregate EV/OP is now 11.6 times, breaking out of a narrow range to reach a  new a ten-year high. EV/POP reached a five-year low in March of 7.9 times but is now 20 basis points above the seven-year average of 8.8 times. By neither measure could the market be considered cheap; however, in EV/POP terms, aggregate valuations are only just above average.  For several favoured companies for which the market is prepared to pay any price for their perceived quality EV/POP multiple are far from average as in the examples below. At the other end of the valuation spectrum, EV/POP reveals some clear bargain-hunting opportunities.In the DETAIL section, we look at the non-financial companies at more examples from both extremes of this metric, in an attempt to pick potential winners and losers as the world slowly normalises and liquidity begins to ebb.  We have purposely excluded companies with negative Enterprise Values, which we shall cover in a upcoming Insight. We have also excluded companies that have listed only in the last four years.

🇯🇵 JAPAN • Stock Picking with 'Peak' EV/OP Multiples - Introducing EV/POP

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/153/689/original/2020-08-20_08-32-43.png?1597879991" class="editor-image img-responsive" data-smartkarma-image-id="153689"></figure><div class="content-caption">All charts sourced from Japan Analytics.</div><p><strong>BRUTAL</strong> - The summer earnings 'season' reflected the broadening impact of COVID-19 on the Japanese and world economies, however, in terms of profit decline, the pace is more moderate than in the previous quarter. Japanese corporates are starting to engage in aggressive cost controls. As a result, an with no signs of virus abating or a vaccine being readily available, earnings will continue to decline in the current quarter. We have yet to reach a low point in this earnings cycle. Many companies delayed making initial forecasts for the current year. As that deficiency is gradually remedied, earnings forecasts are leading trailing results to the downside. The 'gap' for operating profits is ¥5.7 trillion, or 13%. A similar percentage fall applies to net income. Operating income is forecast to be 41% below the peak level of 2019; for net income, the decline is 57%. The aggregate forecast operating margin of 4.8%% is 294 bps lower than the peak, while the forecast net margin is 318 bps lower at 2.67%. If achieved, this outcome will exceed that of the 2008/9 financial crisis when the aggregate was negative. </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/153/694/original/2020-08-20_09-02-34.png?1597881766" class="editor-image img-responsive" data-smartkarma-image-id="153694"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/153/695/original/2020-08-20_09-03-07.png?1597881801" class="editor-image img-responsive" data-smartkarma-image-id="153695"></figure><p><strong>TTM RESULTS &amp; FORECASTS</strong> - Using trailing-twelve-month data to smooth out the seasonality in earnings, TTM operating income is 29% lower year-on-year on a 6% decline in sales. Running the same comparison using published forecasts, operating profit expectations are 40% lower than a year ago and revenues 10% lower.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/153/727/original/2020-08-20_10-57-21.png?1597888653" class="editor-image img-responsive" data-smartkarma-image-id="153727"></figure><p><strong>DAMN THE TORPEDOES</strong> - Our scoring methodology tracks all quarterly results since 2003 and every annual and interim forecast made since 2013. The lines above represent the cap-weighted aggregates of those scores overlayed with the daily series for TOPIX. Other than the three years before the advent of 'Abenomics' and the last six months, the directional correlation is clear.  Mr Market, supported by the BoJ and Federal Reserve, is 'banking' on a sharp and sustained recovery over the next two quarters. </p><div class="content-highlight"><p>In the<strong> DETAIL</strong> section below, we shall review the actual results and initial and revised forecasts by Sector and highlight the best and worst-performing companies by one-quarter revenue and margin changes. We shall also review our Results and Revision Scoring for the market, Sectors and Companies.</p></div>

All charts sourced from Japan Analytics.BRUTAL - The summer earnings 'season' reflected the broadening impact of COVID-19 on the Japanese and world economies, however, in terms of profit decline, the pace is more moderate than in the previous quarter. Japanese corporates are starting to engage in aggressive cost controls. As a result, an with no signs of virus abating or a vaccine being readily available, earnings will continue to decline in the current quarter. We have yet to reach a low point in this earnings cycle. Many companies delayed making initial forecasts for the current year. As that deficiency is gradually remedied, earnings forecasts are leading trailing results to the downside. The 'gap' for operating profits is ¥5.7 trillion, or 13%. A similar percentage fall applies to net income. Operating income is forecast to be 41% below the peak level of 2019; for net income, the decline is 57%. The aggregate forecast operating margin of 4.8%% is 294 bps lower than the peak, while the forecast net margin is 318 bps lower at 2.67%. If achieved, this outcome will exceed that of the 2008/9 financial crisis when the aggregate was negative. TTM RESULTS &amp; FORECASTS - Using trailing-twelve-month data to smooth out the seasonality in earnings, TTM operating income is 29% lower year-on-year on a 6% decline in sales. Running the same comparison using published forecasts, operating profit expectations are 40% lower than a year ago and revenues 10% lower.DAMN THE TORPEDOES - Our scoring methodology tracks all quarterly results since 2003 and every annual and interim forecast made since 2013. The lines above represent the cap-weighted aggregates of those scores overlayed with the daily series for TOPIX. Other than the three years before the advent of 'Abenomics' and the last six months, the directional correlation is clear.  Mr Market, supported by the BoJ and Federal Reserve, is 'banking' on a sharp and sustained recovery over the next two quarters. In the DETAIL section below, we shall review the actual results and initial and revised forecasts by Sector and highlight the best and worst-performing companies by one-quarter revenue and margin changes. We shall also review our Results and Revision Scoring for the market, Sectors and Companies.

🇯🇵 JAPAN • IT’S A WRAP - Summer 2020 Results & Revisions Review

<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

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/130/266/original/2020-04-24_08-07-36.png?1588109848" class="editor-image img-responsive" data-smartkarma-image-id="130266"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>29TH APRIL </strong>- In the<strong> DETAIL</strong> below, we shall review Tuesday's large-cap results, revisions and initial forecast announcements.  The positive/neutral/negative balance for the 117 results was 52:3:62; and for the 76 revisions or initial forecasts, the split was 22:2:52. Of the 82 companies announcing annual results, only 22 made forecasts for the current year, while <a href="https://www.smartkarma.com/entities/shimano-inc" target="_blank" data-smartkarma-citation="entities:3777:1" rel="noopener">Shimano (7309 JP)</a> withdrew its FY2020 forecast. Our Sector Score chart is now showing some dramatic changes. <strong>Consumer Services</strong> is now the lowest-scoring Sector following <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>'s poor full-year results. In comparison, significant declines have been seen in <strong>Transportation &amp; Logistics</strong> (<a href="https://www.smartkarma.com/entities/east-japan-railway-co" target="_blank" data-smartkarma-citation="entities:14271:1" rel="noopener">East Japan Railway Co (9020 JP)</a> and <strong>Utilities</strong> (<a href="https://www.smartkarma.com/entities/tokyo-gas-co-ltd" target="_blank" data-smartkarma-citation="entities:2332:1" rel="noopener">Tokyo Gas (9531 JP))</a>.  The <strong>Internet Content &amp; Services</strong> (<a href="https://www.smartkarma.com/entities/zozo-inc" target="_blank" data-smartkarma-citation="entities:18379:1" rel="noopener">ZOZO (3092 JP)</a>) and <strong>Chemicals</strong> ( <a href="https://www.smartkarma.com/entities/shin-etsu-chemical-co-ltd" target="_blank" data-smartkarma-citation="entities:4481:1" rel="noopener">Shin Etsu Chemical (4063 JP)</a>) Sectors are the largest gainers. </p>

Source • Japan Analytics29TH APRIL - In the DETAIL below, we shall review Tuesday's large-cap results, revisions and initial forecast announcements.  The positive/neutral/negative balance for the 117 results was 52:3:62; and for the 76 revisions or initial forecasts, the split was 22:2:52. Of the 82 companies announcing annual results, only 22 made forecasts for the current year, while Shimano (7309 JP) withdrew its FY2020 forecast. Our Sector Score chart is now showing some dramatic changes. Consumer Services is now the lowest-scoring Sector following Oriental Land (4661 JP)'s poor full-year results. In comparison, significant declines have been seen in Transportation &amp; Logistics (East Japan Railway Co (9020 JP) and Utilities (Tokyo Gas (9531 JP)).  The Internet Content &amp; Services (ZOZO (3092 JP)) and Chemicals ( Shin Etsu Chemical (4063 JP)) Sectors are the largest gainers. 

🇯🇵 JAPAN • Results & Revisions Update 29th April - Mit.Chem, TKC, Keyence, ZOZO, Shimano. Or.Land

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. 

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/123/035/original/2020-03-15_07-07-04.png?1584223644" class="editor-image img-responsive" data-smartkarma-image-id="123035"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>RELATIVE VALUE</strong> - Since the recent peak of December 17th, the TOPIX Index has fallen by 28% in 56 trading days. The<strong> -0.57% daily average rate of decline</strong> over the last three months has only been exceeded on 32 of the 10,142 days since March 1979, eight of which occurred in 1990, with the balance in 2008. From the January 23rd 2018 peak of 1,911, the index has fallen by 34% and is within 3% of our target (expressed in terms of Total Market Value ex REITs) outlined in our <a href="https://www.smartkarma.com/insights/japan-market-update-opportunity-knocks" target="_blank" data-smartkarma-citation="insights:37049" rel="noopener">Opportunity Knocks?</a> Insight published on 1st March. The market is also within 5% of the TOPIX low of 1,196 of 12th February 2016, which we expect will provide some short-term support. Although Japan and many other developed world economies are now in recession, markets do not fall in a straight line forever. <strong>Japanese equities now offer attractive relative value and should outperform over the coming months.</strong></p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/123/034/original/2020-03-15_06-53-01.png?1584222882" class="editor-image img-responsive" data-smartkarma-image-id="123034"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/123/036/original/2020-03-15_07-18-49.png?1584224347" class="editor-image img-responsive" data-smartkarma-image-id="123036"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/123/037/original/2020-03-15_07-23-55.png?1584224666" class="editor-image img-responsive" data-smartkarma-image-id="123037"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>IT'S DIFFERENT THIS TIME</strong> - Most bear markets in Japan have coincided with periods of Yen strength, including the 29% 2015/16 decline when the currency strengthened by 19%. Repeating the rate of decline analysis above, in US dollar terms there have only been <strong>four days in the last twenty-eight years</strong> with worse 56-day rates of decline - all in October 2008. <strong>All four days provided fearless investors with excellent medium-term gains.</strong> Although this increase in market volatility may be less welcome for international investors in Japanese equities, the impact of the <em>Covid-19 recession</em> on the Japanese economy will be more muted. Also, the 48% collapse in the oil price year-to-date will help offset the negative impact of the October 2019 increase in the consumption tax and the decline in export sales in Europe. Lastly, we would suggest that the much-derided net cash that Japanese corporates 'hoard' for rainy days such as these, should delay the need for increases in credit lines. Our recent series of Insights on<a href="https://www.smartkarma.com/insights/japan-who-s-swimming-naked-part-2-altman-z-score" target="_blank" data-smartkarma-citation="insights:37316" rel="noopener"> Who’s Swimming Naked?</a> cover those companies to which this does not apply. <strong>Overall</strong>, <strong>for Japan at least, it is different this time.</strong></p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/123/039/original/File%202020-03-15%203%2024%2020.jpeg?1584225464" class="editor-image img-responsive" data-smartkarma-image-id="123039"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/123/040/original/File%202020-03-15%203%2026%2031.jpeg?1584225508" class="editor-image img-responsive" data-smartkarma-image-id="123040"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/123/041/original/File%202020-03-15%207%2044%2021.jpeg?1584225894" class="editor-image img-responsive" data-smartkarma-image-id="123041"></figure><p></p><div class="content-caption">Source • Max Roser, Hannah Ritchie and Esteban Ortiz-Ospina (2020) - "Coronavirus Disease (COVID-19) – Research and Statistics". Published online at OurWorldInData.org. Retrieved from: 'https://ourworldindata.org/coronavirus' [Online Resource]</div><p><strong>CONTAINING COVID</strong> - According to <a href="https://ourworldindata.org/coronavirus" target="_blank" rel="noopener">data</a> from the peerless <strong>Global Change Data Lab</strong> at Oxford University, Japan has, (except for the unfortunate passengers and crew on the Diamond Princess cruise ship), managed to contain Covid-19 better than any other large nation. While, there is some scepticism that this outcome could be a result of under-testing to avoid cancellation of the Olympic Games; nevertheless, the recorded cases fatality rate in a country with an above-average age profile is surprisingly low.  Currently, the daily increase in active Covid-19 cases in Japan is less than one hundred and was only seventeen on March 15th. The cumulative number of confirmed Covid-19 fatalities is 24, of which two occurred yesterday. The confirmed number of cases per 100,000 population is 0.65, which compares with 19.5 in South Korea, 16.5 in Italy and 12 in Iran. </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/123/038/original/2020-03-15_07-34-05.png?1584225268" class="editor-image img-responsive" data-smartkarma-image-id="123038"></figure><div class="content-caption">Source • oann.com</div><p><strong>KEEP CALM AND CARRY ON -</strong> Last night's press conference by Prime Minister Abe was in stark contrast to the sombre tone to those of Prime Minister Johnson of the United Kingdom and the tragicomic ramblings of the US President. Having received the legislative powers to declare a state of emergency, Abe declined at this stage to invoke any social restrictions beyond the already-announced school closures. As in the UK, sporting authorities are cancelling events or holding them <em>sine populo</em>. Japan's long obsession with cleanliness, the culture of bowing as a greeting and readiness to conform have served to 'flatten the curve'. The increased focus on such practices has also resulted in a very low incidence of seasonal influenza this year. Japan also has significantly lower levels of air pollution compared to China, Iran and northern Italy, a  factor that has become a factor in fatality rates, especially amongst the elderly. Although internal travel and restaurant patronage have sharply declined in Japan, shops are open and are well-stocked (except for now-rationed paper products) and 'free movement' with slightly-greater-than-normal social distancing is the norm. Whatever the motivations may be regarding the Olympics and Abe's legacy, Japan is unwilling to force the economy into the economic depression that would be the result of prolonged lockdown. </p><p><strong>A COVID-19 WORLD</strong> - This 'keep-calm-carry-on' model of a Covid-19-prevalent world (as is also seen in Singapore and Taiwan) will eventually have to be applied globally. These countries rapid transition to the new 'Covid-19 world' should result in better short-term outcomes for these economies.  The UK is currently being criticised for attempting to follow a version of this model, and may eventually have to go against the advice of its epidemiologists. Fortunately, for now, the general public are giving the UK government the benefit of the doubt. There will be a sharp divergence in the medium-term economic outlooks for countries taking these two 'paths' with those that are over-reacting paying a heavy price. While this does not bode well for the Eurozone, East Asia, including Japan, should emerge in better shape in this new 'viral' world.      </p><div class="content-highlight"><p>In the <strong>DETAIL</strong> section below, we shall review a number of our favourite market indicators, recent sector performance and make some recommendations as to how to harness this<strong> once-in-a-decade</strong> opportunity to buy high-quality Japanese companies at attractive prices.</p></div>

Source • Japan AnalyticsRELATIVE VALUE - Since the recent peak of December 17th, the TOPIX Index has fallen by 28% in 56 trading days. The -0.57% daily average rate of decline over the last three months has only been exceeded on 32 of the 10,142 days since March 1979, eight of which occurred in 1990, with the balance in 2008. From the January 23rd 2018 peak of 1,911, the index has fallen by 34% and is within 3% of our target (expressed in terms of Total Market Value ex REITs) outlined in our Opportunity Knocks? Insight published on 1st March. The market is also within 5% of the TOPIX low of 1,196 of 12th February 2016, which we expect will provide some short-term support. Although Japan and many other developed world economies are now in recession, markets do not fall in a straight line forever. Japanese equities now offer attractive relative value and should outperform over the coming months.Source • Japan AnalyticsIT'S DIFFERENT THIS TIME - Most bear markets in Japan have coincided with periods of Yen strength, including the 29% 2015/16 decline when the currency strengthened by 19%. Repeating the rate of decline analysis above, in US dollar terms there have only been four days in the last twenty-eight years with worse 56-day rates of decline - all in October 2008. All four days provided fearless investors with excellent medium-term gains. Although this increase in market volatility may be less welcome for international investors in Japanese equities, the impact of the Covid-19 recession on the Japanese economy will be more muted. Also, the 48% collapse in the oil price year-to-date will help offset the negative impact of the October 2019 increase in the consumption tax and the decline in export sales in Europe. Lastly, we would suggest that the much-derided net cash that Japanese corporates 'hoard' for rainy days such as these, should delay the need for increases in credit lines. Our recent series of Insights on Who’s Swimming Naked? cover those companies to which this does not apply. Overall, for Japan at least, it is different this time.Source • Max Roser, Hannah Ritchie and Esteban Ortiz-Ospina (2020) - "Coronavirus Disease (COVID-19) – Research and Statistics". Published online at OurWorldInData.org. Retrieved from: 'https://ourworldindata.org/coronavirus' [Online Resource]CONTAINING COVID - According to data from the peerless Global Change Data Lab at Oxford University, Japan has, (except for the unfortunate passengers and crew on the Diamond Princess cruise ship), managed to contain Covid-19 better than any other large nation. While, there is some scepticism that this outcome could be a result of under-testing to avoid cancellation of the Olympic Games; nevertheless, the recorded cases fatality rate in a country with an above-average age profile is surprisingly low.  Currently, the daily increase in active Covid-19 cases in Japan is less than one hundred and was only seventeen on March 15th. The cumulative number of confirmed Covid-19 fatalities is 24, of which two occurred yesterday. The confirmed number of cases per 100,000 population is 0.65, which compares with 19.5 in South Korea, 16.5 in Italy and 12 in Iran. Source • oann.comKEEP CALM AND CARRY ON - Last night's press conference by Prime Minister Abe was in stark contrast to the sombre tone to those of Prime Minister Johnson of the United Kingdom and the tragicomic ramblings of the US President. Having received the legislative powers to declare a state of emergency, Abe declined at this stage to invoke any social restrictions beyond the already-announced school closures. As in the UK, sporting authorities are cancelling events or holding them sine populo. Japan's long obsession with cleanliness, the culture of bowing as a greeting and readiness to conform have served to 'flatten the curve'. The increased focus on such practices has also resulted in a very low incidence of seasonal influenza this year. Japan also has significantly lower levels of air pollution compared to China, Iran and northern Italy, a  factor that has become a factor in fatality rates, especially amongst the elderly. Although internal travel and restaurant patronage have sharply declined in Japan, shops are open and are well-stocked (except for now-rationed paper products) and 'free movement' with slightly-greater-than-normal social distancing is the norm. Whatever the motivations may be regarding the Olympics and Abe's legacy, Japan is unwilling to force the economy into the economic depression that would be the result of prolonged lockdown. A COVID-19 WORLD - This 'keep-calm-carry-on' model of a Covid-19-prevalent world (as is also seen in Singapore and Taiwan) will eventually have to be applied globally. These countries rapid transition to the new 'Covid-19 world' should result in better short-term outcomes for these economies.  The UK is currently being criticised for attempting to follow a version of this model, and may eventually have to go against the advice of its epidemiologists. Fortunately, for now, the general public are giving the UK government the benefit of the doubt. There will be a sharp divergence in the medium-term economic outlooks for countries taking these two 'paths' with those that are over-reacting paying a heavy price. While this does not bode well for the Eurozone, East Asia, including Japan, should emerge in better shape in this new 'viral' world.      In the DETAIL section below, we shall review a number of our favourite market indicators, recent sector performance and make some recommendations as to how to harness this once-in-a-decade opportunity to buy high-quality Japanese companies at attractive prices.

🇯🇵 JAPAN MARKET UPDATE • Relative Value: Short-Term Buy On Japanese Equities

Japan

ORIENTAL LAND CO., LTD. operates Tokyo Disney Resort.  The Company also operates restaurants within the complex and sells Disney merchandise.

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

Oriental Land (4661 JP)

🇯🇵 JAPAN • Stock Picking with 'Peak' EV/OP Multiples - Introducing EV/POP

"Beware of geeks bearing formulas." - Warren Buffett Enterprise Value multiples have become common parlance in the investment world, both...

Campbell Gunn

🇯🇵 JAPAN • IT’S A WRAP - Summer 2020 Results & Revisions Review

BRUTAL - The summer earnings 'season' reflected the broadening impact of COVID-19 on the Japanese and world economies, however, in terms of profit...

Campbell Gunn

🇯🇵 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 • Results & Revisions Update 29th April - Mit.Chem, TKC, Keyence, ZOZO, Shimano. Or.Land

29TH APRIL - In the DETAIL below, we shall review Tuesday's large-cap results, revisions and initial forecast announcements. The...

Campbell Gunn

🇯🇵 JAPAN MARKET UPDATE • Relative Value: Short-Term Buy On Japanese Equities

RELATIVE VALUE - Since the recent peak of December 17th, the TOPIX Index has fallen by 28% in 56 trading days. The -0.57% daily average rate of...

Campbell Gunn

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)