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Equity Bottom-Up

<ul>
 <li>Sankyo is a dominant market leader in the Japanese pachinko and pachislot industry, commanding a significant market share and benefiting from a strong portfolio of intellectual property.</li>
 <li>The industry is undergoing a significant technological shift towards 'Smart' pachinko and pachislot machines. This transition, while creating near-term challenges, is solidifying Sankyo's competitive position as smaller operators struggle with the capital-intensive upgrades.</li>
 <li>Despite operating in a structurally declining market facing demographic headwinds and competition from other entertainment forms, Sankyo maintains a robust financial profile with high profitability, a debt-free balance sheet, and a strong commitment to shareholder returns through high dividends.</li>
</ul>This content is AI-generated and displayed for general informational purposes only. Please verify independently before use.


  Sankyo is a dominant market leader in the Japanese pachinko and pachislot industry, commanding a significant market share and benefiting from a strong portfolio of intellectual property.
  The industry is undergoing a significant technological shift towards 'Smart' pachinko and pachislot machines. This transition, while creating near-term challenges, is solidifying Sankyo's competitive position as smaller operators struggle with the capital-intensive upgrades.
  Despite operating in a structurally declining market facing demographic headwinds and competition from other entertainment forms, Sankyo maintains a robust financial profile with high profitability, a debt-free balance sheet, and a strong commitment to shareholder returns through high dividends.
This content is AI-generated and displayed for general informational purposes only. Please verify independently before use.

Primer: Sankyo Co Ltd (6417 JP) - Aug 2026

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Douglas Research Advisory

<ul>
<li>Sankyo is a leading Japanese maker of Pachinko and Pachislot machines. The company has a consistent record of generating positive free cash flow and operating cash flow.</li>
<li>It trades at 6x EV/EBITDA (2025E) and P/E of 9.5x (2025E). Its net margin improved from 9.9% in 2021 to 21.8% in 2022, and 27% in 2024.</li>
<li>Sankyo has also been aggressively buying back its shares in the past five years. We believe Sankyo could continue to outperform the market in the next 1-2 years. </li>
</ul>


Sankyo is a leading Japanese maker of Pachinko and Pachislot machines. The company has a consistent record of generating positive free cash flow and operating cash flow.
It trades at 6x EV/EBITDA (2025E) and P/E of 9.5x (2025E). Its net margin improved from 9.9% in 2021 to 21.8% in 2022, and 27% in 2024.
Sankyo has also been aggressively buying back its shares in the past five years. We believe Sankyo could continue to outperform the market in the next 1-2 years. 


Equity Long-Short

Mo Aziz

Thematic (Sector/Industry)

<ul>
<li>Given Japan's meteoric share price surge in 2024, it is harder to find high yielding stocks</li>
<li>The high-yielding blue chip stocks were extremely popular with retail investors, and the value is now on the lesser known small-cap stocks  </li>
<li>Our recommendations are <a href="https://www.smartkarma.com/entities/japan-tobacco-inc" target="_blank" data-smartkarma-citation="entities:13498:1" rel="noopener">Japan Tobacco (2914 JP)</a> and <a href="https://www.smartkarma.com/entities/sankyo-co-ltd" target="_blank" data-smartkarma-citation="entities:12385:1" rel="noopener">Sankyo Co Ltd (6417 JP). </a>For financial stocks, <a href="https://www.smartkarma.com/entities/tokai-tokyo-financial-holdin" target="_blank" data-smartkarma-citation="entities:18815:1" rel="noopener">Tokai Tokyo Financial Holdin (8616 JP)</a> .  </li>
</ul>


Given Japan's meteoric share price surge in 2024, it is harder to find high yielding stocks
The high-yielding blue chip stocks were extremely popular with retail investors, and the value is now on the lesser known small-cap stocks  
Our recommendations are Japan Tobacco (2914 JP) and Sankyo Co Ltd (6417 JP). For financial stocks, Tokai Tokyo Financial Holdin (8616 JP) .  


Show Me The (Dividend) Money (Part II) - Play on Japanese High Dividend Yielding Stocks

'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.

<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/173/867/original/2020-11-25_11-14-58.png?1606270511" class="editor-image img-responsive" data-smartkarma-image-id="173867"></figure></section><div class="content-caption">Source for all charts &amp; tables: Japan Analytics</div>FOUR QUADRANTS - By combining our two scoring methodologies - the Relative Price Score (RPS) and the Results &amp; Revision Score (RRS), we can assign companies into four quadrants:-<ul>
<li>
CONTRARIAN BUYS - Companies with low Results &amp; Revision and Relative Price Scores</li>
<li>
CONTRARIAN SELLS - Companies with high Results &amp; Revision and Relative Price Scores</li>
<li>
TURNAROUNDS - Companies with high Results &amp; Revision Scores &amp; low Relative Price Scores</li>
<li>
EX-GROWTH - Companies with low Results &amp; Revision Scores &amp; high Relative Price Scores</li>
</ul>In the two Contrarian quadrants, companies can remain outliers for extended periods, such as <a href="https://www.smartkarma.com/entities/jfe-holdings-inc" target="_blank" data-smartkarma-citation="entities:210:1" rel="noopener">JFE (5411 JP)</a>  in Buys, <a href="https://www.smartkarma.com/entities/lasertec-corp" target="_blank" data-smartkarma-citation="entities:4126:1" rel="noopener">Lasertec (6920 JP)</a> in Sells. The other quadrants see much more 'turnover' and van can offer profitable trading opportunities such as <a href="https://www.smartkarma.com/entities/lixil-group-corp" target="_blank" data-smartkarma-citation="entities:454:1" rel="noopener">Lixil(5938 JP)</a> in Turnarounds, and <a href="https://www.smartkarma.com/entities/ariake-japan-co-ltd" target="_blank" data-smartkarma-citation="entities:4908:1" rel="noopener">Ariake Japan (2815 JP)</a> in the Ex-Growth quadrant.<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/173/896/original/2020-11-25_12-25-57.png?1606274769" class="editor-image img-responsive" data-smartkarma-image-id="173896"></figure><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/173/903/original/2020-11-25_12-56-49.png?1606276623" class="editor-image img-responsive" data-smartkarma-image-id="173903"></figure></section><a href="https://www.dropbox.com/s/7b61jl02dh0pzno/2020-11-25_12-43-55.png?dl=0" target="_blank" rel="noopener">CONTRARIAN BUYS</a> - In the DETAIL below, we shall review the current 'crop' of Contrarian Buys for potential opportunities. Subsequent Insights in this mini-series will look into the other three quadrants before concluding with one '2021 High Conviction' recommendation. </section>

Source for all charts &amp; tables: Japan AnalyticsFOUR QUADRANTS - By combining our two scoring methodologies - the Relative Price Score (RPS) and the Results &amp; Revision Score (RRS), we can assign companies into four quadrants:-

CONTRARIAN BUYS - Companies with low Results &amp; Revision and Relative Price Scores

CONTRARIAN SELLS - Companies with high Results &amp; Revision and Relative Price Scores

TURNAROUNDS - Companies with high Results &amp; Revision Scores &amp; low Relative Price Scores

EX-GROWTH - Companies with low Results &amp; Revision Scores &amp; high Relative Price Scores
In the two Contrarian quadrants, companies can remain outliers for extended periods, such as JFE (5411 JP)  in Buys, Lasertec (6920 JP) in Sells. The other quadrants see much more 'turnover' and van can offer profitable trading opportunities such as Lixil(5938 JP) in Turnarounds, and Ariake Japan (2815 JP) in the Ex-Growth quadrant.CONTRARIAN BUYS - In the DETAIL below, we shall review the current 'crop' of Contrarian Buys for potential opportunities. Subsequent Insights in this mini-series will look into the other three quadrants before concluding with one '2021 High Conviction' recommendation. 

🇯🇵 JAPAN • Four Quadrants - Contrarian Buys

<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>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. <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>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.<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>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. <div class="content-highlight">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.</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

Japan

SANKYO CO., LTD. develops, manufactures, and sells pachinko, pachinko slot machines, related parts, and other peripheral devices.  The main products include Fever Zeus Series.  The Company also operates amusement related businesses.

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Sankyo Co Ltd (6417 JP)

Primer: Sankyo Co Ltd (6417 JP) - Aug 2026

Sankyo is a dominant market leader in the Japanese pachinko and pachislot industry, commanding a significant market share and benefiting from a...

αSK Primers

Asian Dividend Gems: Sankyo Co

Sankyo is a leading Japanese maker of Pachinko and Pachislot machines. The company has a strong track record of generating positive free cash flow...

Douglas Kim

Show Me The (Dividend) Money (Part II) - Play on Japanese High Dividend Yielding Stocks

High dividend yields are increasingly harder to find due to Japan's stock price surge. However, the lesser-known small-cap stocks pay well and...

Mo Aziz

🇯🇵 JAPAN • Four Quadrants - Contrarian Buys

FOUR QUADRANTS - By combining our two scoring methodologies - the Relative Price Score (RPS) and the Results & Revision Score (RRS), we can assign...

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

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Primer: Sankyo Co Ltd (6417 JP) - Aug 2026

Sankyo is a dominant market leader in the Japanese pachinko and pachislot industry, commanding a significant market share and benefiting from a...

αSK Primers

Asian Dividend Gems: Sankyo Co

Sankyo is a leading Japanese maker of Pachinko and Pachislot machines. The company has a strong track record of generating positive free cash flow...

Douglas Kim

Show Me The (Dividend) Money (Part II) - Play on Japanese High Dividend Yielding Stocks

High dividend yields are increasingly harder to find due to ​Japan's stock price surge. However, the lesser-known small-cap stocks pay well and...

Mo Aziz

🇯🇵 JAPAN • Four Quadrants - Contrarian Buys

FOUR QUADRANTS - By combining our two scoring methodologies - the Relative Price Score (RPS) and the Results & Revision Score (RRS), we can assign...

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

High dividend yields are increasingly harder to find due to Japan's stock price surge. However, the lesser-known small-cap stocks pay well and...