Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Thematic (Sector/Industry)

<ul>
<li>This is part of a series of M&amp;A guides that our Quiddity* <a href="https://www.smartkarma.com/companies/quiddity-advisors/team" target="_blank" rel="noopener">team</a> is publishing to aid investors in understanding the rules, parameters, possibilities, and processes in M&amp;A. </li>
<li>They are designed to contain links to all the relevant rules, oversight entities, and provide details as to how M&amp;A is conducted and what rules apply.</li>
<li>In many of the insights on deals in specific markets and countries, these insights will be used as points of reference. </li>
</ul>


This is part of a series of M&amp;A guides that our Quiddity* team is publishing to aid investors in understanding the rules, parameters, possibilities, and processes in M&amp;A. 
They are designed to contain links to all the relevant rules, oversight entities, and provide details as to how M&amp;A is conducted and what rules apply.
In many of the insights on deals in specific markets and countries, these insights will be used as points of reference. 


Asia Pac ECM and Index Rebal, Shenton Research

Ke Yan, CFA, FRM

Asia Pac ECM and Index Rebal

Asia Pac IPO & Placement Research, China Biotech

DZT Research

DZT Research is an independent Asia Pacific equity specialist. Our quantitative research covers index rebalancing flows, alongside exchange data analytics accross Asia Pacific. On the equity capital markets side, we focus on Asia Pacific ECM, especially biotech and TMT. Our lead analyst is frequently cited by international media.

Quantitative Analysis

<ul>
<li>We analysed the earning revision of component stocks of MS-Japan in the past month.</li>
<li>We tabulated stocks with the top impact on index's EPS, stocks' EPS revision, and revenue revision.</li>
<li>We highlighted EPS revision on Nissan Motor, Sony Financial, Mitsui Mining &amp; Smelting, Resonac, Orix, Rakuten, Kioxia.</li>
</ul>


We analysed the earning revision of component stocks of MS-Japan in the past month.
We tabulated stocks with the top impact on index's EPS, stocks' EPS revision, and revenue revision.
We highlighted EPS revision on Nissan Motor, Sony Financial, Mitsui Mining &amp; Smelting, Resonac, Orix, Rakuten, Kioxia.


MS-Japan Index Earning Revision (Jun): Nissan Motor, Sony Financial, Mitsui Mining & Smelting, Orix

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

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/000/118/403/original/2020-02-18_08-44-22.png?1581983074" class="editor-image img-responsive" data-smartkarma-image-id="118403"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/118/404/original/2020-02-18_08-42-56.png?1581983098" class="editor-image img-responsive" data-smartkarma-image-id="118404"></figure><div class="content-caption">Source • Japan Analytics</div>THREE-YEAR LOW - With <a href="https://www.smartkarma.com/entities/bridgestone-corp" target="_blank" data-smartkarma-citation="entities:8914:1" rel="noopener">Bridgestone (5108 JP)</a>'s results and revision now added, our final tally for this season is a 196 basis point decline in our Results Sore - the lowest since March 2017.  In contrast, the Forecast/Revision Score reached a three-month high as the 470 companies with December year-ends put an optimistic gloss on their medium-term outlook. As we have noted in our recent daily roundups, a normal precondition for a cycle low is for the Forecast/Revision Score to rise above the Results Score. Forecast/Revision Score peaks and troughs usually occur one to two quarters ahead of those for the Results Score.  Covid-19's impact will likely see the 2016 'playbook' repeated next quarter with a lower Results Score and a 'sideways' Forecast/Results Score. The Results Score cycle low point will be reached with the mostly-interim results to be released in six months. <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/118/405/original/2020-02-18_09-29-28.png?1581985792" class="editor-image img-responsive" data-smartkarma-image-id="118405"></figure><div class="content-caption">Source • Japan Analytics</div>LEADING INDICATOR - By including several momentum factors into our Scoring (see below), we can provide a better indication of future business conditions. Indeed there is a 0.83 correlation between the Cabinet Office's Business Condition Leading Indicator and the Forecast/Revision Score. Reported earnings, as well as company forecasts, are lagging indicators and, as shown in Part 1 of this Insight. Both data series peaked one year after our Scores and the market peaked in early 2018. SCORING METHODOLOGY - For those new to these Insights, we briefly recap our scoring methodology below:-<ul>
<li>Results Scores are calculated using the most recent eight quarters of company data for Revenues, Operating Income and Operating Margin and, for each, measure the rate, degree and consistency of change. The Results Score has a maximum of +30 and a minimum of -30 for each period. Our data series commences from the time a particular company issues quarterly results. The sample size becomes significant from March 2005.</li>
<li>The Forecast/Revision Score is based on both Annual and Interim period company forecasts and compares changes from previous forecasts as well as against the trailing twelve-month (TTM) or previous first-half results, with annual forecasts being double-weighted. This Score also has a maximum of +30 and a minimum of -30 for each period.  For this series, our data samples start from August 2008.</li>
<li>The combined Results &amp; Revision Score (RRS) is the average of the Results Score and the Forecasts/Revision Score.</li>
<li>
All company Scores are then cap-weight-aggregated into Sector, Peer Group and Market Composite Scores for which the seventeen-year monthly and two-year daily track records are shown above. Only currently listed-companies are covered in the aggregate Scores, and the Total Market Capitalisation excludes delisted entities. REITs are not included.
<hr>
• SECTOR SCORES •
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/118/410/original/2020-02-18_09-55-29.png?1581987489" class="editor-image img-responsive" data-smartkarma-image-id="118410"></figure><div class="content-caption">Source • Japan Analytics</div>
In the DETAIL Section below, we provide a detailed breakdown of our RRS Scoring for Sectors, Peer Groups and individual companies, highlighting this quarter's 'winners' and 'losers'. The chart above shows a  seventeen-year 'timeline' of the cap-weight-aggregated Sector RRS Scores and the ebbs and flows around the business cycles. The Metals Sector is the most volatile on the downside and has yet to 'bottom' this cycle. Technology Hardware appears to have already rebounded; however, Covid-19 suggests this Sector may relapse. On the upside, the Information Technology Sector has replaced the Internet and Telecoms Sectors as the contra-cyclical 'champion'. 
</li>
</ul>

Source • Japan AnalyticsTHREE-YEAR LOW - With Bridgestone (5108 JP)'s results and revision now added, our final tally for this season is a 196 basis point decline in our Results Sore - the lowest since March 2017.  In contrast, the Forecast/Revision Score reached a three-month high as the 470 companies with December year-ends put an optimistic gloss on their medium-term outlook. As we have noted in our recent daily roundups, a normal precondition for a cycle low is for the Forecast/Revision Score to rise above the Results Score. Forecast/Revision Score peaks and troughs usually occur one to two quarters ahead of those for the Results Score.  Covid-19's impact will likely see the 2016 'playbook' repeated next quarter with a lower Results Score and a 'sideways' Forecast/Results Score. The Results Score cycle low point will be reached with the mostly-interim results to be released in six months. Source • Japan AnalyticsLEADING INDICATOR - By including several momentum factors into our Scoring (see below), we can provide a better indication of future business conditions. Indeed there is a 0.83 correlation between the Cabinet Office's Business Condition Leading Indicator and the Forecast/Revision Score. Reported earnings, as well as company forecasts, are lagging indicators and, as shown in Part 1 of this Insight. Both data series peaked one year after our Scores and the market peaked in early 2018. SCORING METHODOLOGY - For those new to these Insights, we briefly recap our scoring methodology below:-
Results Scores are calculated using the most recent eight quarters of company data for Revenues, Operating Income and Operating Margin and, for each, measure the rate, degree and consistency of change. The Results Score has a maximum of +30 and a minimum of -30 for each period. Our data series commences from the time a particular company issues quarterly results. The sample size becomes significant from March 2005.
The Forecast/Revision Score is based on both Annual and Interim period company forecasts and compares changes from previous forecasts as well as against the trailing twelve-month (TTM) or previous first-half results, with annual forecasts being double-weighted. This Score also has a maximum of +30 and a minimum of -30 for each period.  For this series, our data samples start from August 2008.
The combined Results &amp; Revision Score (RRS) is the average of the Results Score and the Forecasts/Revision Score.

All company Scores are then cap-weight-aggregated into Sector, Peer Group and Market Composite Scores for which the seventeen-year monthly and two-year daily track records are shown above. Only currently listed-companies are covered in the aggregate Scores, and the Total Market Capitalisation excludes delisted entities. REITs are not included.

• SECTOR SCORES •
Source • Japan Analytics
In the DETAIL Section below, we provide a detailed breakdown of our RRS Scoring for Sectors, Peer Groups and individual companies, highlighting this quarter's 'winners' and 'losers'. The chart above shows a  seventeen-year 'timeline' of the cap-weight-aggregated Sector RRS Scores and the ebbs and flows around the business cycles. The Metals Sector is the most volatile on the downside and has yet to 'bottom' this cycle. Technology Hardware appears to have already rebounded; however, Covid-19 suggests this Sector may relapse. On the upside, the Information Technology Sector has replaced the Internet and Telecoms Sectors as the contra-cyclical 'champion'. 



🇯🇵 JAPAN • IT’S A WRAP! Part 2: 2020-Q1 Results & Revision Scores

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/115/943/original/2020-02-01_07-00-20.png?1580599138" class="editor-image img-responsive" data-smartkarma-image-id="115943"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/115/944/original/2020-02-02_08-38-57.png?1580600364" class="editor-image img-responsive" data-smartkarma-image-id="115944"></figure><div class="content-caption">Source • Japan Analytics</div>30TH JANUARY ROUNDUP - The downward trends in both our Results Score and Forecast/Revision Scores that have been building all week are now more apparent last Friday. On the second-busiest day of this quarter's 'calendar', there were 407 results and 114 forecasts or revisions announcements. The Results Score declined by nine basis points to 0.68, the lowest since April 2017 while the Forecast/Revision Score fell by 15bps and was last this low in December 2016. The 'upside gap' between the market and both Scores is still larger than at any time since our data series commenced and needs to close further. The Bank of Japan bought ETFs on three days last week and will be back in action on Monday.<hr>• SECTOR TIMELINE •<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/115/946/original/2020-02-02_09-01-27.png?1580601710" class="editor-image img-responsive" data-smartkarma-image-id="115946"></figure><div class="content-caption">Source • Japan Analytics</div>SECTOR TIMELINE - This quarter's Sector winners and losers are now emerging.  The former are lead by Banks, Non-Bank Finance, Machinery, Technology Hardware, and Electrical Equipment, with the losers being Transportation, Consumer Services, Healthcare, Utilities and Building Materials.  Of the top ten positive changes in all-cap Results Score on Friday, eight were in the financial sectors. A shift in earnings momentum leadership from consumer to finance and technology-related Sectors is in train.

Source • Japan Analytics30TH JANUARY ROUNDUP - The downward trends in both our Results Score and Forecast/Revision Scores that have been building all week are now more apparent last Friday. On the second-busiest day of this quarter's 'calendar', there were 407 results and 114 forecasts or revisions announcements. The Results Score declined by nine basis points to 0.68, the lowest since April 2017 while the Forecast/Revision Score fell by 15bps and was last this low in December 2016. The 'upside gap' between the market and both Scores is still larger than at any time since our data series commenced and needs to close further. The Bank of Japan bought ETFs on three days last week and will be back in action on Monday.• SECTOR TIMELINE •Source • Japan AnalyticsSECTOR TIMELINE - This quarter's Sector winners and losers are now emerging.  The former are lead by Banks, Non-Bank Finance, Machinery, Technology Hardware, and Electrical Equipment, with the losers being Transportation, Consumer Services, Healthcare, Utilities and Building Materials.  Of the top ten positive changes in all-cap Results Score on Friday, eight were in the financial sectors. A shift in earnings momentum leadership from consumer to finance and technology-related Sectors is in train.

🇯🇵 JAPAN • Results & Revisions Daily Roundup - 31st January ►6861 ▲9433 8473 ▼3099 9062 4922

Senior Bank Analyst - Japanese Banks, Windamee Research

J. Brian Waterhouse

Senior Bank Analyst - Japanese Banks

Windamee Research

Japanese Banks

As we await the imminent release of 3Q FY3/2020 results for the banks for the 9 months to end-December 2019, we look back at the banks’ recent ‘track record’ against the broader Topix index for guidance on likely future performance.  We find little to change our fundamentally negative view of the sector.  Japanese bank stocks have underperformed the broader Topix index virtually unabated since the beginning of CY2017.  We expect this trend to continue over the next one to two years.
The fundamental outlook for Japan’s banks remains challenging, both at home and overseas.  Even the mighty megabanks are finding it harder to fully offset dwindling domestic revenues with profits from overseas operations.  Investment risks are rising, margins remain under downward pressure generally, many regional banks remain underwater on their core domestic businesses and credit costs are rising across the board for all banks.  This is likely to severely limit upside potential in Japanese bank share prices as the year progresses.
In the absence of fresh incentives to support share prices and mindful of the underwhelming outlook for FY3/2021, the sector is no better than a trade between now and the end of March 2020.  For the rest of CY2020 and for the longer term, our advice to would-be investors in Japanese bank stocks remains “Caveat Emptor!”  (May the Buyer Beware) .

As we await the imminent release of 3Q FY3/2020 results for the banks for the 9 months to end-December 2019, we look back at the banks’ recent ‘track record’ against the broader Topix index for guidance on likely future performance.  We find little to change our fundamentally negative view of the sector.  Japanese bank stocks have underperformed the broader Topix index virtually unabated since the beginning of CY2017.  We expect this trend to continue over the next one to two years.
The fundamental outlook for Japan’s banks remains challenging, both at home and overseas.  Even the mighty megabanks are finding it harder to fully offset dwindling domestic revenues with profits from overseas operations.  Investment risks are rising, margins remain under downward pressure generally, many regional banks remain underwater on their core domestic businesses and credit costs are rising across the board for all banks.  This is likely to severely limit upside potential in Japanese bank share prices as the year progresses.
In the absence of fresh incentives to support share prices and mindful of the underwhelming outlook for FY3/2021, the sector is no better than a trade between now and the end of March 2020.  For the rest of CY2020 and for the longer term, our advice to would-be investors in Japanese bank stocks remains “Caveat Emptor!”  (May the Buyer Beware) .

Japan

SBI Holdings, Inc. manages venture capital fund which mainly invest in Internet related venture companies.  The Company also provides brokerage, investment banking, and financial services.

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SBI Holdings (8473 JP)

Quiddity Japan M&A Guide 2022

The 2022 version of the Quiddity Japan M&A Guide with the rules and regulations and practices surrounding Mergers and Acquisitions in Japan as they...

Travis Lundy

MS-Japan Index Earning Revision (Jun): Nissan Motor, Sony Financial, Mitsui Mining & Smelting, Orix

We analyzed MS-Japan's consensus for Jun 2026 and highlighted changes of EPS in Nissan Motor, Sony Financial, Mitsui Mining & Smelting, Resonac,...

Ke Yan, CFA, FRM

🇯🇵 JAPAN • IT’S A WRAP! Part 2: 2020-Q1 Results & Revision Scores

THREE-YEAR LOW - With Bridgestone (5108 JP)'s results and revision now added, our final tally for this season is a 196 basis point decline in our...

Campbell Gunn

🇯🇵 JAPAN • Results & Revisions Daily Roundup - 31st January ►6861 ▲9433 8473 ▼3099 9062 4922

30TH JANUARY ROUNDUP - The downward trends in both our Results Score and Forecast/Revision Scores that have been building all week are now more...

Campbell Gunn

Japanese Banks: A Backward Glance

As we await the imminent release of 3Q FY3/2020 results for the banks for the 9 months to end-December 2019, we look back at the banks’ recent...

J. Brian Waterhouse

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