'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. 

Quantitative Analysis

<div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/068/507/original/2018-11-02_10-20-29.png?1541121653" class="editor-image img-responsive" data-smartkarma-image-id="68507"></figure>Source: Japan Analytics
NB: companies are colour-coded by sector
</div>28 YEARS OF NON-FINANCIAL MARKET LEADERSHIP - To offer some light relief from the current market, we have compiled a graphic illustrating the evolution in the ranking of the leading non-financial Japanese companies by market capitalisation measured at the end of each of the last 28 years.METHODOLOGY - Our comments follow in the detail below, but first a few notes:-<ul>
<li>In the interests of clarity (/sanity?), financials have been omitted. Twelve of the Top 20-ranked companies in 1990 were financials. However, only <a href="https://www.smartkarma.com/entities/742" target="_blank" data-smartkarma-citation="entities:742:1">Nomura (8604 JP)</a>, <a href="https://www.smartkarma.com/entities/6483" target="_blank" data-smartkarma-citation="entities:6483:1">Aozora (8304 JP)</a> and <a href="https://www.smartkarma.com/entities/16897" target="_blank" data-smartkarma-citation="entities:16897:1">Shinsei (8303 JP)</a> have survived in their original corporate structure and have the same ticker code. Our chart would have otherwise have included the now-merged IBJ, Fuji Bank, Dai-Ichi Kangyo Bank, Mitsubishi Bank, Sakura Bank, Sumitomo Bank, Tokai Bank, Sanwa Bank and Mitsubishi Trust Bank.  Excluded from the present-day Top 20 are <a href="https://www.smartkarma.com/entities/218" target="_blank" data-smartkarma-citation="entities:218:1">Mitsubishi UFJ (8306 JP)</a>, <a href="https://www.smartkarma.com/entities/217" target="_blank" data-smartkarma-citation="entities:217:1">Sumitomo Mitsui Financial (8316 JP)</a>, <a href="https://www.smartkarma.com/entities/838" target="_blank" data-smartkarma-citation="entities:838:1">Japan Post Bank (7182 JP)</a>, <a href="https://www.smartkarma.com/entities/359" target="_blank" data-smartkarma-citation="entities:359:1">Japan Post Holdings (6178 JP)</a> and <a href="https://www.smartkarma.com/entities/219" target="_blank" data-smartkarma-citation="entities:219:1">Mizuho Financial (8411 JP)</a> from the present day.</li>
<li>Only companies that were in the Top 20 in 1990 or 2018, as well as those companies that have been in the Top 10 for at least three of the last 28 years, have been included. </li>
<li>Two companies from 1990's Top 20 - Seibu Railway and Japan Airlines - have since been delisted. Although they have relisted as <a href="https://www.smartkarma.com/entities/458" target="_blank" data-smartkarma-citation="entities:458:1">Seibu Holdings (9024 JP)</a> and <a href="https://www.smartkarma.com/entities/1184" target="_blank" data-smartkarma-citation="entities:1184:1">Japan Airlines (9201 JP)</a>, they are no longer highly-ranked.</li>
<li>Seven current Top 20 companies - (<a href="https://www.smartkarma.com/entities/315" target="_blank" data-smartkarma-citation="entities:315:1">Softbank (9984 JP)</a>, <a href="https://www.smartkarma.com/entities/1089" target="_blank" data-smartkarma-citation="entities:1089:1">NTT Docomo (9437 JP)</a>, <a href="https://www.smartkarma.com/entities/639" target="_blank" data-smartkarma-citation="entities:639:1">KDDI (9433 JP)</a>, <a href="https://www.smartkarma.com/entities/13498" target="_blank" data-smartkarma-citation="entities:13498:1">Japan Tobacco (2914 JP)</a>, <a href="https://www.smartkarma.com/entities/13520" target="_blank" data-smartkarma-citation="entities:13520:1">Central Japan Railway (9022 JP)</a>, <a href="https://www.smartkarma.com/entities/751" target="_blank" data-smartkarma-citation="entities:751:1">Fast Retailing (9983 JP)</a> and <a href="https://www.smartkarma.com/entities/15070" target="_blank" data-smartkarma-citation="entities:15070:1">Recruit (6098 JP)</a>)  - have listed during the last 28 years. </li>
</ul>THE 2050 RANKING?- Which of the current market leaders will still be in the Top 20 in 2050 in their current guise? For those still around to read this in 32 year's time, we would wager on just three - <a href="https://www.smartkarma.com/entities/3077" target="_blank" data-smartkarma-citation="entities:3077:1">Keyence (6861 JP)</a>, <a href="https://www.smartkarma.com/entities/73" target="_blank" data-smartkarma-citation="entities:73:1">Toyota Motor (7203 JP)</a> and <a href="https://www.smartkarma.com/entities/563" target="_blank" data-smartkarma-citation="entities:563:1">Sony (6758 JP)</a>.


Source: Japan Analytics
NB: companies are colour-coded by sector
28 YEARS OF NON-FINANCIAL MARKET LEADERSHIP - To offer some light relief from the current market, we have compiled a graphic illustrating the evolution in the ranking of the leading non-financial Japanese companies by market capitalisation measured at the end of each of the last 28 years.METHODOLOGY - Our comments follow in the detail below, but first a few notes:-
In the interests of clarity (/sanity?), financials have been omitted. Twelve of the Top 20-ranked companies in 1990 were financials. However, only Nomura (8604 JP), Aozora (8304 JP) and Shinsei (8303 JP) have survived in their original corporate structure and have the same ticker code. Our chart would have otherwise have included the now-merged IBJ, Fuji Bank, Dai-Ichi Kangyo Bank, Mitsubishi Bank, Sakura Bank, Sumitomo Bank, Tokai Bank, Sanwa Bank and Mitsubishi Trust Bank.  Excluded from the present-day Top 20 are Mitsubishi UFJ (8306 JP), Sumitomo Mitsui Financial (8316 JP), Japan Post Bank (7182 JP), Japan Post Holdings (6178 JP) and Mizuho Financial (8411 JP) from the present day.
Only companies that were in the Top 20 in 1990 or 2018, as well as those companies that have been in the Top 10 for at least three of the last 28 years, have been included. 
Two companies from 1990's Top 20 - Seibu Railway and Japan Airlines - have since been delisted. Although they have relisted as Seibu Holdings (9024 JP) and Japan Airlines (9201 JP), they are no longer highly-ranked.
Seven current Top 20 companies - (Softbank (9984 JP), NTT Docomo (9437 JP), KDDI (9433 JP), Japan Tobacco (2914 JP), Central Japan Railway (9022 JP), Fast Retailing (9983 JP) and Recruit (6098 JP))  - have listed during the last 28 years. 
THE 2050 RANKING?- Which of the current market leaders will still be in the Top 20 in 2050 in their current guise? For those still around to read this in 32 year's time, we would wager on just three - Keyence (6861 JP), Toyota Motor (7203 JP) and Sony (6758 JP). 

Japan: The Evolution Of (Non-Financial) Market Leadership

Senior Bank Analyst - Japanese Banks, Windamee Research

J. Brian Waterhouse

Senior Bank Analyst - Japanese Banks

Windamee Research

Japanese Banks

Equity Bottom-Up

The share price of embattled regional bank <a href="https://www.smartkarma.com/entities/6267" target="_blank" data-smartkarma-citation="entities:6267:1">Suruga Bank Ltd (8358 JP)</a> rebounded very strongly last week, closing in the afternoon of Friday, 21 September 2018 at ¥602, or a weekly gain of 23.3%.  Indeed, the stock rose by ¥100 on that Friday alone: a daily gain of 19.2% on exceptionally heavy volume.  What prompted the short-covering scramble was a media report suggesting that the Okano Family, which has dominated Suruga Bank since its official founding in 1895, was looking to divest itself of all family holdings in the bank.  While this development, if true, would represent a further step along the long road to redemption for the bank, we think it is much too early for foreign investors (other than those with very long investment time-horizons) to be piling in to the stock at this stage.  Caveat emptor (may the buyer beware!).

The share price of embattled regional bank Suruga Bank Ltd (8358 JP) rebounded very strongly last week, closing in the afternoon of Friday, 21 September 2018 at ¥602, or a weekly gain of 23.3%.  Indeed, the stock rose by ¥100 on that Friday alone: a daily gain of 19.2% on exceptionally heavy volume.  What prompted the short-covering scramble was a media report suggesting that the Okano Family, which has dominated Suruga Bank since its official founding in 1895, was looking to divest itself of all family holdings in the bank.  While this development, if true, would represent a further step along the long road to redemption for the bank, we think it is much too early for foreign investors (other than those with very long investment time-horizons) to be piling in to the stock at this stage.  Caveat emptor (may the buyer beware!).

Suruga Bank (8358 JP): Purging the Augean Stables 2018 - Part 4

Thematic (Sector/Industry)

TREASURY SHARES IN JAPAN - As a prelude to an upcoming insight on share buybacks in Japan, this note is a fork of <a href="https://www.smartkarma.com/profiles/342" target="_blank" data-smartkarma-citation="accounts:342">Douglas Kim</a> 's quick note on Korean Companies with Highest Levels of Treasury Shares. We highlight the Japanese companies with the highest percentage of Treasury Shares to shares in issue as well as those larger capitalisation stocks that have forgone the pleasure of buybacks.2.7% OF SHARES HELD IN TREASURY - As is the case in Korea, most Japanese companies do not cancel shares after…

TREASURY SHARES IN JAPAN - As a prelude to an upcoming insight on share buybacks in Japan, this note is a fork of Douglas Kim 's quick note on Korean Companies with Highest Levels of Treasury Shares. We highlight the Japanese companies with the highest percentage of Treasury Shares to shares in issue as well as those larger capitalisation stocks that have forgone the pleasure of buybacks.2.7% OF SHARES HELD IN TREASURY - As is the case in Korea, most Japanese companies do not cancel shares after…

Japan: Treasury Share 'Kings' and 'Paupers'

Silver Point

Thomas J. Monaco

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

* Domestic Japanese lending business has new customer acquisition tracking above target, reflecting positive changes in the current environment for unsecured loans. The absolute JPY balance increases at Aiful (8515.JP) remains the highest within the consumer finance industry. * Aiful’s Thai business will be profitable by FY 3/19 and is expected to represent 7% of consolidated profits by FY 3/20.  Further, media reports suggest that Aiful is considering listing its Thai subsidiary. * The drawdown…

* Domestic Japanese lending business has new customer acquisition tracking above target, reflecting positive changes in the current environment for unsecured loans. The absolute JPY balance increases at Aiful (8515.JP) remains the highest within the consumer finance industry. * Aiful’s Thai business will be profitable by FY 3/19 and is expected to represent 7% of consolidated profits by FY 3/20.  Further, media reports suggest that Aiful is considering listing its Thai subsidiary. * The drawdown…

Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

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Download the Morningstar Fact Sheet : http://corporate.morningstar.com/US/documents/MarketingFactSheets/AboutMorningstarFactsheet.pdf

<div class="content-highlight">Better regulations and technology benefits will increase disparity among Japanese banks; <a href="https://www.smartkarma.com/entities/218" target="_blank" data-smartkarma-citation="entities:218:1">Mitsubishi UFJ Financial Group (8306 JP)</a> remains our top pick.</div><hr><h2>Investors Should Change Their Focus in Evaluating Banks</h2>For most banks, digital banking means lower revenue, lower margins, and more competition. We have outlined six drivers for understanding competition against new industry players that will benefit from building cost advantages and intangible assets backed by better technology adoption and flexible business formats. Japan's proactive regulatory initiatives to promote digital banking and cross-industry collaboration, as well as competition, will likely accelerate the race for cost advantages.<h2>Key Takeaways</h2><ul><li>We expect fewer big winners among banks over the next decade. The new digital banking platform will require business scale as more processes will be automated in the middle to back office, leaving just customer-facing functions at many banks.</li><li>Valuation drivers have changed for banks with shifting business models. The new industry landscape is likely to see more pricing pressure, but hyperscale banks can still improve the status quo via improving cost advantages and generating intangible assets through complementary partnerships.</li><li>We still think <a href="https://www.smartkarma.com/entities/218" target="_blank" data-smartkarma-citation="entities:218:1">Mitsubishi UFJ Financial Group (8306 JP)</a>, or MUFG, maintains sustainable competitive advantages. Japan's largest bank is set to maintain high barriers to entry with its technology leadership and raise switching costs from a more comprehensive product offering. MUFG can benefit the most from high sensitivity to asset gains. Furthermore, we think the group’s cost-saving targets from digital banking initiatives are also understated, aiming for only 0.64% reduction per year against a peer average of mid-3%.</li><li>Among the banks under our coverage, we prefer MUFG, <a href="https://www.smartkarma.com/entities/217" target="_blank" data-smartkarma-citation="entities:217:1">Sumitomo Mitsui Financial Group (8316 JP)</a>, <a href="https://www.smartkarma.com/entities/838" target="_blank" data-smartkarma-citation="entities:838:1">Japan Post Bank Co Ltd (7182 JP)</a>, Resona, <a href="https://www.smartkarma.com/entities/19450" target="_blank" data-smartkarma-citation="entities:19450:1">Sumitomo Mitsui Trust Holdings (8309 JP)</a>, <a href="https://www.smartkarma.com/entities/219" target="_blank" data-smartkarma-citation="entities:219:1">Mizuho Financial Group Inc (8411 JP)</a>, and <a href="https://www.smartkarma.com/entities/16897" target="_blank" data-smartkarma-citation="entities:16897:1">Shinsei Bank Ltd (8303 JP)</a> in that order, according to the scale of available cost-saving opportunities during our forecast horizon. Operating outside the banking platform, <a href="https://www.smartkarma.com/entities/31" target="_blank" data-smartkarma-citation="entities:31:1">Rakuten Inc (4755 JP)</a> will continue to benefit from better earning opportunities in financial services, leveraging low-cost advantages and increased network effects arising through its dominant e-commerce platform.</li></ul>Analysts: Mari Kumagai and Michael Wu

Better regulations and technology benefits will increase disparity among Japanese banks; Mitsubishi UFJ Financial Group (8306 JP) remains our top pick.Investors Should Change Their Focus in Evaluating BanksFor most banks, digital banking means lower revenue, lower margins, and more competition. We have outlined six drivers for understanding competition against new industry players that will benefit from building cost advantages and intangible assets backed by better technology adoption and flexible business formats. Japan's proactive regulatory initiatives to promote digital banking and cross-industry collaboration, as well as competition, will likely accelerate the race for cost advantages.Key TakeawaysWe expect fewer big winners among banks over the next decade. The new digital banking platform will require business scale as more processes will be automated in the middle to back office, leaving just customer-facing functions at many banks.Valuation drivers have changed for banks with shifting business models. The new industry landscape is likely to see more pricing pressure, but hyperscale banks can still improve the status quo via improving cost advantages and generating intangible assets through complementary partnerships.We still think Mitsubishi UFJ Financial Group (8306 JP), or MUFG, maintains sustainable competitive advantages. Japan's largest bank is set to maintain high barriers to entry with its technology leadership and raise switching costs from a more comprehensive product offering. MUFG can benefit the most from high sensitivity to asset gains. Furthermore, we think the group’s cost-saving targets from digital banking initiatives are also understated, aiming for only 0.64% reduction per year against a peer average of mid-3%.Among the banks under our coverage, we prefer MUFG, Sumitomo Mitsui Financial Group (8316 JP), Japan Post Bank Co Ltd (7182 JP), Resona, Sumitomo Mitsui Trust Holdings (8309 JP), Mizuho Financial Group Inc (8411 JP), and Shinsei Bank Ltd (8303 JP) in that order, according to the scale of available cost-saving opportunities during our forecast horizon. Operating outside the banking platform, Rakuten Inc (4755 JP) will continue to benefit from better earning opportunities in financial services, leveraging low-cost advantages and increased network effects arising through its dominant e-commerce platform.Analysts: Mari Kumagai and Michael Wu

Japanese Banks: Silver Lining in Digital Banking Lies in Cost Savings

Japan

SBI Shinsei Bank, Ltd. provides banking services including deposits, loans, and foreign exchange transaction, as well as investment trust service and issuance of long-term bonds.

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SBI Shinsei Bank (8303 JP)

Japan: The Evolution Of (Non-Financial) Market Leadership

28 YEARS OF NON-FINANCIAL MARKET LEADERSHIP - To offer some light relief from the current market, we have compiled a graphic illustrating the...

Campbell Gunn

Suruga Bank (8358 JP): Purging the Augean Stables 2018 - Part 4

The share price of embattled regional bank Suruga Bank Ltd (8358 JP) rebounded very strongly last week, closing in the afternoon of Friday, 21...

J. Brian Waterhouse

Aiful – Sawasdee Ka

* Domestic Japanese lending business has new customer acquisition tracking above target, reflecting positive changes in the current environment for...

Thomas J. Monaco

Japanese Banks: Silver Lining in Digital Banking Lies in Cost Savings

Better regulations and technology benefits will increase disparity among Japanese banks; Mitsubishi UFJ Financial Group (8306 JP) remains our top...

Morningstar, Inc.

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Japan: The Evolution Of (Non-Financial) Market Leadership

28 YEARS OF NON-FINANCIAL MARKET LEADERSHIP - To offer some light relief from the current market, we have compiled a graphic illustrating the...

Campbell Gunn

Suruga Bank (8358 JP): Purging the Augean Stables 2018 - Part 4

The share price of embattled regional bank Suruga Bank Ltd (8358 JP) rebounded very strongly last week, closing in the afternoon of Friday, 21...

J. Brian Waterhouse

Japan: Treasury Share 'Kings' and 'Paupers'

TREASURY SHARES IN JAPAN - As a prelude to an upcoming insight on share buybacks in Japan, this note is a fork of Douglas Kim 's quick note on...

Campbell Gunn

Aiful – Sawasdee Ka

* Domestic Japanese lending business has new customer acquisition tracking above target, reflecting positive changes in the current environment for...

Thomas J. Monaco

Japanese Banks: Silver Lining in Digital Banking Lies in Cost Savings

Better regulations and technology benefits will increase disparity among Japanese banks; Mitsubishi UFJ Financial Group (8306 JP) remains our top...

Morningstar, Inc.