'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. 

Thematic (Sector/Industry)

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/116/923/original/2020-02-08_18-15-45.png?1581196263" class="editor-image img-responsive" data-smartkarma-image-id="116923"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/116/924/original/2020-02-09_06-34-51.png?1581197706" class="editor-image img-responsive" data-smartkarma-image-id="116924"></figure><div class="content-caption">Source • Japan Analytics</div><div class="content-caption"></div><p><strong>OOOPS!</strong> - The 480 quarterly results announced on Friday subtracted a further 20 basis points from our Results Score. If the remaining 38% of companies continue this trend, the current quarter will equal CQ2019-1 and CQ2018-2 in seeing a 200 basis point Results Score decline. 169 forecasts or revision announcements added  5bps to the Forecast/Revision Score, supported by slight upward revisions from <a href="https://www.smartkarma.com/entities/softbank-corp" target="_blank" data-smartkarma-citation="entities:27445:1" rel="noopener">Softbank Corp (9434 JP)</a> and <a href="https://www.smartkarma.com/entities/honda-motor-co-ltd" target="_blank" data-smartkarma-citation="entities:154:1" rel="noopener">Honda Motor (7267 JP)</a>.  The Results Score has dipped below the Forecast/Revision Score for the first time since July 2016 and is a necessary precursor of the bottoming of the cycle. Japan is now in a recession and could see a decline in GDP for the calendar year. The market's current optimism (aided by the Bank of Japan's buy-the-dips support programme) is more appropriate to the middle of the cycle and, with two further poor earnings quarters ahead, suggests limited further upside. </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/116/925/original/2020-02-08_10-48-19.png?1581199859" class="editor-image img-responsive" data-smartkarma-image-id="116925"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>18x EARNINGS</strong> - Trailing-twelve-month (TTM) Operating Income for the composite of listed companies has declined to ¥57.4t, 10% below the peak of early 2019. TTM Net Income has declined by 20% over the same period, resulting in a 6.1 point increase in the market price-earnings ratio to 17.6 times.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/116/927/original/2020-02-08_10-55-21.png?1581200256" class="editor-image img-responsive" data-smartkarma-image-id="116927"></figure><div class="content-caption">Source • Japan Analytics</div><p style="text-align: left;"><strong>TTM RESULTS</strong> - TTM Operating Profits have been declining quarter-on-quarter for five straight quarters, and are 8.1% lower year-on-year. The Operating Margin has declined from 7.45% to 6.80%. TTM Revenues are now also falling and have only increased by 0.7% year-on-year.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/116/928/original/2020-02-08_10-59-00.png?1581200533" class="editor-image img-responsive" data-smartkarma-image-id="116928"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>FORECASTS</strong> - The year-on-year Operating Profit decline using current forecasts is 8.5%, while Revenues are flat. Revenue forecasts have been falling quarter-on-quarter for three quarters in a row. The 'uplift' from TTM to Forecast is just ¥3t for sales and ¥0.3t for OP. </p>

Source • Japan AnalyticsOOOPS! - The 480 quarterly results announced on Friday subtracted a further 20 basis points from our Results Score. If the remaining 38% of companies continue this trend, the current quarter will equal CQ2019-1 and CQ2018-2 in seeing a 200 basis point Results Score decline. 169 forecasts or revision announcements added  5bps to the Forecast/Revision Score, supported by slight upward revisions from Softbank Corp (9434 JP) and Honda Motor (7267 JP).  The Results Score has dipped below the Forecast/Revision Score for the first time since July 2016 and is a necessary precursor of the bottoming of the cycle. Japan is now in a recession and could see a decline in GDP for the calendar year. The market's current optimism (aided by the Bank of Japan's buy-the-dips support programme) is more appropriate to the middle of the cycle and, with two further poor earnings quarters ahead, suggests limited further upside. Source • Japan Analytics18x EARNINGS - Trailing-twelve-month (TTM) Operating Income for the composite of listed companies has declined to ¥57.4t, 10% below the peak of early 2019. TTM Net Income has declined by 20% over the same period, resulting in a 6.1 point increase in the market price-earnings ratio to 17.6 times.Source • Japan AnalyticsTTM RESULTS - TTM Operating Profits have been declining quarter-on-quarter for five straight quarters, and are 8.1% lower year-on-year. The Operating Margin has declined from 7.45% to 6.80%. TTM Revenues are now also falling and have only increased by 0.7% year-on-year.Source • Japan AnalyticsFORECASTS - The year-on-year Operating Profit decline using current forecasts is 8.5%, while Revenues are flat. Revenue forecasts have been falling quarter-on-quarter for three quarters in a row. The 'uplift' from TTM to Forecast is just ¥3t for sales and ¥0.3t for OP. 

🇯🇵 JAPAN • Results & Revisions Daily Roundup - 7th February ▲2121 7267 5713 ▼ 5401 9616 3407

Telco/Internet specialist

Kirk Boodry

Redex Research

Equity Bottom-Up

<p>Softbank shares are up 6% on news that Elliott Management has built up a $2.5bn (c. 3%) stake and is talking to management on enhancing value. That would reportedly entail a $20bn share buyback, greater visibility on Vision Fund investments and strengthening independent directors. And as we wrote a few days ago, that is relevant as shares are trading at a historically high discount to fair value. In the past, Softbank has been open to buying back stock at times like this but the WeWork debacle last year and hopes for a Vision Fund 2 had seemingly ruled that out. Elliott thinks Masa can do it by selling some of his Alibaba shares which makes sense to us but has been a red line in the past. All else remaining equal, Softbank could resist this kind of pressure but a failed Sprint/TMUS merger, weakness at WeWork and a need to fund Vision Fund 2 could force Softbank’s hand.  We think chances of a some sort of buyback have risen and a further reduction in the discount to fair value is possible. </p>

Softbank shares are up 6% on news that Elliott Management has built up a $2.5bn (c. 3%) stake and is talking to management on enhancing value. That would reportedly entail a $20bn share buyback, greater visibility on Vision Fund investments and strengthening independent directors. And as we wrote a few days ago, that is relevant as shares are trading at a historically high discount to fair value. In the past, Softbank has been open to buying back stock at times like this but the WeWork debacle last year and hopes for a Vision Fund 2 had seemingly ruled that out. Elliott thinks Masa can do it by selling some of his Alibaba shares which makes sense to us but has been a red line in the past. All else remaining equal, Softbank could resist this kind of pressure but a failed Sprint/TMUS merger, weakness at WeWork and a need to fund Vision Fund 2 could force Softbank’s hand.  We think chances of a some sort of buyback have risen and a further reduction in the discount to fair value is possible. 

Softbank G: Elliott's Activist Intervention Is Well-Timed Especially if the Sprint Merger Is Blocked

<p><a href="https://www.smartkarma.com/entities/z-holdings-corp" target="_blank" data-smartkarma-citation="entities:19603:1" rel="noopener">Z Holdings (4689 JP)</a> Q3 19 results included the first details on the integration of Zozo, a firming up of guidance at the top of the range for operating profit, organic eCommerce sales growth ahead of the overall market and robust usage in its cashless payment app PayPay which likely remains the market leader.  Advertising revenue appears softer than expected and the company is guiding lower but eCommerce/fintech upside more than compensates. As with other consumer companies, quarterly trends have been impacted by the consumption tax hike on 1 October which makes Q3 YoY comps look weaker but this was a good quarter. </p>

Z Holdings (4689 JP) Q3 19 results included the first details on the integration of Zozo, a firming up of guidance at the top of the range for operating profit, organic eCommerce sales growth ahead of the overall market and robust usage in its cashless payment app PayPay which likely remains the market leader.  Advertising revenue appears softer than expected and the company is guiding lower but eCommerce/fintech upside more than compensates. As with other consumer companies, quarterly trends have been impacted by the consumption tax hike on 1 October which makes Q3 YoY comps look weaker but this was a good quarter. 

Z Holdings: Solid Quarter Even Before Zozo Integration

<p>The Financial Times reports that one of Softbank Vision Fund's top managing partners in the US has resigned citing concerns about internal issues including a failure to raise funds from outside investors for Vision Fund 2.  Whilst the public portfolio has rebounded this year as tech and China rally, it is clear that WeWork remains a long-term project, Sprint's merger plans are increasingly viewed as failing whilst concerns are rising about other parts of the Vision Fund portfolio. Softbank shares now trade at a 52% discount to fair value and a 50-60% range is likely the new normal until these issues are resolved. </p>

The Financial Times reports that one of Softbank Vision Fund's top managing partners in the US has resigned citing concerns about internal issues including a failure to raise funds from outside investors for Vision Fund 2.  Whilst the public portfolio has rebounded this year as tech and China rally, it is clear that WeWork remains a long-term project, Sprint's merger plans are increasingly viewed as failing whilst concerns are rising about other parts of the Vision Fund portfolio. Softbank shares now trade at a 52% discount to fair value and a 50-60% range is likely the new normal until these issues are resolved. 

Softbank Group: Tech Upside Trumped by Sprint, WeWork and Vision Fund 2 Worries

Senior Credit Analyst, Lucror Analytics

Leonard Law, CFA

Senior Credit Analyst

High Yield Experts

Lucror Analytics

Lucror Analytics is a leading credit and ESG research specialist and a provider of technology solutions for differentiated fixed income strategies. Our roots are in bottom-up fundamental credit analysis with a specialization in high yield corporate credits from Europe, Asia and Latin America. We are one of few research specialists integrating ESG considerations with fundamental credit research through a dedicated ESG platform. Our ESG assessment covers five key criteria: Disclosure, E,S, & G Pillars, Controversies, ESG Impact on Credit and ESG Momentum.

Recognizing the importance and value-add of Factor Investing in fixed income, Lucror developed the Smart Quant Navigator (SQN), an intuitive platform that helps clients devise and implement factor-based strategies ranging from pure quant to active fundamental, with integrated ESG.

Our company has been at the forefront of developments in the fixed income markets, identifying opportunities and consistently delivering new products and value-adding solutions to clients. Lucror has close relationships with the largest and most reputable asset managers, family offices, hedge funds, investment and wealth managers globally.

Credit

<p><br/> In this month's “In-Focus”, we discuss Chinese offshore bond defaults in 2019. We look at the broader trends as well as select cases, and give our key takeaways on how best to assess the credit profiles of Chinese companies.<br/><br/> The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks and discussing specific areas of interest in the “In-Focus” section. The Asia Monthly is intended to broaden investors' understanding of the Asian USD high-yield market. <br/></p>

  In this month's “In-Focus”, we discuss Chinese offshore bond defaults in 2019. We look at the broader trends as well as select cases, and give our key takeaways on how best to assess the credit profiles of Chinese companies.   The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks and discussing specific areas of interest in the “In-Focus” section. The Asia Monthly is intended to broaden investors' understanding of the Asian USD high-yield market.  

Asia HY Monthly - Chinese Offshore Bond Defaults - Lucror Analytics

Japan

SoftBank Group Corp provides telecommunication services.  The Company also operates ADSL (Asymmetric Digital Subscriber Line) and fiber optic high-speed Internet connection, e-Commerce businesses, and Internet based advertising and auction businesses.

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Softbank Group (ADR) (SFTBY US)

🇯🇵 JAPAN • Results & Revisions Daily Roundup - 7th February ▲2121 7267 5713 ▼ 5401 9616 3407

OOOPS! - The 480 quarterly results announced on Friday subtracted a further 20 basis points from our Results Score. If the remaining 38% of...

Campbell Gunn

Softbank G: Elliott's Activist Intervention Is Well-Timed Especially if the Sprint Merger Is Blocked

Softbank shares are up 6% on news that Elliott Management has built up a $2.5bn (c. 3%) stake and is talking to management on enhancing value. That...

Kirk Boodry

Z Holdings: Solid Quarter Even Before Zozo Integration

Z Holdings (4689 JP) Q3 19 results included the first details on the integration of Zozo, a firming up of guidance at the top of the range for...

Kirk Boodry

Softbank Group: Tech Upside Trumped by Sprint, WeWork and Vision Fund 2 Worries

The Financial Times reports that one of Softbank Vision Fund's top managing partners in the US has resigned citing concerns about internal issues...

Kirk Boodry

Asia HY Monthly - Chinese Offshore Bond Defaults - Lucror Analytics

In this month's “In-Focus”, we discuss Chinese offshore bond defaults in 2019. We look at the broader trends as well as select cases, and give our...

Lucror Analytics

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