Director | Exposing Creative Accounting, Bucephalus Research Partnership

Robert Medd

Director | Exposing Creative Accounting

Exposing Creative Accounting

Bucephalus Research Partnership

Bucephalus Research Partnership Limited. Exposing Creative Accounting.

At the Bucephalus Research Partnership (BRP) we analyse financial statements using our accountant's practical experience and our own quantitative algorithms for corporate governance, accounting risk and peer performance.

Our thematic research refines our unique algorithms while our single stock research focuses on examples where we discover a significant gap between published accounts and business reality.

​Bucephalus Research Partnership:
- Is an independent fee-based research service
- Does not take proprietary positions, long or short
- Does not solicit business or fees from the corporates we review

Forensic Accounting

Vinda International / Forensic Accounting

<p>In 2017, Vinda introduced a new compensation scheme that specifically targets share price performance. This appears to be part of Essity’s plan to improve returns across the group. Historically, management prioritised growth over margins and the stock underperformed. Changing the incentives should change the outcomes.</p><p>Their overall Governance, Accounting risk and Peer performance score, 104, is unexceptional. We worry about their payables, leverage and the fixed margin related party contracts…</p>

In 2017, Vinda introduced a new compensation scheme that specifically targets share price performance. This appears to be part of Essity’s plan to improve returns across the group. Historically, management prioritised growth over margins and the stock underperformed. Changing the incentives should change the outcomes.Their overall Governance, Accounting risk and Peer performance score, 104, is unexceptional. We worry about their payables, leverage and the fixed margin related party contracts…

Buy Vinda (3331 HK): New Incentives, Leverage & Margins - Target HK$25.2 (Up 80%+)

Hengan International / Forensic Accounting

<p>We are concerned that Hengan’s governance leaves minorities vulnerable, their accounts create false confidence in credit quality; and that business performance is unsustainable.</p><p>The overall Governance, Accounting risk and Performance score of 119 is not very bad, but the aggregate hides extreme scores for debt churn, margins and leverage.</p><p>With limited revenue growth, the stock’s premium valuation relies on its high margins. If they prove to be unsustainable, investors could be in for a shock.</p><p>…</p>

We are concerned that Hengan’s governance leaves minorities vulnerable, their accounts create false confidence in credit quality; and that business performance is unsustainable.The overall Governance, Accounting risk and Performance score of 119 is not very bad, but the aggregate hides extreme scores for debt churn, margins and leverage.With limited revenue growth, the stock’s premium valuation relies on its high margins. If they prove to be unsustainable, investors could be in for a shock.…

Sell Hengan (1044 HK): Relationships, Churn & Margin Pressure. Target HK$38 (Down 50%)

Equity Analyst, LightStream Research

Chacko Jacob

Equity Analyst

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.

Equity Bottom-Up

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<p><a href="https://www.smartkarma.com/entities/12933" target="_blank" data-smartkarma-citation="entities:12933:1">Kao Corp (4452 JP)</a> is at a crossroads where it must look to alternate channels and regions to continue its growth. Unlike peers like Shiseido and Kose, the company was late in getting on e-commerce platforms and tapping travel retail. The decline in domestic revenue in FY17 served as an eye-opener for the company and culminated in changes in strategy that saw the company trim its cosmetic line and look aggressively at other Asian markets for growth. As the company continues its overhaul through…</p>
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Kao Corp (4452 JP) is at a crossroads where it must look to alternate channels and regions to continue its growth. Unlike peers like Shiseido and Kose, the company was late in getting on e-commerce platforms and tapping travel retail. The decline in domestic revenue in FY17 served as an eye-opener for the company and culminated in changes in strategy that saw the company trim its cosmetic line and look aggressively at other Asian markets for growth. As the company continues its overhaul through…


Kao Corp: Takes a Gamble With Leaner Cosmetic Line & Alternative Sales Channels To Further Growth

<h2><strong>Overview</strong></h2>
<p><a href="https://www.smartkarma.com/entities/5718" target="_blank" data-smartkarma-citation="entities:5718:1">Shiseido Co Ltd (4911 JP)</a> is a 145-year-old Japanese company that is estimated to be the fifth largest cosmetics company in the world. Spurred on by strong demand for its products and growing profitability margins, the company’s stock price has surged 2.3x in the last year alone. As part of its mid-term plan, Shiseido aims to grow its topline to JPY 1.2tn by 2020, or a CAGR of 7.5%.</p>
<p>Shiseido currently has a presence in 120 countries including R&amp;D bases in 7 and manufacturing plants in…</p>

Overview
Shiseido Co Ltd (4911 JP) is a 145-year-old Japanese company that is estimated to be the fifth largest cosmetics company in the world. Spurred on by strong demand for its products and growing profitability margins, the company’s stock price has surged 2.3x in the last year alone. As part of its mid-term plan, Shiseido aims to grow its topline to JPY 1.2tn by 2020, or a CAGR of 7.5%.
Shiseido currently has a presence in 120 countries including R&amp;D bases in 7 and manufacturing plants in…

Shiseido: Growth Strategy Focused on East Asian Travellers Liable to Backfire

<p>In our earlier report, we covered <a href="https://www.smartkarma.com/entities/27159" target="_blank" data-smartkarma-citation="entities:27159:1">MTG Co Ltd (7806 JP)</a> 's product and geographic segments and arrived at an initial conclusion that the company’s current business model was not a sustainable one in the long-run. In this report, we will focus on the company’s growth prospects for the next two years and its relative valuation based on the offer price range. </p>
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<h2><strong>We Would Subscribe</strong></h2>
<p>Based on our analysis, we think the company could see upside risk in the days' post issue. MTG's brands offer niche…</p>
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In our earlier report, we covered MTG Co Ltd (7806 JP) 's product and geographic segments and arrived at an initial conclusion that the company’s current business model was not a sustainable one in the long-run. In this report, we will focus on the company’s growth prospects for the next two years and its relative valuation based on the offer price range. 

We Would Subscribe
Based on our analysis, we think the company could see upside risk in the days' post issue. MTG's brands offer niche…


MTG IPO Preview II: Powered By Celebrities

Japan

UNICHARM CORPORATION is a manufacturer of sanitary napkins and baby products. Products include infant & adult diapers, household cleaning wipes, and feminine hygienic products.  The Company also produces pet food and pet toiletries as well as operates educational and finance businesses.

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Unicharm Corp (8113 JP)

Buy Vinda (3331 HK): New Incentives, Leverage & Margins - Target HK$25.2 (Up 80%+)

In 2017, Vinda introduced a new compensation scheme that specifically targets share price performance. This appears to be part of Essity’s plan to...

Bucephalus Research Partnership

Sell Hengan (1044 HK): Relationships, Churn & Margin Pressure. Target HK$38 (Down 50%)

We are concerned that Hengan’s governance leaves minorities vulnerable, their accounts create false confidence in credit quality; and that business...

Bucephalus Research Partnership

Kao Corp: Takes a Gamble With Leaner Cosmetic Line & Alternative Sales Channels To Further Growth

Kao Corp (4452 JP) is at a crossroads where it must look to alternate channels and regions to continue its growth. Unlike peers like Shiseido and...

Chacko Jacob

Shiseido: Growth Strategy Focused on East Asian Travellers Liable to Backfire

Overview Shiseido Co Ltd (4911 JP) is a 145-year-old Japanese company that is estimated to be the fifth largest cosmetics company in the world....

Chacko Jacob

MTG IPO Preview II: Powered By Celebrities

In our earlier report, we covered MTG Co Ltd (7806 JP) 's product and geographic segments and arrived at an initial conclusion that the company’s...

Chacko Jacob

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