'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.

Thematic (Sector/Industry)

<div>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/139/997/original/2020-06-15_11-08-56.png?1592186965" class="editor-image img-responsive" data-smartkarma-image-id="139997"></figure><div class="content-caption">Source: Japan Analytics</div>
STRESS TESTS - This Insight is the second in our Japan Stress Test series in which we endeavour to assess where business risk is concentrated among larger Japanese companies. <a href="https://www.smartkarma.com/insights/japan-stress-tests-part-1-altman-z-scores" target="_blank" data-smartkarma-citation="insights:40180" rel="noopener">Part 1</a> looked at the time-worn Altman-Z Score for both manufacturing and non-manufacturing companies. In Part 2 will we turn our attention to the cash flow statement starting with the 'lifeblood' of all businesses - Operating Cash Flow.
ACCRUAL ACCOUNTING - Despite the sacrosanctity in some quarters of discounted cash flow analysis, for valuation purposes, our preference is to use accrual accounting. As Professor Stephen Penman states, "Accrual accounting brings the future forward in time and anticipates future cash flows."  Nevertheless, cash flow accounting, and the level of accounting accruals, can provide early insights into periodic stress. <a href="https://www.smartkarma.com/entities/nissan-motor-co-ltd" target="_blank" data-smartkarma-citation="entities:72:1" rel="noopener">Nissan Motor (7201 JP)'s</a> Accruals (Operating Income less Operating Cash Flow) as a percentage of period-end market capitalisation correlate with the company's Relative Price Score over the last thirty years. Further Insights in this series will continue to 'mine'  the Cash Flow statement by exploring Financing Cash Flows and the Working Capital Cycle.
REFORMULATED CASH FLOWSTATEMENTS - Our Operating Cash Flow calculation is derived from each company's Balance Sheet and Income Statement for periods of up to twenty-eight years. Cash Flow items relating to operating activities are divided into Operating Cash Flow and Investing Cash Flow, which includes Fixed Asset and Inventory Cash Flows.  Cash flows relating to financing activities are divided into Financing Cash Flow and Shareholder Cash Flow. The reformulated Balance Sheets, Income and Cash Flow Statements follow a clean-surplus relationship. All three Statements are fully articulated to include items of Other Comprehensive Income which are added to or subtracted from Shareholders' Equity. 
</div>UNIVERSE - The universe for this Insight comprises the 614 Japanese companies with a market capitalisation excluding Treasury Stock over ¥100 million and for which we have at least two years of cash flow data.  Five non-financial companies, which have significant financial subsidiaries (<a href="https://www.smartkarma.com/entities/rakuten-inc" target="_blank" data-smartkarma-citation="entities:31:1" rel="noopener">Rakuten (4755 JP)</a>, <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>, <a href="https://www.smartkarma.com/entities/japan-post-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:359:1" rel="noopener">Japan Post (6178 JP)</a>, <a href="https://www.smartkarma.com/entities/softbank-group-corp" target="_blank" data-smartkarma-citation="entities:315:1" rel="noopener">Softbank Group (9984 JP)</a> and <a href="https://www.smartkarma.com/entities/sony-corp" target="_blank" data-smartkarma-citation="entities:563:1" rel="noopener">Sony (6758 JP)</a>), have been excluded from this analysis.


Source: Japan Analytics
STRESS TESTS - This Insight is the second in our Japan Stress Test series in which we endeavour to assess where business risk is concentrated among larger Japanese companies. Part 1 looked at the time-worn Altman-Z Score for both manufacturing and non-manufacturing companies. In Part 2 will we turn our attention to the cash flow statement starting with the 'lifeblood' of all businesses - Operating Cash Flow.
ACCRUAL ACCOUNTING - Despite the sacrosanctity in some quarters of discounted cash flow analysis, for valuation purposes, our preference is to use accrual accounting. As Professor Stephen Penman states, "Accrual accounting brings the future forward in time and anticipates future cash flows."  Nevertheless, cash flow accounting, and the level of accounting accruals, can provide early insights into periodic stress. Nissan Motor (7201 JP)'s Accruals (Operating Income less Operating Cash Flow) as a percentage of period-end market capitalisation correlate with the company's Relative Price Score over the last thirty years. Further Insights in this series will continue to 'mine'  the Cash Flow statement by exploring Financing Cash Flows and the Working Capital Cycle.
REFORMULATED CASH FLOWSTATEMENTS - Our Operating Cash Flow calculation is derived from each company's Balance Sheet and Income Statement for periods of up to twenty-eight years. Cash Flow items relating to operating activities are divided into Operating Cash Flow and Investing Cash Flow, which includes Fixed Asset and Inventory Cash Flows.  Cash flows relating to financing activities are divided into Financing Cash Flow and Shareholder Cash Flow. The reformulated Balance Sheets, Income and Cash Flow Statements follow a clean-surplus relationship. All three Statements are fully articulated to include items of Other Comprehensive Income which are added to or subtracted from Shareholders' Equity. 
UNIVERSE - The universe for this Insight comprises the 614 Japanese companies with a market capitalisation excluding Treasury Stock over ¥100 million and for which we have at least two years of cash flow data.  Five non-financial companies, which have significant financial subsidiaries (Rakuten (4755 JP), Z Holdings (4689 JP), Japan Post (6178 JP), Softbank Group (9984 JP) and Sony (6758 JP)), have been excluded from this analysis. 

🇯🇵 JAPAN - Stress Tests Part 2 - Operating Cash Flow & Accruals

Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

Equity Capital Markets

At an estimated JPY1.8bn capital raise (based on an estimated share price of JPY2,400), Silver Life, which specialises in home meal deliveries for seniors is a mid-size issue for the TSE's Mothers board. According to the company's disclosures, the main purpose for the funds sought are to invest in a cold chain logistics centre, company dormitories and a second food production centre. Amidst the aging of Japan's population and the growing need for food delivery services for those in need of nursing care and seniors living on their own, the key points for the company are whether they will be able to differentiate themselves and maintain or increase their market share in a market with relatively low barriers to entry. In this insight, we provide details on the company's basic business model and the competition that exists within this segment that is likely to be a focus of investor attention as the impact of Japan's aging population continues to gain steam.

At an estimated JPY1.8bn capital raise (based on an estimated share price of JPY2,400), Silver Life, which specialises in home meal deliveries for seniors is a mid-size issue for the TSE's Mothers board. According to the company's disclosures, the main purpose for the funds sought are to invest in a cold chain logistics centre, company dormitories and a second food production centre. Amidst the aging of Japan's population and the growing need for food delivery services for those in need of nursing care and seniors living on their own, the key points for the company are whether they will be able to differentiate themselves and maintain or increase their market share in a market with relatively low barriers to entry. In this insight, we provide details on the company's basic business model and the competition that exists within this segment that is likely to be a focus of investor attention as the impact of Japan's aging population continues to gain steam.

Silver Life IPO: Aging Society Pure Play to Usher in the Age of Demographics

Doing bespoke work since 2002....., Custom Products Group

Patrick Hansen

Doing bespoke work since 2002.....

Custom Products Group

Custom Products was started 14 years ago at Lehman Brothers by current co-founder Patrick Hansen, CFA. After 3 years at Lehman, Patrick moved the team to Macquarie Securities where Simon Rigney (co-founder) joined. 3 years ago we took Custom Products independent. 

Our core strength can be summed up three words. 1- Customization - we have very little off the shelf products and most work is done on a one on one bespoke basis. 2- Speed - We pride ourselves in our ability to get requests back to the client very quickly. 3- Confidentiality - We do not redistribute. There is no grace period where we wait a week and then mass blast. Any request stops with that client.

We looked at what factors do the best in September in Japan and as you can see by the chart below found that longer-term price momentum  and positive earnings revision names tend to do the best. On the other side, Value (low PE and high dividend yield) names historically have not done well in September.  <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/032/345/original/1.png?1503958952" class="editor-image img-responsive" data-smartkarma-image-id="32345"></figure><div class="content-caption">Source: Custom Products </div>Note: The IC is a ranked information coefficient or basically the correlation between the factor and price performance.   <h2>On the Positive side....</h2>We screened for names…

We looked at what factors do the best in September in Japan and as you can see by the chart below found that longer-term price momentum  and positive earnings revision names tend to do the best. On the other side, Value (low PE and high dividend yield) names historically have not done well in September.  Source: Custom Products Note: The IC is a ranked information coefficient or basically the correlation between the factor and price performance.   On the Positive side....We screened for names…

Price Momentum and Earnings Revisions Do the Best in September / Value Does Not Do Well....

Japan

WATAMI Co., Ltd. operates Japanese style pub restaurant chain, known as Watami, primarily in Tokyo and Kanagawa prefecture.  The Company also operates restaurant and American bar chain, T.G.I.Friday.  Watami Food launches new establishments from station-front to suburban area types.

Watami Co Ltd (7522 JP)

🇯🇵 JAPAN - Stress Tests Part 2 - Operating Cash Flow & Accruals

STRESS TESTS - This Insight is the second in our Japan Stress Test series in which we endeavour to assess where business risk is concentrated...

Campbell Gunn

Silver Life IPO: Aging Society Pure Play to Usher in the Age of Demographics

At an estimated JPY1.8bn capital raise (based on an estimated share price of JPY2,400), Silver Life, which specialises in home meal deliveries for...

Mio Kato

Price Momentum and Earnings Revisions Do the Best in September / Value Does Not Do Well....

We looked at what factors do the best in September in Japan and as you can see by the chart below found that longer-term price momentum and...

Custom Products Group