'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/000/145/396/original/2020-07-11_10-05-20.png?1594454466" class="editor-image img-responsive" data-smartkarma-image-id="145396"></figure><div class="content-caption"> Source • Japan Analytics</div>
<p><strong>SMALL CHANGE</strong> - With over half of the companies with February, May, August and November year-ends having reported, the gap between the performance of larger and smaller capitalisation companies is widening again - as was the case prior to the March COVID 'crash'. The former are benefiting from a relatively more robust earnings momentum and the willingness of shareholders to look through to 2022. For the latter, their mostly-retail investor base is focused more on the prolongation of current operating losses despite, in many cases, ample Net Financial Assets.  42% of companies reporting on Friday had net losses for the last three months on an average decline in revenues of 14%. For the next reporting 'cohort' with one less 'normal' month, these statistics will be worse.</p>
<p style="text-align: center;"><strong>DAILY STATS</strong></p>
</div><hr><div><p style="text-align: center;"><strong>83 Quarterly Results</strong></p></div><div><ul>
<li>
<strong>Results Score:</strong> 19 Positive / 3 Neutral / 61 Negative</li>
<li>
<strong>Average Results Score Change:</strong> -4.4</li>
<li>
<strong>Average % Change in Revenue:</strong> -14.2% Quarter YoY / -0.9% Rolling TTM YoY</li>
<li>
<strong>Average Operating Profit Margin Change:</strong> -0.7ppt</li>
<li>
<strong>Percentage Making Quarterly Losses:</strong> 42%</li>
</ul></div><hr><div><p style="text-align: center;"><br><strong>31 Annual • 13 Interim Forecasts/Revisions</strong></p></div><div><ul>
<li>
<strong>Annual Forecast/Revision Score: </strong>13 Positive / 4 Neutral / 14 Negative</li>
<li>
<strong>Interim Forecast/Revision Score Change: </strong>5 Positive / 1 Neutral / 7 Negative</li>
<li>
<strong>Average Forecast/Revision Score Change:</strong> -3.9</li>
</ul></div>


 Source • Japan Analytics
SMALL CHANGE - With over half of the companies with February, May, August and November year-ends having reported, the gap between the performance of larger and smaller capitalisation companies is widening again - as was the case prior to the March COVID 'crash'. The former are benefiting from a relatively more robust earnings momentum and the willingness of shareholders to look through to 2022. For the latter, their mostly-retail investor base is focused more on the prolongation of current operating losses despite, in many cases, ample Net Financial Assets.  42% of companies reporting on Friday had net losses for the last three months on an average decline in revenues of 14%. For the next reporting 'cohort' with one less 'normal' month, these statistics will be worse.
DAILY STATS
83 Quarterly Results

Results Score: 19 Positive / 3 Neutral / 61 Negative

Average Results Score Change: -4.4

Average % Change in Revenue: -14.2% Quarter YoY / -0.9% Rolling TTM YoY

Average Operating Profit Margin Change: -0.7ppt

Percentage Making Quarterly Losses: 42%
 31 Annual • 13 Interim Forecasts/Revisions

Annual Forecast/Revision Score: 13 Positive / 4 Neutral / 14 Negative

Interim Forecast/Revision Score Change: 5 Positive / 1 Neutral / 7 Negative

Average Forecast/Revision Score Change: -3.9


🇯🇵 JAPAN • Results & Revisions 10th July - Small Change

Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

Equity Bottom-Up

<p>Yaskawa reported results today which surprised to the upside significantly at the OP level (¥6.2bn vs. consensus ¥3.7bn and LSR ¥6.7bn) but were in-line at the revenue level (¥90.8bn vs. consensus ¥91.3bn and LSR ¥98.4bn). Our forecasts were driven based on a variety of datapoints including regional breakdowns and identified but underestimated the extent of developed market weakness. We detected the strength in China as well and one of the key drivers of profitability appears to have been the seasonally high servomotor sales in China which we flagged previously. Inverter sales to the US oil and gas industry appear to have collapsed faster than expected dragging down revenues.</p>

Yaskawa reported results today which surprised to the upside significantly at the OP level (¥6.2bn vs. consensus ¥3.7bn and LSR ¥6.7bn) but were in-line at the revenue level (¥90.8bn vs. consensus ¥91.3bn and LSR ¥98.4bn). Our forecasts were driven based on a variety of datapoints including regional breakdowns and identified but underestimated the extent of developed market weakness. We detected the strength in China as well and one of the key drivers of profitability appears to have been the seasonally high servomotor sales in China which we flagged previously. Inverter sales to the US oil and gas industry appear to have collapsed faster than expected dragging down revenues.

Yaskawa – Developed Market Deceleration Striking

<p>Yaskawa Electric will report 1QFY03/21 earnings on Fri the 10<sup>th</sup> of Jul kicking off earnings season for the factory automation sector as usual. The sector has been a high-flyer in the recent market rally. Yaskawa itself is up almost 9% in four trading sessions pointing to high market expectations. LSR has been experimenting with data-driven forecasting of company results and we continue this below.</p>

Yaskawa Electric will report 1QFY03/21 earnings on Fri the 10th of Jul kicking off earnings season for the factory automation sector as usual. The sector has been a high-flyer in the recent market rally. Yaskawa itself is up almost 9% in four trading sessions pointing to high market expectations. LSR has been experimenting with data-driven forecasting of company results and we continue this below.

Yaskawa – Previewing 1Q Earnings With Data Analysis

<p>Keyence reported FY numbers in line with consensus as OP of ¥277.6bn was marginally above consensus’ ¥277.0bn. Revenue was more encouraging as the ¥551.8bn result was 0.8% above consensus’ ¥547.5bn. OP was hurt by increased SG&amp;A expenses. A slight encouragement was an effective increase in the dividend as Keyence maintained its ¥100 payout despite the Nov 21 stock split, effectively increasing the dividend from ¥200 to ¥300 (on pre-split like for like) and forecasting ¥400 for this year (¥200 post-split). Of course, this could still be increased but it is a step in the right direction and implies a payout ratio that will probably be over 20% this year. That is not high, but it is better than what you might imagine given Keyence’s miserly reputation.</p>

Keyence reported FY numbers in line with consensus as OP of ¥277.6bn was marginally above consensus’ ¥277.0bn. Revenue was more encouraging as the ¥551.8bn result was 0.8% above consensus’ ¥547.5bn. OP was hurt by increased SG&amp;A expenses. A slight encouragement was an effective increase in the dividend as Keyence maintained its ¥100 payout despite the Nov 21 stock split, effectively increasing the dividend from ¥200 to ¥300 (on pre-split like for like) and forecasting ¥400 for this year (¥200 post-split). Of course, this could still be increased but it is a step in the right direction and implies a payout ratio that will probably be over 20% this year. That is not high, but it is better than what you might imagine given Keyence’s miserly reputation.

Keyence – Weakness in China but the US Encourages

<p>Yaskawa reported results for FY02/20 last Friday kicking off the earnings season for the FA sector. With its FY ending one month earlier than other players, investors and analysts were keen to get some sort of a read on the real impact of COVID-19 on the sector. However, while the company beat subdued consensus numbers, particularly at the OP level, and sounded optimistic about recovering orders, there was nevertheless significant uncertainty and it would be difficult take an overly bullish stance here. Results and orders appear to be bottoming and we believe consensus is too low for FY02/21, but with very rich valuations prevailing, we believe the market is also significantly above consensus and could be pricing in too strong of a recovery, creating downside risks.</p>

Yaskawa reported results for FY02/20 last Friday kicking off the earnings season for the FA sector. With its FY ending one month earlier than other players, investors and analysts were keen to get some sort of a read on the real impact of COVID-19 on the sector. However, while the company beat subdued consensus numbers, particularly at the OP level, and sounded optimistic about recovering orders, there was nevertheless significant uncertainty and it would be difficult take an overly bullish stance here. Results and orders appear to be bottoming and we believe consensus is too low for FY02/21, but with very rich valuations prevailing, we believe the market is also significantly above consensus and could be pricing in too strong of a recovery, creating downside risks.

Yaskawa – First Peek at FA Earnings Cycle Suggests Recovery but One Which Won’t Justify Valuations

Japan

YASKAWA Electric Corporation manufactures and markets servomotors, controllers, inverters, and industrial robots.  The Company's products include spindle controllers, computerized numerical control (CNC) systems, and system engineering.

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Yaskawa Electric (6506 JP)

🇯🇵 JAPAN • Results & Revisions 10th July - Small Change

SMALL CHANGE - With over half of the companies with February, May, August and November year-ends having reported, the gap between the performance...

Campbell Gunn

Yaskawa – Developed Market Deceleration Striking

Yaskawa reported results today which surprised to the upside significantly at the OP level (¥6.2bn vs. consensus ¥3.7bn and LSR ¥6.7bn) but were...

Mio Kato

Yaskawa – Previewing 1Q Earnings With Data Analysis

Yaskawa Electric will report 1QFY03/21 earnings on Fri the 10th of Jul kicking off earnings season for the factory automation sector as usual. The...

Mio Kato

Keyence – Weakness in China but the US Encourages

Keyence reported FY numbers in line with consensus as OP of ¥277.6bn was marginally above consensus’ ¥277.0bn. Revenue was more encouraging as the...

Mio Kato

Yaskawa – First Peek at FA Earnings Cycle Suggests Recovery but One Which Won’t Justify Valuations

Yaskawa reported results for FY02/20 last Friday kicking off the earnings season for the FA sector. With its FY ending one month earlier than other...

Mio Kato

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