'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

Former Japan Equity PM with over 30 of experience now providing database-driven analysis of the market, sectors, peer groups and stocks for LightStream Research.

Leveraging data and graphic analysis provided by Japan Analytics, and the related Japan Analytics iPad App, we provide insights on companies are often ignored by the sell-side as well as challenging conventional wisdom on the market overall.

'Quantamental' Japan Specialist

🇯🇵 JAPAN • Results & Revisions Update 7th May - Yamaha, Misumi, FANCL, Workman, Nintendo

🇯🇵 JAPAN • Results & Revisions 11th May - Nissin, Seria, Mitsubishi Electric, Asahi Group

🇯🇵 JAPAN • Results & Revisions 12th May - Secom, Shiseido, Toyota, Sysmex, Mitsui Fudosan

🇯🇵 JAPAN • Results & Revisions Update 29th April - Mit.Chem, TKC, Keyence, ZOZO, Shimano. Or.Land

🇯🇵 JAPAN • Results & Revisions Update 30th April - D1Life, Toto, JR-W, CTC, Murata, Nidec, Mercari

🇯🇵 JAPAN • Results & Revisions 28th April - The 'Unlimited' BoJ + Panasonic, T.Yuden, Kao, Kyocera

Mercari – Prospects for Achieving Profitability Next Year Have Increased Significantly

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)

Japan Industrials / Thematic (Sector/Industry)

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/131/100/original/File%202020-05-04%207%2017%2056.jpeg?1588544362" class="editor-image img-responsive" data-smartkarma-image-id="131100"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/131/101/original/File%202020-05-04%207%2017%2024.jpeg?1588544387" class="editor-image img-responsive" data-smartkarma-image-id="131101"></figure><div class="content-caption">Source<a href="http://www.ourworldindata.org" target="_blank" rel="noopener"> • ourworldindata.org</a>
</div>NO QUARTER - Since the declaration of a nationwide state of emergency less than three weeks ago, Japan has seen a modest decline in the number of daily confirmed new cases of COVID-19, however, the number of attributed deaths continues to trend upwards. As we have been suggesting, Prime Minister Abe will, therefore, announce an extension of the restrictions until the end of May. Some measures will be eased outside the eighteen most-affected prefectures, but travel across prefectural borders will be discouraged.  For many businesses in Japan, the current quarter will see no revenues and the overly-strict and bureaucratic compensation schemes will be insufficient and delayed. In the last few days, several suicides among restaurant owners have been reported. A second supplementary budget will be required before July to avoid a permanent loss of economic and social capital. <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/131/152/original/File%202020-05-03%208%2038%2020.jpeg?1588566632" class="editor-image img-responsive" data-smartkarma-image-id="131152"></figure><div class="content-caption">Source • ourworldindata.org</div>NO WAY OUT? - For Japan to exit its state of emergency by the end of May will require an ability to trace cases beyond just several 'clusters'. Although the previous fax-based procedures have been streamlined, Japan is the testing 'outlier' amongst the developed world. If Japan does not improve its testing capability over the next four weeks, further extensions may become necessary.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/131/102/original/2020-05-03_09-16-26.png?1588546147" class="editor-image img-responsive" data-smartkarma-image-id="131102"></figure><div class="content-caption">Source • Japan Analytics</div>EARLY DAYS - With just 411 or 13% of the March/June/September/December cohort of companies having announced results, the declines in trailing-twelve-month (TTM) profits are modest. Forecast revisions are a sign of what is to come after the Golden Week holidays end this Thursday. The 'gap' between TTM results and forecasts is the widest since 2009. Forecast Operating Income is now 18% below the 2019 peak, while the same differential for Net Income is 31%. The changes in operating and net margins are -153bps and -188bps, respectively. The market aggregate multiple of 17.1x is close to a two-year high but is still half the pre-Abenomics decade average. We expect the COVID-19 trough TTM Net Income to be approximately ¥12.5 trillion, similar to the ¥13.4 trillion average aggregate Net Income for 2002-12. Using the average annual multiple for that period of 34x suggests a total market value 'low' of ¥425 trillion, 25% below Friday's close.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/131/105/original/2020-05-04_08-41-08.png?1588549288" class="editor-image img-responsive" data-smartkarma-image-id="131105"></figure><div class="content-caption">Source • Japan Analytics</div>SECTOR RESULTS &amp; REVISION SCORE TIMELINE - The leading and lagging Sectors as measured by Our Results &amp; Revision Score have some striking similarities and differences from 2008/9.  During the COVID crisis, the Internet Content &amp; Services Sector is performing as well in 2008/9. The Sector will soon 'overtake' the Information Technology Sector, which will suffer from corporate spending cutback, as is also try for Commercial Services. Metals, Machinery, and Electrical Equipment, are repeating their GFC declines. Technology Hardware will play 'catch up' on the downside in the second 'wave'. Perhaps the most-directly-affected Sector has yet to see any significant decline, primarily because many companies have given up forecasting and their Score is mostly backwards-looking. As COVID-19 is a social and not, as yet, a financial crisis, the Consumer Services and Transportation &amp; Logistics Sectors have replaced the Banks and Non-Bank Finance Sectors on the downside on this occasion. The extent to which the latter two are impacted remains to be seen.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/131/138/original/2020-05-04_11-15-00.png?1588558519" class="editor-image img-responsive" data-smartkarma-image-id="131138"></figure><div class="content-caption">Source • Japan Analytics</div>In the DETAIL below, we shall review the results, revisions and initial forecast announcements made on Friday by larger-cap companies.  On a relatively quiet day ahead of three consecutive public holidays, the positive/neutral/negative balance of the 33 results announcements was 13:1:19. The net change in Score was -31. For the 40 revisions/initial forecasts, the split was 11:2:27  and the average Score was -7. Of the nineteen companies declaring full-year results, ten made interim or annual forecasts for the current year. <a href="https://www.smartkarma.com/entities/tokyu-recreation-co-ltd" target="_blank" data-smartkarma-citation="entities:20602:1" rel="noopener">Tokyu Recreation (9631 JP)</a> and <a href="https://www.smartkarma.com/entities/space-co-ltd" target="_blank" data-smartkarma-citation="entities:10550:1" rel="noopener">Space (9622 JP)</a> withdrew their forecasts for the current year.

Source • ourworldindata.org
NO QUARTER - Since the declaration of a nationwide state of emergency less than three weeks ago, Japan has seen a modest decline in the number of daily confirmed new cases of COVID-19, however, the number of attributed deaths continues to trend upwards. As we have been suggesting, Prime Minister Abe will, therefore, announce an extension of the restrictions until the end of May. Some measures will be eased outside the eighteen most-affected prefectures, but travel across prefectural borders will be discouraged.  For many businesses in Japan, the current quarter will see no revenues and the overly-strict and bureaucratic compensation schemes will be insufficient and delayed. In the last few days, several suicides among restaurant owners have been reported. A second supplementary budget will be required before July to avoid a permanent loss of economic and social capital. Source • ourworldindata.orgNO WAY OUT? - For Japan to exit its state of emergency by the end of May will require an ability to trace cases beyond just several 'clusters'. Although the previous fax-based procedures have been streamlined, Japan is the testing 'outlier' amongst the developed world. If Japan does not improve its testing capability over the next four weeks, further extensions may become necessary.Source • Japan AnalyticsEARLY DAYS - With just 411 or 13% of the March/June/September/December cohort of companies having announced results, the declines in trailing-twelve-month (TTM) profits are modest. Forecast revisions are a sign of what is to come after the Golden Week holidays end this Thursday. The 'gap' between TTM results and forecasts is the widest since 2009. Forecast Operating Income is now 18% below the 2019 peak, while the same differential for Net Income is 31%. The changes in operating and net margins are -153bps and -188bps, respectively. The market aggregate multiple of 17.1x is close to a two-year high but is still half the pre-Abenomics decade average. We expect the COVID-19 trough TTM Net Income to be approximately ¥12.5 trillion, similar to the ¥13.4 trillion average aggregate Net Income for 2002-12. Using the average annual multiple for that period of 34x suggests a total market value 'low' of ¥425 trillion, 25% below Friday's close.Source • Japan AnalyticsSECTOR RESULTS &amp; REVISION SCORE TIMELINE - The leading and lagging Sectors as measured by Our Results &amp; Revision Score have some striking similarities and differences from 2008/9.  During the COVID crisis, the Internet Content &amp; Services Sector is performing as well in 2008/9. The Sector will soon 'overtake' the Information Technology Sector, which will suffer from corporate spending cutback, as is also try for Commercial Services. Metals, Machinery, and Electrical Equipment, are repeating their GFC declines. Technology Hardware will play 'catch up' on the downside in the second 'wave'. Perhaps the most-directly-affected Sector has yet to see any significant decline, primarily because many companies have given up forecasting and their Score is mostly backwards-looking. As COVID-19 is a social and not, as yet, a financial crisis, the Consumer Services and Transportation &amp; Logistics Sectors have replaced the Banks and Non-Bank Finance Sectors on the downside on this occasion. The extent to which the latter two are impacted remains to be seen.Source • Japan AnalyticsIn the DETAIL below, we shall review the results, revisions and initial forecast announcements made on Friday by larger-cap companies.  On a relatively quiet day ahead of three consecutive public holidays, the positive/neutral/negative balance of the 33 results announcements was 13:1:19. The net change in Score was -31. For the 40 revisions/initial forecasts, the split was 11:2:27  and the average Score was -7. Of the nineteen companies declaring full-year results, ten made interim or annual forecasts for the current year. Tokyu Recreation (9631 JP) and Space (9622 JP) withdrew their forecasts for the current year. 

🇯🇵 JAPAN MARKET UPDATE 4th May - No Quarter