Equity Analyst, LightStream Research

Oshadhi Kumarasiri

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 Capital Markets

Asahi Group Holdings / Equity Capital Markets

The Japanese beer company, <a href="https://www.smartkarma.com/entities/asahi-group-holdings-ltd" target="_blank" data-smartkarma-citation="entities:10482:1" rel="noopener">Asahi Group Holdings (2502 JP)</a>, which holds the largest market share in the Japanese market and sells Japan’s No. 1 beer, “Asahi Super Dry”, acquired Carlton &amp; United Breweries (CUB) in June 2020 for a valuation of A$16 billion, (¥1,141.6 billion) which is the largest outbound purchase by a Japanese beer maker to date.
The acquisition was financed through a short-term loan of ¥1.185 trillion from <a href="https://www.smartkarma.com/entities/sumitomo-mitsui-financial-group-inc" target="_blank" data-smartkarma-citation="entities:217:1" rel="noopener">Sumitomo Mitsui Financial Group (8316 JP)</a> and the loan is to be repaid on 19th May 2021, which gives Asahi until second quarter of 2021 to pursue the proposed equity and long-term debt issue to refinance this short-term loan.
However, the current capital market conditions are unfavourable for Asahi to pursue a secondary equity offering as the share price has declined 30% from the pre COVID-19 level. Although Asahi currently has a weak financial position relative to its history, we still feel it is not enough to force an equity offering at a discount to its pre-COVID-19 price.

The Japanese beer company, Asahi Group Holdings (2502 JP), which holds the largest market share in the Japanese market and sells Japan’s No. 1 beer, “Asahi Super Dry”, acquired Carlton &amp; United Breweries (CUB) in June 2020 for a valuation of A$16 billion, (¥1,141.6 billion) which is the largest outbound purchase by a Japanese beer maker to date.
The acquisition was financed through a short-term loan of ¥1.185 trillion from Sumitomo Mitsui Financial Group (8316 JP) and the loan is to be repaid on 19th May 2021, which gives Asahi until second quarter of 2021 to pursue the proposed equity and long-term debt issue to refinance this short-term loan.
However, the current capital market conditions are unfavourable for Asahi to pursue a secondary equity offering as the share price has declined 30% from the pre COVID-19 level. Although Asahi currently has a weak financial position relative to its history, we still feel it is not enough to force an equity offering at a discount to its pre-COVID-19 price.

Asahi Group Holdings Placement: Unlikely Until Share Price Rebounds

Research and consultancy, Tabbush Report

Daniel Tabbush

Research and consultancy

Tabbush Report

We provide research and consultancy on Asian banks. Our focus is on what we call “Asian bank research, without the noise.” We are interested in the most critical swing-factors for banks, the NPL and credit cycle, and where we believe there is a gap between perception and reality. We often focus on the less studied components of bank financial statements.  Our research is highly thematic, sometimes examining unlisted banks and companies as a window on mainstream banks. 

Being independent allows us to look at smaller banks, often overlooked by others. Analysis of BIS bank guidelines in the context of Asia, is also a focal point, while we also analyze global banks operating in the region. We use what we believe is the most comprehensive, reliable financials database, SNL Financial. S&P Capital IQ augments our database, with corporate data and CEIC, with economics. 

Asian bank research, without the noise.

Thematic (Sector/Industry)

It is rare for Japan’s banks to shine. We wonder if this is now their time and even if only fleetingly so? Credit costs are down substantially for almost every reporting bank in the June quarter, at least so far. Most will recognize by now that this crisis is not like past crises, and that as we turn economies back on, together with unprecedented stimulus, low interest rates, the recovery profile can also be very different. We are seeing this within many economies and Japan’s banks stand out, globally. Their credit cost delta is generally higher than others and what matters more is that some have seen their previous six months’ credit costs still far higher than recent years. This can mean substantially lower provisions in coming quarters, leading to substantially higher profit.

It is rare for Japan’s banks to shine. We wonder if this is now their time and even if only fleetingly so? Credit costs are down substantially for almost every reporting bank in the June quarter, at least so far. Most will recognize by now that this crisis is not like past crises, and that as we turn economies back on, together with unprecedented stimulus, low interest rates, the recovery profile can also be very different. We are seeing this within many economies and Japan’s banks stand out, globally. Their credit cost delta is generally higher than others and what matters more is that some have seen their previous six months’ credit costs still far higher than recent years. This can mean substantially lower provisions in coming quarters, leading to substantially higher profit.

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

<div>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/148/784/original/2020-07-30_08-23-32.png?1596065031" class="editor-image img-responsive" data-smartkarma-image-id="148784"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/148/785/original/2020-07-30_08-24-39.png?1596065092" class="editor-image img-responsive" data-smartkarma-image-id="148785"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/148/786/original/2020-07-30_08-25-16.png?1596065140" class="editor-image img-responsive" data-smartkarma-image-id="148786"></figure><div class="content-caption">Source • Japan Analytics</div>
29th JULY - As the pace of announcements picks up, <a href="https://www.smartkarma.com/entities/ana-holdings-inc" target="_blank" data-smartkarma-citation="entities:5308:1" rel="noopener">ANA (9202 JP)</a>, <a href="https://www.smartkarma.com/entities/showa-corp" target="_blank" data-smartkarma-citation="entities:15079:1" rel="noopener">Showa (7274 JP)</a>, and <a href="https://www.smartkarma.com/entities/isetan-mitsukoshi-holdings-ltd" target="_blank" data-smartkarma-citation="entities:18871:1" rel="noopener">Isetan Mitsukoshi (3099 JP)</a> were the three 'worst' large-cap results yesterday in terms of our scoring methodology. In the DETAIL below, we cover all the results and forecasts for companies with a market cap of over ¥100 billion and make some trading suggestions.
<hr>
DAILY STATS
</div><hr><div>85 Quarterly Results</div><div><ul>
<li>
Results Score: 30 Positive / 5 Neutral / 50 Negative</li>
<li>
Average Results Score Change: -2.4</li>
<li>
Average % Change in Revenue: -9.7% Quarter YoY / -2.7% Rolling TTM YoY </li>
<li>
Average Operating Profit Margin Change: -1.0ppt</li>
<li>
Percentage Making Quarterly Losses: 24%</li>
</ul></div><hr><div> 35 Annual • 15 Interim Forecasts/Revisions</div><div><ul>
<li>
Annual Forecast/Revision Score: 6 Positive / 1 Neutral / 28 Negative</li>
<li>
Interim Forecast/Revision Score Change: 4 Positive / 0 Neutral / 11 Negative</li>
<li>
Average Forecast/Revision Score Change: -12.8</li>
</ul></div>


Source • Japan Analytics
29th JULY - As the pace of announcements picks up, ANA (9202 JP), Showa (7274 JP), and Isetan Mitsukoshi (3099 JP) were the three 'worst' large-cap results yesterday in terms of our scoring methodology. In the DETAIL below, we cover all the results and forecasts for companies with a market cap of over ¥100 billion and make some trading suggestions.

DAILY STATS
85 Quarterly Results

Results Score: 30 Positive / 5 Neutral / 50 Negative

Average Results Score Change: -2.4

Average % Change in Revenue: -9.7% Quarter YoY / -2.7% Rolling TTM YoY 

Average Operating Profit Margin Change: -1.0ppt

Percentage Making Quarterly Losses: 24%
 35 Annual • 15 Interim Forecasts/Revisions

Annual Forecast/Revision Score: 6 Positive / 1 Neutral / 28 Negative

Interim Forecast/Revision Score Change: 4 Positive / 0 Neutral / 11 Negative

Average Forecast/Revision Score Change: -12.8


🇯🇵 JAPAN • Results & Revisions 29th July - Kao, SMFG, Nomura, NRI, Asahi Holdings, NRE

Senior Bank Analyst - Japanese Banks, Windamee Research

J. Brian Waterhouse

Senior Bank Analyst - Japanese Banks

Windamee Research

Japanese Banks

Spare a thought for the poor, embattled Japanese banker.  In this COVID-19-altered world, his biggest problem is that he has too much money.  Way, way too much money.  Money keeps piling in through the branch doors faster than he can put it to work, shovelling it out to customers as loans or investing it in minimal-return securities.
In our recent Insight <a href="https://www.smartkarma.com/insights/japanese-banks-ill-winds" target="_blank" data-smartkarma-citation="insights:41530" rel="noopener">Japanese Banks:  Ill Winds</a> we noted that YoY loan growth for the major Japanese banks in June 2020 hit an all-time record high of +9.4%.  That’s the good news.  The bad news is that average deposits at the major banks rose +10.3% YoY in May and then a record +12.0% YoY in June, according to the Japanese Bankers Association (JBA).  Major corporates drew down on their credit lines as a precaution against a prolonged economic downturn and then parked the additional cash with their bankers for safe-keeping until needed.  The megabankers are drowning in cash: their loan to deposit ratios (LDR)  -  an important measure of overall efficiency  -  have collapsed to just 52%, whereas back in 2001 they were close to 98%.  In the meantime, margins remain under pressure amidst this hyper-liquidity, banks are struggling to make any profit on their domestic book, unrealised securities gains have been whittled away, and credit costs are rising exponentially.
While many Japanese bank stocks have risen by double-digits over the last three months, rising on a gentle tide of cautious investor optimism over the outlook for recovery in Japan’s manufacturing sector post-COVID-19, it remains a fact that Japanese banks have underperformed Topix virtually unchecked since 2015.  We expect this trend to continue.  “Caveat Emptor!” (May the Buyer Beware) remains our advice to would-be investors in Japanese bank stocks for FY3/2021 and beyond.

Spare a thought for the poor, embattled Japanese banker.  In this COVID-19-altered world, his biggest problem is that he has too much money.  Way, way too much money.  Money keeps piling in through the branch doors faster than he can put it to work, shovelling it out to customers as loans or investing it in minimal-return securities.
In our recent Insight Japanese Banks:  Ill Winds we noted that YoY loan growth for the major Japanese banks in June 2020 hit an all-time record high of +9.4%.  That’s the good news.  The bad news is that average deposits at the major banks rose +10.3% YoY in May and then a record +12.0% YoY in June, according to the Japanese Bankers Association (JBA).  Major corporates drew down on their credit lines as a precaution against a prolonged economic downturn and then parked the additional cash with their bankers for safe-keeping until needed.  The megabankers are drowning in cash: their loan to deposit ratios (LDR)  -  an important measure of overall efficiency  -  have collapsed to just 52%, whereas back in 2001 they were close to 98%.  In the meantime, margins remain under pressure amidst this hyper-liquidity, banks are struggling to make any profit on their domestic book, unrealised securities gains have been whittled away, and credit costs are rising exponentially.
While many Japanese bank stocks have risen by double-digits over the last three months, rising on a gentle tide of cautious investor optimism over the outlook for recovery in Japan’s manufacturing sector post-COVID-19, it remains a fact that Japanese banks have underperformed Topix virtually unchecked since 2015.  We expect this trend to continue.  “Caveat Emptor!” (May the Buyer Beware) remains our advice to would-be investors in Japanese bank stocks for FY3/2021 and beyond.

It’s an ill wind that blows nobody any good, as the saying goes.  While Japanese industry is starting to count the economic cost of the coronavirus pandemic in terms of lost production and the global disruption to the supply chain, some Japanese banks have seen a remarkable surge in loan demand as major companies rush to secure lines of credit and draw down cash reserves in order to survive what is shaping up to be a prolonged economic recession.  Overall lending rose +6.8% YoY in June – the highest year-on-year increase recorded in the last 20 years, led by the megabanks and other major banks whose loan balances rose by an average of +9.4% YoY: a new all-time record.  Whether this is the start of a trend or is simply a short-term phenomenon remains to be seen, as is the question of whether these new loans are economically rational, depending on the interest rate applied.  ‘Profitless prosperity’ remains a clear and present danger for the Japanese banks post-COVID-19.Be that as it may, the fundamental outlook for Japan’s banks has not improved in CY2020: if anything, the outlook for FY3/2021 and beyond is even more uncertain than it was prior to the coronavirus pandemic.  As we have frequently pointed out in past Insights, margins remain under downward pressure, many banks (both big and small) remain underwater on their core domestic businesses, and credit costs are rising across the board as Japanese banks brace for a new wave of corporate failures in the wake of the coronavirus pandemic.While many Japanese bank stocks have risen by double-digits over the last three months, rising on a gentle tide of cautious investor optimism over the outlook for recovery in Japan’s manufacturing sector post-COVID-19, it remains a fact that Japanese banks have underperformed Topix virtually unchecked since 2015.  We expect this trend to continue.  “Caveat Emptor!” (May the Buyer Beware) remains our advice to would-be investors in Japanese bank stocks for FY3/2021 and beyond.

It’s an ill wind that blows nobody any good, as the saying goes.  While Japanese industry is starting to count the economic cost of the coronavirus pandemic in terms of lost production and the global disruption to the supply chain, some Japanese banks have seen a remarkable surge in loan demand as major companies rush to secure lines of credit and draw down cash reserves in order to survive what is shaping up to be a prolonged economic recession.  Overall lending rose +6.8% YoY in June – the highest year-on-year increase recorded in the last 20 years, led by the megabanks and other major banks whose loan balances rose by an average of +9.4% YoY: a new all-time record.  Whether this is the start of a trend or is simply a short-term phenomenon remains to be seen, as is the question of whether these new loans are economically rational, depending on the interest rate applied.  ‘Profitless prosperity’ remains a clear and present danger for the Japanese banks post-COVID-19.Be that as it may, the fundamental outlook for Japan’s banks has not improved in CY2020: if anything, the outlook for FY3/2021 and beyond is even more uncertain than it was prior to the coronavirus pandemic.  As we have frequently pointed out in past Insights, margins remain under downward pressure, many banks (both big and small) remain underwater on their core domestic businesses, and credit costs are rising across the board as Japanese banks brace for a new wave of corporate failures in the wake of the coronavirus pandemic.While many Japanese bank stocks have risen by double-digits over the last three months, rising on a gentle tide of cautious investor optimism over the outlook for recovery in Japan’s manufacturing sector post-COVID-19, it remains a fact that Japanese banks have underperformed Topix virtually unchecked since 2015.  We expect this trend to continue.  “Caveat Emptor!” (May the Buyer Beware) remains our advice to would-be investors in Japanese bank stocks for FY3/2021 and beyond.

Japan

Mitsubishi UFJ Financial Group, Inc. (MUFG) is a holding company established through the merger of Mitsubishi Tokyo Financial Group and UFJ Holdings. As a financial group, the Company provides a variety of financial and investment services including commercial banking, trust banking, international finance, and assets management services.

Mitsubishi UFJ Financial (MUFG) (8306 JP)

Mizuho Financial Group, Inc. provides comprehensive financial services through its subsidiaries. The Group provides variety of financial services such as general banking, securities brokerage, trust banking, and assets management.

Japan Post Bank Co. Ltd. provides general banking services. The Company offers deposits, savings, loans, currency exchange transactions, investment trusts, national bonds, and other related banking services to individuals and businesses. Japan Post Bank also provides other financial services such as insurance agency and financing service.

Shinkin Central Bank is a central bank for shinkin banks nationwide, operating as a cooperative financial institution.  The Bank has developed businesses in a variety of fields that contribute the shinkin banking industry.  The Bank's services include enhancement of the credit standing, efficient use of shikin bank's surplus funds, and settlement of domestic exchange transaction.

Resona Holdings, Inc. operates as a holding company. The Company, through its subsidiaries, provides financial services, including banking, trust operations, and credit card services. Resona Holdings also offers consulting services related to personal loans, asset management, and asset succession.

Sumitomo Mitsui Trust Holdings, Inc. is a holding company established jointly by Chuo Mitsui Trust Holdings and Sumitomo Trust and Banking. As a financial group, the Bank provides trust banking business, as well as securities brokerage, assets management, and related financial services.

The Chiba Bank, Ltd. is a regional bank based in Chiba Prefecture. The Bank offers general banking services including deposits, loans, and foreign exchange transactions. The Chiba Bank also develops software and provides financial services such as leasing, securities brokerage, letter of credit, and credit cards.

Concordia Financial Group, Ltd. is a holding company established through the merger of Bank of Yokohama and Higashi-Nippon Bank. The Company provides banking services and other financial services.

Fukuoka Financial Group, Inc. is a holding company established through the merger of the Bank of Fukuoka and Kumamoto Family Bank. As a financial group, the Company provides banking services including deposits, loans, foreign currency transactions. The Company also provides other financial services such as credit card, letter of credit, and leasing services.

The Bank of Kyoto, Ltd. is a regional bank in Kyoto.  The Bank provides banking services including deposits, savings, loans, foreign exchange transactions, and securities investments.  The Bank of Kyoto also provides financial services such as letter of credit, leasing, loans, and credit cards.

National Australia Bank Limited is an international banking group which operates in Australia, New Zealand, Europe, Asia and the United States.  The Group offers banking services, credit and access card facilities, leasing, housing and general finance, international and investment banking, wealth and funds management, life insurance and custodian, trustee and nominee services.

DBS Group Holdings Limited and its subsidiaries provide a variety of financial services.  The Company offers services including mortgage financing, lease and hire purchase financing, nominee and trustee, funds management, corporate advisory and brokerage .  DBS Group also acts as the primary dealer in Singapore government securities.

United Overseas Bank Limited provides a wide range of financial services including personal financial services, wealth management, private banking, commercial and corporate banking, transaction banking, investment banking, corporate finance, capital market activities, treasury services, futures broking, asset management, venture capital management and insurance.

Oversea-Chinese Banking Corporation Limited offers a comprehensive range of financial services.  The Company's services include deposit-taking, corporate, enterprise and personal lending, international trade financing, investment banking, private banking, treasury, stockbroking, insurance, credit cards, cash management, asset management and other financial and related services.

Kotak Mahindra Bank Limited is a full service commercial bank. The Bank offers a wide range of products and services such as personal, commercial, and corporate banking services, including deposit accounts, loans, and investments. Kotak Mahindra Bank serves customers in India.

State Bank of India provides a wide range of banking and financial services to corporate, institutional, commercial, agricultural, industrial and individual customers throughout India.  The Bank also provides international banking to its Indian customers and has operations in other countries.

PNC Financial Services Group, Inc. is a diversified financial services organization.  The Company provides regional banking, wholesale banking, and asset management services nationally and in the Company's primary regional markets.

Citigroup Inc. is a diversified financial services holding company that provides a broad range of financial services to consumer and corporate customers. The Company services include investment banking, retail brokerage, corporate banking, and cash management products and services. Citigroup serves customers globally.

PT Bank Central Asia Tbk provides banking and related services.  The Bank also provides custodianship, trusteeship, and management of pension funds of financial institutions.  Through its subsidiaries, the Bank also provides leasing and consumer financing services.

Westpac Banking Corporation offers general and savings banking services.  The Company provides investment portfolio management and advice, insurance services,  consumer finance, and money market services among other services.  Westpac Banking Corp. serves individuals, businesses, and corporations worldwide.

Sumitomo Mitsui Financial Group, Inc. manages financial operations for its subsidiaries. The Company provides commercial banking and a variety of financial services.

Sumitomo Mitsui Financial Group (8316 JP)

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Sumitomo Mitsui Financial Group (8316 JP)

Japan Banks – Rare Time to Shine?

It is rare for Japan’s banks to shine. We wonder if this is now their time and even if only fleetingly so? Credit costs are down substantially for...

Daniel Tabbush

🇯🇵 JAPAN • Results & Revisions 29th July - Kao, SMFG, Nomura, NRI, Asahi Holdings, NRE

29th JULY - As the pace of announcements picks up, ANA (9202 JP), Showa (7274 JP), and Isetan Mitsukoshi (3099 JP) were the three 'worst'...

Campbell Gunn

Japanese Banks - Drowning in Liquidity

Spare a thought for the poor, embattled Japanese banker. In this COVID-19-altered world, his biggest problem is that he has too much money. Way,...

J. Brian Waterhouse

Japanese Banks: Ill Winds

It’s an ill wind that blows nobody any good, as the saying goes. While Japanese industry is starting to count the economic cost of the coronavirus...

J. Brian Waterhouse

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Asahi Group Holdings Placement: Unlikely Until Share Price Rebounds

The Japanese beer company, Asahi Group Holdings (2502 JP), which holds the largest market share in the Japanese market and sells Japan’s No. 1...

Oshadhi Kumarasiri

Japan Banks – Rare Time to Shine?

It is rare for Japan’s banks to shine. We wonder if this is now their time and even if only fleetingly so? Credit costs are down substantially for...

Daniel Tabbush

🇯🇵 JAPAN • Results & Revisions 29th July - Kao, SMFG, Nomura, NRI, Asahi Holdings, NRE

29th JULY - As the pace of announcements picks up, ANA (9202 JP), Showa (7274 JP), and Isetan Mitsukoshi (3099 JP) were the three 'worst'...

Campbell Gunn

Japanese Banks - Drowning in Liquidity

Spare a thought for the poor, embattled Japanese banker. In this COVID-19-altered world, his biggest problem is that he has too much money. Way,...

J. Brian Waterhouse

Japanese Banks: Ill Winds

It’s an ill wind that blows nobody any good, as the saying goes. While Japanese industry is starting to count the economic cost of the coronavirus...

J. Brian Waterhouse