'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/000/144/315/original/2020-07-05_13-49-05.png?1593924588" class="editor-image img-responsive" data-smartkarma-image-id="144315"></figure><div class="content-caption">Source • Japan Analytics</div>
<p><strong>PROFITS TIMELINE</strong> - As the pace of quarterly results begins to pick up, the downward drift of trailing and forecast profits continue. Forecast Net Income is now below the trough of the previous cycle, and the trailing number should follow soon. Supported by the Bank of Japan, aggregate market capitalisation is above that of the early 2019 profit peak. As a result, earnings multiples are at the upper end of the five-year range, although there is evidence of some resistance at these levels.</p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/144/329/original/2020-07-05_15-13-29.png?1593929621" class="editor-image img-responsive" data-smartkarma-image-id="144329"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/144/331/original/2020-07-05_15-17-50.png?1593929930" class="editor-image img-responsive" data-smartkarma-image-id="144331"></figure><div class="content-caption">Source • Japan Analytics</div>
<p><strong>RESULTS &amp; REVISION SCORES</strong> - Our Scoring methodology tells the same 'story'. We are one to two quarters away from the bottom of this earnings cycle - a bottom that is likely to match that of 2009. Whether a 10% decline in market value from pre-COVID-19 levels is sufficient 'recognition' of the temporary, and in some cases, permanent, impairment of the earnings generation capability and momentum remains to be seen. We suspect the coming 'next wave' of downward revisions, as shown by Friday's one positive to nine negative ratio, will limit any upside over the summer months. </p>
<p style="text-align: center;"><strong>DAILY STATS</strong></p>
</div><hr><div><p style="text-align: center;"><strong>19 Quarterly Results</strong></p></div><div>
<ul>
<li>
<strong>Results Score:</strong> 7 Positive / 2 Neutral / 10 Negative</li>
<li>
<strong>Average Results Score Change</strong>:-2.0</li>
<li>
<strong>Average % Change in Revenue: </strong>-7.8% Quarter YoY* / +3.1% Rolling TTM YoY</li>
<li>
<strong>Average Operating Profit Margin Change:</strong> -0.4ppt</li>
</ul>
<div class="content-remarks"><p>* Excluding Kasumigaseki Capital</p></div>
</div><hr><div><p style="text-align: center;"><br><strong>7 Annual • 3 Interim Forecasts/Revisions</strong></p></div><div><ul>
<li>
<strong>Annual Forecast/Revision Score:</strong> 1 Positive / 0 Neutral / 6 Negative</li>
<li>
<strong>Interim Forecast/Revision Score Change:</strong> 0 Positive / 0 Neutral / 3 Negative</li>
<li>
<strong>Average Forecast/Revision Score Change:</strong> -15.3</li>
</ul></div>


Source • Japan Analytics
PROFITS TIMELINE - As the pace of quarterly results begins to pick up, the downward drift of trailing and forecast profits continue. Forecast Net Income is now below the trough of the previous cycle, and the trailing number should follow soon. Supported by the Bank of Japan, aggregate market capitalisation is above that of the early 2019 profit peak. As a result, earnings multiples are at the upper end of the five-year range, although there is evidence of some resistance at these levels.
Source • Japan Analytics
RESULTS &amp; REVISION SCORES - Our Scoring methodology tells the same 'story'. We are one to two quarters away from the bottom of this earnings cycle - a bottom that is likely to match that of 2009. Whether a 10% decline in market value from pre-COVID-19 levels is sufficient 'recognition' of the temporary, and in some cases, permanent, impairment of the earnings generation capability and momentum remains to be seen. We suspect the coming 'next wave' of downward revisions, as shown by Friday's one positive to nine negative ratio, will limit any upside over the summer months. 
DAILY STATS
19 Quarterly Results


Results Score: 7 Positive / 2 Neutral / 10 Negative

Average Results Score Change:-2.0

Average % Change in Revenue: -7.8% Quarter YoY* / +3.1% Rolling TTM YoY

Average Operating Profit Margin Change: -0.4ppt

* Excluding Kasumigaseki Capital
 7 Annual • 3 Interim Forecasts/Revisions

Annual Forecast/Revision Score: 1 Positive / 0 Neutral / 6 Negative

Interim Forecast/Revision Score Change: 0 Positive / 0 Neutral / 3 Negative

Average Forecast/Revision Score Change: -15.3


🇯🇵 JAPAN • Results & Revisions 3rd July • The Next Wave

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<p>On Friday, October 19th, KITAKEI CO.,LTD <a href="http://file.swcms.net/file/kitakei/ja/news/auto_20181019419788/pdfFile.pdf" target="_blank">announced</a> (J-only) that the TSE had approved its application to move from the Second Section to the First Section of the TSE as of the 26th of October 2018. It will list on the TSE1 today.</p>
<p>Kitakei, is a Japanese supplier of housing materials, which was established in 1991. It has a market capitalisation of ¥9.6 billion. The company, while small, is well-known as an independent producer and seller of housing materials including interior and exterior housing material as well as equipment for kitchens, bathrooms, and restrooms, along with wood, metal, hardware materials, housing preservation chemicals, and construction materials. The company sees its itself as a comprehensive supplier of materials and goods to make homes livable and comfortable ("human-friendly housing" in their words), and they specialize in slightly up-market high-quality solid wood materials (flooring, panelling, banisters, columns, etc). The company has consistently grown sales over the past ten years (revenues rising every year but the year to November 2015) and gross margins have remained consistent at 10%, meaning OPMs are almost permanently low - in the 1-2% range.</p>
<p>The stock is up 11.7% in the last 12 months, to 25th October 2018, is up 150% in the last five years and has quintupled since post-GFC lows. Yesterday's close was a 23-year high price. Kitakei did not have to do a <em>tachiaigai bunbai</em> as is common with TSE2--&gt; TSE1 promotions because with their 3,781 shareholders (as of Nov 2017), they met the minimum requirement for TSE1 reclassification of 2,200 shareholders.</p>
<div class="content-highlight">
<p>This is a small company (¥9.6bn market cap now) TOPIX inclusion. Float is not huge as these things go, but the inclusion is likely worth about ¥0.5-0.6bn as of Wednesday's close.</p>
<p>This company is only discussed because of the TOPIX inclusion situation. I would avoid the stock. If you don't have it in the book and are uninterested in tiny caps, I would look away now.</p>
</div>

On Friday, October 19th, KITAKEI CO.,LTD announced (J-only) that the TSE had approved its application to move from the Second Section to the First Section of the TSE as of the 26th of October 2018. It will list on the TSE1 today.
Kitakei, is a Japanese supplier of housing materials, which was established in 1991. It has a market capitalisation of ¥9.6 billion. The company, while small, is well-known as an independent producer and seller of housing materials including interior and exterior housing material as well as equipment for kitchens, bathrooms, and restrooms, along with wood, metal, hardware materials, housing preservation chemicals, and construction materials. The company sees its itself as a comprehensive supplier of materials and goods to make homes livable and comfortable ("human-friendly housing" in their words), and they specialize in slightly up-market high-quality solid wood materials (flooring, panelling, banisters, columns, etc). The company has consistently grown sales over the past ten years (revenues rising every year but the year to November 2015) and gross margins have remained consistent at 10%, meaning OPMs are almost permanently low - in the 1-2% range.
The stock is up 11.7% in the last 12 months, to 25th October 2018, is up 150% in the last five years and has quintupled since post-GFC lows. Yesterday's close was a 23-year high price. Kitakei did not have to do a tachiaigai bunbai as is common with TSE2--&gt; TSE1 promotions because with their 3,781 shareholders (as of Nov 2017), they met the minimum requirement for TSE1 reclassification of 2,200 shareholders.

This is a small company (¥9.6bn market cap now) TOPIX inclusion. Float is not huge as these things go, but the inclusion is likely worth about ¥0.5-0.6bn as of Wednesday's close.
This company is only discussed because of the TOPIX inclusion situation. I would avoid the stock. If you don't have it in the book and are uninterested in tiny caps, I would look away now.


Japan

KITAKEI CO., LTD. is a wholesaler for housing materials and home furnishings based in the Kansai area.  The Company sells housing facility products such as bathroom units, wooden building materials, special wooden products, housing equipment, veneer boards, chemical products, and housing preservative agents.

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Kitakei Co Ltd (9872 JP)

🇯🇵 JAPAN • Results & Revisions 3rd July • The Next Wave

PROFITS TIMELINE - As the pace of quarterly results begins to pick up, the downward drift of trailing and forecast profits continue. Forecast Net...

Campbell Gunn

Kitakei (9872 JP) TOPIX Inclusion

On Friday, October 19th, KITAKEI CO.,LTD announced (J-only) that the TSE had approved its application to move from the Second Section to the First...

Travis Lundy

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