Equity Analyst, LightStream Research

Shifara Samsudeen, ACMA, CGMA

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 Bottom-Up

On Thursday (16th May), <a href="https://www.smartkarma.com/entities/fujifilm-holdings-corp/overview" target="_blank">Fujifilm (4901 JP)</a> announced that it has entered into an agreement to acquire medwork GmbH, headquartered in Bayern, Germany. medwork develops, manufactures and markets instruments for therapeutic and diagnostic endoscopy and following the acquisition, medwork will become a 100%-owned subsidiary of Fujifilm. The company has not provided more details regarding the deal. However, according to sources, Fujifilm will be paying close to JPY8-9bn for medwork. We expect the medwork acquisition to complement Fujifilm’s existing endoscopes business.
This comes as a part of Fujifilm’s focus on rapidly expanding its footprint in the growing healthcare sector. In March 2019, the company also announced the acquisition of Biogen Manufacturing, a manufacturing subsidiary of Biogen (Denmark) which is expected to strengthen Fujifilm’s Bio CDMO business.

On Thursday (16th May), Fujifilm (4901 JP) announced that it has entered into an agreement to acquire medwork GmbH, headquartered in Bayern, Germany. medwork develops, manufactures and markets instruments for therapeutic and diagnostic endoscopy and following the acquisition, medwork will become a 100%-owned subsidiary of Fujifilm. The company has not provided more details regarding the deal. However, according to sources, Fujifilm will be paying close to JPY8-9bn for medwork. We expect the medwork acquisition to complement Fujifilm’s existing endoscopes business.
This comes as a part of Fujifilm’s focus on rapidly expanding its footprint in the growing healthcare sector. In March 2019, the company also announced the acquisition of Biogen Manufacturing, a manufacturing subsidiary of Biogen (Denmark) which is expected to strengthen Fujifilm’s Bio CDMO business.

Fujifilm Continues to Increase Its Focus on Healthcare Sector Through the Acquisition of Medwork

<ul>
<li>
<a href="https://www.smartkarma.com/entities/olympus-corp/overview" target="_blank">Olympus Corporation (7733 JP)</a> reported its full-year FY03/19 results on Friday (10th May). The company reported 0.9% YoY growth in revenue for FY03/19 which was a touch above its own estimate and consensus. However, the OP for the year declined by 65.1% YoY while it fell below guidance as well as consensus by 35.7% and 35.1% respectively. The OP for the year was affected by several one-time expenditures and excluding these one-off items of JPY40.9bn, the OP declined by 14.6% YoY resulting in an OPM of 8.7% compared to the 3.6% reported by the company.</li>
<li>On a segmental basis, the revenues of the Medical segment grew 2.9% YoY in FY03/19 while OP declined 8.1% YoY during the year. The growth in revenue was mainly driven by Surgical and Endotherapy businesses while the OP decline was mainly due to the costs associated with the plea agreement with the US DOJ.</li>
<li>The Scientific Solutions segment saw its revenue growing 4.2% YoY while its OP increased 26.6% YoY for FY03/19. The strong performance of the segment could be attributed to growth in sales of biological microscopes for hospital and life science research in North America and China.</li>
<li>The Imaging Segment which has been struggling due to the contracting digital camera market, reported yet again another quarter of revenue decline as the segment’s revenue was under pressure due to intensifying competition in the mirrorless camera market.</li>
<li>For FY03/20, Olympus is forecasting revenue to grow 0.8% YoY to JPY800bn while it expects the OP to grow by more than three-fold to JPY90bn compared to JPY28.3bn reported for FY03/18. When compared to the adjusted OP of JPY69.2bn (excluding the one-off expenses), the OP will grow by 30.1% YoY.</li>
<li>Olympus is currently trading at JPY1,251 per share which we believe is overvalued based on our valuation. We believe such a premium is not justified given the governance related issues and the scandals currently faced by the company. Though we expect the company financials to improve, we expect the transformation plan to take a long-time to deliver meaningful changes in the way the company conducts itself.  In our view, the potential for a transformation in governance and business practices is already fully-discounted in the share price.</li>
</ul>



Olympus Corporation (7733 JP) reported its full-year FY03/19 results on Friday (10th May). The company reported 0.9% YoY growth in revenue for FY03/19 which was a touch above its own estimate and consensus. However, the OP for the year declined by 65.1% YoY while it fell below guidance as well as consensus by 35.7% and 35.1% respectively. The OP for the year was affected by several one-time expenditures and excluding these one-off items of JPY40.9bn, the OP declined by 14.6% YoY resulting in an OPM of 8.7% compared to the 3.6% reported by the company.
On a segmental basis, the revenues of the Medical segment grew 2.9% YoY in FY03/19 while OP declined 8.1% YoY during the year. The growth in revenue was mainly driven by Surgical and Endotherapy businesses while the OP decline was mainly due to the costs associated with the plea agreement with the US DOJ.
The Scientific Solutions segment saw its revenue growing 4.2% YoY while its OP increased 26.6% YoY for FY03/19. The strong performance of the segment could be attributed to growth in sales of biological microscopes for hospital and life science research in North America and China.
The Imaging Segment which has been struggling due to the contracting digital camera market, reported yet again another quarter of revenue decline as the segment’s revenue was under pressure due to intensifying competition in the mirrorless camera market.
For FY03/20, Olympus is forecasting revenue to grow 0.8% YoY to JPY800bn while it expects the OP to grow by more than three-fold to JPY90bn compared to JPY28.3bn reported for FY03/18. When compared to the adjusted OP of JPY69.2bn (excluding the one-off expenses), the OP will grow by 30.1% YoY.
Olympus is currently trading at JPY1,251 per share which we believe is overvalued based on our valuation. We believe such a premium is not justified given the governance related issues and the scandals currently faced by the company. Though we expect the company financials to improve, we expect the transformation plan to take a long-time to deliver meaningful changes in the way the company conducts itself.  In our view, the potential for a transformation in governance and business practices is already fully-discounted in the share price.


Olympus: FY03/19 Affected by One-Time Expenses; Yet to See Any Major Change in Culture

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

ja research

ja research is an independent research platform focused exclusively on Japanese equities. Leveraging data and graphic analysis provided by Japan Analytics, we provide insights on small and medium-sized companies that have been ignored by the sell-side as well as challenging conventional wisdom on larger companies. We also offer analyst and corporate access, the latter with translation if required. 

Quantitative Analysis

<div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/087/536/original/2019-05-12_08-28-48.png?1557617338" class="editor-image img-responsive" data-smartkarma-image-id="87536"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/087/537/original/2019-05-12_08-29-53.png?1557617406" class="editor-image img-responsive" data-smartkarma-image-id="87537"></figure>Source: Japan Analytics
</div>SLIP-SLIDIN' AWAY - Japanese equities have lost 3.9% in the last holiday-shortened week and 4.6% or ¥30t since the bear-market rally peak on 17th April. The new Reiwa 令和 era has yet to see a positive close and the Bank of Japan has intervened to buy ETFs on three out of the last six trading days. A ¥2 appreciation in the Yen has cushioned the blow for non-resident/unhedged investors. For the first time since October 2018, the 50-day moving average of Total Market Value has been decisively breached. The remaining bulls will now be looking for a 'higher low' between ¥600t and ¥625t. <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/087/533/original/2019-05-12_08-13-49.png?1557616440" class="editor-image img-responsive" data-smartkarma-image-id="87533"></figure><div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/087/538/original/2019-05-12_08-38-11.png?1557617904" class="editor-image img-responsive" data-smartkarma-image-id="87538"></figure>Source: Japan Analytics
</div>BOUNCE AHEAD - The 5-day Relative Strength Index suggests a short-term recovery in the coming week, or until China announces its 'retaliation' measures to counter the recently-expanded US tariffs. 'Japan Inc.' is now voicing concerns about Japan's trade practices becoming the next focus for the US Trade Representative. Our Value Traded Ratio has also seen the strongest upward move- from 28 (the lowest level in nine months) to 53 (the highest since 21st December) in only eight trading days. Such sharp moves usually mark short-term low points.RESULTS &amp; REVISIONS - In the last four trading days, 1,153 Japanese companies have reported quarterly results, and there have been 855 initial forecasts for FY2020, 101 revision to annual forecasts, 598 initial interim estimates and ten revisions to interim forecasts. We are now at the halfway point of the Spring results announcements.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/087/539/original/2019-05-12_11-25-42.png?1557627962" class="editor-image img-responsive" data-smartkarma-image-id="87539"></figure><div class="content-caption">Source: Japan Analytics</div>RESULTS &amp; REVISION SCORE - Our scoring methodology continues to have a reasonable correlation (0.79) with the Total Market Value. In the DETAIL section below we will analyse the breakdown the three components of the score, update our Sector Scores and look at the best and worst large-cap company results over the week. In the meantime, Simon &amp; Garfunkel can provide some light relief.<center><iframe src="https://www.youtube.com/embed/ZNt5FnMK2sM" width="854" height="480" frameborder="0" allow="accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture" allowfullscreen="allowfullscreen"></iframe></center><div class="content-caption">Simon &amp; Garfunkel: Slip-Slidin' Away - The Concert in Central Park, September 19, 1981</div>


Source: Japan Analytics
SLIP-SLIDIN' AWAY - Japanese equities have lost 3.9% in the last holiday-shortened week and 4.6% or ¥30t since the bear-market rally peak on 17th April. The new Reiwa 令和 era has yet to see a positive close and the Bank of Japan has intervened to buy ETFs on three out of the last six trading days. A ¥2 appreciation in the Yen has cushioned the blow for non-resident/unhedged investors. For the first time since October 2018, the 50-day moving average of Total Market Value has been decisively breached. The remaining bulls will now be looking for a 'higher low' between ¥600t and ¥625t. 
Source: Japan Analytics
BOUNCE AHEAD - The 5-day Relative Strength Index suggests a short-term recovery in the coming week, or until China announces its 'retaliation' measures to counter the recently-expanded US tariffs. 'Japan Inc.' is now voicing concerns about Japan's trade practices becoming the next focus for the US Trade Representative. Our Value Traded Ratio has also seen the strongest upward move- from 28 (the lowest level in nine months) to 53 (the highest since 21st December) in only eight trading days. Such sharp moves usually mark short-term low points.RESULTS &amp; REVISIONS - In the last four trading days, 1,153 Japanese companies have reported quarterly results, and there have been 855 initial forecasts for FY2020, 101 revision to annual forecasts, 598 initial interim estimates and ten revisions to interim forecasts. We are now at the halfway point of the Spring results announcements.Source: Japan AnalyticsRESULTS &amp; REVISION SCORE - Our scoring methodology continues to have a reasonable correlation (0.79) with the Total Market Value. In the DETAIL section below we will analyse the breakdown the three components of the score, update our Sector Scores and look at the best and worst large-cap company results over the week. In the meantime, Simon &amp; Garfunkel can provide some light relief.Simon &amp; Garfunkel: Slip-Slidin' Away - The Concert in Central Park, September 19, 1981

🇯🇵 Japan • Spring Results & Revisions & Market Update - Slip-Slidin' Away

This insight mainly focuses on the key takeaways from our recent visit to <a href="https://www.smartkarma.com/entities/hoya-corp/overview" target="_blank">Hoya Corporation (7741 JP)</a>:
<ul>
<li>Hoya will continue to refresh its lineup of endoscopes this year as the company introduces new models once in every five to six years and we believe the company’s existing endoscope systems are nearing the end of their life cycles. We believe, this should result in growth in revenues for the company.</li>
<li>Hoya was the first company to introduce its Disposable Injector Development system which is one of the fastest growing businesses for Hoya. The global intraocular market is forecasted to grow at a CAGR of 5.4% until 2024 resulting in growth in top-line for Hoya which has been gradually taking share in this market.</li>
<li>The Luxottica/Essilor merger could pose a significant long-term threat to Hoya and will have a knock-on effect on the rest of the spectacle and eyewear manufacturers due to their market domination. That being said, we forecast the eyeglass and contact lenses to continue to witness growth due to Hoya’s strong presence in the markets in which it operates and a tailwind in the short-term as customers switch to Hoya for diversification reasons. The company’s acquisition of the eyewear business of 3M will also add to the revenue growth.</li>
<li>Hoya holds a monopoly in the glass HDD substrates market and the market is currently underpenetrated. The superior features of glass substrates compared to aluminum should shift the demand towards glass, which is sold at twice the price of aluminum.</li>
<li>Hoya Corporation is currently trading at a 1-year forward EV/EBIT multiple of 16.75x, which is close to its 52-week high of 16.79x. When compared with 5 year forward EBIT multiples there is still room for some multiple expansion in the short-term leading to price appreciation.</li>
</ul>

This insight mainly focuses on the key takeaways from our recent visit to Hoya Corporation (7741 JP):

Hoya will continue to refresh its lineup of endoscopes this year as the company introduces new models once in every five to six years and we believe the company’s existing endoscope systems are nearing the end of their life cycles. We believe, this should result in growth in revenues for the company.
Hoya was the first company to introduce its Disposable Injector Development system which is one of the fastest growing businesses for Hoya. The global intraocular market is forecasted to grow at a CAGR of 5.4% until 2024 resulting in growth in top-line for Hoya which has been gradually taking share in this market.
The Luxottica/Essilor merger could pose a significant long-term threat to Hoya and will have a knock-on effect on the rest of the spectacle and eyewear manufacturers due to their market domination. That being said, we forecast the eyeglass and contact lenses to continue to witness growth due to Hoya’s strong presence in the markets in which it operates and a tailwind in the short-term as customers switch to Hoya for diversification reasons. The company’s acquisition of the eyewear business of 3M will also add to the revenue growth.
Hoya holds a monopoly in the glass HDD substrates market and the market is currently underpenetrated. The superior features of glass substrates compared to aluminum should shift the demand towards glass, which is sold at twice the price of aluminum.
Hoya Corporation is currently trading at a 1-year forward EV/EBIT multiple of 16.75x, which is close to its 52-week high of 16.79x. When compared with 5 year forward EBIT multiples there is still room for some multiple expansion in the short-term leading to price appreciation.


Hoya: Future Prospects Remain Positive with More Room for Share Price Growth

<a href="https://www.smartkarma.com/entities/hoya-corp/insights" target="_blank">Hoya Corporation (7741 JP)</a> reported its 3QFY03/19 earnings yesterday (01st Feb). The revenues grew at 4.9% YoY while operating profit increased by a hefty 20.2% YoY during the quarter. On a constant currency basis, revenues grew 6.6% YoY while pre-tax profit increased 15.0% YoY during the period. In addition, Hoya’s margin too witnessed an expansion with operating profit margin reaching 27.8% from 24.3%, while it reported a pre-tax margin of 27.7% compared to 25.4% a year ago. Moreover, the company beat consensus estimates on revenue, operating profit and pre-tax profit.
<table class="table table-striped">
<tbody>
<tr>
<td style="width: 123px;">
JPY (bn)
</td>
<td style="text-align: center; width: 90px;">
3QFY03/18
</td>
<td style="text-align: center; width: 90px;">
3QFY03/19
</td>
<td style="text-align: center; width: 96px;">
YoY Change
</td>
<td style="text-align: center; width: 123px;">
Consensus Median
</td>
<td style="text-align: center; width: 157px;">
Actual Vs. Consensus
</td>
</tr>
<tr>
<td style="width: 123px;">
Revenue
</td>
<td style="text-align: center; width: 90px;">
136.8
</td>
<td style="text-align: center; width: 90px;">
143.4
</td>
<td style="text-align: center; width: 96px;">
4.9%
</td>
<td style="text-align: center; width: 123px;">
141.6
</td>
<td style="text-align: center; width: 157px;">
1.3%
</td>
</tr>
<tr>
<td style="width: 123px;">
Operating Profit
</td>
<td style="text-align: center; width: 90px;">
33.2
</td>
<td style="text-align: center; width: 90px;">
39.9
</td>
<td style="text-align: center; width: 96px;">
20.2%
</td>
<td style="text-align: center; width: 123px;">
37.3
</td>
<td style="text-align: center; width: 157px;">
7.0%
</td>
</tr>
<tr>
<td style="width: 123px;">
OPM
</td>
<td style="text-align: center; width: 90px;">
24.3%
</td>
<td style="text-align: center; width: 90px;">
27.8%
</td>
<td style="text-align: center; width: 96px;">
 
</td>
<td style="text-align: center; width: 123px;">
26.4%
</td>
<td style="text-align: center; width: 157px;">
 
</td>
</tr>
<tr>
<td style="width: 123px;">
Pre-tax Profit
</td>
<td style="text-align: center; width: 90px;">
34.7
</td>
<td style="text-align: center; width: 90px;">
39.7
</td>
<td style="text-align: center; width: 96px;">
14.4%
</td>
<td style="text-align: center; width: 123px;">
37.7
</td>
<td style="text-align: center; width: 157px;">
5.3%
</td>
</tr>
<tr>
<td style="width: 123px;">
Pre-tax Margin
</td>
<td style="text-align: center; width: 90px;">
25.4%
</td>
<td style="text-align: center; width: 90px;">
27.7%
</td>
<td style="text-align: center; width: 96px;">
 
</td>
<td style="text-align: center; width: 123px;">
26.6%
</td>
<td style="text-align: center; width: 157px;">
 
</td>
</tr>
</tbody>
</table>
<div class="content-caption">Source: Company Disclosures, Cap IQ</div>
Revenues grew thanks to strong performances by the Life Care and Electronics businesses although the Imaging business saw a decline.

Hoya Corporation (7741 JP) reported its 3QFY03/19 earnings yesterday (01st Feb). The revenues grew at 4.9% YoY while operating profit increased by a hefty 20.2% YoY during the quarter. On a constant currency basis, revenues grew 6.6% YoY while pre-tax profit increased 15.0% YoY during the period. In addition, Hoya’s margin too witnessed an expansion with operating profit margin reaching 27.8% from 24.3%, while it reported a pre-tax margin of 27.7% compared to 25.4% a year ago. Moreover, the company beat consensus estimates on revenue, operating profit and pre-tax profit.




JPY (bn)


3QFY03/18


3QFY03/19


YoY Change


Consensus Median


Actual Vs. Consensus




Revenue


136.8


143.4


4.9%


141.6


1.3%




Operating Profit


33.2


39.9


20.2%


37.3


7.0%




OPM


24.3%


27.8%


 


26.4%


 




Pre-tax Profit


34.7


39.7


14.4%


37.7


5.3%




Pre-tax Margin


25.4%


27.7%


 


26.6%


 




Source: Company Disclosures, Cap IQ
Revenues grew thanks to strong performances by the Life Care and Electronics businesses although the Imaging business saw a decline.

Hoya Reports Solid 3QFY03/19 Performance; Our Outlook on the Company Remains Unchanged

Japan

Hoya Corp manufactures electro-optics products such as mask blanks for semiconductors, photomasks for LCD panels, optical glasses, glass memory disks for HDDs, medical flexible endoscopes, eyeglasses, and contact lenses. The Company also provides information system architecture.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Hoya Corp (7741 JP)

Fujifilm Continues to Increase Its Focus on Healthcare Sector Through the Acquisition of Medwork

On Thursday (16th May), Fujifilm (4901 JP) announced that it has entered into an agreement to acquire medwork GmbH, headquartered in Bayern,...

Shifara Samsudeen, ACMA, CGMA

Olympus: FY03/19 Affected by One-Time Expenses; Yet to See Any Major Change in Culture

Olympus Corporation (7733 JP) reported its full-year FY03/19 results on Friday (10th May). The company reported 0.9% YoY growth in revenue for...

Shifara Samsudeen, ACMA, CGMA

🇯🇵 Japan • Spring Results & Revisions & Market Update - Slip-Slidin' Away

SLIP-SLIDIN' AWAY - Japanese equities have lost 3.9% in the last holiday-shortened week and 4.6% or ¥30t since the bear-market rally peak on 17th...

Campbell Gunn

Hoya Reports Solid 3QFY03/19 Performance; Our Outlook on the Company Remains Unchanged

Hoya Corporation (7741 JP) reported its 3QFY03/19 earnings yesterday (01st Feb). The revenues grew at 4.9% YoY while operating profit increased by...

Shifara Samsudeen, ACMA, CGMA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Fujifilm Continues to Increase Its Focus on Healthcare Sector Through the Acquisition of Medwork

On Thursday (16th May), Fujifilm (4901 JP) announced that it has entered into an agreement to acquire medwork GmbH, headquartered in Bayern,...

Shifara Samsudeen, ACMA, CGMA

Olympus: FY03/19 Affected by One-Time Expenses; Yet to See Any Major Change in Culture

Olympus Corporation (7733 JP) reported its full-year FY03/19 results on Friday (10th May). The company reported 0.9% YoY growth in revenue for...

Shifara Samsudeen, ACMA, CGMA

🇯🇵 Japan • Spring Results & Revisions & Market Update - Slip-Slidin' Away

SLIP-SLIDIN' AWAY - Japanese equities have lost 3.9% in the last holiday-shortened week and 4.6% or ¥30t since the bear-market rally peak on 17th...

Campbell Gunn

Hoya: Future Prospects Remain Positive with More Room for Share Price Growth

This insight mainly focuses on the key takeaways from our recent visit to Hoya Corporation (7741 JP): Hoya will continue to refresh its lineup of...

Shifara Samsudeen, ACMA, CGMA

Hoya Reports Solid 3QFY03/19 Performance; Our Outlook on the Company Remains Unchanged

Hoya Corporation (7741 JP) reported its 3QFY03/19 earnings yesterday (01st Feb). The revenues grew at 4.9% YoY while operating profit increased by...

Shifara Samsudeen, ACMA, CGMA