'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/000/068/507/original/2018-11-02_10-20-29.png?1541121653" class="editor-image img-responsive" data-smartkarma-image-id="68507"></figure><p>Source: Japan Analytics</p>
<p>NB: companies are colour-coded by sector</p>
</div><p style="text-align: left;"><strong>28 YEARS OF NON-FINANCIAL MARKET LEADERSHIP</strong> - To offer some light relief from the current market, we have compiled a graphic illustrating the evolution in the ranking of the leading non-financial Japanese companies by market capitalisation measured at the end of each of the last 28 years.</p><p><strong>METHODOLOGY</strong> - Our comments follow in the detail below, but first a few notes:-</p><ul>
<li>In the interests of clarity (/sanity?), financials have been omitted. Twelve of the Top 20-ranked companies in 1990 were financials. However, only <a href="https://www.smartkarma.com/entities/742" target="_blank" data-smartkarma-citation="entities:742:1">Nomura (8604 JP)</a>, <a href="https://www.smartkarma.com/entities/6483" target="_blank" data-smartkarma-citation="entities:6483:1">Aozora (8304 JP)</a> and <a href="https://www.smartkarma.com/entities/16897" target="_blank" data-smartkarma-citation="entities:16897:1">Shinsei (8303 JP)</a> have survived in their original corporate structure and have the same ticker code. Our chart would have otherwise have included the now-merged IBJ, Fuji Bank, Dai-Ichi Kangyo Bank, Mitsubishi Bank, Sakura Bank, Sumitomo Bank, Tokai Bank, Sanwa Bank and Mitsubishi Trust Bank.  Excluded from the present-day Top 20 are <a href="https://www.smartkarma.com/entities/218" target="_blank" data-smartkarma-citation="entities:218:1">Mitsubishi UFJ (8306 JP)</a>, <a href="https://www.smartkarma.com/entities/217" target="_blank" data-smartkarma-citation="entities:217:1">Sumitomo Mitsui Financial (8316 JP)</a>, <a href="https://www.smartkarma.com/entities/838" target="_blank" data-smartkarma-citation="entities:838:1">Japan Post Bank (7182 JP)</a>, <a href="https://www.smartkarma.com/entities/359" target="_blank" data-smartkarma-citation="entities:359:1">Japan Post Holdings (6178 JP)</a> and <a href="https://www.smartkarma.com/entities/219" target="_blank" data-smartkarma-citation="entities:219:1">Mizuho Financial (8411 JP)</a> from the present day.</li>
<li>Only companies that were in the Top 20 in 1990 or 2018, as well as those companies that have been in the Top 10 for at least three of the last 28 years, have been included. </li>
<li>Two companies from 1990's Top 20 - Seibu Railway and Japan Airlines - have since been delisted. Although they have relisted as <a href="https://www.smartkarma.com/entities/458" target="_blank" data-smartkarma-citation="entities:458:1">Seibu Holdings (9024 JP)</a> and <a href="https://www.smartkarma.com/entities/1184" target="_blank" data-smartkarma-citation="entities:1184:1">Japan Airlines (9201 JP)</a>, they are no longer highly-ranked.</li>
<li>Seven current Top 20 companies - (<a href="https://www.smartkarma.com/entities/315" target="_blank" data-smartkarma-citation="entities:315:1">Softbank (9984 JP)</a>, <a href="https://www.smartkarma.com/entities/1089" target="_blank" data-smartkarma-citation="entities:1089:1">NTT Docomo (9437 JP)</a>, <a href="https://www.smartkarma.com/entities/639" target="_blank" data-smartkarma-citation="entities:639:1">KDDI (9433 JP)</a>, <a href="https://www.smartkarma.com/entities/13498" target="_blank" data-smartkarma-citation="entities:13498:1">Japan Tobacco (2914 JP)</a>, <a href="https://www.smartkarma.com/entities/13520" target="_blank" data-smartkarma-citation="entities:13520:1">Central Japan Railway (9022 JP)</a>, <a href="https://www.smartkarma.com/entities/751" target="_blank" data-smartkarma-citation="entities:751:1">Fast Retailing (9983 JP)</a> and <a href="https://www.smartkarma.com/entities/15070" target="_blank" data-smartkarma-citation="entities:15070:1">Recruit (6098 JP)</a>)  - have listed during the last 28 years. </li>
</ul><p><strong>THE 2050 RANKING?</strong>- Which of the current market leaders will still be in the Top 20 in 2050 in their current guise? For those still around to read this in 32 year's time, we would wager on just three - <a href="https://www.smartkarma.com/entities/3077" target="_blank" data-smartkarma-citation="entities:3077:1">Keyence (6861 JP)</a>, <a href="https://www.smartkarma.com/entities/73" target="_blank" data-smartkarma-citation="entities:73:1">Toyota Motor (7203 JP)</a> and <a href="https://www.smartkarma.com/entities/563" target="_blank" data-smartkarma-citation="entities:563:1">Sony (6758 JP)</a>. </p>


Source: Japan Analytics
NB: companies are colour-coded by sector
28 YEARS OF NON-FINANCIAL MARKET LEADERSHIP - To offer some light relief from the current market, we have compiled a graphic illustrating the evolution in the ranking of the leading non-financial Japanese companies by market capitalisation measured at the end of each of the last 28 years.METHODOLOGY - Our comments follow in the detail below, but first a few notes:-
In the interests of clarity (/sanity?), financials have been omitted. Twelve of the Top 20-ranked companies in 1990 were financials. However, only Nomura (8604 JP), Aozora (8304 JP) and Shinsei (8303 JP) have survived in their original corporate structure and have the same ticker code. Our chart would have otherwise have included the now-merged IBJ, Fuji Bank, Dai-Ichi Kangyo Bank, Mitsubishi Bank, Sakura Bank, Sumitomo Bank, Tokai Bank, Sanwa Bank and Mitsubishi Trust Bank.  Excluded from the present-day Top 20 are Mitsubishi UFJ (8306 JP), Sumitomo Mitsui Financial (8316 JP), Japan Post Bank (7182 JP), Japan Post Holdings (6178 JP) and Mizuho Financial (8411 JP) from the present day.
Only companies that were in the Top 20 in 1990 or 2018, as well as those companies that have been in the Top 10 for at least three of the last 28 years, have been included. 
Two companies from 1990's Top 20 - Seibu Railway and Japan Airlines - have since been delisted. Although they have relisted as Seibu Holdings (9024 JP) and Japan Airlines (9201 JP), they are no longer highly-ranked.
Seven current Top 20 companies - (Softbank (9984 JP), NTT Docomo (9437 JP), KDDI (9433 JP), Japan Tobacco (2914 JP), Central Japan Railway (9022 JP), Fast Retailing (9983 JP) and Recruit (6098 JP))  - have listed during the last 28 years. 
THE 2050 RANKING?- Which of the current market leaders will still be in the Top 20 in 2050 in their current guise? For those still around to read this in 32 year's time, we would wager on just three - Keyence (6861 JP), Toyota Motor (7203 JP) and Sony (6758 JP). 

Japan: The Evolution Of (Non-Financial) Market Leadership

Semiconductor & Technology Specialist, Ingenuity

William Keating

Semiconductor & Technology Specialist

Ingenuity

Our focus is exclusively on in-depth research & consulting in the broader semiconductor industry. We focus on the key players, namely Intel, Micron, Qualcomm, Apple, Samsung, NVIDIA, AMD, TSMC & Global Foundries - as well as some of the lesser known, but nonetheless critical, companies such as ASML (for EUV), Mellanox, Cavium, Xilinx etc. We specialise in their products, roadmaps, process technologies, competitive advantages & threats etc. We also help our clients understand the implications of new and emerging technologies, e.g. 3D X-Point, 3D NAND, Carbon Nanotubes, Autonomous Driving, Graphene, Silicon Photonics, Wafer-Level Optics, Artificial Intelligence, FPGA, GPU, ASIC etc. 

Semiconductor Analysis & Research

Thematic (Sector/Industry)

<p>Dutch lithography giant <a href="https://www.smartkarma.com/entities/21097" target="_blank" data-smartkarma-citation="entities:21097:1">ASML</a> last month recorded its strongest quarter ever with revenues of €2.74 billion, up 30.4% YoY. ASML leads the wafer fab equipment sector for lithography systems and since the introduction of its extreme ultraviolet (EUV) tools last year, that leadership has expanded significantly and will continue to do so based on the company's technology development roadmap.</p><p>It's rare for a single company to be the only one capable of producing a particular piece of equipment and even rarer for that piece of equipment to be absolutely critical to the continued advancement of Moore's Law through enabling ever more advanced process technology generations such as 7nm and 5nm. That, however, is precisely the case with ASML's EUV lithography tools. Furthermore, driven by their customers' insatiable demand for higher throughput and even smaller device dimensions, ASML is already engaged in the development of more advanced versions of their current generation tools, as well as an entirely new generation, known as "High-NA".  While the current generation tools have a price tag of ~€100 million, the cost of the next generation tools is expected to skyrocket to ~ €270 million. </p><p>ASML is on track to deliver 20 of their highest-end EUV tools in 2018. That number will increase by 50% to 30 tools in 2019. Their next-generation tools are expected to begin shipping in late 2021. For now, the company's outlook is for continued strong growth for the remainder of 2018 and into the first half of 2019. The moat that ASML has assembled over the past thirty years just keeps on getting wider and deeper and, in our opinion, is virtually unassailable. </p>

Dutch lithography giant ASML last month recorded its strongest quarter ever with revenues of €2.74 billion, up 30.4% YoY. ASML leads the wafer fab equipment sector for lithography systems and since the introduction of its extreme ultraviolet (EUV) tools last year, that leadership has expanded significantly and will continue to do so based on the company's technology development roadmap.It's rare for a single company to be the only one capable of producing a particular piece of equipment and even rarer for that piece of equipment to be absolutely critical to the continued advancement of Moore's Law through enabling ever more advanced process technology generations such as 7nm and 5nm. That, however, is precisely the case with ASML's EUV lithography tools. Furthermore, driven by their customers' insatiable demand for higher throughput and even smaller device dimensions, ASML is already engaged in the development of more advanced versions of their current generation tools, as well as an entirely new generation, known as "High-NA".  While the current generation tools have a price tag of ~€100 million, the cost of the next generation tools is expected to skyrocket to ~ €270 million. ASML is on track to deliver 20 of their highest-end EUV tools in 2018. That number will increase by 50% to 30 tools in 2019. Their next-generation tools are expected to begin shipping in late 2021. For now, the company's outlook is for continued strong growth for the remainder of 2018 and into the first half of 2019. The moat that ASML has assembled over the past thirty years just keeps on getting wider and deeper and, in our opinion, is virtually unassailable. 

Lithography Leader ASML's Latest Record Results & Outlook Reinforces A Virtually Unassailable Moat

Doing bespoke work since 2002....., Custom Products Group

Patrick Hansen

Doing bespoke work since 2002.....

Custom Products Group

Custom Products was started 14 years ago at Lehman Brothers by current co-founder Patrick Hansen, CFA. After 3 years at Lehman, Patrick moved the team to Macquarie Securities where Simon Rigney (co-founder) joined. 3 years ago we took Custom Products independent. 

Our core strength can be summed up three words. 1- Customization - we have very little off the shelf products and most work is done on a one on one bespoke basis. 2- Speed - We pride ourselves in our ability to get requests back to the client very quickly. 3- Confidentiality - We do not redistribute. There is no grace period where we wait a week and then mass blast. Any request stops with that client.

<p>Over the last month, 9 companies have been upgraded by 2 or more analyst. <a href="https://www.smartkarma.com/entities/5415" target="_blank" data-smartkarma-citation="entities:5415:1">Nintendo Co Ltd (7974 JP)</a> is the largest by mkt-cap to make the list and one of only two to get 3 upgrades. Now 18 out of 21 recommendations are BUY for Nintendo.</p><p><a href="https://www.smartkarma.com/entities/11649" target="_blank" data-smartkarma-citation="entities:11649:1">Murata Manufacturing (6981 JP)</a>, <a href="https://www.smartkarma.com/entities/11747" target="_blank" data-smartkarma-citation="entities:11747:1">Takeda Pharmaceutical (4502 JP)</a> and <a href="https://www.smartkarma.com/entities/21001" target="_blank" data-smartkarma-citation="entities:21001:1">Eisai Co Ltd (4523 JP)</a> are other large-cap names that had 2 or more upgrades over the last month. Eisai had 3 upgrades, however it was also downgraded by two analysts over the same time frame. </p>…

Over the last month, 9 companies have been upgraded by 2 or more analyst. Nintendo Co Ltd (7974 JP) is the largest by mkt-cap to make the list and one of only two to get 3 upgrades. Now 18 out of 21 recommendations are BUY for Nintendo.Murata Manufacturing (6981 JP), Takeda Pharmaceutical (4502 JP) and Eisai Co Ltd (4523 JP) are other large-cap names that had 2 or more upgrades over the last month. Eisai had 3 upgrades, however it was also downgraded by two analysts over the same time frame. …

Most Popular / Unpopular Names in Japan over Last Month. Nintendo Made the Good List....

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<p>Last week in <a href="https://www.smartkarma.com/insights/japan-passive-boj-heading-for-trouble-with-nikkei-225" target="_blank" data-smartkarma-citation="insights:21980">JAPAN PASSIVE:  BOJ Heading For Trouble with Nikkei 225</a> I discussed the BOJ's past and current ETF purchasing selection, ownership, and the expected impact from its purchases going forward. </p><h2>NOT, MAYBE, and LIKELY Problems</h2><p><strong>NOT A PROBLEM:</strong> The fact that the BOJ owned 80.7% of the ETFs outstanding at the end of June.</p><p><strong>MAYBE A PROBLEM:</strong> The fact that BOJ-owned ETFs own 15% or more of 6 names on a look-through basis and more than 10% of 30+ names looks a bit odd.</p><p><strong>LIKELY A PROBLEM:</strong> Based on June month-end prices and the existing program of purchasing ¥5.7 trillion/year of ETFs under the 'regular index' Asset Purchase Plan (ETFs tracking TOPIX, the Nikkei 225, and JPX-Nikkei400 as discussed in the <a href="https://www.smartkarma.com/insights/japan-passive-boj-heading-for-trouble-with-nikkei-225" target="_blank">previous insight</a>), over the next 12 months the BOJ would purchase 16-18% of the remaining real float in Fast Retailing, and even more of <a href="https://www.smartkarma.com/entities/320" target="_blank" data-smartkarma-citation="entities:320:1">FamilyMart UNY Holdings Co Ltd (8028 JP)</a>, as well as more than 5% of the remaining float of a half dozen other names in its ETF ownership universe.</p><h2>What To Do?</h2><p>The previous insight proposed possible changes to the BOJ's buying patterns and possible changes to the Nikkei 225. This insight delves into the risk metrics of a Nikkei-related trade in greater detail. </p><p>That's a good start. If the BOJ or Nikkei makes changes, there is probably A LOT more to go.</p>

Last week in JAPAN PASSIVE:  BOJ Heading For Trouble with Nikkei 225 I discussed the BOJ's past and current ETF purchasing selection, ownership, and the expected impact from its purchases going forward. NOT, MAYBE, and LIKELY ProblemsNOT A PROBLEM: The fact that the BOJ owned 80.7% of the ETFs outstanding at the end of June.MAYBE A PROBLEM: The fact that BOJ-owned ETFs own 15% or more of 6 names on a look-through basis and more than 10% of 30+ names looks a bit odd.LIKELY A PROBLEM: Based on June month-end prices and the existing program of purchasing ¥5.7 trillion/year of ETFs under the 'regular index' Asset Purchase Plan (ETFs tracking TOPIX, the Nikkei 225, and JPX-Nikkei400 as discussed in the previous insight), over the next 12 months the BOJ would purchase 16-18% of the remaining real float in Fast Retailing, and even more of FamilyMart UNY Holdings Co Ltd (8028 JP), as well as more than 5% of the remaining float of a half dozen other names in its ETF ownership universe.What To Do?The previous insight proposed possible changes to the BOJ's buying patterns and possible changes to the Nikkei 225. This insight delves into the risk metrics of a Nikkei-related trade in greater detail. That's a good start. If the BOJ or Nikkei makes changes, there is probably A LOT more to go.

JAPAN PASSIVE:  The Nikkei 225 Baskets if BOJ Changes

<p>We screened for the highest dividend yield names in Japan. At the top of the list is <a href="https://www.smartkarma.com/entities/72" target="_blank" data-smartkarma-citation="entities:72:1">Nissan Motor Co Ltd (7201 JP)</a> with a 5.5% dividend yield. Nissan Motors also has a 0.7x PBR. <a href="https://www.smartkarma.com/entities/8389" target="_blank" data-smartkarma-citation="entities:8389:1">Daiwa Securities Group Inc (8601 JP)</a> and <a href="https://www.smartkarma.com/entities/13498" target="_blank" data-smartkarma-citation="entities:13498:1">Japan Tobacco Inc (2914 JP)</a> are next. Both have an above 5% dividend yield. Japan Tobacco's PBR is high at 2x, but its ROE is also high at 14%.</p><h2>Screen Criteria</h2><ol>
<li>Mkt-cap greater than ¥500bn</li>
<li>FY1 Dividend Yield above 3.5%</li>
<li>FY1 ROE greater than 7%</li>
</ol><h2>Screen Results</h2><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/058/400/original/2.png?1532022287" class="editor-image img-responsive" data-smartkarma-image-id="58400"></figure><div class="content-caption">Source: Custom Products</div><p>The…</p>

We screened for the highest dividend yield names in Japan. At the top of the list is Nissan Motor Co Ltd (7201 JP) with a 5.5% dividend yield. Nissan Motors also has a 0.7x PBR. Daiwa Securities Group Inc (8601 JP) and Japan Tobacco Inc (2914 JP) are next. Both have an above 5% dividend yield. Japan Tobacco's PBR is high at 2x, but its ROE is also high at 14%.Screen Criteria
Mkt-cap greater than ¥500bn
FY1 Dividend Yield above 3.5%
FY1 ROE greater than 7%
Screen ResultsSource: Custom ProductsThe…

Japan

Canon Inc. is a professional and consumer imaging solutions company and patent-holder of digital imaging technologies. The Company's products include networked multifunction devices, digital and analog copiers, computer peripherals, facsimile machines, image filing systems, camcorders, cameras and lenses, semiconductor, and broadcast and medical equipment.

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Canon Inc (7751 JP)

Japan: The Evolution Of (Non-Financial) Market Leadership

28 YEARS OF NON-FINANCIAL MARKET LEADERSHIP - To offer some light relief from the current market, we have compiled a graphic illustrating the...

Campbell Gunn

Lithography Leader ASML's Latest Record Results & Outlook Reinforces A Virtually Unassailable Moat

Dutch lithography giant ASML last month recorded its strongest quarter ever with revenues of €2.74 billion, up 30.4% YoY. ASML leads the wafer fab...

William Keating

Most Popular / Unpopular Names in Japan over Last Month. Nintendo Made the Good List....

Over the last month, 9 companies have been upgraded by 2 or more analyst. Nintendo Co Ltd (7974 JP) is the largest by mkt-cap to make the list and...

Custom Products Group

JAPAN PASSIVE: The Nikkei 225 Baskets if BOJ Changes

Last week in JAPAN PASSIVE: BOJ Heading For Trouble with Nikkei 225 I discussed the BOJ's past and current ETF purchasing selection, ownership,...

Travis Lundy

Highest Dividend Yields in Japan....

We screened for the highest dividend yield names in Japan. At the top of the list is Nissan Motor Co Ltd (7201 JP) with a 5.5% dividend yield....

Custom Products Group

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