Equity Analyst, LightStream Research

Supun Walpola

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

We believe it is likely for <a href="https://www.smartkarma.com/entities/recruit-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:15070:1" rel="noopener">Recruit Holdings (6098 JP)</a> to reach its full-year EBITDA guidance for FY03/20. However, we remain bearish, as we expect Recruit to feel the full impact of COVID-19 from 1Q FY03/21 onwards. Both global and domestic labour markets have weakened since March and the demand for online advertising remains low with the disruption of economic activities.

We believe it is likely for Recruit Holdings (6098 JP) to reach its full-year EBITDA guidance for FY03/20. However, we remain bearish, as we expect Recruit to feel the full impact of COVID-19 from 1Q FY03/21 onwards. Both global and domestic labour markets have weakened since March and the demand for online advertising remains low with the disruption of economic activities.

Recruit Holdings: Likely to Reach Full-Year Guidance but Bad News Could Be on the Way

In our previous note, <a href="https://www.smartkarma.com/insights/cyberagent-likely-to-remain-resilient-during-the-pandemic" target="_blank" data-smartkarma-citation="insights:38912" rel="noopener">CyberAgent: Likely to Remain Resilient During the Pandemic</a>, we mentioned that, despite worries over the prospects of its Internet Advertisement (IA) business, <a href="https://www.smartkarma.com/entities/cyberagent-inc" target="_blank" data-smartkarma-citation="entities:8197:1" rel="noopener">Cyberagent Inc (4751 JP)</a> is unlikely to miss its full-year OP guidance. In this note, we will take a look at different scenarios that could play out around this theme.

In our previous note, CyberAgent: Likely to Remain Resilient During the Pandemic, we mentioned that, despite worries over the prospects of its Internet Advertisement (IA) business, Cyberagent Inc (4751 JP) is unlikely to miss its full-year OP guidance. In this note, we will take a look at different scenarios that could play out around this theme.

CyberAgent: A Full-Year OP Beat Is Possible if Game Business Growth Upholds

Our long thesis for <a href="https://www.smartkarma.com/entities/cyberagent-inc" target="_blank" data-smartkarma-citation="entities:8197:1" rel="noopener">Cyberagent Inc (4751 JP)</a> has worked out well so far. CyberAgent’s share price has increased by c.30% since we wrote about the company in <a href="https://www.smartkarma.com/insights/cyberagent-4751-jp-buy-the-dip" target="_blank" data-smartkarma-citation="insights:34099" rel="noopener">CyberAgent (4751 JP): Buy the Dip?</a> and has remained resilient during the pandemic.CyberAgent reported its 2Q FY09/20 financial results last week. CyberAgent’s revenue and OP were JPY 129bn (+10.1% YoY) and JPY12bn (+45.3% YoY) respectively in 2Q FY09/20. OP beat consensus by c.39%. This was mostly due to 1) a surprise boost to Game business revenue due to PRINCESS CONNECT! and some new titles released this year performing well and 2) an improvement in the Internet Advertisement business OP margin.CyberAgent maintained its full-year guidance but warned investors against the potential negative impact of COVID-19 on the company’s Internet Advertisement (IA) business.

Our long thesis for Cyberagent Inc (4751 JP) has worked out well so far. CyberAgent’s share price has increased by c.30% since we wrote about the company in CyberAgent (4751 JP): Buy the Dip? and has remained resilient during the pandemic.CyberAgent reported its 2Q FY09/20 financial results last week. CyberAgent’s revenue and OP were JPY 129bn (+10.1% YoY) and JPY12bn (+45.3% YoY) respectively in 2Q FY09/20. OP beat consensus by c.39%. This was mostly due to 1) a surprise boost to Game business revenue due to PRINCESS CONNECT! and some new titles released this year performing well and 2) an improvement in the Internet Advertisement business OP margin.CyberAgent maintained its full-year guidance but warned investors against the potential negative impact of COVID-19 on the company’s Internet Advertisement (IA) business. 

CyberAgent: Likely to Remain Resilient During the Pandemic

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

Thematic (Sector/Industry)

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/129/213/original/File%202020-04-23%205%2019%2052.jpeg?1587587091" class="editor-image img-responsive" data-smartkarma-image-id="129213"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/129/215/original/File%202020-04-23%205%2019%2008.jpeg?1587587183" class="editor-image img-responsive" data-smartkarma-image-id="129215"></figure><div class="content-caption">Source • Marco Piani</div>TIMELINES - The excellent timelines prepared by @Marco_Piani provide a novel interpretation of Japan's 'rank' in the progression of COVID-19 on terms of both cases and deaths. The data confirms that Japan is 'lagging' the World in both respects. Also of note are the 'second waves' that are appearing in several countries, including South Africa, Argentina, Poland and the Philippines. <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/129/216/original/2020-04-23_05-29-31.png?1587587408" class="editor-image img-responsive" data-smartkarma-image-id="129216"></figure><div class="content-caption">Source • Arbor Data Science</div>GOING-OUT RELATED - As the hospital system overflows, the government is becoming more strident in its attempts to have greater compliance with the current 'suggestions' on social distancing and working from home diverting attention from their failure to anticipate the breakdown of the medical system.  PM Abe has resorted to pleading with citizens not to make their traditional home-town visits over Golden Week, while the still-crowded supermarkets may be required to limit the number of shoppers at any one time. As is evident from the Google search data above, Japan (and Singapore and latterly Indonesia) are on diverging 'paths' from most European countries, and it is premature to consider any exit strategies. We conclude that the current states of emergency across all Japanese prefectures will be extended beyond the end of Golden Week on 6th May, probably to the end of next month.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/129/259/original/2020-04-23_07-06-14.png?1587593194" class="editor-image img-responsive" data-smartkarma-image-id="129259"></figure><div class="content-caption">Source • Japan Analytics</div>IMPENDING PEAK - The first of the March year-end company results were announced yesterday and will become a deluge over the eight trading days either side of the Golden Week holidays. As many companies are now avoiding interim and annual forecasts, the absolute number of data points will be reduced. In the DETAIL below, we shall review the results, revisions and initial forecast announcements made yesterday.  The positive/neutral/negative balance for the nine results was 5:0:4; and for the 23 revisions/forecasts, the split was 10:1:12. Of the six companies reporting annual results, only one made a forecast for the current year. Dry cleaner <a href="https://www.smartkarma.com/entities/hakuyosha-company-ltd" target="_blank" data-smartkarma-citation="entities:4492:1" rel="noopener">Hakuyosha (9731 JP)</a> withdrew its December year-end forecasts. Three companies cut their dividends; two increased. <blockquote>Everybody talks as if they know what is going to happen - nobody knows what is going to happen - Charlie Munger</blockquote>

Source • Marco PianiTIMELINES - The excellent timelines prepared by @Marco_Piani provide a novel interpretation of Japan's 'rank' in the progression of COVID-19 on terms of both cases and deaths. The data confirms that Japan is 'lagging' the World in both respects. Also of note are the 'second waves' that are appearing in several countries, including South Africa, Argentina, Poland and the Philippines. Source • Arbor Data ScienceGOING-OUT RELATED - As the hospital system overflows, the government is becoming more strident in its attempts to have greater compliance with the current 'suggestions' on social distancing and working from home diverting attention from their failure to anticipate the breakdown of the medical system.  PM Abe has resorted to pleading with citizens not to make their traditional home-town visits over Golden Week, while the still-crowded supermarkets may be required to limit the number of shoppers at any one time. As is evident from the Google search data above, Japan (and Singapore and latterly Indonesia) are on diverging 'paths' from most European countries, and it is premature to consider any exit strategies. We conclude that the current states of emergency across all Japanese prefectures will be extended beyond the end of Golden Week on 6th May, probably to the end of next month.Source • Japan AnalyticsIMPENDING PEAK - The first of the March year-end company results were announced yesterday and will become a deluge over the eight trading days either side of the Golden Week holidays. As many companies are now avoiding interim and annual forecasts, the absolute number of data points will be reduced. In the DETAIL below, we shall review the results, revisions and initial forecast announcements made yesterday.  The positive/neutral/negative balance for the nine results was 5:0:4; and for the 23 revisions/forecasts, the split was 10:1:12. Of the six companies reporting annual results, only one made a forecast for the current year. Dry cleaner Hakuyosha (9731 JP) withdrew its December year-end forecasts. Three companies cut their dividends; two increased. Everybody talks as if they know what is going to happen - nobody knows what is going to happen - Charlie Munger

🇯🇵 JAPAN • Revisions & Results 22nd April - Timelines + JAL/ZOZO/Mizuno/CyberAgent

A slowdown in the HR Technology business, which operates two popular employment websites, indeed.com (Indeed) and glassdoor.com (Glassdoor), is one of many risks for <a href="https://www.smartkarma.com/entities/recruit-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:15070:1" rel="noopener">Recruit Holdings (6098 JP)</a> (Recruit) that we have highlighted in our previous notes.Our traffic analysis of Indeed and Glassdoor suggests that HR Technology business revenue growth would be around c.17%-22% YoY in 4Q FY03/20. This is lower than 28.7% YoY last quarter and an average of 53.7% YoY over the past 10 quarters.

A slowdown in the HR Technology business, which operates two popular employment websites, indeed.com (Indeed) and glassdoor.com (Glassdoor), is one of many risks for Recruit Holdings (6098 JP) (Recruit) that we have highlighted in our previous notes.Our traffic analysis of Indeed and Glassdoor suggests that HR Technology business revenue growth would be around c.17%-22% YoY in 4Q FY03/20. This is lower than 28.7% YoY last quarter and an average of 53.7% YoY over the past 10 quarters.

Recruit Holdings [Alternative Data]: Indeed Is Flat Even Before COVID-19 Hits

Japan

CyberAgent, Inc. operates blog media website, Ameba.  The Company also operates internet advertising agency, foreign exchange trading website, and creates PC and mobile contents such as advertisements and games. CyberAgent invests in companies with internet related business.

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CyberAgent Inc (4751 JP)

Recruit Holdings: Likely to Reach Full-Year Guidance but Bad News Could Be on the Way

We believe it is likely for Recruit Holdings (6098 JP) to reach its full-year EBITDA guidance for FY03/20. However, we remain bearish, as we expect...

Supun Walpola

CyberAgent: A Full-Year OP Beat Is Possible if Game Business Growth Upholds

In our previous note, CyberAgent: Likely to Remain Resilient During the Pandemic, we mentioned that, despite worries over the prospects of its...

Supun Walpola

CyberAgent: Likely to Remain Resilient During the Pandemic

Our long thesis for Cyberagent Inc (4751 JP) has worked out well so far. CyberAgent’s share price has increased by c.30% since we wrote about the...

Supun Walpola

🇯🇵 JAPAN • Revisions & Results 22nd April - Timelines + JAL/ZOZO/Mizuno/CyberAgent

TIMELINES - The excellent timelines prepared by @Marco_Piani provide a novel interpretation of Japan's 'rank' in the progression of COVID-19 on...

Campbell Gunn

Recruit Holdings [Alternative Data]: Indeed Is Flat Even Before COVID-19 Hits

A slowdown in the HR Technology business, which operates two popular employment websites, indeed.com (Indeed) and glassdoor.com (Glassdoor), is one...

Supun Walpola

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