'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)

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/139/255/original/2020-06-11_08-36-54.png?1591832240" class="editor-image img-responsive" data-smartkarma-image-id="139255"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>STRESS TESTS</strong> - This Insight is the first in a series that will use a variety of standard and less-frequently used 'stress-tests' to look through the current euphoria and assess where business risk is concentrated among larger Japanese companies. According to Tokyo Shoko Research, 171 listed Japanese firms have raised nearly ¥10 trillion in new funds to weather COVID-19.</p><p><strong>ALTMAN Z-SCORES</strong> - The first Insight will update our earlier Who's<a href="https://www.smartkarma.com/insights/japan-who-s-swimming-naked-part-2-altman-z-score" target="_blank" data-smartkarma-citation="insights:37316" rel="noopener"> Swimming Naked?</a> Insight and focus on the Altman Z-Score as updated for the most recent quarterly results for both manufacturing and non-manufacturing companies.  In each category, ee will look at both the companies that are below Altman's 'distress' levels and those companies that have the most significant negative deviation from their seven-year average score. Only six of the bottom-thirty manufacturing and five of the bottom-thirty manufacturing companies have outperformed over one year. Many are already Oversold and offer potential value opportunities -as with <a href="https://www.smartkarma.com/entities/nissan-motor-co-ltd" target="_blank" data-smartkarma-citation="entities:72:1" rel="noopener">Nissan Motor (7201 JP)</a> which is now as distressed as when Carlos Ghosn first arrived.  </p><p><strong>QUASI-FINANCIAL FIRMS</strong> - The Z-Score methodology does not work for financial firms. Accordingly, five non-financial companies which have significant financial subsidiaries - <strong> <a href="https://www.smartkarma.com/entities/rakuten-inc" target="_blank" data-smartkarma-citation="entities:31:1" rel="noopener">Rakuten (4755 JP)</a></strong>,<strong> <a href="https://www.smartkarma.com/entities/z-holdings-corp" target="_blank" data-smartkarma-citation="entities:19603:1" rel="noopener">Z Holdings (4689 JP)</a></strong>, <strong><a href="https://www.smartkarma.com/entities/japan-post-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:359:1" rel="noopener">Japan Post (6178 JP)</a></strong>, <strong><a href="https://www.smartkarma.com/entities/softbank-group-corp" target="_blank" data-smartkarma-citation="entities:315:1" rel="noopener">Softbank Group (9984 JP)</a></strong> and <strong><a href="https://www.smartkarma.com/entities/sony-corp" target="_blank" data-smartkarma-citation="entities:563:1" rel="noopener">Sony (6758 JP)</a></strong>- have been excluded from this analysis. </p>

Source: Japan AnalyticsSTRESS TESTS - This Insight is the first in a series that will use a variety of standard and less-frequently used 'stress-tests' to look through the current euphoria and assess where business risk is concentrated among larger Japanese companies. According to Tokyo Shoko Research, 171 listed Japanese firms have raised nearly ¥10 trillion in new funds to weather COVID-19.ALTMAN Z-SCORES - The first Insight will update our earlier Who's Swimming Naked? Insight and focus on the Altman Z-Score as updated for the most recent quarterly results for both manufacturing and non-manufacturing companies.  In each category, ee will look at both the companies that are below Altman's 'distress' levels and those companies that have the most significant negative deviation from their seven-year average score. Only six of the bottom-thirty manufacturing and five of the bottom-thirty manufacturing companies have outperformed over one year. Many are already Oversold and offer potential value opportunities -as with Nissan Motor (7201 JP) which is now as distressed as when Carlos Ghosn first arrived.  QUASI-FINANCIAL FIRMS - The Z-Score methodology does not work for financial firms. Accordingly, five non-financial companies which have significant financial subsidiaries -  Rakuten (4755 JP), Z Holdings (4689 JP), Japan Post (6178 JP), Softbank Group (9984 JP) and Sony (6758 JP)- have been excluded from this analysis. 

🇯🇵 JAPAN - Stress Tests Part 1 - Altman Z-Scores

Korea / Special Sits, Pairs, Index Rebalancing, Clepsydra Capital

Sanghyun Park

Korea / Special Sits, Pairs, Index Rebalancing

Event-Driven

<p>Which one or ones would Nexon hunt with US$1.5bil, which it got from Neople from late last year to this May? Or it may already be in discussion with some of the target companies. </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/137/962/original/1.png?1591240890" class="editor-image img-responsive" data-smartkarma-image-id="137962"></figure><div class="content-caption">(Source: Nexon Co., Ltd.)</div><hr><div class="content-highlight"><h2>Four clear points</h2></div><p>Nexon made the below four points very clear.</p><p>It will invest a total of US$1.5bil. Which ones? It will go after publicly traded entertainment companies, presumably including gaming companies. Then, it limits its role as a minority shareholder. What does it want in return? Of course, it is IPs, for which Nexon always has a great need.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/137/969/original/3.png?1591243139" class="editor-image img-responsive" data-smartkarma-image-id="137969"></figure>

Which one or ones would Nexon hunt with US$1.5bil, which it got from Neople from late last year to this May? Or it may already be in discussion with some of the target companies. (Source: Nexon Co., Ltd.)Four clear pointsNexon made the below four points very clear.It will invest a total of US$1.5bil. Which ones? It will go after publicly traded entertainment companies, presumably including gaming companies. Then, it limits its role as a minority shareholder. What does it want in return? Of course, it is IPs, for which Nexon always has a great need.

Nexon's "Realistic" Target Companies (Mostly from Japan) For US$1.5bil Cash

Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

Equity Bottom-Up

<p>Nintendo blew the doors off with OP of ¥352.4bn vs. consensus at ¥314.9bn. Revenue of ¥1,308.5bn was also above consensus at ¥1,273bn, but by a smaller margin, showing the magnitude of the profitability improvements that we have been flagging as a key driver for the stock. Guidance of ¥300bn in OP for next FY looks conservative, and to us so does consensus at ¥369bn. Below we examine exactly how much upside may remain, but in short, it is not too late to buy.</p>

Nintendo blew the doors off with OP of ¥352.4bn vs. consensus at ¥314.9bn. Revenue of ¥1,308.5bn was also above consensus at ¥1,273bn, but by a smaller margin, showing the magnitude of the profitability improvements that we have been flagging as a key driver for the stock. Guidance of ¥300bn in OP for next FY looks conservative, and to us so does consensus at ¥369bn. Below we examine exactly how much upside may remain, but in short, it is not too late to buy.

Nintendo – Deftly Animal Crossing Over the COVID Trap

<p>Koei-Tecmo reported strong results yesterday with OP of ¥14.1bn comfortably beating consensus’ ¥12.7bn and even our ¥13.5bn estimate which was above the consensus high. The stock closed just 5.5% below its Feb all-time high and we believe that the strength of Sangokushi Senryaku Ban and a strong game pipeline should help the company continue to outperform significantly.</p>

Koei-Tecmo reported strong results yesterday with OP of ¥14.1bn comfortably beating consensus’ ¥12.7bn and even our ¥13.5bn estimate which was above the consensus high. The stock closed just 5.5% below its Feb all-time high and we believe that the strength of Sangokushi Senryaku Ban and a strong game pipeline should help the company continue to outperform significantly.

Koei-Tecmo – Plenty of Headroom to Play With

<p>On Thursday we highlighted a number of stock pairs that had seen extreme levels of relative performance dislocations, speculating that this was due to relative value unwinds that were being rushed for completion prior to the long weekend. This morning the skews are reversing and with Nikkei now outperforming Topix (+02.7% vs. -0.87% at the time of this writing) we believe this opportunity is being realised quickly. Our thoughts on next steps below.</p>

On Thursday we highlighted a number of stock pairs that had seen extreme levels of relative performance dislocations, speculating that this was due to relative value unwinds that were being rushed for completion prior to the long weekend. This morning the skews are reversing and with Nikkei now outperforming Topix (+02.7% vs. -0.87% at the time of this writing) we believe this opportunity is being realised quickly. Our thoughts on next steps below.

Japan Long Weekend Portfolio Blowout Theme Is Working Quickly

Japan

Koei Tecmo Holdings Co.,Ltd. is a holding company which was established through the merger of Koei Co., Ltd. and Tecmo Ltd. The Company develops and distributes video game software for personal computers and home video game consoles. The Company also operates other media business such as marketing of books and CDs and amusement facility operation.

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Koei Tecmo Holdings (3635 JP)

🇯🇵 JAPAN - Stress Tests Part 1 - Altman Z-Scores

STRESS TESTS - This Insight is the first in a series that will use a variety of standard and less-frequently used 'stress-tests' to look through...

Campbell Gunn

Nexon's "Realistic" Target Companies (Mostly from Japan) For US$1.5bil Cash

Which one or ones would Nexon hunt with US$1.5bil, which it got from Neople from late last year to this May? Or it may already be in discussion...

Sanghyun Park

Nintendo – Deftly Animal Crossing Over the COVID Trap

Nintendo blew the doors off with OP of ¥352.4bn vs. consensus at ¥314.9bn. Revenue of ¥1,308.5bn was also above consensus at ¥1,273bn, but by a...

Mio Kato

Koei-Tecmo – Plenty of Headroom to Play With

Koei-Tecmo reported strong results yesterday with OP of ¥14.1bn comfortably beating consensus’ ¥12.7bn and even our ¥13.5bn estimate which was...

Mio Kato

Japan Long Weekend Portfolio Blowout Theme Is Working Quickly

On Thursday we highlighted a number of stock pairs that had seen extreme levels of relative performance dislocations, speculating that this was due...

Mio Kato

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