Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

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

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 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

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 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

Event-Driven

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.

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

We previously highlighted the strong skew between names which have a heavy weighting in Topix vs. those which have a heavy weighting in the Nikkei. Given extreme looking skews even in individual names it does not seem unreasonable that some relative value fund(s) are exiting positions aggressively prior to what could be a key long weekend for Japan with potentially heavy volatility on Monday. We examine some striking performance discrepancies below.

We previously highlighted the strong skew between names which have a heavy weighting in Topix vs. those which have a heavy weighting in the Nikkei. Given extreme looking skews even in individual names it does not seem unreasonable that some relative value fund(s) are exiting positions aggressively prior to what could be a key long weekend for Japan with potentially heavy volatility on Monday. We examine some striking performance discrepancies below.

What Is Getting Blown Out of Portfolios Before the Long Weekend in Japan?

On 26 Jan, Koei-Tecmo reported underwhelming results with revenue of ¥10.11bn and OP of ¥2.99bn coming in below the consensus estimates of ¥10.47bn (results -3.4% vs. consensus) and ¥3.88bn (results -22.9% vs. consensus). The noticeable miss at the OP level was somewhat surprising given relatively strong results for online and mobile gaming so we have delved into the numbers carefully below.

On 26 Jan, Koei-Tecmo reported underwhelming results with revenue of ¥10.11bn and OP of ¥2.99bn coming in below the consensus estimates of ¥10.47bn (results -3.4% vs. consensus) and ¥3.88bn (results -22.9% vs. consensus). The noticeable miss at the OP level was somewhat surprising given relatively strong results for online and mobile gaming so we have delved into the numbers carefully below. 

Koei-Tecmo – Deciphering the Profitability of Sangokushi Strategy

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)

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

What Is Getting Blown Out of Portfolios Before the Long Weekend in Japan?

We previously highlighted the strong skew between names which have a heavy weighting in Topix vs. those which have a heavy weighting in the Nikkei....

Mio Kato

Koei-Tecmo – Deciphering the Profitability of Sangokushi Strategy

On 26 Jan, Koei-Tecmo reported underwhelming results with revenue of ¥10.11bn and OP of ¥2.99bn coming in below the consensus estimates of ¥10.47bn...

Mio Kato

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