Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<p>The housewares company <a href="https://www.smartkarma.com/entities/lixil-group-corp" target="_blank" data-smartkarma-citation="entities:454:1" rel="noopener">Lixil Group (5938 JP)</a> was formed as we know it through the merger of Tostem (which made doors, windows, curtain wall (for high rises), sash, and shutters) with INAX which made porcelain and FRP toilets and sinks and plumbing fixtures) in 2001. That was renamed JS Group in 2004 and from then until just after the GFC JFC continued with bolt-on acquisitions (American Standard Asia Pacific (porcelain toilets), Sunwave (stainless steel sinks, etc for pro use), Shin Nikkei, Toyo Exterior, etc) then in 2011 merged them all together to form LIXIL Group. </p><p><a href="https://www.smartkarma.com/entities/lixil-viva" target="_blank" data-smartkarma-citation="entities:24060:1" rel="noopener">LIXIL VIVA (3564 JP)</a> started its life as a subsidiary of Toyo Sash which launched what in Japan is called a DIY store or a "home center" (something akin to a Home Depot), branded "Viva Home", in the late 1970s. It was early. In the 1980s it listed itself, and in the early 1990s, it rebranded itself Tostem Viva when Toyo Sash itself rebranded itself as Tostem. In 2001, it merged with Tostem and Inax to form Tostem Inax which, as above, became JS Group and then LIXIL Group. </p><p>LIXIL IPOed LIXIL VIVA in April 2017, and climbed until TOPIX inclusion week at the end of May 2017, and then the shares fell for five months, falling well below the IPO price (¥2050/share). The shares rallied into the end of the fiscal year, regaining the IPO price for several weeks before falling 45% to the ¥1200/share area in summer 2019. The goal had been for LIXIL Group to cut LIXIL VIVA loose, because it was deemed something of a conflict of interest to have a home furnishings company owning a low-priced retailer of both its items (which might put its stores in competition with its distributor network) and competitors' items, however the appetite for a large offering was never deemed right, and eventually a private sale was looked at. The search for a buyer started in earnest several months ago, with reports suggesting the field had been winnowed down to a half dozen by March when markets started getting hairy - split between strategics and financial buyers. </p><h2>The NEW News Today</h2><p>Today, <a href="https://www.smartkarma.com/entities/arcland-sakamoto-co-ltd" target="_blank" data-smartkarma-citation="entities:10395:1" rel="noopener">Arcland Sakamoto (9842 JP)</a>, <a href="https://www.smartkarma.com/entities/lixil-viva" target="_blank" data-smartkarma-citation="entities:24060:1" rel="noopener">LIXIL VIVA (3564 JP)</a>, and <a href="https://www.smartkarma.com/entities/lixil-group-corp" target="_blank" data-smartkarma-citation="entities:454:1" rel="noopener">Lixil Group (5938 JP)</a> announced a multi-leg agreement where Arcland Sakamoto would launch a Tender Offer to take over enough shares in LIXIL Viva so that after the Tender Offer, Arcland and LIXIL Group would own enough to squeeze out minorities. Then Arcland will inject some capital into LIXIL Viva, enabling it to buy back shares from LIXIL Group so that Arcland will be the sole owner.</p><p>There are a couple of specific reasons for doing it this way which only support an improved price for minorities, so the structure is not terribly objectionable, but the minimum threshold for tender success being only 12% out of the ~45% minority ownership is a part of Japanese tender offers on companies with large incumbent stake holdings which should be fixed at some point.</p><div class="content-remarks"><p>(hint: if you investors don't demand the change to better defend minorities, companies won't volunteer it on their own). </p></div><p>This sales process hasn't exactly been conducted in secret, but even then, the premium vs the last week and month is pretty miserly. One could imagine <em>some</em> people getting upset. It is not clear people <em>should</em> be upset. It was well-signalled, it's a tough business, an auction was conducted with multiple participants, and while LIXIL Viva may be the largest and best example of how to run this business, they are not cheap.</p><p><em>This should get done, but it may be interesting to watch. </em></p>

The housewares company Lixil Group (5938 JP) was formed as we know it through the merger of Tostem (which made doors, windows, curtain wall (for high rises), sash, and shutters) with INAX which made porcelain and FRP toilets and sinks and plumbing fixtures) in 2001. That was renamed JS Group in 2004 and from then until just after the GFC JFC continued with bolt-on acquisitions (American Standard Asia Pacific (porcelain toilets), Sunwave (stainless steel sinks, etc for pro use), Shin Nikkei, Toyo Exterior, etc) then in 2011 merged them all together to form LIXIL Group. LIXIL VIVA (3564 JP) started its life as a subsidiary of Toyo Sash which launched what in Japan is called a DIY store or a "home center" (something akin to a Home Depot), branded "Viva Home", in the late 1970s. It was early. In the 1980s it listed itself, and in the early 1990s, it rebranded itself Tostem Viva when Toyo Sash itself rebranded itself as Tostem. In 2001, it merged with Tostem and Inax to form Tostem Inax which, as above, became JS Group and then LIXIL Group. LIXIL IPOed LIXIL VIVA in April 2017, and climbed until TOPIX inclusion week at the end of May 2017, and then the shares fell for five months, falling well below the IPO price (¥2050/share). The shares rallied into the end of the fiscal year, regaining the IPO price for several weeks before falling 45% to the ¥1200/share area in summer 2019. The goal had been for LIXIL Group to cut LIXIL VIVA loose, because it was deemed something of a conflict of interest to have a home furnishings company owning a low-priced retailer of both its items (which might put its stores in competition with its distributor network) and competitors' items, however the appetite for a large offering was never deemed right, and eventually a private sale was looked at. The search for a buyer started in earnest several months ago, with reports suggesting the field had been winnowed down to a half dozen by March when markets started getting hairy - split between strategics and financial buyers. The NEW News TodayToday, Arcland Sakamoto (9842 JP), LIXIL VIVA (3564 JP), and Lixil Group (5938 JP) announced a multi-leg agreement where Arcland Sakamoto would launch a Tender Offer to take over enough shares in LIXIL Viva so that after the Tender Offer, Arcland and LIXIL Group would own enough to squeeze out minorities. Then Arcland will inject some capital into LIXIL Viva, enabling it to buy back shares from LIXIL Group so that Arcland will be the sole owner.There are a couple of specific reasons for doing it this way which only support an improved price for minorities, so the structure is not terribly objectionable, but the minimum threshold for tender success being only 12% out of the ~45% minority ownership is a part of Japanese tender offers on companies with large incumbent stake holdings which should be fixed at some point.(hint: if you investors don't demand the change to better defend minorities, companies won't volunteer it on their own). This sales process hasn't exactly been conducted in secret, but even then, the premium vs the last week and month is pretty miserly. One could imagine some people getting upset. It is not clear people should be upset. It was well-signalled, it's a tough business, an auction was conducted with multiple participants, and while LIXIL Viva may be the largest and best example of how to run this business, they are not cheap.This should get done, but it may be interesting to watch. 

Lixil Viva (3564 JP) Takeout Tender Offer

'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/000/131/100/original/File%202020-05-04%207%2017%2056.jpeg?1588544362" class="editor-image img-responsive" data-smartkarma-image-id="131100"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/131/101/original/File%202020-05-04%207%2017%2024.jpeg?1588544387" class="editor-image img-responsive" data-smartkarma-image-id="131101"></figure><div class="content-caption">Source<a href="http://www.ourworldindata.org" target="_blank" rel="noopener"> • ourworldindata.org</a>
</div><p><strong>NO QUARTER</strong> - Since the declaration of a nationwide state of emergency less than three weeks ago, Japan has seen a modest decline in the number of daily confirmed new cases of COVID-19, however, the number of attributed deaths continues to trend upwards. As we have been suggesting, Prime Minister Abe will, therefore, announce an extension of the restrictions until the end of May. Some measures will be eased outside the eighteen most-affected prefectures, but travel across prefectural borders will be discouraged.  For many businesses in Japan, the current quarter will see no revenues and the overly-strict and bureaucratic compensation schemes will be insufficient and delayed. In the last few days, several suicides among restaurant owners have been reported. A second supplementary budget will be required before July to avoid a permanent loss of economic and social capital. </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/131/152/original/File%202020-05-03%208%2038%2020.jpeg?1588566632" class="editor-image img-responsive" data-smartkarma-image-id="131152"></figure><div class="content-caption">Source • ourworldindata.org</div><p><strong>NO WAY OUT? -</strong> For Japan to exit its state of emergency by the end of May will require an ability to trace cases beyond just several 'clusters'. Although the previous fax-based procedures have been streamlined, Japan is the testing 'outlier' amongst the developed world. If Japan does not improve its testing capability over the next four weeks, further extensions may become necessary.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/131/102/original/2020-05-03_09-16-26.png?1588546147" class="editor-image img-responsive" data-smartkarma-image-id="131102"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>EARLY DAYS</strong> - With just 411 or 13% of the March/June/September/December cohort of companies having announced results, the declines in trailing-twelve-month (TTM) profits are modest. Forecast revisions are a sign of what is to come after the Golden Week holidays end this Thursday. The 'gap' between TTM results and forecasts is the widest since 2009. Forecast Operating Income is now 18% below the 2019 peak, while the same differential for Net Income is 31%. The changes in operating and net margins are -153bps and -188bps, respectively. The market aggregate multiple of 17.1x is close to a two-year high but is still half the pre-Abenomics decade average. <strong>We expect the COVID-19 trough TTM Net Income to be approximately ¥12.5 trillion, similar to the ¥13.4 trillion average aggregate Net Income for 2002-12. Using the average annual multiple for that period of 34x suggests a total market value 'low' of ¥425 trillion, 25% below Friday's close.</strong></p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/131/105/original/2020-05-04_08-41-08.png?1588549288" class="editor-image img-responsive" data-smartkarma-image-id="131105"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>SECTOR RESULTS &amp; REVISION SCORE TIMELINE</strong> - The leading and lagging Sectors as measured by Our Results &amp; Revision Score have some striking similarities and differences from 2008/9.  During the COVID crisis, the <strong>Internet Content &amp; Services</strong> Sector is performing as well in 2008/9. The Sector will soon 'overtake' the <strong>Information Technology</strong> Sector, which will suffer from corporate spending cutback, as is also try for <strong>Commercial Services</strong>. <strong>Metals</strong>, <strong>Machinery</strong>, and <strong>Electrical Equipment,</strong> are repeating their GFC declines. <strong>Technology Hardware</strong> will play 'catch up' on the downside in the second 'wave'. Perhaps the most-directly-affected Sector has yet to see any significant decline, primarily because many companies have given up forecasting and their Score is mostly backwards-looking. As COVID-19 is a social and not, as yet, a financial crisis, the <strong>Consumer Services</strong> and<strong> Transportation &amp; Logistics</strong> Sectors have replaced the<strong> Banks</strong> and<strong> Non-Bank Finance</strong> Sectors on the downside on this occasion. The extent to which the latter two are impacted remains to be seen.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/131/138/original/2020-05-04_11-15-00.png?1588558519" class="editor-image img-responsive" data-smartkarma-image-id="131138"></figure><div class="content-caption">Source • Japan Analytics</div><p>In the<strong> DETAIL </strong>below, we shall review the results, revisions and initial forecast announcements made on Friday by larger-cap companies.  On a relatively quiet day ahead of three consecutive public holidays, the <em>positive/neutral/negative</em> balance of the 33 results announcements was <em>13:1:19</em>. The net change in Score was -31. For the 40 revisions/initial forecasts, the split was<em> 11:2:27</em>  and the average Score was -7. Of the nineteen companies declaring full-year results, ten made interim or annual forecasts for the current year. <a href="https://www.smartkarma.com/entities/tokyu-recreation-co-ltd" target="_blank" data-smartkarma-citation="entities:20602:1" rel="noopener">Tokyu Recreation (9631 JP)</a> and <a href="https://www.smartkarma.com/entities/space-co-ltd" target="_blank" data-smartkarma-citation="entities:10550:1" rel="noopener">Space (9622 JP)</a> withdrew their forecasts for the current year. </p>

Source • ourworldindata.org
NO QUARTER - Since the declaration of a nationwide state of emergency less than three weeks ago, Japan has seen a modest decline in the number of daily confirmed new cases of COVID-19, however, the number of attributed deaths continues to trend upwards. As we have been suggesting, Prime Minister Abe will, therefore, announce an extension of the restrictions until the end of May. Some measures will be eased outside the eighteen most-affected prefectures, but travel across prefectural borders will be discouraged.  For many businesses in Japan, the current quarter will see no revenues and the overly-strict and bureaucratic compensation schemes will be insufficient and delayed. In the last few days, several suicides among restaurant owners have been reported. A second supplementary budget will be required before July to avoid a permanent loss of economic and social capital. Source • ourworldindata.orgNO WAY OUT? - For Japan to exit its state of emergency by the end of May will require an ability to trace cases beyond just several 'clusters'. Although the previous fax-based procedures have been streamlined, Japan is the testing 'outlier' amongst the developed world. If Japan does not improve its testing capability over the next four weeks, further extensions may become necessary.Source • Japan AnalyticsEARLY DAYS - With just 411 or 13% of the March/June/September/December cohort of companies having announced results, the declines in trailing-twelve-month (TTM) profits are modest. Forecast revisions are a sign of what is to come after the Golden Week holidays end this Thursday. The 'gap' between TTM results and forecasts is the widest since 2009. Forecast Operating Income is now 18% below the 2019 peak, while the same differential for Net Income is 31%. The changes in operating and net margins are -153bps and -188bps, respectively. The market aggregate multiple of 17.1x is close to a two-year high but is still half the pre-Abenomics decade average. We expect the COVID-19 trough TTM Net Income to be approximately ¥12.5 trillion, similar to the ¥13.4 trillion average aggregate Net Income for 2002-12. Using the average annual multiple for that period of 34x suggests a total market value 'low' of ¥425 trillion, 25% below Friday's close.Source • Japan AnalyticsSECTOR RESULTS &amp; REVISION SCORE TIMELINE - The leading and lagging Sectors as measured by Our Results &amp; Revision Score have some striking similarities and differences from 2008/9.  During the COVID crisis, the Internet Content &amp; Services Sector is performing as well in 2008/9. The Sector will soon 'overtake' the Information Technology Sector, which will suffer from corporate spending cutback, as is also try for Commercial Services. Metals, Machinery, and Electrical Equipment, are repeating their GFC declines. Technology Hardware will play 'catch up' on the downside in the second 'wave'. Perhaps the most-directly-affected Sector has yet to see any significant decline, primarily because many companies have given up forecasting and their Score is mostly backwards-looking. As COVID-19 is a social and not, as yet, a financial crisis, the Consumer Services and Transportation &amp; Logistics Sectors have replaced the Banks and Non-Bank Finance Sectors on the downside on this occasion. The extent to which the latter two are impacted remains to be seen.Source • Japan AnalyticsIn the DETAIL below, we shall review the results, revisions and initial forecast announcements made on Friday by larger-cap companies.  On a relatively quiet day ahead of three consecutive public holidays, the positive/neutral/negative balance of the 33 results announcements was 13:1:19. The net change in Score was -31. For the 40 revisions/initial forecasts, the split was 11:2:27  and the average Score was -7. Of the nineteen companies declaring full-year results, ten made interim or annual forecasts for the current year. Tokyu Recreation (9631 JP) and Space (9622 JP) withdrew their forecasts for the current year. 

🇯🇵 JAPAN MARKET UPDATE 4th May - No Quarter

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

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/121/977/original/2020-03-09_14-29-36.png?1583731808" class="editor-image img-responsive" data-smartkarma-image-id="121977"></figure><div class="content-caption">Source • Stoxx.com</div><p style="text-align: left;"><strong>ALTMAN'S Z-SCORE</strong> - Dr Edward Altman's Z-Score has been in use for over 50 years as a statistical model to calculate the probability of bankruptcy which built on the work of William Beaver and R.A. Fisher. Altman's original article (attached below) was published in the September 1968 issue of the Journal of Finance when he was an assistant professor of finance at NYU Stern.  The 'classic' Z-Score sampled publically-traded manufacturing companies. Later versions were formulated for private companies, non-manufacturing companies and emerging markets.  The model is between 80% and 90% accurate in predicting bankruptcy one year ahead of the event, while the rate of false positives has been between 15% and 20%.</p><p style="text-align: left;"><strong>APPLICATION TO JAPAN</strong> - We have been using Altman Z-Scores in Japan since the mid-1980s. We have found the Scores to be reasonably predictive, as has been confirmed by several academic papers, including  <a href="https://www.semanticscholar.org/paper/A-Model-of-Bankruptcy-Prediction%3A-Calibration-of/5565168f75b578ba28115ef314acbdd387f82483" target="_blank" rel="noopener">Gurau (2013)</a>. The persistence of a large number of 'zombie' companies supported by banks or keiretsu 'relatives' has, however, reduced the overall 'hit' rate for larger listed companies. The following charts show a timeline of the Altman Z-Score and Market Capitalisation for several memorable Japanese corporate bankruptcies. </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/122/005/original/2020-03-09_15-53-11.png?1583736804" class="editor-image img-responsive" data-smartkarma-image-id="122005"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/122/006/original/2020-03-09_15-54-52.png?1583736903" class="editor-image img-responsive" data-smartkarma-image-id="122006"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/122/007/original/2020-03-09_15-56-58.png?1583737032" class="editor-image img-responsive" data-smartkarma-image-id="122007"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/122/009/original/2020-03-09_15-59-08.png?1583737161" class="editor-image img-responsive" data-smartkarma-image-id="122009"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/122/011/original/2020-03-09_16-03-28.png?1583737425" class="editor-image img-responsive" data-smartkarma-image-id="122011"></figure><div class="content-caption">Source • Japan Analytics</div><div class="content-highlight"><p>This Insight is the second part of a three-part series attempting to highlight those Japanese companies that at the highest risk from the 2020 <em>Covid-19 recession</em>. The first focused on the<strong><a href="https://www.smartkarma.com/insights/japan-who-s-swimming-naked-part-1-audit-score" target="_blank" data-smartkarma-citation="insights:37265" rel="noopener">Audit Score</a></strong>, while a forthcoming Insight will look at <strong>Cumulative Cash Flows.</strong></p></div>

Source • Stoxx.comALTMAN'S Z-SCORE - Dr Edward Altman's Z-Score has been in use for over 50 years as a statistical model to calculate the probability of bankruptcy which built on the work of William Beaver and R.A. Fisher. Altman's original article (attached below) was published in the September 1968 issue of the Journal of Finance when he was an assistant professor of finance at NYU Stern.  The 'classic' Z-Score sampled publically-traded manufacturing companies. Later versions were formulated for private companies, non-manufacturing companies and emerging markets.  The model is between 80% and 90% accurate in predicting bankruptcy one year ahead of the event, while the rate of false positives has been between 15% and 20%.APPLICATION TO JAPAN - We have been using Altman Z-Scores in Japan since the mid-1980s. We have found the Scores to be reasonably predictive, as has been confirmed by several academic papers, including  Gurau (2013). The persistence of a large number of 'zombie' companies supported by banks or keiretsu 'relatives' has, however, reduced the overall 'hit' rate for larger listed companies. The following charts show a timeline of the Altman Z-Score and Market Capitalisation for several memorable Japanese corporate bankruptcies. Source • Japan AnalyticsThis Insight is the second part of a three-part series attempting to highlight those Japanese companies that at the highest risk from the 2020 Covid-19 recession. The first focused on theAudit Score, while a forthcoming Insight will look at Cumulative Cash Flows.

🇯🇵 JAPAN • Who’s Swimming Naked? > Part 2: Altman Z-Score

<div>
<p style="text-align: center;"><strong>• RELATIVE PRICE SCORE - COMPANIES •</strong></p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/110/839/original/2019-12-17_10-16-56.png?1576545466" class="editor-image img-responsive" data-smartkarma-image-id="110839"></figure><div class="content-caption">Source: Japan Analytics</div>
<p><strong>COMPANY RELATIVE PRICE SCORE OUTLIERS </strong>- The Relative Price Score (RPS) is a measure of price performance relative to TOPIX calculated by comparing the current deviation with the mean absolute deviation of monthly and daily relative share prices over the last 28 years and 24 months, respectively. As all companies are put on a comparable scale, 'Overbought' and 'Oversold' outliers and short-term changes in scoring can reveal attractive trading opportunities. Company outlier thresholds are set at +4 &amp; -2 and equate to the top and bottom first-to-second percentiles of historical observations from which mean reversion takes a matter of months. </p>
</div><div><div><p>Following on from our previous Insight <a href="https://www.smartkarma.com/insights/japan-december-sector-peer-group-relative-price-scores-from-defensives-to-cylicals" target="_blank" data-smartkarma-citation="insights:35266" rel="noopener">December Sector &amp; Peer Group Relative Price Scores - From Defensives to Cylicals</a> which covered <strong>Sectors</strong> and <strong>Peer Groups</strong>, in the <strong>DETAIL</strong> section below, we update our list of Overbought and Oversold large-cap companies (market capitalisation over ¥100b) with the current <strong>Very Overbought</strong> (RPS&gt;5), <strong>Too-Late-To-Buy</strong> (RPS &gt;4.5) and <strong>Oversold</strong> (RPS &lt;-2) companies, as well as the largest positive and negative <strong>3-month Changes</strong> in RPS adding some stock-specific comments in each category.</p></div></div>


• RELATIVE PRICE SCORE - COMPANIES •
Source: Japan Analytics
COMPANY RELATIVE PRICE SCORE OUTLIERS - The Relative Price Score (RPS) is a measure of price performance relative to TOPIX calculated by comparing the current deviation with the mean absolute deviation of monthly and daily relative share prices over the last 28 years and 24 months, respectively. As all companies are put on a comparable scale, 'Overbought' and 'Oversold' outliers and short-term changes in scoring can reveal attractive trading opportunities. Company outlier thresholds are set at +4 &amp; -2 and equate to the top and bottom first-to-second percentiles of historical observations from which mean reversion takes a matter of months. 
Following on from our previous Insight December Sector &amp; Peer Group Relative Price Scores - From Defensives to Cylicals which covered Sectors and Peer Groups, in the DETAIL section below, we update our list of Overbought and Oversold large-cap companies (market capitalisation over ¥100b) with the current Very Overbought (RPS&gt;5), Too-Late-To-Buy (RPS &gt;4.5) and Oversold (RPS &lt;-2) companies, as well as the largest positive and negative 3-month Changes in RPS adding some stock-specific comments in each category.

🇯🇵 JAPAN • December Company Relative Price Scores - Opportunities in the Outliers

<p style="text-align: center;"><strong>• RELATIVE PRICE SCORE</strong> •</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/098/178/original/2019-09-06_09-42-35.png?1567730614" class="editor-image img-responsive" data-smartkarma-image-id="98178"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>INTRODUCTION </strong>- The Relative Price Score (RPS) is a measure of stock price performance relative to TOPIX calculated by comparing the current deviation with the mean absolute deviation of monthly and daily relative share prices. As all companies are thus on a comparable scale, 'Overbought' and 'Oversold' outliers and changes in scoring can reveal short-term and longer-term trading opportunities. Company outlier thresholds are set at<strong> +4</strong> &amp; <strong>-2</strong> and equate to the top and bottom first-to-second percentiles of historical observations from which mean reversion takes a matter of months. RPS outliers with a Score of greater than 10.0 are rare outside of the 2000 tech 'bubble'. <a href="https://www.smartkarma.com/entities/lasertec-corp" target="_blank" data-smartkarma-citation="entities:4126:1" rel="noopener">Lasertec (6920 JP)</a> has just joined <a href="https://www.smartkarma.com/entities/goldwin-inc" target="_blank" data-smartkarma-citation="entities:410:1" rel="noopener">Goldwin (8111 JP)</a> in being only the second large-cap RPS 'ten-baggers' in the last twenty years. </p><div class="content-highlight"><p><strong>This insight updates our list of Overbought and Oversold companies, reviews the best and worst-performing companies in terms of RPS over the last three months and adds some specific comments on stocks on each category.</strong></p></div><div></div><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/098/046/original/2019-09-05_12-46-46.png?1567655232" class="editor-image img-responsive" data-smartkarma-image-id="98046"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>STATISTICS</strong> - Currently, of the 3,706 listed companies for which monthly RPS data is available, 81 companies are 'Overbought', and 133 are 'Oversold' - 2.45% and 3.8%, respectively of the total. For the 737 companies with a market capitalisation of over ¥100b, there are 44 'Overbought' and 37 'Oversold' companies, 6% and 5%, respectively.</p><hr><p style="text-align: center;"><strong>• RELATIVE PRICE SCORE 'TOPS' •</strong></p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/098/055/original/2019-09-05_13-06-30.png?1567656423" class="editor-image img-responsive" data-smartkarma-image-id="98055"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>RPS 'TOPS'</strong> - In the last two years, 388 companies have achieved an RPS of '4' or more and the average Overbought 'persistence' is 42 days. 1.26% of the total of 1.94 million traded stock days were by companies with an RPS of over 4. For companies with a market capitalisation higher than ¥100b, the numbers are 95 companies and 74 days - demonstrating the superior persistence of large capitalisation companies in this regard. The chart above highlights the track record of all 95 large caps which are some point were Overbought in the last twenty-four months and illustrates the extreme outlier status of Goldwin and Lasertec.</p><p><strong>RPS NEGATIVE MEAN REVERSION</strong> - Some examples of RPS mean reversion in the last three months have been <a href="https://www.smartkarma.com/entities/suzuken-co-ltd" target="_blank" data-smartkarma-citation="entities:14996:1" rel="noopener">Suzuken (9987 JP)</a>, <a href="https://www.smartkarma.com/entities/infomart-corp" target="_blank" data-smartkarma-citation="entities:1301:1" rel="noopener">Infomart (2492 JP)</a>, <a href="https://www.smartkarma.com/entities/nichirei-corp" target="_blank" data-smartkarma-citation="entities:7168:1" rel="noopener">Nichirei (2871 JP)</a>, and <a href="https://www.smartkarma.com/entities/fancl-corp" target="_blank" data-smartkarma-citation="entities:15862:1" rel="noopener">Fancl (4921 JP)</a>. </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/098/096/original/2019-09-05_16-25-39.png?1567668352" class="editor-image img-responsive" data-smartkarma-image-id="98096"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/098/097/original/2019-09-05_16-27-09.png?1567668441" class="editor-image img-responsive" data-smartkarma-image-id="98097"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/098/098/original/2019-09-05_16-28-42.png?1567668548" class="editor-image img-responsive" data-smartkarma-image-id="98098"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/098/099/original/2019-09-05_16-30-29.png?1567668640" class="editor-image img-responsive" data-smartkarma-image-id="98099"></figure><div class="content-caption">Source: Japan Analytics</div><hr><p style="text-align: center;"><strong>• RELATIVE PRICE SCORE 'BOTTOMS' •</strong></p><div>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/098/056/original/2019-09-05_13-12-52.png?1567656806" class="editor-image img-responsive" data-smartkarma-image-id="98056"></figure><div class="content-caption">Source: Japan Analytics</div>
</div><p><strong>RPS 'BOTTOMS'</strong> - 259 companies have seen their RPS fall to '-2' or below in the last two years, and the average Oversold 'persistence' is 83 days. 1.46% of the total of 1.94 million traded stock days were by companies with an RPS of less than -2.  For larger capitalisation companies, the numbers are 79 companies and 94 days. The chart above highlights the track record of the 79 large caps which are some point were Oversold in the last twenty-four months and illustrates the strong recovery in the<strong> REITs</strong> Sector and the continuing demise of <strong>Regional Banks</strong>.</p><p><strong>RPS POSITIVE MEAN REVERSION</strong> - Some recent examples of positive RPS mean reversions are <a href="https://www.smartkarma.com/entities/otsuka-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:12292:1" rel="noopener">Otsuka Holdings (4578 JP) </a>and <a href="https://www.smartkarma.com/entities/line-corp" target="_blank" data-smartkarma-citation="entities:22772:1" rel="noopener">LINE (3938 JP)</a>.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/098/100/original/2019-09-05_16-35-47.png?1567668972" class="editor-image img-responsive" data-smartkarma-image-id="98100"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/098/102/original/2019-09-05_16-36-50.png?1567669047" class="editor-image img-responsive" data-smartkarma-image-id="98102"></figure><div class="content-caption">Source: Japan Analytics</div><p>As we noted in our June <a href="https://www.smartkarma.com/insights/japan-relative-price-scores-overbought-oversold-companies-june-2019" target="_blank" data-smartkarma-citation="insights:30393" rel="noopener">Insight: -</a></p><blockquote><p><strong><a href="https://www.smartkarma.com/entities/line-corp" target="_blank" data-smartkarma-citation="entities:22772:1" rel="noopener">LINE (3938 JP)</a></strong>- Line has performed poorly since being featured in last year's Sohn Conference and has had negative and worsening Operating Income for each of the previous five quarters. Although there is a possibility of a double-bottom RPS 'bounce' and <strong>the company is now the most-Oversold non-financial large-cap over one year,</strong> there are no fundamental reasons to own the shares.   </p></blockquote><p>In the <strong>DETAIL </strong>section below, we list the current<strong> Very Overbought (RPS&gt;5</strong>), <strong>Too-Late-To-Buy (RPS &gt;4&lt;5)</strong> and <strong>Oversold (RPS &lt;-2)</strong> stocks as well as the most substantial three-month positive and negative changes in RPS.</p>

• RELATIVE PRICE SCORE •Source: Japan AnalyticsINTRODUCTION - The Relative Price Score (RPS) is a measure of stock price performance relative to TOPIX calculated by comparing the current deviation with the mean absolute deviation of monthly and daily relative share prices. As all companies are thus on a comparable scale, 'Overbought' and 'Oversold' outliers and changes in scoring can reveal short-term and longer-term trading opportunities. Company outlier thresholds are set at +4 &amp; -2 and equate to the top and bottom first-to-second percentiles of historical observations from which mean reversion takes a matter of months. RPS outliers with a Score of greater than 10.0 are rare outside of the 2000 tech 'bubble'. Lasertec (6920 JP) has just joined Goldwin (8111 JP) in being only the second large-cap RPS 'ten-baggers' in the last twenty years. This insight updates our list of Overbought and Oversold companies, reviews the best and worst-performing companies in terms of RPS over the last three months and adds some specific comments on stocks on each category.Source: Japan AnalyticsSTATISTICS - Currently, of the 3,706 listed companies for which monthly RPS data is available, 81 companies are 'Overbought', and 133 are 'Oversold' - 2.45% and 3.8%, respectively of the total. For the 737 companies with a market capitalisation of over ¥100b, there are 44 'Overbought' and 37 'Oversold' companies, 6% and 5%, respectively.• RELATIVE PRICE SCORE 'TOPS' •Source: Japan AnalyticsRPS 'TOPS' - In the last two years, 388 companies have achieved an RPS of '4' or more and the average Overbought 'persistence' is 42 days. 1.26% of the total of 1.94 million traded stock days were by companies with an RPS of over 4. For companies with a market capitalisation higher than ¥100b, the numbers are 95 companies and 74 days - demonstrating the superior persistence of large capitalisation companies in this regard. The chart above highlights the track record of all 95 large caps which are some point were Overbought in the last twenty-four months and illustrates the extreme outlier status of Goldwin and Lasertec.RPS NEGATIVE MEAN REVERSION - Some examples of RPS mean reversion in the last three months have been Suzuken (9987 JP), Infomart (2492 JP), Nichirei (2871 JP), and Fancl (4921 JP). Source: Japan Analytics• RELATIVE PRICE SCORE 'BOTTOMS' •
Source: Japan Analytics
RPS 'BOTTOMS' - 259 companies have seen their RPS fall to '-2' or below in the last two years, and the average Oversold 'persistence' is 83 days. 1.46% of the total of 1.94 million traded stock days were by companies with an RPS of less than -2.  For larger capitalisation companies, the numbers are 79 companies and 94 days. The chart above highlights the track record of the 79 large caps which are some point were Oversold in the last twenty-four months and illustrates the strong recovery in the REITs Sector and the continuing demise of Regional Banks.RPS POSITIVE MEAN REVERSION - Some recent examples of positive RPS mean reversions are Otsuka Holdings (4578 JP) and LINE (3938 JP).Source: Japan AnalyticsAs we noted in our June Insight: -LINE (3938 JP)- Line has performed poorly since being featured in last year's Sohn Conference and has had negative and worsening Operating Income for each of the previous five quarters. Although there is a possibility of a double-bottom RPS 'bounce' and the company is now the most-Oversold non-financial large-cap over one year, there are no fundamental reasons to own the shares.   In the DETAIL section below, we list the current Very Overbought (RPS&gt;5), Too-Late-To-Buy (RPS &gt;4&lt;5) and Oversold (RPS &lt;-2) stocks as well as the most substantial three-month positive and negative changes in RPS.

🇯🇵 Japan • September Relative Price Scores - Life at the Poles Part 2: Companies

Japan

LIXIL Group Corporation produces aluminum housing materials such as doors, windows,curtain walls, and screens.  The Company also sells interior materials and a variety of housing equipment.

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Lixil Group (5938 JP)

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Campbell Gunn

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