'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

- MARKET COMPOSITE -<div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/078/374/original/2019-02-10_16-48-41.png?1549784942" class="editor-image img-responsive" data-smartkarma-image-id="78374"></figure>Source: Japan Analytics
</div>RECOVERY TOPPING OUT - Both the market and our 'percentage-above-moving-averages' ratio peaked on 5th February and, as covered in our earlier Insight, <a href="https://www.smartkarma.com/insights/japan-results-revisions-second-cut-bottom-line-breakdown" target="_blank" data-smartkarma-citation="insights:27862">Japan: Results &amp; Revisions Second Cut - Bottom Line Breakdown</a>,  both may now head lower and retest the Christmas lows.<hr>- SECTORS -<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/078/383/original/2019-02-10_17-14-18.png?1549786476" class="editor-image img-responsive" data-smartkarma-image-id="78383"></figure><div style="text-align: left;" class="content-caption">
LEGEND: The 'sparklines' show the three-year trend in the weighted percentage above moving average relative to the Market Composite and the 'STDev' column is a measure of the variability of that relative measure. The table also provides averages for the breaks above and breaks below and the positive and negative crossovers.</div>SECTOR BREAKDOWN - The top six sectors measured by their percentage above the weighted average of 5-240 Days remain domestic and defensive. REITs, Information Technology, Media, and Utilities continue from our previous review with Transportation and Telecommunications replacing Restaurants and Healthcare. Equally predictable is the bottom half-dozen - Banks, Autos, Metals and Chemicals remain from two weeks ago, with Non-Bank Finance and Other Materials replacing Construction and Building Materials. <hr>- COMPANIES -<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/078/385/original/2019-02-10_17-31-03.png?1549787483" class="editor-image img-responsive" data-smartkarma-image-id="78385"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/078/386/original/2019-02-10_17-32-57.png?1549787590" class="editor-image img-responsive" data-smartkarma-image-id="78386"></figure><div class="content-caption">Source: Japan Analytics</div>COMPANY MOVING AVERAGE OUTLIERS - As with the Market Composite and Sectors, the Moving Average Outlier indicator uses a weighted sum of each company's share price relative to its 5-day, 20-day, 60-day, 120-day and 240-day moving averages. 'Extreme' values are weighted sums greater than 100% and less than -100%. We would caution that this indicator is best used for timing shorter-term reversals and, in many cases, higher highs and lower lows will be seen. Nevertheless, the list of negative outliers outperformed the list of positive outliers by 3% over the last two weeks with <a href="https://www.smartkarma.com/entities/24540" target="_blank" data-smartkarma-citation="entities:24540:1">SanBio (4592 JP)</a> falling by 72% and despite <a href="https://www.smartkarma.com/entities/18379" target="_blank" data-smartkarma-citation="entities:18379:1">ZOZO (3092 JP)</a> falling by a further 22%.In the DETAIL section below, we highlight the current top and bottom twenty-five larger capitalisation outliers, as well as those companies that have seen the most significant positive and negative changes in their outlier percentage in the last two weeks and provide short comments on companies of particular note. <a href="https://www.smartkarma.com/entities/4126" target="_blank" data-smartkarma-citation="entities:4126:1">Lasertec (6920 JP)</a>  is currently the most 'extreme' positive outlier, and <a href="https://www.smartkarma.com/entities/24540" target="_blank" data-smartkarma-citation="entities:24540:1">SanBio (4592 JP)</a> is the most 'extreme' negative outlier, having topped the 13th January positive outlier list.

- MARKET COMPOSITE -
Source: Japan Analytics
RECOVERY TOPPING OUT - Both the market and our 'percentage-above-moving-averages' ratio peaked on 5th February and, as covered in our earlier Insight, Japan: Results &amp; Revisions Second Cut - Bottom Line Breakdown,  both may now head lower and retest the Christmas lows.- SECTORS -
LEGEND: The 'sparklines' show the three-year trend in the weighted percentage above moving average relative to the Market Composite and the 'STDev' column is a measure of the variability of that relative measure. The table also provides averages for the breaks above and breaks below and the positive and negative crossovers.SECTOR BREAKDOWN - The top six sectors measured by their percentage above the weighted average of 5-240 Days remain domestic and defensive. REITs, Information Technology, Media, and Utilities continue from our previous review with Transportation and Telecommunications replacing Restaurants and Healthcare. Equally predictable is the bottom half-dozen - Banks, Autos, Metals and Chemicals remain from two weeks ago, with Non-Bank Finance and Other Materials replacing Construction and Building Materials. - COMPANIES -Source: Japan AnalyticsCOMPANY MOVING AVERAGE OUTLIERS - As with the Market Composite and Sectors, the Moving Average Outlier indicator uses a weighted sum of each company's share price relative to its 5-day, 20-day, 60-day, 120-day and 240-day moving averages. 'Extreme' values are weighted sums greater than 100% and less than -100%. We would caution that this indicator is best used for timing shorter-term reversals and, in many cases, higher highs and lower lows will be seen. Nevertheless, the list of negative outliers outperformed the list of positive outliers by 3% over the last two weeks with SanBio (4592 JP) falling by 72% and despite ZOZO (3092 JP) falling by a further 22%.In the DETAIL section below, we highlight the current top and bottom twenty-five larger capitalisation outliers, as well as those companies that have seen the most significant positive and negative changes in their outlier percentage in the last two weeks and provide short comments on companies of particular note. Lasertec (6920 JP)  is currently the most 'extreme' positive outlier, and SanBio (4592 JP) is the most 'extreme' negative outlier, having topped the 13th January positive outlier list.

Japan: Moving Average Outliers - Lasertec, SanBio, Digital Arts, Modec & Leopalace21

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

<a href="https://www.smartkarma.com/entities/2840" target="_blank" data-smartkarma-citation="entities:2840:1">Modec Inc (6269 JP)</a> reported strong 2018 results as operations for the year went smoothly and gross margin recovered to double digits in the fourth quarter with the company also releasing its contingency reserves resulting in a large uptick in SPC related earnings below the operating line.<table class="table table-striped"><tbody>
<tr>
<td></td>
<td>Results vs. Guidance</td>
<td>Results vs. Consensus</td>
<td>Results vs. Consensus High</td>
<td></td>
<td>Guidance vs. Consensus</td>
</tr>
<tr>
<td>OP</td>
<td>+24%</td>
<td>+16%</td>
<td>+14%</td>
<td></td>
<td>-42%</td>
</tr>
<tr>
<td>Current Profit</td>
<td>+31%</td>
<td>+24%</td>
<td>+20%</td>
<td></td>
<td>-30%</td>
</tr>
<tr>
<td>NP</td>
<td>+46%</td>
<td>+33%</td>
<td>+19%</td>
<td></td>
<td>-32%</td>
</tr>
</tbody></table>Like last year however, guidance disappointed as the company released what we consider to be lowball estimates. Nevertheless, the stock reacted positively as the strong results offset some of the recent negativity from the large fall in crude prices. We examine the degree of conservatism we see in guidance below.

Modec Inc (6269 JP) reported strong 2018 results as operations for the year went smoothly and gross margin recovered to double digits in the fourth quarter with the company also releasing its contingency reserves resulting in a large uptick in SPC related earnings below the operating line.


Results vs. Guidance
Results vs. Consensus
Results vs. Consensus High

Guidance vs. Consensus


OP
+24%
+16%
+14%

-42%


Current Profit
+31%
+24%
+20%

-30%


NP
+46%
+33%
+19%

-32%

Like last year however, guidance disappointed as the company released what we consider to be lowball estimates. Nevertheless, the stock reacted positively as the strong results offset some of the recent negativity from the large fall in crude prices. We examine the degree of conservatism we see in guidance below.

MODEC: 17% Price Jump as Results Beat, Guidance Is Lowballed

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Last Week in Event SPACE: Alpine/Alps, Renault, Takeda, Trade Me, Holcim, Toshiba, GMO

Asia Long-Short PM/Analyst

Curtis Lehnert

Every dog has its day and every thing has a price. <a href="https://www.smartkarma.com/entities/2402" target="_blank" data-smartkarma-citation="entities:2402:1">Mitsui Engineer &amp; Shipbuild (7003 JP)</a> has been a dog that hasn't had its day in a long, long time. Currently trading at 56% discount to its Sum-of-the-Parts value and .46x P/B, the stock could double and still trade at a 8% discount to its liquidation value. After reporting that the company would incur significant losses of JPY 41 billion at an Indonesian thermal power plant project, the stock plunged 42% and the stub now stands 2.4 Z-scores below its long-term average.
Despite the poor state of Japanese engineering and shipbuilding companies, there remains a price that presents compelling value to investors. In this insight, I will detail the present value proposition to owning the Mitsui E&amp;S stub and discuss the following topics:
I. The Trade
II. The Industry
III. The Stub
IV. Financials

Every dog has its day and every thing has a price. Mitsui Engineer &amp; Shipbuild (7003 JP) has been a dog that hasn't had its day in a long, long time. Currently trading at 56% discount to its Sum-of-the-Parts value and .46x P/B, the stock could double and still trade at a 8% discount to its liquidation value. After reporting that the company would incur significant losses of JPY 41 billion at an Indonesian thermal power plant project, the stock plunged 42% and the stub now stands 2.4 Z-scores below its long-term average.
Despite the poor state of Japanese engineering and shipbuilding companies, there remains a price that presents compelling value to investors. In this insight, I will detail the present value proposition to owning the Mitsui E&amp;S stub and discuss the following topics:
I. The Trade
II. The Industry
III. The Stub
IV. Financials

TRADE IDEA: Mitsui E&S (7003 JP) Stub - Every Dog Has Its Day

<a href="https://www.smartkarma.com/entities/2840" target="_blank" data-smartkarma-citation="entities:2840:1">Modec Inc (6269 JP)</a> has <a href="http://www.modec.com/news/pdf/20181011_pr_enimexico_en.pdf" target="_blank">won an order for an FPSO in Mexico including a 15+5 year charter</a>. The company was bidding against  <a href="https://www.smartkarma.com/entities/17506" target="_blank" data-smartkarma-citation="entities:17506:1">Bumi Armada (BAB MK)</a> and <a href="https://www.smartkarma.com/entities/3252" target="_blank" data-smartkarma-citation="entities:3252:1">Yinson Holdings (YNS MK)</a> which are generally highly cost competitive but managed to win the bid anyway, perhaps thanks to the slightly larger size of the project (90k barrels per day). This should help keep the company's backlog above ¥1,000bn at the end of this year and fills about half of the company's capacity with several more projects which could be won within the next 6-12 months.

Modec Inc (6269 JP) has won an order for an FPSO in Mexico including a 15+5 year charter. The company was bidding against  Bumi Armada (BAB MK) and Yinson Holdings (YNS MK) which are generally highly cost competitive but managed to win the bid anyway, perhaps thanks to the slightly larger size of the project (90k barrels per day). This should help keep the company's backlog above ¥1,000bn at the end of this year and fills about half of the company's capacity with several more projects which could be won within the next 6-12 months.

MODEC: Order Win in Mexico Is a Positive, Stock Rebounds 7% as MS Initiates with Buy

Japan

MODEC, INC. manufactures petroleum and natural gas production machinery.  The Company specializes in extraction machinery for marine use, including semi-submersible and fixed platform types, and also machinery as on-board equipment on ships.

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Modec Inc (6269 JP)

Japan: Moving Average Outliers - Lasertec, SanBio, Digital Arts, Modec & Leopalace21

- MARKET COMPOSITE -RECOVERY TOPPING OUT - Both the market and our 'percentage-above-moving-averages' ratio peaked on 5th February and, as covered...

Campbell Gunn

MODEC: 17% Price Jump as Results Beat, Guidance Is Lowballed

Modec Inc (6269 JP) reported strong 2018 results as operations for the year went smoothly and gross margin recovered to double digits in the fourth...

Mio Kato

Last Week in Event SPACE: Alpine/Alps, Renault, Takeda, Trade Me, Holcim, Toshiba, GMO

Last Week in Event SPACE ... In the sordid and ongoing war for the hearts and minds of investors in Alpine Electronics (6816 JP), ISS says take...

David Blennerhassett

TRADE IDEA: Mitsui E&S (7003 JP) Stub - Every Dog Has Its Day

Every dog has its day and every thing has a price. Mitsui Engineer & Shipbuild (7003 JP) has been a dog that hasn't had its day in a long, long...

Curtis Lehnert

MODEC: Order Win in Mexico Is a Positive, Stock Rebounds 7% as MS Initiates with Buy

Modec Inc (6269 JP) has won an order for an FPSO in Mexico including a 15+5 year charter. The company was bidding against Bumi Armada (BAB MK) and...

Mio Kato

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