'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.

Quantitative Analysis

<div>
• RELATIVE PRICE SCORE •
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/160/735/original/2020-09-23_11-03-49.png?1600826665" class="editor-image img-responsive" data-smartkarma-image-id="160735"></figure><div class="content-caption">Source for all charts &amp; tables: Japan Analytics</div>
<a href="https://www.dropbox.com/s/6h3m1giwbtzcupg/2020-09-23_11-03-49.png?dl=0" target="_blank" rel="noopener">PEAK OUTLIER</a> - Since the onset of  COVID-19 in March, the degree of polarisation in the Japanese equity market as measured by our Relative Price Score [definition below] has increased significantly. Although only 3.1% and 5.1% of listed companies are Overbought and Oversold, respectively, their market weight represented is 10.8% and 6.2%. Such extreme outlier weightings have not occurred since the technology 'bubble' of 2000, and, since then, only during the 2008/9 financial crisis. Investors have increasingly held and bid up perceived long-term domestic non-manufacturing 'winners' without much regard for valuation while discarding Japan's manufacturers, and transportation, utility and energy companies as well as insurers and banks.  
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/160/736/original/2020-09-23_11-11-07.png?1600827080" class="editor-image img-responsive" data-smartkarma-image-id="160736"></figure>
</div>SECTOR TIMELINE - The twenty-eight-year history of Sector Relative Price Scores illustrates the ebbs and flows of investment themes in the market, from the 2000 Technology 'bubble' to the REIT and Real Estate peak of 2013/14, the Healthcare and FB&amp;T market of 2016/17. On the downside, there is greater Oversold 'persistence' in the Energy, Banks, Multi-Industry ( <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>  and Utilities Sectors. Currently, nine Sectors are Overbought, and four are Oversold - thirty-year and twenty-year highs, respectively.  <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/160/741/original/2020-09-23_11-39-24.png?1600828791" class="editor-image img-responsive" data-smartkarma-image-id="160741"></figure>In the DETAIL section below, we provide an update on  Sector, Peer Group and individual company Relative Price Score trends and outliers and make some stock-specific comments.<div class="content-highlight">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 on a comparable scale, 'Overbought' and 'Oversold' outliers and short-term changes in scoring can offer some trading opportunities. The data for all 3,883 currently-listed Companies is cap-weight-aggregated into Relative Price Scores for our 328 Peer Groups and 30 Sectors. The Overbought and Oversold outlier 'thresholds are set' at +4 &amp; -2 for Companies, +3 &amp; -1.5 for Peer Groups and +2 and -1 for Sectors, respectively. These thresholds equate with the top and bottom percentiles of over 3.2 million observations.</div>


• RELATIVE PRICE SCORE •
Source for all charts &amp; tables: Japan Analytics
PEAK OUTLIER - Since the onset of  COVID-19 in March, the degree of polarisation in the Japanese equity market as measured by our Relative Price Score [definition below] has increased significantly. Although only 3.1% and 5.1% of listed companies are Overbought and Oversold, respectively, their market weight represented is 10.8% and 6.2%. Such extreme outlier weightings have not occurred since the technology 'bubble' of 2000, and, since then, only during the 2008/9 financial crisis. Investors have increasingly held and bid up perceived long-term domestic non-manufacturing 'winners' without much regard for valuation while discarding Japan's manufacturers, and transportation, utility and energy companies as well as insurers and banks.  

SECTOR TIMELINE - The twenty-eight-year history of Sector Relative Price Scores illustrates the ebbs and flows of investment themes in the market, from the 2000 Technology 'bubble' to the REIT and Real Estate peak of 2013/14, the Healthcare and FB&amp;T market of 2016/17. On the downside, there is greater Oversold 'persistence' in the Energy, Banks, Multi-Industry ( Japan Post (6178 JP))  and Utilities Sectors. Currently, nine Sectors are Overbought, and four are Oversold - thirty-year and twenty-year highs, respectively.  In the DETAIL section below, we provide an update on  Sector, Peer Group and individual company Relative Price Score trends and outliers and make some stock-specific comments.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 on a comparable scale, 'Overbought' and 'Oversold' outliers and short-term changes in scoring can offer some trading opportunities. The data for all 3,883 currently-listed Companies is cap-weight-aggregated into Relative Price Scores for our 328 Peer Groups and 30 Sectors. The Overbought and Oversold outlier 'thresholds are set' at +4 &amp; -2 for Companies, +3 &amp; -1.5 for Peer Groups and +2 and -1 for Sectors, respectively. These thresholds equate with the top and bottom percentiles of over 3.2 million observations.

🇯🇵 JAPAN • September Relative Price Scores - Profiting from Outlier Mean Reversion

Thematic (Sector/Industry)

<div>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/148/784/original/2020-07-30_08-23-32.png?1596065031" class="editor-image img-responsive" data-smartkarma-image-id="148784"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/148/785/original/2020-07-30_08-24-39.png?1596065092" class="editor-image img-responsive" data-smartkarma-image-id="148785"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/148/786/original/2020-07-30_08-25-16.png?1596065140" class="editor-image img-responsive" data-smartkarma-image-id="148786"></figure><div class="content-caption">Source • Japan Analytics</div>
29th JULY - As the pace of announcements picks up, <a href="https://www.smartkarma.com/entities/ana-holdings-inc" target="_blank" data-smartkarma-citation="entities:5308:1" rel="noopener">ANA (9202 JP)</a>, <a href="https://www.smartkarma.com/entities/showa-corp" target="_blank" data-smartkarma-citation="entities:15079:1" rel="noopener">Showa (7274 JP)</a>, and <a href="https://www.smartkarma.com/entities/isetan-mitsukoshi-holdings-ltd" target="_blank" data-smartkarma-citation="entities:18871:1" rel="noopener">Isetan Mitsukoshi (3099 JP)</a> were the three 'worst' large-cap results yesterday in terms of our scoring methodology. In the DETAIL below, we cover all the results and forecasts for companies with a market cap of over ¥100 billion and make some trading suggestions.
<hr>
DAILY STATS
</div><hr><div>85 Quarterly Results</div><div><ul>
<li>
Results Score: 30 Positive / 5 Neutral / 50 Negative</li>
<li>
Average Results Score Change: -2.4</li>
<li>
Average % Change in Revenue: -9.7% Quarter YoY / -2.7% Rolling TTM YoY </li>
<li>
Average Operating Profit Margin Change: -1.0ppt</li>
<li>
Percentage Making Quarterly Losses: 24%</li>
</ul></div><hr><div> 35 Annual • 15 Interim Forecasts/Revisions</div><div><ul>
<li>
Annual Forecast/Revision Score: 6 Positive / 1 Neutral / 28 Negative</li>
<li>
Interim Forecast/Revision Score Change: 4 Positive / 0 Neutral / 11 Negative</li>
<li>
Average Forecast/Revision Score Change: -12.8</li>
</ul></div>


Source • Japan Analytics
29th JULY - As the pace of announcements picks up, ANA (9202 JP), Showa (7274 JP), and Isetan Mitsukoshi (3099 JP) were the three 'worst' large-cap results yesterday in terms of our scoring methodology. In the DETAIL below, we cover all the results and forecasts for companies with a market cap of over ¥100 billion and make some trading suggestions.

DAILY STATS
85 Quarterly Results

Results Score: 30 Positive / 5 Neutral / 50 Negative

Average Results Score Change: -2.4

Average % Change in Revenue: -9.7% Quarter YoY / -2.7% Rolling TTM YoY 

Average Operating Profit Margin Change: -1.0ppt

Percentage Making Quarterly Losses: 24%
 35 Annual • 15 Interim Forecasts/Revisions

Annual Forecast/Revision Score: 6 Positive / 1 Neutral / 28 Negative

Interim Forecast/Revision Score Change: 4 Positive / 0 Neutral / 11 Negative

Average Forecast/Revision Score Change: -12.8


🇯🇵 JAPAN • Results & Revisions 29th July - Kao, SMFG, Nomura, NRI, Asahi Holdings, NRE

Senior Bank Analyst - Japanese Banks, Windamee Research

J. Brian Waterhouse

Senior Bank Analyst - Japanese Banks

Windamee Research

Japanese Banks

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/shimizu-bank-ltd" target="_blank" data-smartkarma-citation="entities:15400:1" rel="noopener">Shimizu Bank (8364 JP)</a>, a small Japanese regional bank from Shizuoka Prefecture in the Chubu Region of central Japan, has slashed its FY3/2020 forecast for consolidated profits by ¥6.3 billion and is now warning of consolidated net losses of as much as ¥3.9 billion, or ¥336.67/share.  The problem seems to be hefty valuation losses in the bank’s investment trusts and equities portfolio, for which the turmoil in global markets caused by the coronavirus pandemic is being blamed. But Shimizu Bank was running into trouble long before the outbreak of COVID-19, with a chronically high Overhead Ratio (OHR) eating into revenues, falling net loan margins, downward pressure on net interest income and core earnings, and a tendency to rely on equity-related profits to shore up reported earnings.Given that the bank only recently agreed to have online financial specialist <a href="https://www.smartkarma.com/entities/sbi-holdings-inc" target="_blank" data-smartkarma-citation="entities:10928:1" rel="noopener">Sbi Holdings (8473 JP)</a> acquire around 3% of Shimizu Bank’s shares and become a major shareholder, it seems that SBI Group’s president and financial entrepreneur Yoshitaka Kitao is going to be a busy man sorting his latest regional bank alliance out and recouping his investment.Caveat Emptor!  (May the Buyer Beware!)

Shimizu Bank (8364 JP), a small Japanese regional bank from Shizuoka Prefecture in the Chubu Region of central Japan, has slashed its FY3/2020 forecast for consolidated profits by ¥6.3 billion and is now warning of consolidated net losses of as much as ¥3.9 billion, or ¥336.67/share.  The problem seems to be hefty valuation losses in the bank’s investment trusts and equities portfolio, for which the turmoil in global markets caused by the coronavirus pandemic is being blamed. But Shimizu Bank was running into trouble long before the outbreak of COVID-19, with a chronically high Overhead Ratio (OHR) eating into revenues, falling net loan margins, downward pressure on net interest income and core earnings, and a tendency to rely on equity-related profits to shore up reported earnings.Given that the bank only recently agreed to have online financial specialist Sbi Holdings (8473 JP) acquire around 3% of Shimizu Bank’s shares and become a major shareholder, it seems that SBI Group’s president and financial entrepreneur Yoshitaka Kitao is going to be a busy man sorting his latest regional bank alliance out and recouping his investment.Caveat Emptor!  (May the Buyer Beware!)

Shimizu Bank  (8364 JP):  Clear Water Runs Red

Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

<ul><li>
Strong FY 4Q19 To End Year: Japan Exchange (JSX) reported a strong FY 4Q19 result of JPY 14.3 bnm increasing JPY 2.6 bn (22.2%) linked period. Outperformance was across the board on transaction revenues, which improved JOY 5.1 bn (28.7%); standouts during the period were derivatives trading which increased JPY 2.3 bn (79.3%) and cash equities trading which increased JPY 1.3 bn or 21.0%; and </li></ul><ul><li>
Lowering Guidance:April derivative volumes  are tracking 61% lower MOM and cash equities volumes are tracking 35%. With that, JSX is guiding for an 11% YOY decline in FY 2020 net income reflecting a forecasted 2% lower top line, and 5% higher operating expenses.</li></ul>


Strong FY 4Q19 To End Year: Japan Exchange (JSX) reported a strong FY 4Q19 result of JPY 14.3 bnm increasing JPY 2.6 bn (22.2%) linked period. Outperformance was across the board on transaction revenues, which improved JOY 5.1 bn (28.7%); standouts during the period were derivatives trading which increased JPY 2.3 bn (79.3%) and cash equities trading which increased JPY 1.3 bn or 21.0%; and 
Lowering Guidance:April derivative volumes  are tracking 61% lower MOM and cash equities volumes are tracking 35%. With that, JSX is guiding for an 11% YOY decline in FY 2020 net income reflecting a forecasted 2% lower top line, and 5% higher operating expenses.

Japan Exchange – Nice Way to End The Year

Tiny, struggling <a href="https://www.smartkarma.com/entities/shimane-bank-ltd" target="_blank" data-smartkarma-citation="entities:5219:1" rel="noopener">Shimane Bank Ltd/ The (7150 JP)</a>, a Japanese secondary regional bank from Shimane Prefecture in the Chugoku Region of western Japan that in November of last year threw in its lot with <a href="https://www.smartkarma.com/entities/sbi-holdings-inc" target="_blank" data-smartkarma-citation="entities:10928:1" rel="noopener">Sbi Holdings (8473 JP)</a> and is now a 34%-owned affiliate of the online financial specialist, has announced an upward revision to FY3/2020 earnings.  That’s the good news.  The bad news is that the upward revision is just ¥100 million, the bank is still predicting a consolidated net loss for FY3/2020 of close to ¥2.3 billion, the dividend remains suspended, credit costs and the bank’s non-performing loans are way up, the bank’s Overhead Ratio (OHR) is still not under control, and management has decided not to publish earnings guidance for FY3/2021.  Despite the infusion of new capital from the SBI Group, the stock price has fallen even further since our last Insight <a href="https://www.smartkarma.com/insights/shimane-bank-7150-jp-and-behold-a-pale-knight" target="_blank" data-smartkarma-citation="insights:32314" rel="noopener">Shimane Bank (7150 JP):  And Behold, a Pale Knight</a> to just over the ¥400 level.Caveat Emptor!  (May the Buyer Beware!)

Tiny, struggling Shimane Bank Ltd/ The (7150 JP), a Japanese secondary regional bank from Shimane Prefecture in the Chugoku Region of western Japan that in November of last year threw in its lot with Sbi Holdings (8473 JP) and is now a 34%-owned affiliate of the online financial specialist, has announced an upward revision to FY3/2020 earnings.  That’s the good news.  The bad news is that the upward revision is just ¥100 million, the bank is still predicting a consolidated net loss for FY3/2020 of close to ¥2.3 billion, the dividend remains suspended, credit costs and the bank’s non-performing loans are way up, the bank’s Overhead Ratio (OHR) is still not under control, and management has decided not to publish earnings guidance for FY3/2021.  Despite the infusion of new capital from the SBI Group, the stock price has fallen even further since our last Insight Shimane Bank (7150 JP):  And Behold, a Pale Knight to just over the ¥400 level.Caveat Emptor!  (May the Buyer Beware!) 

Shimane Bank (7150 JP):  A Paler Shade of Red

Japan

Nomura Holdings, Inc. is a holding company which manages financial operations for its subsidiaries.  As a group, the Company provides a variety of financial services such as dealing, brokerage, underwriting, and asset management. Nomura Securities Co., a registered member of the New York and London Stock Exchanges, has branches around the world.

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Nomura Holdings (8604 JP)

🇯🇵 JAPAN • September Relative Price Scores - Profiting from Outlier Mean Reversion

• RELATIVE PRICE SCORE • RELATIVE PRICE SCORE OUTLIERS - The Relative Price Score (RPS) is a measure of price performance relative to TOPIX...

Campbell Gunn

🇯🇵 JAPAN • Results & Revisions 29th July - Kao, SMFG, Nomura, NRI, Asahi Holdings, NRE

29th JULY - As the pace of announcements picks up, ANA (9202 JP), Showa (7274 JP), and Isetan Mitsukoshi (3099 JP) were the three 'worst'...

Campbell Gunn

Shimizu Bank (8364 JP): Clear Water Runs Red

Shimizu Bank (8364 JP), a small Japanese regional bank from Shizuoka Prefecture in the Chubu Region of central Japan, has slashed its FY3/2020...

J. Brian Waterhouse

Japan Exchange – Nice Way to End The Year

Strong FY 4Q19 To End Year: Japan Exchange (JSX) reported a strong FY 4Q19 result of JPY 14.3 bnm increasing JPY 2.6 bn (22.2%) linked period....

Thomas J. Monaco

Shimane Bank (7150 JP): A Paler Shade of Red

Tiny, struggling Shimane Bank Ltd/ The (7150 JP), a Japanese secondary regional bank from Shimane Prefecture in the Chugoku Region of western Japan...

J. Brian Waterhouse

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