Executive Director, Metrical Inc

Aki Matsumoto

Executive Director

Independent Leading Corporate Governance Research

Metrical Inc

METRICAL INC. is an independent leading Corporate Governance research firm in Japan where Corporate Governance is increasingly recognized as an important element on corporate management in these days. Thus, CG research and solutions would become an essential component of global capital markets and play important to contribute to transparency of the markets and maximize shareholders’ value in Japan. 

METRICAL INC. provides Corporate Governance research and analysis including rating services, and  also offers investment research and IR services with solutions and customized profound research on CG and IR issues.

In relation to my previous articles "Update on "Transitional Measures" for TSE Market Reorganization" and "TOPIX Reform Update", I would like to update you on a noteworthy disclosure. On September 21, Oracle Corporation Japan (4716) made a disclosure titled "Announcement of Application for Selection of New Market Category "Standard Market."" Currently, many listed companies have released "Notice of Application for Selection of New Market Classification". The reason why Oracle Corporation Japan (4716)'s disclosure attracted attention is that the company, which is currently listed on the TSE 1st Section, has applied for the new market segment "Standard Market". As you know, under the new market classification, the market will be reorganized into three markets: Prime Market, Standard Market, and Growth Market. The current TSE 1st Section is roughly equivalent to the Prime Market, the TSE 2nd Section and the JASDAQ Market are roughly equivalent to the Standard Market, and the TSE Mothers Market is roughly equivalent to the Growth Market. Oracle Corporation Japan, which is currently listed on the TSE 1st Section, chose to list on the Standard Market, which is considered to be the equivalent of the TSE 2nd Section and the JASDAQ Market, which is different from what most listed companies are doing.

In relation to my previous articles "Update on "Transitional Measures" for TSE Market Reorganization" and "TOPIX Reform Update", I would like to update you on a noteworthy disclosure. On September 21, Oracle Corporation Japan (4716) made a disclosure titled "Announcement of Application for Selection of New Market Category "Standard Market."" Currently, many listed companies have released "Notice of Application for Selection of New Market Classification". The reason why Oracle Corporation Japan (4716)'s disclosure attracted attention is that the company, which is currently listed on the TSE 1st Section, has applied for the new market segment "Standard Market". As you know, under the new market classification, the market will be reorganized into three markets: Prime Market, Standard Market, and Growth Market. The current TSE 1st Section is roughly equivalent to the Prime Market, the TSE 2nd Section and the JASDAQ Market are roughly equivalent to the Standard Market, and the TSE Mothers Market is roughly equivalent to the Growth Market. Oracle Corporation Japan, which is currently listed on the TSE 1st Section, chose to list on the Standard Market, which is considered to be the equivalent of the TSE 2nd Section and the JASDAQ Market, which is different from what most listed companies are doing.

Japan's Governance: TSE Market Reclassification Update: Oracle Japan (4716)

Senior Technology Analyst, Japanese Equities, LightStream Research

Scott Foster

Senior Technology Analyst, Japanese Equities

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

Oracle Japan dropped 15% on Friday (June 25) after the announcement of disappointing results on Thursday. The share price is down 39% from its 52-week high (reached in February) and down 21% since we last wrote on the company at the end of March.What to do with it now?Performance deteriorated significantly in 4Q of FY May-21, when a 23.4% year-on-year decline in Cloud &amp; On-Premise License revenues more than offset growth in service and hardware, resulting in a 5.8% decline in operating profit and a 5.5% decline in net profit.On top of that, management is guidance for an increase in revenues of only 1% to 4% and an increase in EPS of 0.3% to 2.9% in the new fiscal year, pointing to a slow recovery with little room left for cost cutting.With the forward (guidance-based) P/E ratio down to 22x, Oracle Japan may no longer be a short, but it is not much of an investment either. If you like the business, look at the parent company.In the same three months to May, Oracle Corp. (NYSE: ORCL) reported 8% growth in revenues, 5% growth in operating profit and a 40% operating margin (vs. 34% for Oracle Japan). ORCL is selling at 17x projected earnings.

Oracle Japan dropped 15% on Friday (June 25) after the announcement of disappointing results on Thursday. The share price is down 39% from its 52-week high (reached in February) and down 21% since we last wrote on the company at the end of March.What to do with it now?Performance deteriorated significantly in 4Q of FY May-21, when a 23.4% year-on-year decline in Cloud &amp; On-Premise License revenues more than offset growth in service and hardware, resulting in a 5.8% decline in operating profit and a 5.5% decline in net profit.On top of that, management is guidance for an increase in revenues of only 1% to 4% and an increase in EPS of 0.3% to 2.9% in the new fiscal year, pointing to a slow recovery with little room left for cost cutting.With the forward (guidance-based) P/E ratio down to 22x, Oracle Japan may no longer be a short, but it is not much of an investment either. If you like the business, look at the parent company.In the same three months to May, Oracle Corp. (NYSE: ORCL) reported 8% growth in revenues, 5% growth in operating profit and a 40% operating margin (vs. 34% for Oracle Japan). ORCL is selling at 17x projected earnings.

Oracle Japan (4716 JP): No Longer a Short, but Not Much of an Investment

Oracle Japan announced unusually poor 3Q results and unexciting guidance for FY May-21 as a whole. This was primarily due to the collapse of Cloud &amp; On-Premise License revenues. Drastic cost cutting saved the bottom line.Both the results and guidance compare unfavorably with those of the parent company, Oracle Corporation. Japan is simply not one of Oracle's better markets. Oracle Japan is considerably more expensive than Oracle Corp., much less profitable, and notably illiquid. We see no reason to own it.

Oracle Japan announced unusually poor 3Q results and unexciting guidance for FY May-21 as a whole. This was primarily due to the collapse of Cloud &amp; On-Premise License revenues. Drastic cost cutting saved the bottom line.Both the results and guidance compare unfavorably with those of the parent company, Oracle Corporation. Japan is simply not one of Oracle's better markets. Oracle Japan is considerably more expensive than Oracle Corp., much less profitable, and notably illiquid. We see no reason to own it. 

Oracle Japan (4716 JP): What's Going Down?

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

Thematic (Sector/Industry)

<div>• BEST &amp; WORST •</div><div>
Friday's 'best' and 'worst' larger-cap announcements came from <a href="https://www.smartkarma.com/entities/hamamatsu-photonics-kk" target="_blank" data-smartkarma-citation="entities:14074:1" rel="noopener">Hamamatsu Photonics (6965 JP)</a> and <a href="https://www.smartkarma.com/entities/oracle-corp-japan" target="_blank" data-smartkarma-citation="entities:16787:1" rel="noopener">Oracle Japan (4716 JP)</a>.  For more, see the DETAIL section below.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/196/070/original/image?1616365750" class="editor-image img-responsive" data-smartkarma-image-id="196070"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/196/069/original/image?1616365750" class="editor-image img-responsive" data-smartkarma-image-id="196069"></figure>
</div><div class="content-caption">Source for all charts &amp; tables: Japan Analytics</div>

• BEST &amp; WORST •
Friday's 'best' and 'worst' larger-cap announcements came from Hamamatsu Photonics (6965 JP) and Oracle Japan (4716 JP).  For more, see the DETAIL section below.

Source for all charts &amp; tables: Japan Analytics

🇯🇵 JAPAN • Results & Revisions 03/​​​19 - Hamamatsu Photonics & Oracle Japan

• BEST &amp; WORST •Our best and worst pair from yesterday is <a href="https://www.smartkarma.com/entities/hirose-electric-co-ltd" target="_blank" data-smartkarma-citation="entities:13513:1" rel="noopener">Hirose Electric (6806 JP)</a> with a 41% upward revision to interim operating income, and leisure and travel conglomerate <a href="https://www.smartkarma.com/entities/seibu-holdings-inc" target="_blank" data-smartkarma-citation="entities:458:1" rel="noopener">Seibu (9024 JP)</a> which revised down both for the interim and full-year, the latter scoring a maximum negative -30.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/161/651/original/2020-09-25_06-15-33.png?1600982296" class="editor-image img-responsive" data-smartkarma-image-id="161651"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/161/652/original/2020-09-25_06-14-28.png?1600982419" class="editor-image img-responsive" data-smartkarma-image-id="161652"></figure><div class="content-caption">Source for all charts &amp; tables: Japan Analytics</div>DAILY STATS <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/161/650/original/2020-09-25_06-07-47.png?1600981686" class="editor-image img-responsive" data-smartkarma-image-id="161650"></figure><a href="https://www.smartkarma.com/entities/oracle-corp-japan" target="_blank" data-smartkarma-citation="entities:16787:1" rel="noopener">Oracle Japan (4716 JP)</a>- Seasonally, the first quarter is the low point of Oracle's annual cycle following the fourth quarter high. This first quarter was unusually subdued as revenue growth was flat for the second quarter in a row. As revenues slow to a single-digit pace, the company has focused on cost reductions, resulting in a Q1 year-on-year 50bps operating margin improvement. OJ is becoming more of an annuity. As such and noting the ¥225b in Net Financial Assets on the Balance Sheet and no debt, it is time for another extraordinary dividend.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/161/653/original/2020-09-25_06-29-09.png?1600982967" class="editor-image img-responsive" data-smartkarma-image-id="161653"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/161/654/original/2020-09-25_06-28-42.png?1600983014" class="editor-image img-responsive" data-smartkarma-image-id="161654"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/161/655/original/2020-09-25_06-33-14.png?1600983265" class="editor-image img-responsive" data-smartkarma-image-id="161655"></figure><hr><div>
 12 Annual • 13 Interim Forecasts/Revisions
The trend in forecasts and revisions has turned down again - only four of 25 announcements made yesterday scored positively and the average score change was -11: -
</div><div><ul style="list-style-type: disc;">
<li>Annual Forecast/Revision Score: 17% Positive / 0% Neutral / 83% Negative</li>
<li>Interim Forecast/Revision Score Change: 15% Positive / 8% Neutral / 77% Negative</li>
<li>Average Forecast/Revision Score Change: -11.2 points</li>
</ul></div>

• BEST &amp; WORST •Our best and worst pair from yesterday is Hirose Electric (6806 JP) with a 41% upward revision to interim operating income, and leisure and travel conglomerate Seibu (9024 JP) which revised down both for the interim and full-year, the latter scoring a maximum negative -30.Source for all charts &amp; tables: Japan AnalyticsDAILY STATS Oracle Japan (4716 JP)- Seasonally, the first quarter is the low point of Oracle's annual cycle following the fourth quarter high. This first quarter was unusually subdued as revenue growth was flat for the second quarter in a row. As revenues slow to a single-digit pace, the company has focused on cost reductions, resulting in a Q1 year-on-year 50bps operating margin improvement. OJ is becoming more of an annuity. As such and noting the ¥225b in Net Financial Assets on the Balance Sheet and no debt, it is time for another extraordinary dividend.
 12 Annual • 13 Interim Forecasts/Revisions
The trend in forecasts and revisions has turned down again - only four of 25 announcements made yesterday scored positively and the average score change was -11: -

Annual Forecast/Revision Score: 17% Positive / 0% Neutral / 83% Negative
Interim Forecast/Revision Score Change: 15% Positive / 8% Neutral / 77% Negative
Average Forecast/Revision Score Change: -11.2 points


🇯🇵 JAPAN • Results & Revisions 09/​​​​​​​​​​​​24 - A Quieter Oracle, Hirose, Shippers, NGK, Seibu

Japan

ORACLE CORPORATION JAPAN sells a variety of software, including database management system software, application development tools, decision-making support tools, and business related applications.  The Company also provides support services for users.

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Oracle Corp Japan (4716 JP)

Japan's Governance: TSE Market Reclassification Update: Oracle Japan (4716)

Oracle Corporation of Japan, currently listed on the TSE 1st Section, chose to list on the Standard Market instead of the Prime Market on September...

Metrical Inc

Oracle Japan (4716 JP): No Longer a Short, but Not Much of an Investment

Oracle Japan dropped 15% on weak 4Q results. Sales and profits both declined and FY Mar-22 guidance is for low single-digit recovery. It no longer...

Scott Foster

Oracle Japan (4716 JP): What's Going Down?

Oracle Japan reported unusually poor 3Q results and weak full-year guidance, underperforming Oracle Corp by a wide margin. It is also more...

Scott Foster

🇯🇵 JAPAN • Results & Revisions 03/19 - Hamamatsu Photonics & Oracle Japan

• BEST & WORST • Friday's 'best' and 'worst' larger-cap announcements came from Hamamatsu Photonics (6965 JP) and Oracle Japan (4716 JP). For...

Campbell Gunn

🇯🇵 JAPAN • Results & Revisions 09/24 - A Quieter Oracle, Hirose, Shippers, NGK, Seibu

• BEST WORST • DAILY STATS

Campbell Gunn

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Japan's Governance: TSE Market Reclassification Update: Oracle Japan (4716)

Oracle Corporation of Japan, currently listed on the TSE 1st Section, chose to list on the Standard Market instead of the Prime Market on September...

Metrical Inc

Oracle Japan (4716 JP): No Longer a Short, but Not Much of an Investment

Oracle Japan dropped 15% on weak 4Q results. Sales and profits both declined and FY Mar-22 guidance is for low single-digit recovery. It no longer...

Scott Foster

Oracle Japan (4716 JP): What's Going Down?

Oracle Japan reported unusually poor 3Q results and weak full-year guidance, underperforming Oracle Corp by a wide margin. It is also more...

Scott Foster

🇯🇵 JAPAN • Results & Revisions 03/​​​19 - Hamamatsu Photonics & Oracle Japan

• BEST & WORST • Friday's 'best' and 'worst' larger-cap announcements came from Hamamatsu Photonics (6965 JP) and Oracle Japan (4716 JP). For...

Campbell Gunn

🇯🇵 JAPAN • Results & Revisions 09/​​​​​​​​​​​​24 - A Quieter Oracle, Hirose, Shippers, NGK, Seibu

• BEST WORST • DAILY STATS

Campbell Gunn

🇯🇵 JAPAN • Results & Revisions 03/19 - Hamamatsu Photonics & Oracle Japan

🇯🇵 JAPAN • Results & Revisions 09/24 - A Quieter Oracle, Hirose, Shippers, NGK, Seibu