Equity Analyst, LightStream Research

Oshadhi Kumarasiri

Equity Analyst

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)

Negative Shiseido, Kose and Pola OrbisWe analysed the top five Japanese cosmetics companies predominantly focusing on fundamental investment research principles. And based on our analysis we are negative on Shiseido, Kose and Pola Orbis, with the last two names being our top picks to short. We consider Shiseido to be short term neutral but believe the name is over-owned and growth deceleration exposes the name to significant downside risk from flows.Our long-term views on individual companies are mainly based on fundamental investment research principles and we have used POS data to track any changes in the trends behind our fundamentals based long term view. The frequency of POS data is much higher than traditional IR data and POS also breaks the data into extremely granular levels, meaning the information derived from POS is far more than what the traditional IR provides. Therefore, using POS we have developed systems to monitor the changes in our investment thesis at micro levels and also at a much higher frequency. Furthermore, we have also used POS data to forecast the company performance in its upcoming earnings. Lastly, the analysis of POS data helps us mitigate any surprises and potentially turn trend reversals to our advantage.We provide our detailed views on Shiseido, Kose and Pola Orbis below.

Negative Shiseido, Kose and Pola OrbisWe analysed the top five Japanese cosmetics companies predominantly focusing on fundamental investment research principles. And based on our analysis we are negative on Shiseido, Kose and Pola Orbis, with the last two names being our top picks to short. We consider Shiseido to be short term neutral but believe the name is over-owned and growth deceleration exposes the name to significant downside risk from flows.Our long-term views on individual companies are mainly based on fundamental investment research principles and we have used POS data to track any changes in the trends behind our fundamentals based long term view. The frequency of POS data is much higher than traditional IR data and POS also breaks the data into extremely granular levels, meaning the information derived from POS is far more than what the traditional IR provides. Therefore, using POS we have developed systems to monitor the changes in our investment thesis at micro levels and also at a much higher frequency. Furthermore, we have also used POS data to forecast the company performance in its upcoming earnings. Lastly, the analysis of POS data helps us mitigate any surprises and potentially turn trend reversals to our advantage.We provide our detailed views on Shiseido, Kose and Pola Orbis below.

Alternative Data - An Evolving Weapon for Active Managers (Shiseido, Kose, Pola Orbis)

'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. 

ALTERNATIVE DATA &amp; JAPAN’S PERSONAL CARE COMPANIES <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/099/254/original/1.png?1568785606" class="editor-image img-responsive" data-smartkarma-image-id="99254"></figure><div class="content-caption">Source: Japan Analytics, TrueData, Lightstream Research</div>This Insight will present a unique overview of Japan’s leading Personal Care companies combining:- <ul><li>the ‘quantamental’ analysis of ja research/Japan Analytics,</li><li>an alternative data set sourced from TrueData and Nikkei POS point-of-sale and credit card transactions made available exclusively to Lightstream Research for this report, and</li><li>traditional bottom-up analysis based on disclosed financial statements and investor relations materials by Lightstream Research</li></ul><div class="content-highlight">We consider this blend of quantitative, ‘real-time’ alternative and traditional data to be the active buy side’s best option in combating the tidal wave in favour of passive investing.</div>In the DETAIL section below, after briefly outlining our conclusions on our sample of leading Japanese Personal Care companies from all three perspectives, we review the history and current usage of alternative data in the fund management industry and provide a 'quantamental' analysis of the Peer Groups and five featured companies.<hr>TABLE OF CONTENTS<hr> PART I - SUMMARY &amp; CONCLUSIONS RECOMMENDATIONS ALTERNATIVE DATA SUMMARY FUNDAMENTAL DATA SUMMARYQUANTAMENTAL DATA SUMMARY<hr> PART II - ALTERNATIVE DATA  ALTERNATIVE DATA IN THE FUND MANAGEMENT PROCESSCHALLENGES FOR THE CREATION AND USE OF ALTERNATIVE DATATHE FUTURE OF ALTERNATIVE DATA IN ASSET MANAGEMENT<hr>PART III - PERSONAL PRODUCTS: QUANTAMENTAL REVIEW<hr>APPENDIX: THE (IM)PRACTICALITIES OF USING ALTERNATIVE DATA<hr><div class="content-highlight">In-depth Insights on <a href="https://www.smartkarma.com/entities/kao-corp" target="_blank" data-smartkarma-citation="entities:12933" rel="noopener">Kao Corp (4452 JP),</a><a href="https://www.smartkarma.com/entities/shiseido-co-ltd" target="_blank" data-smartkarma-citation="entities:5718" rel="noopener">Shiseido Co Ltd (4911 JP)</a>, <a href="https://www.smartkarma.com/entities/kose-corp" target="_blank" data-smartkarma-citation="entities:18009" rel="noopener">Kose Corp (4922 JP)</a>, <a href="https://www.smartkarma.com/entities/fancl-corp" target="_blank" data-smartkarma-citation="entities:15862" rel="noopener">Fancl Corp (4921 JP)</a> and <a href="https://www.smartkarma.com/entities/pola-orbis-holdings-inc" target="_blank" data-smartkarma-citation="entities:2287" rel="noopener">Pola Orbis Holdings (4927 JP)</a> follow in two companion Smartkarma Originals in this series.</div>

ALTERNATIVE DATA &amp; JAPAN’S PERSONAL CARE COMPANIES Source: Japan Analytics, TrueData, Lightstream ResearchThis Insight will present a unique overview of Japan’s leading Personal Care companies combining:- the ‘quantamental’ analysis of ja research/Japan Analytics,an alternative data set sourced from TrueData and Nikkei POS point-of-sale and credit card transactions made available exclusively to Lightstream Research for this report, andtraditional bottom-up analysis based on disclosed financial statements and investor relations materials by Lightstream ResearchWe consider this blend of quantitative, ‘real-time’ alternative and traditional data to be the active buy side’s best option in combating the tidal wave in favour of passive investing.In the DETAIL section below, after briefly outlining our conclusions on our sample of leading Japanese Personal Care companies from all three perspectives, we review the history and current usage of alternative data in the fund management industry and provide a 'quantamental' analysis of the Peer Groups and five featured companies.TABLE OF CONTENTS PART I - SUMMARY &amp; CONCLUSIONS RECOMMENDATIONS ALTERNATIVE DATA SUMMARY FUNDAMENTAL DATA SUMMARYQUANTAMENTAL DATA SUMMARY PART II - ALTERNATIVE DATA  ALTERNATIVE DATA IN THE FUND MANAGEMENT PROCESSCHALLENGES FOR THE CREATION AND USE OF ALTERNATIVE DATATHE FUTURE OF ALTERNATIVE DATA IN ASSET MANAGEMENTPART III - PERSONAL PRODUCTS: QUANTAMENTAL REVIEWAPPENDIX: THE (IM)PRACTICALITIES OF USING ALTERNATIVE DATAIn-depth Insights on Kao Corp (4452 JP),Shiseido Co Ltd (4911 JP), Kose Corp (4922 JP), Fancl Corp (4921 JP) and Pola Orbis Holdings (4927 JP) follow in two companion Smartkarma Originals in this series.

Alternative Data & Japan's Personal Care Companies - An Evolving Weapon For Active Managers?

Equity Bottom-Up

According to the preliminary results of the current production survey released by the Ministry of Economy, Trade and Industry, the following YoY growth rates for Japanse cosmetics sales can be observed for July 2019.Haircare products - 28.3% YoYFacial washing creams - 8.9%Milky lotions and skin lotions - (4.7%)Makeup products - 3.0%Sunscreen and suntan preparations - (35.9%)

According to the preliminary results of the current production survey released by the Ministry of Economy, Trade and Industry, the following YoY growth rates for Japanse cosmetics sales can be observed for July 2019.Haircare products - 28.3% YoYFacial washing creams - 8.9%Milky lotions and skin lotions - (4.7%)Makeup products - 3.0%Sunscreen and suntan preparations - (35.9%)

Japanese Cosmetics Industry: Monthly Statistics Update - July 2019

Shiseido is scheduled to release its 2Q19 earnings on 8th August 2019. All other Japanese cosmetic companies have already reported their results and most of them had a relatively weak quarter when compared to the last 2-3 years. This was mainly down to the relatively weaker demand in the domestic market especially in product categories such as UV care, Shampoo and Milky Lotions.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/095/048/original/1.PNG?1565158215" class="editor-image img-responsive" data-smartkarma-image-id="95048"></figure><div class="content-caption">Source: Truedata POS</div>

Shiseido is scheduled to release its 2Q19 earnings on 8th August 2019. All other Japanese cosmetic companies have already reported their results and most of them had a relatively weak quarter when compared to the last 2-3 years. This was mainly down to the relatively weaker demand in the domestic market especially in product categories such as UV care, Shampoo and Milky Lotions.Source: Truedata POS

Shiseido: POS Alternative Data Report - 2Q19 Earnings

Quantitative Analysis

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/094/809/original/2019-08-04_13-24-01.png?1564892655" class="editor-image img-responsive" data-smartkarma-image-id="94809"></figure><div class="content-caption">Source: Japan Analytics</div>SOUTHBOUND - Two weeks into the announcements of the June quarter-end period, it is clear that the momentum of Japanese listed corporate earnings is still heading lower. Since July 22nd, 1,216 or 32% of companies have reported results and 292 forecast revisions have been announced. The Japan Analytics Results &amp; Revision Score reached a new 28-month low on Friday of 1.43, a decline of 78% from the current cycle peak of 6.50 on 16th November 2017. The correlation between the Score and the Market Capitalisation of listed companies excluding REITs is 0.77, and the Score is more of a leading or co-incident than lagging indicator.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/094/810/original/2019-08-04_13-32-15.png?1564893149" class="editor-image img-responsive" data-smartkarma-image-id="94810"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/094/812/original/2019-08-04_13-39-03.png?1564893556" class="editor-image img-responsive" data-smartkarma-image-id="94812"></figure><div class="content-caption">Source: Japan Analytics</div>BREAKDOWN - The Results &amp; Revision Score is a weighted sum of three components, the Results Score, the Annual Forecast/Revision Score and the Interim Forecast/Revision Score, with the last of these only being applicable for nine months of each year. The two Forecast/Revision Scores are, as would be expected., leading indicators for the Results Score. The current quarter's Results Scor decline already exceeds the previous quarter's more-benign decline which also saw an increase in the Annual Forecast/Revision Score as the majority of companies 'rolled' their forecast ahead by one year. In contrast, the forecasts for the Interim period which for most companies ends next month were the most pessimistic since April 2016 and the mostly first-quarter results are confirming the early caution. In addition, full-year forecasts are also being downgraded and are at the lowest level for three months.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/094/816/original/2019-08-04_13-44-46.png?1564893904" class="editor-image img-responsive" data-smartkarma-image-id="94816"></figure><div class="content-caption">Source: Japan Analytics</div>YEN DRIVER - The key driver of the Results &amp; Revision Score has been the year-on-year change in the US dollar/Yen exchange rate lagged by six months. The major turning points in <a href="https://www.smartkarma.com/entities/22826" target="_blank" data-smartkarma-citation="entities:22826:1" rel="noopener">JUSDJPY CURNCY</a> over the last twelve years highlighted above line up well with changes in the direction of earnings momentum as represented by the Results &amp; Revision Score. With the Yen having reverted to a period of strengthening in recent weeks, the trend in the Score will be downwards over the next six months, which will be reflected in due course by the market.    <div class="content-highlight">In the DETAIL section below, we update our Market Composite Results Timeline, Sector and Peer Group Results &amp; Revision Scores, Sector Performance and Valuation and look at the best and worst large-cap individual company results over the last two weeks. In the meantime, we lighten the mood with a classic Allman Brother track featuring the incomparable Dicky Betts.</div><center></center><div class="content-caption">The Allman Brothers Band - Southbound - 1/16/1982 - University Of Florida Bandshell</div>

Source: Japan AnalyticsSOUTHBOUND - Two weeks into the announcements of the June quarter-end period, it is clear that the momentum of Japanese listed corporate earnings is still heading lower. Since July 22nd, 1,216 or 32% of companies have reported results and 292 forecast revisions have been announced. The Japan Analytics Results &amp; Revision Score reached a new 28-month low on Friday of 1.43, a decline of 78% from the current cycle peak of 6.50 on 16th November 2017. The correlation between the Score and the Market Capitalisation of listed companies excluding REITs is 0.77, and the Score is more of a leading or co-incident than lagging indicator.Source: Japan AnalyticsBREAKDOWN - The Results &amp; Revision Score is a weighted sum of three components, the Results Score, the Annual Forecast/Revision Score and the Interim Forecast/Revision Score, with the last of these only being applicable for nine months of each year. The two Forecast/Revision Scores are, as would be expected., leading indicators for the Results Score. The current quarter's Results Scor decline already exceeds the previous quarter's more-benign decline which also saw an increase in the Annual Forecast/Revision Score as the majority of companies 'rolled' their forecast ahead by one year. In contrast, the forecasts for the Interim period which for most companies ends next month were the most pessimistic since April 2016 and the mostly first-quarter results are confirming the early caution. In addition, full-year forecasts are also being downgraded and are at the lowest level for three months.Source: Japan AnalyticsYEN DRIVER - The key driver of the Results &amp; Revision Score has been the year-on-year change in the US dollar/Yen exchange rate lagged by six months. The major turning points in JUSDJPY CURNCY over the last twelve years highlighted above line up well with changes in the direction of earnings momentum as represented by the Results &amp; Revision Score. With the Yen having reverted to a period of strengthening in recent weeks, the trend in the Score will be downwards over the next six months, which will be reflected in due course by the market.    In the DETAIL section below, we update our Market Composite Results Timeline, Sector and Peer Group Results &amp; Revision Scores, Sector Performance and Valuation and look at the best and worst large-cap individual company results over the last two weeks. In the meantime, we lighten the mood with a classic Allman Brother track featuring the incomparable Dicky Betts.The Allman Brothers Band - Southbound - 1/16/1982 - University Of Florida Bandshell

🇯🇵 Japan • Summer Results & Revisions First Cut - Southbound

Japan

POLA ORBIS HOLDINGS INC. develops, manufactures and markets cosmetic products, centering in skincare  products. Under its multi-brand strategy, the Company holds nine cosmetic brands including POLA, prestige skincare brand, ORBIS, oil-free skincare brand, H2O PLUS and Jurlique.

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Pola Orbis Holdings (4927 JP)

Alternative Data - An Evolving Weapon for Active Managers (Shiseido, Kose, Pola Orbis)

Negative Shiseido, Kose and Pola OrbisWe analysed the top five Japanese cosmetics companies predominantly focusing on fundamental investment...

Oshadhi Kumarasiri

Alternative Data & Japan's Personal Care Companies - An Evolving Weapon For Active Managers?

ALTERNATIVE DATA & JAPAN’S PERSONAL CARE COMPANIES This Insight will present a unique overview of Japan’s leading Personal Care companies...

Campbell Gunn

Japanese Cosmetics Industry: Monthly Statistics Update - July 2019

According to the preliminary results of the current production survey released by the Ministry of Economy, Trade and Industry, the following YoY...

Oshadhi Kumarasiri

Shiseido: POS Alternative Data Report - 2Q19 Earnings

Shiseido is scheduled to release its 2Q19 earnings on 8th August 2019. All other Japanese cosmetic companies have already reported their results...

Oshadhi Kumarasiri

🇯🇵 Japan • Summer Results & Revisions First Cut - Southbound

SOUTHBOUND - Two weeks into the announcements of the June quarter-end period, it is clear that the momentum of Japanese listed corporate earnings...

Campbell Gunn

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