'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)

<div style="text-align: center;"><strong>• NET GAIN • </strong></div><div><div class="content-caption">
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/189/590/original/2021-02-19_07-20-52.png?1613686864" class="editor-image img-responsive" data-smartkarma-image-id="189590"></figure><p></p></section> Source for all charts &amp; tables: Japan Analytics</div></div><div>
<p><strong>NET GAIN</strong> - Forecast Aggregate Net Income for the universe of  Japanese listed companies ended the quarter 23.8%  higher than three months ago - an increase of  ¥5.2 trillion. As a result, the market's forward earnings multiple has declined to 28 times following a 10% increase in total market value (ex REITs). The increase in forecast operating income is a more modest 10.2% reflecting the degree of previously-projected COVID-related extraordinary losses.</p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/189/591/original/2021-02-19_07-29-59.png?1613687413" class="editor-image img-responsive" data-smartkarma-image-id="189591"></figure></section><p><strong>TRAILING TWELVE MONTHS (TTM)</strong> - Trailing revenues and operating profits are still falling by 9.9% and 26.3%, respectively; however, operating income rose by 4.1% quarter-on-quarter as margins improved by 30 basis points. Despite a reasonable effort at cost-cutting, aggregate operating margins are still  228 bps below their mid-2018 peak, and it will take at least another eight quarters for that gap to be closed.</p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/189/595/original/2021-02-19_07-38-34.png?1613687927" class="editor-image img-responsive" data-smartkarma-image-id="189595"></figure></section><p><strong>FORECASTS</strong> - The majority of companies are forecasting for the year ending next month. Despite no change in the aggregate revenue forecast, the outlook for operating income increased by ¥3.7 trillion during the quarter resulting in a 50 bps operating margin uplift. </p>
</div><section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/189/596/original/2021-02-19_07-40-09.png?1613688021" class="editor-image img-responsive" data-smartkarma-image-id="189596"></figure><hr></section><p><strong>POSITIVE MOMENTUM</strong> - Both our forward-looking Results Score and Results &amp; Revision Score have returned to the positive after less than one year. Whether this merits a new thirty-year high in TOPIX is, however, a moot point. We would note that the Cabinet Office Leading Indicator of Business Conditions for December turned down for the first time since April 2020.   </p></section><div></div><div>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/189/597/original/2021-02-19_08-02-24.png?1613689355" class="editor-image img-responsive" data-smartkarma-image-id="189597"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/189/694/original/2021-02-19_16-02-06.png?1613718138" class="editor-image img-responsive" data-smartkarma-image-id="189694"></figure><hr></section><p><strong>SECTOR BREAKDOWN</strong> - The leading sectors in terms of one-month change in Results &amp; Revision Score are <strong>Other Commercial Products</strong>, <strong>Autos</strong>,<strong> Other Consumer Products</strong>, <strong>Metals</strong>, and <strong>Building Materials.</strong> The RRS 'losers' are <strong>Utilities</strong>, <strong>Internet Content &amp; Services</strong>, <strong>Food, Beverages &amp; Tobacco,</strong><strong>Retail</strong>, and <strong>Healthcare</strong>.  </p>
</div><div>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/189/700/original/2021-02-19_16-05-32.png?1613718344" class="editor-image img-responsive" data-smartkarma-image-id="189700"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/189/701/original/2021-02-19_16-06-12.png?1613718383" class="editor-image img-responsive" data-smartkarma-image-id="189701"></figure></section><hr>
</div><section></section><div><div>
<p>In the <strong>DETAIL</strong> section below, we shall review the actual results and initial and revised forecasts by Sector and highlight the best and worst-performing companies by one-quarter revenue and margin changes.</p>
<hr>
<p></p>
</div></div>

• NET GAIN • 
 Source for all charts &amp; tables: Japan Analytics
NET GAIN - Forecast Aggregate Net Income for the universe of  Japanese listed companies ended the quarter 23.8%  higher than three months ago - an increase of  ¥5.2 trillion. As a result, the market's forward earnings multiple has declined to 28 times following a 10% increase in total market value (ex REITs). The increase in forecast operating income is a more modest 10.2% reflecting the degree of previously-projected COVID-related extraordinary losses.
TRAILING TWELVE MONTHS (TTM) - Trailing revenues and operating profits are still falling by 9.9% and 26.3%, respectively; however, operating income rose by 4.1% quarter-on-quarter as margins improved by 30 basis points. Despite a reasonable effort at cost-cutting, aggregate operating margins are still  228 bps below their mid-2018 peak, and it will take at least another eight quarters for that gap to be closed.
FORECASTS - The majority of companies are forecasting for the year ending next month. Despite no change in the aggregate revenue forecast, the outlook for operating income increased by ¥3.7 trillion during the quarter resulting in a 50 bps operating margin uplift. 
POSITIVE MOMENTUM - Both our forward-looking Results Score and Results &amp; Revision Score have returned to the positive after less than one year. Whether this merits a new thirty-year high in TOPIX is, however, a moot point. We would note that the Cabinet Office Leading Indicator of Business Conditions for December turned down for the first time since April 2020.   
SECTOR BREAKDOWN - The leading sectors in terms of one-month change in Results &amp; Revision Score are Other Commercial Products, Autos, Other Consumer Products, Metals, and Building Materials. The RRS 'losers' are Utilities, Internet Content &amp; Services, Food, Beverages &amp; Tobacco,Retail, and Healthcare.  



In the DETAIL section below, we shall review the actual results and initial and revised forecasts by Sector and highlight the best and worst-performing companies by one-quarter revenue and margin changes.




🇯🇵 JAPAN • IT’S A WRAP - Winter 2020 Results & Revisions Review

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/000/102/797/original/2019-10-22_07-21-37.png?1571696560" class="editor-image img-responsive" data-smartkarma-image-id="102797"></figure><div class="content-caption">Source: Japan Analytics</div><p>There has been much discussion on Smartkarma in the last week on the 'overexuberance' in Japan's semiconductor production equipment ("SPE") and factory automation (FA) companies' share prices following a 'spike' in <strong><a href="https://www.smartkarma.com/entities/harmonic-drive-systems-inc" target="_blank" data-smartkarma-citation="entities:10238:1" rel="noopener">Harmonic Drive Systems (6324 JP)</a></strong>(HDS) as discussed <a href="https://www.smartkarma.com/entities/harmonic-drive-systems-inc/discussion?discussion=56418" target="_blank" rel="noopener">here, </a>and Capital Group’s block sale in SK Hynix. <a href="https://www.smartkarma.com/companies/lightstream-research" target="_blank" data-smartkarma-citation="companies:909" rel="noopener">LightStream Research</a> explored the topic in detail in yesterday's <a href="https://www.smartkarma.com/insights/readthrough-to-japanese-fa-sector-from-capital-s-sk-hynix-block-sale" target="_blank" data-smartkarma-citation="insights:33298" rel="noopener">Readthrough to Japanese FA Sector from Capital's SK Hynix Block Sale</a>. As <a href="https://www.smartkarma.com/profiles/raghav-kapoor" target="_blank" data-smartkarma-citation="accounts:2" rel="noopener">Raghav Kapoor</a> noted in the discussion on that note: - "<em><strong>The trends between the pricing of the BI Japan Factory Automation Index (BIAPJAVP Index) and the SOX are strikingly similar</strong></em>."   </p><p>This Insight will briefly examine these correlations using the Japan Analytic's scoring framework as well as updating our valuation work on <strong><a href="https://www.smartkarma.com/entities/fanuc-corp" target="_blank" data-smartkarma-citation="entities:752:1" rel="noopener">Fanuc (6954 JP)</a>, <a href="https://www.smartkarma.com/entities/yaskawa-electric-corp" target="_blank" data-smartkarma-citation="entities:2458:1" rel="noopener">Yaskawa Electric (6506 JP)</a>, <a href="https://www.smartkarma.com/entities/daifuku-co-ltd" target="_blank" data-smartkarma-citation="entities:10408:1" rel="noopener">Daifuku (6383 JP)</a>, </strong><a href="https://www.smartkarma.com/entities/harmonic-drive-systems-inc" target="_blank" data-smartkarma-citation="entities:10238:1" rel="noopener"><strong>Harmonic Drive Systems (6324 JP)</strong>, </a>as well as <strong><a href="https://www.smartkarma.com/entities/tokyo-electron-ltd" target="_blank" data-smartkarma-citation="entities:280:1" rel="noopener">Tokyo Electron (8035 JP)</a>, <a href="https://www.smartkarma.com/entities/advantest-corp" target="_blank" data-smartkarma-citation="entities:18107:1" rel="noopener">Advantest (6857 JP)</a>,</strong> and <strong><a href="https://www.smartkarma.com/entities/disco-corp" target="_blank" data-smartkarma-citation="entities:15817:1" rel="noopener">Disco (6146 JP)</a></strong>.     Please refer to our earlier Insight <a href="https://www.smartkarma.com/insights/6954-fanuc-timing-the-cycle" target="_blank" data-smartkarma-citation="insights:29401" rel="noopener">Fanuc • Timing the Cycle</a> for details on our scoring methodology.</p><p><strong>We conclude that, although we are likely to confirm the cycle bottom in the next few weeks as interim results are announced, the potential for recovery is more than adequately reflected in these group's extreme valuations and relative-to-market stock prices. As we noted in the discussion on HDS, "the market is re-running the playbook of 2009-2010 where earnings momentum recovered sharply [..] we think the better scenario is the more gradual recovery of  2012-2015 which saw the stock trade sideways until the recovery was well-advanced."</strong></p>

Source: Japan AnalyticsThere has been much discussion on Smartkarma in the last week on the 'overexuberance' in Japan's semiconductor production equipment ("SPE") and factory automation (FA) companies' share prices following a 'spike' in Harmonic Drive Systems (6324 JP)(HDS) as discussed here, and Capital Group’s block sale in SK Hynix. LightStream Research explored the topic in detail in yesterday's Readthrough to Japanese FA Sector from Capital's SK Hynix Block Sale. As Raghav Kapoor noted in the discussion on that note: - "The trends between the pricing of the BI Japan Factory Automation Index (BIAPJAVP Index) and the SOX are strikingly similar."   This Insight will briefly examine these correlations using the Japan Analytic's scoring framework as well as updating our valuation work on Fanuc (6954 JP), Yaskawa Electric (6506 JP), Daifuku (6383 JP), Harmonic Drive Systems (6324 JP), as well as Tokyo Electron (8035 JP), Advantest (6857 JP), and Disco (6146 JP).     Please refer to our earlier Insight Fanuc • Timing the Cycle for details on our scoring methodology.We conclude that, although we are likely to confirm the cycle bottom in the next few weeks as interim results are announced, the potential for recovery is more than adequately reflected in these group's extreme valuations and relative-to-market stock prices. As we noted in the discussion on HDS, "the market is re-running the playbook of 2009-2010 where earnings momentum recovered sharply [..] we think the better scenario is the more gradual recovery of  2012-2015 which saw the stock trade sideways until the recovery was well-advanced."

🇯🇵 Japan • FA & SPE - Calling Bottoms and Tops

Doing bespoke work since 2002....., Custom Products Group

Patrick Hansen

Doing bespoke work since 2002.....

Custom Products Group

Custom Products was started 14 years ago at Lehman Brothers by current co-founder Patrick Hansen, CFA. After 3 years at Lehman, Patrick moved the team to Macquarie Securities where Simon Rigney (co-founder) joined. 3 years ago we took Custom Products independent. 

Our core strength can be summed up three words. 1- Customization - we have very little off the shelf products and most work is done on a one on one bespoke basis. 2- Speed - We pride ourselves in our ability to get requests back to the client very quickly. 3- Confidentiality - We do not redistribute. There is no grace period where we wait a week and then mass blast. Any request stops with that client.

<p>We went and backtested the seasonality of the different factors and found that names with a high Beta to TOPIX tend to underperform in June. As you can see from the chart below, in June Beta has an average negative 18% information coefficient (IC). Looking at just the most recent performance and in June of 2016 the IC for Beta was negative 41%. </p><h2>Historical Factor Performance in June </h2><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/027/438/original/5.png?1496762253" class="editor-image img-responsive" data-smartkarma-image-id="27438"></figure><div class="content-caption">Source: Custom Products</div><div style="text-align: center;" class="content-caption">
<strong>Please contact us if you would like more information on how we calculated the Information</strong>…</div>

We went and backtested the seasonality of the different factors and found that names with a high Beta to TOPIX tend to underperform in June. As you can see from the chart below, in June Beta has an average negative 18% information coefficient (IC). Looking at just the most recent performance and in June of 2016 the IC for Beta was negative 41%. Historical Factor Performance in June Source: Custom Products
Please contact us if you would like more information on how we calculated the Information…

High Beta Names Do Not Do Well in June....

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

Smartkarma

Smartkarma unites the fragmented investment industry, connecting institutional investors, independent research providers, and corporates within a single network.

Research Reinvented

Equity Capital Markets

<p><a href="https://www.smartkarma.com/entities/15120" target="_blank" data-smartkarma-citation="entities:15120:1">Hirata Corp (6258 JP)</a> and its shareholders are selling US$160m of shares. Hirata Corp is a Kumamoto-based Japanese production engineering company.</p><p>As the stock is not well covered by the street, we had a call with the company's management. In this insight, we will look at the company's fundamentals and prospects and score the deal in our ECM Framework. </p><h2>Placement specifics</h2><ul>
<li>Company Name: Hirata Corp</li>
<li>Ticker: 6258 JP</li>
<li>Treasury and secondary share sales</li>
<li>Retail/Institution split: 90/10</li>
<li>Settlement on 15 Jun…</li>
</ul>

Hirata Corp (6258 JP) and its shareholders are selling US$160m of shares. Hirata Corp is a Kumamoto-based Japanese production engineering company.As the stock is not well covered by the street, we had a call with the company's management. In this insight, we will look at the company's fundamentals and prospects and score the deal in our ECM Framework. Placement specifics
Company Name: Hirata Corp
Ticker: 6258 JP
Treasury and secondary share sales
Retail/Institution split: 90/10
Settlement on 15 Jun…


Hirata Corp Placement: Huge Two-Year Runup Due to OLED & EVs; Partial Family Exit

Japan

RORZE CORPORATION manufactures printed circuit board conveyers and wafer handlers for semiconductor manufacturing.  The Company also produces sorters and vacuum chamber robots, as well as controllers and stepping motor drivers used in various automation systems.  Rorze provides parts replacement and repair services for its products.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Rorze Corp (6323 JP)

🇯🇵 JAPAN • IT’S A WRAP - Winter 2020 Results & Revisions Review

NET GAIN - Forecast Aggregate Net Income for the universe of Japanese listed companies ended the quarter 23.8% higher than three months ago - an...

Campbell Gunn

🇯🇵 Japan • FA & SPE - Calling Bottoms and Tops

There has been much discussion on Smartkarma in the last week on the 'overexuberance' in Japan's semiconductor production equipment ("SPE") and...

Campbell Gunn

High Beta Names Do Not Do Well in June....

We went and backtested the seasonality of the different factors and found that names with a high Beta to TOPIX tend to underperform in June. As you...

Custom Products Group

Hirata Corp Placement: Huge Two-Year Runup Due to OLED & EVs; Partial Family Exit

Hirata Corp (6258 JP) and its shareholders are selling US$160m of shares. Hirata Corp is a Kumamoto-based Japanese production engineering...

Ke Yan, CFA, FRM

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)