Equity Analyst, LightStream Research

Supun Walpola

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)

<a href="https://www.smartkarma.com/entities/25895" target="_blank" data-smartkarma-citation="entities:25895:1">Bitcoin (XBTUSD CURNCY)</a> fell below the USD5,000 level yesterday (18th November) to a new one-year low. At the time this note is published, Bitcoin is trading at around USD5,100, down 20% from last Monday (12th October 2018). Top altcoins like <a href="https://www.smartkarma.com/entities/25896" target="_blank" data-smartkarma-citation="entities:25896:1">Ethereum (ETH BGN CURNCY)</a>, Ripple and Bitcoin Cash are also down 26%, 5% and 32% respectively from last Monday.
The recent sell-off was triggered by the controversial Bitcoin Cash hard fork that took place last week (15th November). The two factions, Bitcoin Cash ABC (or Bitcoin Cash core) and Bitcoin Cash SV (Bitcoin Cash "Satoshi Version), are currently at a "hash war", which seems to be causing FUD across the board.

Bitcoin (XBTUSD CURNCY) fell below the USD5,000 level yesterday (18th November) to a new one-year low. At the time this note is published, Bitcoin is trading at around USD5,100, down 20% from last Monday (12th October 2018). Top altcoins like Ethereum (ETH BGN CURNCY), Ripple and Bitcoin Cash are also down 26%, 5% and 32% respectively from last Monday.
The recent sell-off was triggered by the controversial Bitcoin Cash hard fork that took place last week (15th November). The two factions, Bitcoin Cash ABC (or Bitcoin Cash core) and Bitcoin Cash SV (Bitcoin Cash "Satoshi Version), are currently at a "hash war", which seems to be causing FUD across the board. 

Last Week in Blockchain & Cryptos: Bitcoin Hits a One-Year Low Amidst "Hash Wars"

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

<ul class="">
<li>
Both <a href="https://www.smartkarma.com/entities/8814" target="_blank" data-smartkarma-citation="entities:8814:1">Lg Electronics (066570 KS)</a> and <a href="https://www.smartkarma.com/entities/6653" target="_blank" data-smartkarma-citation="entities:6653:1">LG Corp (003550 KS)</a> shares have been rebounding nicely since the end of October. In late June 2018, Koo Kwang-mo officially became the new Chairman of LG Corp (holding company of LG Group) and the LG Group, after the late former Chairman Koo Bon-moo passed away in May 2018. Koo Kwang-mo currently has a 15% stake in LG Corp (6.2% stake + additional 8.8% stake which was inherited from his adopted father Koo Bon-moo). The official transition of this additional gain in LG Corp shares by Koo Kwang-mo occurred on November 1st, 2018. This is an important date. With the official transition of the share stake to the new Chairman Koo Kwang-mo, there is little reason for the company to "keep the share price low" in order to pay lower inheritance taxes. </li>
<li>There could be an increasing pressure to raise dividends for LG Corp, partly because of the need for Chairman Koo Kwang-mo to pay for his huge inheritance taxes of the LG related shares that were given to him from the former, late LG Group Chairman Koo Bon-moo. If the LG Group makes a move to pay out higher dividends for LG Corp, there could also be a similar move to pay out higher dividends at LG Electronics as well. </li>
<li>Both LG Electronics and LG Corp have been outperforming KOSPI and other tech/holdco peers in Korea in the month of November. LG Electronics and LG Corp shares are up 13.1% and 9.8%, respectively from the end of October to November 19th. During the same period, Samsung Electronics shares are up 2.9% and KOSPI is up 3.5%. Certainly, the official LG Corp shares inheritance transfer to the new LG Chairman Koo Kwang-mo, a solid 3Q18 earnings, and an increasing perception that the LG Electronics is likely to generate higher earnings in 2019, driven by the improving profitability of its HE, H&amp;A, and MC business units have been key catalysts driving higher share price for both LG Electronics and LG Corp.  </li>
<li>The company's operating margin increased nicely from 2.1% in 2015 to 4% in 2017 and 5.8% in 1Q-3Q18. The company's efforts to gradually increase its value-added, higher margin products have worked in the past three years.</li>
<li>We are including both LG Electronics and LG Corp in our model stock portfolio. </li>
</ul>



Both Lg Electronics (066570 KS) and LG Corp (003550 KS) shares have been rebounding nicely since the end of October. In late June 2018, Koo Kwang-mo officially became the new Chairman of LG Corp (holding company of LG Group) and the LG Group, after the late former Chairman Koo Bon-moo passed away in May 2018. Koo Kwang-mo currently has a 15% stake in LG Corp (6.2% stake + additional 8.8% stake which was inherited from his adopted father Koo Bon-moo). The official transition of this additional gain in LG Corp shares by Koo Kwang-mo occurred on November 1st, 2018. This is an important date. With the official transition of the share stake to the new Chairman Koo Kwang-mo, there is little reason for the company to "keep the share price low" in order to pay lower inheritance taxes. 
There could be an increasing pressure to raise dividends for LG Corp, partly because of the need for Chairman Koo Kwang-mo to pay for his huge inheritance taxes of the LG related shares that were given to him from the former, late LG Group Chairman Koo Bon-moo. If the LG Group makes a move to pay out higher dividends for LG Corp, there could also be a similar move to pay out higher dividends at LG Electronics as well. 
Both LG Electronics and LG Corp have been outperforming KOSPI and other tech/holdco peers in Korea in the month of November. LG Electronics and LG Corp shares are up 13.1% and 9.8%, respectively from the end of October to November 19th. During the same period, Samsung Electronics shares are up 2.9% and KOSPI is up 3.5%. Certainly, the official LG Corp shares inheritance transfer to the new LG Chairman Koo Kwang-mo, a solid 3Q18 earnings, and an increasing perception that the LG Electronics is likely to generate higher earnings in 2019, driven by the improving profitability of its HE, H&amp;A, and MC business units have been key catalysts driving higher share price for both LG Electronics and LG Corp.  
The company's operating margin increased nicely from 2.1% in 2015 to 4% in 2017 and 5.8% in 1Q-3Q18. The company's efforts to gradually increase its value-added, higher margin products have worked in the past three years.
We are including both LG Electronics and LG Corp in our model stock portfolio. 


LG Electronics: A Turnaround Story + Extra Dividends Alpha Kicker

Farha Sabri

<ul>
<li>Sony showed strong performance in 1HFY03/19, leading the company to revise full year guidance for both revenue and OP. Software sales in the gaming segments were a key catalyst in driving the company's financial performance.</li>
<li>Sony is currently trading at a FY1 PE multiple of 12.8x, which is at a discount to its historical median of 19.4x. </li>
</ul>


Sony showed strong performance in 1HFY03/19, leading the company to revise full year guidance for both revenue and OP. Software sales in the gaming segments were a key catalyst in driving the company's financial performance.
Sony is currently trading at a FY1 PE multiple of 12.8x, which is at a discount to its historical median of 19.4x. 


Sony Upgrades FY03/19 Guidance Following Strong Gaming Software Sales

'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

<div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/068/507/original/2018-11-02_10-20-29.png?1541121653" class="editor-image img-responsive" data-smartkarma-image-id="68507"></figure>Source: Japan Analytics
NB: companies are colour-coded by sector
</div>28 YEARS OF NON-FINANCIAL MARKET LEADERSHIP - To offer some light relief from the current market, we have compiled a graphic illustrating the evolution in the ranking of the leading non-financial Japanese companies by market capitalisation measured at the end of each of the last 28 years.METHODOLOGY - Our comments follow in the detail below, but first a few notes:-<ul>
<li>In the interests of clarity (/sanity?), financials have been omitted. Twelve of the Top 20-ranked companies in 1990 were financials. However, only <a href="https://www.smartkarma.com/entities/742" target="_blank" data-smartkarma-citation="entities:742:1">Nomura (8604 JP)</a>, <a href="https://www.smartkarma.com/entities/6483" target="_blank" data-smartkarma-citation="entities:6483:1">Aozora (8304 JP)</a> and <a href="https://www.smartkarma.com/entities/16897" target="_blank" data-smartkarma-citation="entities:16897:1">Shinsei (8303 JP)</a> have survived in their original corporate structure and have the same ticker code. Our chart would have otherwise have included the now-merged IBJ, Fuji Bank, Dai-Ichi Kangyo Bank, Mitsubishi Bank, Sakura Bank, Sumitomo Bank, Tokai Bank, Sanwa Bank and Mitsubishi Trust Bank.  Excluded from the present-day Top 20 are <a href="https://www.smartkarma.com/entities/218" target="_blank" data-smartkarma-citation="entities:218:1">Mitsubishi UFJ (8306 JP)</a>, <a href="https://www.smartkarma.com/entities/217" target="_blank" data-smartkarma-citation="entities:217:1">Sumitomo Mitsui Financial (8316 JP)</a>, <a href="https://www.smartkarma.com/entities/838" target="_blank" data-smartkarma-citation="entities:838:1">Japan Post Bank (7182 JP)</a>, <a href="https://www.smartkarma.com/entities/359" target="_blank" data-smartkarma-citation="entities:359:1">Japan Post Holdings (6178 JP)</a> and <a href="https://www.smartkarma.com/entities/219" target="_blank" data-smartkarma-citation="entities:219:1">Mizuho Financial (8411 JP)</a> from the present day.</li>
<li>Only companies that were in the Top 20 in 1990 or 2018, as well as those companies that have been in the Top 10 for at least three of the last 28 years, have been included. </li>
<li>Two companies from 1990's Top 20 - Seibu Railway and Japan Airlines - have since been delisted. Although they have relisted as <a href="https://www.smartkarma.com/entities/458" target="_blank" data-smartkarma-citation="entities:458:1">Seibu Holdings (9024 JP)</a> and <a href="https://www.smartkarma.com/entities/1184" target="_blank" data-smartkarma-citation="entities:1184:1">Japan Airlines (9201 JP)</a>, they are no longer highly-ranked.</li>
<li>Seven current Top 20 companies - (<a href="https://www.smartkarma.com/entities/315" target="_blank" data-smartkarma-citation="entities:315:1">Softbank (9984 JP)</a>, <a href="https://www.smartkarma.com/entities/1089" target="_blank" data-smartkarma-citation="entities:1089:1">NTT Docomo (9437 JP)</a>, <a href="https://www.smartkarma.com/entities/639" target="_blank" data-smartkarma-citation="entities:639:1">KDDI (9433 JP)</a>, <a href="https://www.smartkarma.com/entities/13498" target="_blank" data-smartkarma-citation="entities:13498:1">Japan Tobacco (2914 JP)</a>, <a href="https://www.smartkarma.com/entities/13520" target="_blank" data-smartkarma-citation="entities:13520:1">Central Japan Railway (9022 JP)</a>, <a href="https://www.smartkarma.com/entities/751" target="_blank" data-smartkarma-citation="entities:751:1">Fast Retailing (9983 JP)</a> and <a href="https://www.smartkarma.com/entities/15070" target="_blank" data-smartkarma-citation="entities:15070:1">Recruit (6098 JP)</a>)  - have listed during the last 28 years. </li>
</ul>THE 2050 RANKING?- Which of the current market leaders will still be in the Top 20 in 2050 in their current guise? For those still around to read this in 32 year's time, we would wager on just three - <a href="https://www.smartkarma.com/entities/3077" target="_blank" data-smartkarma-citation="entities:3077:1">Keyence (6861 JP)</a>, <a href="https://www.smartkarma.com/entities/73" target="_blank" data-smartkarma-citation="entities:73:1">Toyota Motor (7203 JP)</a> and <a href="https://www.smartkarma.com/entities/563" target="_blank" data-smartkarma-citation="entities:563:1">Sony (6758 JP)</a>.


Source: Japan Analytics
NB: companies are colour-coded by sector
28 YEARS OF NON-FINANCIAL MARKET LEADERSHIP - To offer some light relief from the current market, we have compiled a graphic illustrating the evolution in the ranking of the leading non-financial Japanese companies by market capitalisation measured at the end of each of the last 28 years.METHODOLOGY - Our comments follow in the detail below, but first a few notes:-
In the interests of clarity (/sanity?), financials have been omitted. Twelve of the Top 20-ranked companies in 1990 were financials. However, only Nomura (8604 JP), Aozora (8304 JP) and Shinsei (8303 JP) have survived in their original corporate structure and have the same ticker code. Our chart would have otherwise have included the now-merged IBJ, Fuji Bank, Dai-Ichi Kangyo Bank, Mitsubishi Bank, Sakura Bank, Sumitomo Bank, Tokai Bank, Sanwa Bank and Mitsubishi Trust Bank.  Excluded from the present-day Top 20 are Mitsubishi UFJ (8306 JP), Sumitomo Mitsui Financial (8316 JP), Japan Post Bank (7182 JP), Japan Post Holdings (6178 JP) and Mizuho Financial (8411 JP) from the present day.
Only companies that were in the Top 20 in 1990 or 2018, as well as those companies that have been in the Top 10 for at least three of the last 28 years, have been included. 
Two companies from 1990's Top 20 - Seibu Railway and Japan Airlines - have since been delisted. Although they have relisted as Seibu Holdings (9024 JP) and Japan Airlines (9201 JP), they are no longer highly-ranked.
Seven current Top 20 companies - (Softbank (9984 JP), NTT Docomo (9437 JP), KDDI (9433 JP), Japan Tobacco (2914 JP), Central Japan Railway (9022 JP), Fast Retailing (9983 JP) and Recruit (6098 JP))  - have listed during the last 28 years. 
THE 2050 RANKING?- Which of the current market leaders will still be in the Top 20 in 2050 in their current guise? For those still around to read this in 32 year's time, we would wager on just three - Keyence (6861 JP), Toyota Motor (7203 JP) and Sony (6758 JP). 

Japan: The Evolution Of (Non-Financial) Market Leadership

<a href="https://www.smartkarma.com/entities/25895" target="_blank" data-smartkarma-citation="entities:25895:1">Bitcoin (XBTUSD CURNCY)</a> almost touched the USD7,000 mark last Monday (15th October) with the news on Fidelity's new institutional platform for cryptos and jitters surrounding the stablecoin Tether, but stabilized around the USD6,500 mark later that day and for the rest of the week. Goldman Sachs' investment in the cryptocurrency custodian service BitGo was another positive. 
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/067/300/original/BTC.PNG?1540148387" class="editor-image img-responsive" data-smartkarma-image-id="67300"></figure>
<div style="text-align: left;" class="content-caption">Source: Coinmarketcap</div>
A report published by Glassdoor last week showed that cryptocurrency and blockchain related job openings in the US are up 300% this year. Another report by EY suggested that top ICOs are down 86% this year. 
In Japan, Epoch launched the first crypto-fund IPO and <a href="https://www.smartkarma.com/entities/13003" target="_blank" data-smartkarma-citation="entities:13003:1">Fisco Ltd (3807 JP)</a> has decided to acquire the troubled cryptocurrency exchange Zaif.  In South Korea, lawmakers are to decide on ICO legalization in November.

Bitcoin (XBTUSD CURNCY) almost touched the USD7,000 mark last Monday (15th October) with the news on Fidelity's new institutional platform for cryptos and jitters surrounding the stablecoin Tether, but stabilized around the USD6,500 mark later that day and for the rest of the week. Goldman Sachs' investment in the cryptocurrency custodian service BitGo was another positive. 

Source: Coinmarketcap
A report published by Glassdoor last week showed that cryptocurrency and blockchain related job openings in the US are up 300% this year. Another report by EY suggested that top ICOs are down 86% this year. 
In Japan, Epoch launched the first crypto-fund IPO and Fisco Ltd (3807 JP) has decided to acquire the troubled cryptocurrency exchange Zaif.  In South Korea, lawmakers are to decide on ICO legalization in November.  

Last Week in Blockchain & Cryptos: Cryptos Recover with Institutional Support

Japan

Sony Corporation manufactures audio, home video game consoles, communications, key device and information technology products for the consumer and professional markets.  The Company's other businesses include music, pictures, computer entertainment, and online businesses.

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Sony Corp (6758 JP)

Last Week in Blockchain & Cryptos: Bitcoin Hits a One-Year Low Amidst "Hash Wars"

Bitcoin (XBTUSD CURNCY) fell below the USD5,000 level yesterday (18th November) to a new one-year low. At the time this note is published, Bitcoin...

Supun Walpola

LG Electronics: A Turnaround Story + Extra Dividends Alpha Kicker

Both Lg Electronics (066570 KS) and LG Corp (003550 KS) shares have been rebounding nicely since the end of October. In late June 2018, Koo...

Douglas Kim

Sony Upgrades FY03/19 Guidance Following Strong Gaming Software Sales

Sony showed strong performance in 1HFY03/19, leading the company to revise full year guidance for both revenue and OP. Software sales in the...

Farha Sabri

Japan: The Evolution Of (Non-Financial) Market Leadership

28 YEARS OF NON-FINANCIAL MARKET LEADERSHIP - To offer some light relief from the current market, we have compiled a graphic illustrating the...

Campbell Gunn

Last Week in Blockchain & Cryptos: Cryptos Recover with Institutional Support

Bitcoin (XBTUSD CURNCY) almost touched the USD7,000 mark last Monday (15th October) with the news on Fidelity's new institutional platform for...

Supun Walpola

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