Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

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)

<h3>What’s Original?</h3>
<p>In this original, we have discussed some of the key aspects highlighted in Kishida’s policy statements along with the current status of these policies and companies that are likely to benefit.</p>

What’s Original?
In this original, we have discussed some of the key aspects highlighted in Kishida’s policy statements along with the current status of these policies and companies that are likely to benefit.

Kishida as Prime Minister: The Path Ahead

Expert on Japan Retail and Consumer Markets, JapanConsuming

Michael Causton

Expert on Japan Retail and Consumer Markets

Real Insight on Japanese Consumer Markets

JapanConsuming

JapanConsuming is a specialist research firm producing intelligence on Japanese retail and consumer markets. Founded in 2000, JapanConsuming has become the leading provider of insights on Japanese retailers and consumer trends to retailers, brands, government agencies and investors. As well as a highly regarded monthly report on the market, JapanConsuming produces in-depth reports on retail sectors, seminars on key trends and telephone consulting to investors on trends and retailers.

JapanConsuming was founded by Michael Causton and Roy Larke. 

<p>The growth in subscription services is a global phenomenon that has been growing just as fast in Japan as anywhere else. While most attention is given to music and media subscriptions, many brands and retailers of consumer goods are finding that the subscription model can be a key part of their online strategy, delivering multiple benefits across sales growth, customer data, marketing, inventory management and margin improvement.</p>

The growth in subscription services is a global phenomenon that has been growing just as fast in Japan as anywhere else. While most attention is given to music and media subscriptions, many brands and retailers of consumer goods are finding that the subscription model can be a key part of their online strategy, delivering multiple benefits across sales growth, customer data, marketing, inventory management and margin improvement.

The Subscription Economy: Keeping Customers Keen While Earning Recurring Revenues

Asia Consumer Research, Investory

Devi Subhakesan

Asia Consumer Research

ASIA CONSUMER: INSIGHTS AND INVESTMENT IDEAS

Investory

Investory is a Singapore-based boutique independent equity research firm founded in January 2017 with a primary focus on consumption themes across Asia-Pacific.

We aim to generate investible ideas based on consumption trends and outlook. We screen our ideas on several parameters - product potential, long-term growth and management commitment being the most critical.  We follow a fundamental analysis approach in our stock selection process and are not restricted by market cap.

We aspire to grow into a leading source of unbiased research, free of conflict of interest, for investors yearning for independent and disciplined analysis. 

We also undertake bespoke research mandates to support our Institutional clients’ investment needs.

Our team comprises of professionals with extensive experience in the Asian equity markets, in areas ranging from research, servicing institutional clients and investment management.

<p>In this Smartkarma Original Series report, we look at how the pet care industry in Asia, specifically China, grew 10x fold in the past 10 years and what sets it apart. Compared to the west, the pet care industry is a relatively recent development in emerging Asia. It is still early days of growth and evolution for the various segments of the industry and local players are still trying to establish a meaningful presence in most categories. However, the unique social/demographic factors that have spurred the pet boom in China has also opened up new product needs that are being addressed by local players - smart petting gadgets being one of them. Investors have been active in segments where local players have established a strong presence, like medical facilities; an IPO is reportedly on the anvil in 2021. This could attract more market attention to this high-growth sector especially if investors get an option to ride the sector growth. </p>
<p><strong>What is original about this report?</strong> In this report, we analyse the data available on Pet ownership in Asia, predominantly China, and compare it with the US to understand and assess the scope of growth for Asia's pet care sector. We study the underlying factors driving the pet boom and spending spree in China and discuss the various segments of the pet care industry and highlight emerging trends and pockets of opportunity. Lastly, we scan the Asia-based branded pet industry space in each segment, to select and study players that have built a meaningful presence in the market place. We see attractive growth potential for many of the early entrants - listed and unlisted- in the sector. We believe there is room for more branded players to enter the industry and tap into the existing and emerging product white spaces.</p>

In this Smartkarma Original Series report, we look at how the pet care industry in Asia, specifically China, grew 10x fold in the past 10 years and what sets it apart. Compared to the west, the pet care industry is a relatively recent development in emerging Asia. It is still early days of growth and evolution for the various segments of the industry and local players are still trying to establish a meaningful presence in most categories. However, the unique social/demographic factors that have spurred the pet boom in China has also opened up new product needs that are being addressed by local players - smart petting gadgets being one of them. Investors have been active in segments where local players have established a strong presence, like medical facilities; an IPO is reportedly on the anvil in 2021. This could attract more market attention to this high-growth sector especially if investors get an option to ride the sector growth. 
What is original about this report? In this report, we analyse the data available on Pet ownership in Asia, predominantly China, and compare it with the US to understand and assess the scope of growth for Asia's pet care sector. We study the underlying factors driving the pet boom and spending spree in China and discuss the various segments of the pet care industry and highlight emerging trends and pockets of opportunity. Lastly, we scan the Asia-based branded pet industry space in each segment, to select and study players that have built a meaningful presence in the market place. We see attractive growth potential for many of the early entrants - listed and unlisted- in the sector. We believe there is room for more branded players to enter the industry and tap into the existing and emerging product white spaces.

Pet Care Sector in Asia: Saga Has Just Started. Opportunities Galore.

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

<section class="figure"><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/169/948/original/2020-11-08_12-52-02.png?1604807697" class="editor-image img-responsive" data-smartkarma-image-id="169948"></figure><div class="content-caption">Source for all charts &amp; tables: Japan Analytics</div></section><p><strong>AUTOS ▲</strong> - Positive results and full-year upward revisions from <a href="https://www.smartkarma.com/entities/toyota-motor-corp" target="_blank" data-smartkarma-citation="entities:73:1" rel="noopener">Toyota (7203 JP)</a> and <a href="https://www.smartkarma.com/entities/honda-motor-co-ltd" target="_blank" data-smartkarma-citation="entities:154:1" rel="noopener">Honda (7267 JP)</a> have confirmed that Japan's overall revenue and earnings momentum has bottomed and is now in an uptrend.  Although <a href="https://www.smartkarma.com/entities/nissan-motor-co-ltd" target="_blank" data-smartkarma-citation="entities:72:1" rel="noopener">Nissan (7201 JP)</a> has yet to report, the auto assembler Peer Group's Forecast/Revision Score is at a five-year high following its largest-ever single-quarter increase. </p></section><section class="figure"><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/169/950/original/2020-11-08_13-11-05.png?1604808678" class="editor-image img-responsive" data-smartkarma-image-id="169950"></figure></section><p><strong>MARKET ▲</strong> - Since bottoming in mid-September, the  Results Score has gained 147 basis points, and the Forecast/Revision Score has rallied 509 bps. Total Market Value ex REITs has rallied to a new post-COVID high of ¥661 trillion but remains 12.6% below the 2017 peak. In TOPIX terms, the 'gap to peak' is 15.3%.</p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/169/951/original/2020-11-08_14-37-14.png?1604813847" class="editor-image img-responsive" data-smartkarma-image-id="169951"></figure></section><p><strong>SECTORS</strong> -  The <strong>Auto</strong> Sector joins the <strong>Machinery</strong>,<strong> Electrical Equipment</strong> Sectors as the top-three gainers. Only six Sectors have seen a decline in Score, led by <strong>Other Commercial Products</strong>, <strong>Information Technology</strong> and<strong> Non-Bank Finance</strong>.</p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/169/952/original/2020-11-08_14-45-33.png?1604814353" class="editor-image img-responsive" data-smartkarma-image-id="169952"></figure></section><p><strong>MULTIPLES</strong> - The uptick in forecast all0market Net Income has capped the market's forward multiple at 34 times and reduced the 'gap' to trailing earnings to ¥1.3 trillion.  </p>
<div><p style="text-align: center;"><strong>• BEST &amp; WORST •</strong></p></div>
<div><p>Our 'best' and 'worst' pairing from Friday's announcements is <a href="https://www.smartkarma.com/entities/honda-motor-co-ltd" target="_blank" data-smartkarma-citation="entities:154:1" rel="noopener">Honda (7267 JP)</a> and <a href="https://www.smartkarma.com/entities/square-enix-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:15003:1" rel="noopener">Square Enix (9684 JP)</a> </p></div>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/169/953/original/2020-11-08_14-54-54.png?1604814911" class="editor-image img-responsive" data-smartkarma-image-id="169953"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/169/954/original/2020-11-08_15-05-04.png?1604815536" class="editor-image img-responsive" data-smartkarma-image-id="169954"></figure></section><div>
<hr>
<p style="text-align: center;"><strong>DAILY STATS</strong></p>
</div>
<div><p>Results are evenly split between positive and neutral; however, TTM revenues are still falling by 3%, and operating margins are on average 1.6 points lower. 50% of annual revisions are negative, but the average change in score has improved to a decline of 1.4 points.</p></div>
<hr>
<div><p style="text-align: center;"><strong>377 Quarterly Results</strong></p></div>
<div><ul style="list-style-type: disc;">
<li><p><strong>Results Score:</strong> 41% Positive / 8% Neutral / 51% Negative</p></li>
<li><p><strong>Average Results Score Change:</strong> -1.4 points</p></li>
<li><p><strong>Average % Change in Revenue:</strong> -6.1% Quarter YoY / -3.3% Rolling TTM YoY </p></li>
<li><p><strong>Average Operating Profit Margin Change:</strong> -1.6ppt</p></li>
<li><p><strong>Percentage Making Quarterly Losses:</strong> 21%</p></li>
</ul></div>
<hr>
<div><p style="text-align: center;"><strong>167 Annual • 22 Interim Forecasts/Revisions</strong></p></div>
<div><ul style="list-style-type: disc;">
<li><p><strong>Annual Forecast/Revision Score:</strong> 40% Positive / 10% Neutral / 50% Negative</p></li>
<li><p><strong>Interim Forecast/Revision Score Change:</strong> 68% Positive / 9% Neutral / 23% Negative</p></li>
<li><p><strong>Average Forecast/Revision Score Change:</strong> -1.4 points</p></li>
</ul></div></section>

Source for all charts &amp; tables: Japan AnalyticsAUTOS ▲ - Positive results and full-year upward revisions from Toyota (7203 JP) and Honda (7267 JP) have confirmed that Japan's overall revenue and earnings momentum has bottomed and is now in an uptrend.  Although Nissan (7201 JP) has yet to report, the auto assembler Peer Group's Forecast/Revision Score is at a five-year high following its largest-ever single-quarter increase. MARKET ▲ - Since bottoming in mid-September, the  Results Score has gained 147 basis points, and the Forecast/Revision Score has rallied 509 bps. Total Market Value ex REITs has rallied to a new post-COVID high of ¥661 trillion but remains 12.6% below the 2017 peak. In TOPIX terms, the 'gap to peak' is 15.3%.
SECTORS -  The Auto Sector joins the Machinery, Electrical Equipment Sectors as the top-three gainers. Only six Sectors have seen a decline in Score, led by Other Commercial Products, Information Technology and Non-Bank Finance.
MULTIPLES - The uptick in forecast all0market Net Income has capped the market's forward multiple at 34 times and reduced the 'gap' to trailing earnings to ¥1.3 trillion.  
• BEST &amp; WORST •
Our 'best' and 'worst' pairing from Friday's announcements is Honda (7267 JP) and Square Enix (9684 JP) 


DAILY STATS

Results are evenly split between positive and neutral; however, TTM revenues are still falling by 3%, and operating margins are on average 1.6 points lower. 50% of annual revisions are negative, but the average change in score has improved to a decline of 1.4 points.

377 Quarterly Results

Results Score: 41% Positive / 8% Neutral / 51% Negative
Average Results Score Change: -1.4 points
Average % Change in Revenue: -6.1% Quarter YoY / -3.3% Rolling TTM YoY 
Average Operating Profit Margin Change: -1.6ppt
Percentage Making Quarterly Losses: 21%


167 Annual • 22 Interim Forecasts/Revisions

Annual Forecast/Revision Score: 40% Positive / 10% Neutral / 50% Negative
Interim Forecast/Revision Score Change: 68% Positive / 9% Neutral / 23% Negative
Average Forecast/Revision Score Change: -1.4 points


🇯🇵 JAPAN • Results & Revisions 11/06 - Autos Lead the Way

<div>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/163/118/original/2020-10-03_15-34-01.png?1601706874" class="editor-image img-responsive" data-smartkarma-image-id="163118"></figure><div class="content-caption">Source for all charts &amp; tables: Japan Analytics</div>
<p><strong>WARMING UP</strong> - Earnings momentum is finally on the 'up'. Our Interim Forecast/Revision Score data series which runs from March to September finished 2020 on a two-month high, while both the Annual series are above their September low points. The divergence between domestic non-manufacturing and globally-orientated manufacturing companies continues to widen exemplified by <a href="https://www.smartkarma.com/entities/honda-motor-co-ltd" target="_blank" data-smartkarma-citation="entities:154:1" rel="noopener">Honda Motor (7267 JP)</a>'s announcement of their decision to pull out of Formula 1 from the end of the 2021 season. Although trailing earnings have also stabilised, operating and net income forecasts and their 'gap to trailing' continue to increase. The forward multiple is 32.5 times. </p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/163/261/original/2020-10-04_07-12-52.png?1601763187" class="editor-image img-responsive" data-smartkarma-image-id="163261"></figure><p style="text-align: center;"><strong>• BEST &amp; WORST •</strong></p>
</div><div><p>Our best and worst pair is home centre <a href="https://www.smartkarma.com/entities/shimachu-co-ltd" target="_blank" data-smartkarma-citation="entities:5235:1" rel="noopener">Shimachu (8184 JP)</a> for whom a rumoured bid from peer DCM has emerged and diaper machinery maker and small-cap value investor favourite and Unicharm proxy<a href="https://www.smartkarma.com/entities/zuiko-corp" target="_blank" data-smartkarma-citation="entities:5568:1" rel="noopener"> Zuiko (6279 JP)</a>. </p></div><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/163/135/original/2020-10-03_17-07-27.png?1601712488" class="editor-image img-responsive" data-smartkarma-image-id="163135"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/163/136/original/2020-10-03_17-08-41.png?1601712545" class="editor-image img-responsive" data-smartkarma-image-id="163136"></figure><hr><div><p style="text-align: center;"><strong>DAILY STATS</strong></p></div><hr><div><p style="text-align: center;"><strong>18 Quarterly Results</strong></p></div><div><ul style="list-style-type: disc;">
<li><p><strong>Results Score:</strong> 56% Positive / 11% Neutral / 33% Negative</p></li>
<li><p><strong>Average Results Score Change:</strong> 0.0 points</p></li>
<li><p><strong>Average % Change in Revenue:</strong> -9.6% Quarter YoY / -5.2% Rolling TTM YoY </p></li>
<li><p><strong>Average Operating Profit Margin Change:</strong> -2.6ppt</p></li>
<li><p><strong>Percentage Making Quarterly Losses:</strong> 33%</p></li>
</ul></div><hr><div><p style="text-align: center;"><strong>9 Annual • 6 Interim Forecasts/Revisions</strong></p></div><div><ul style="list-style-type: disc;">
<li><p><strong>Annual Forecast/Revision Score:</strong> 33% Positive /22% Neutral / 44% Negative</p></li>
<li><p><strong>Interim Forecast/Revision Score Change:</strong> 50% Positive / 17% Neutral / 33% Negative</p></li>
<li><p><strong>Average Forecast/Revision Score Change:</strong> -2.1 points</p></li>
</ul></div>


Source for all charts &amp; tables: Japan Analytics
WARMING UP - Earnings momentum is finally on the 'up'. Our Interim Forecast/Revision Score data series which runs from March to September finished 2020 on a two-month high, while both the Annual series are above their September low points. The divergence between domestic non-manufacturing and globally-orientated manufacturing companies continues to widen exemplified by Honda Motor (7267 JP)'s announcement of their decision to pull out of Formula 1 from the end of the 2021 season. Although trailing earnings have also stabilised, operating and net income forecasts and their 'gap to trailing' continue to increase. The forward multiple is 32.5 times. 
• BEST &amp; WORST •
Our best and worst pair is home centre Shimachu (8184 JP) for whom a rumoured bid from peer DCM has emerged and diaper machinery maker and small-cap value investor favourite and Unicharm proxy Zuiko (6279 JP). DAILY STATS18 Quarterly Results
Results Score: 56% Positive / 11% Neutral / 33% Negative
Average Results Score Change: 0.0 points
Average % Change in Revenue: -9.6% Quarter YoY / -5.2% Rolling TTM YoY 
Average Operating Profit Margin Change: -2.6ppt
Percentage Making Quarterly Losses: 33%
9 Annual • 6 Interim Forecasts/Revisions
Annual Forecast/Revision Score: 33% Positive /22% Neutral / 44% Negative
Interim Forecast/Revision Score Change: 50% Positive / 17% Neutral / 33% Negative
Average Forecast/Revision Score Change: -2.1 points


🇯🇵 JAPAN • Results & Revisions 10/​​​​​02 DCM (Under)Bids for Shimachu, Zuiko>Unicharm, Ktk>Canon

Japan

UNICHARM CORPORATION is a manufacturer of sanitary napkins and baby products. Products include infant & adult diapers, household cleaning wipes, and feminine hygienic products.  The Company also produces pet food and pet toiletries as well as operates educational and finance businesses.

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Unicharm Corp (8113 JP)

Kishida as Prime Minister: The Path Ahead

In this original, we have discussed some of the key aspects highlighted in Kishida’s policy statements along with the current status of these...

Mio Kato

The Subscription Economy: Keeping Customers Keen While Earning Recurring Revenues

Subscriptions to physical goods are rapidly becoming a popular model. In Japan, many major retailers and brands are creating subscriptions, gaining...

Michael Causton

Pet Care Sector in Asia: Saga Has Just Started. Opportunities Galore.

Asia pet care industry is in the early stages of growth. Attractive product white spaces for new entrants. Notable Asia based players profiled....

Devi Subhakesan

🇯🇵 JAPAN • Results & Revisions 11/06 - Autos Lead the Way

Results are evenly split between positive and neutral; however, TTM revenues are still falling by 3%, and operating margins are on average 1.6...

Campbell Gunn

🇯🇵 JAPAN • Results & Revisions 10/02 DCM (Under)Bids for Shimachu, Zuiko>Unicharm, Ktk>Canon

• BEST & WORST • The release of earnings announcements, forecasts and revisions was unaffected, and our best and worst pair is medical wear...

Campbell Gunn

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52-week Range

Market Cap (USDm)

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Kishida as Prime Minister: The Path Ahead

In this original, we have discussed some of the key aspects highlighted in Kishida’s policy statements along with the current status of these...

Mio Kato

The Subscription Economy: Keeping Customers Keen While Earning Recurring Revenues

Subscriptions to physical goods are rapidly becoming a popular model. In Japan, many major retailers and brands are creating subscriptions, gaining...

Michael Causton

Pet Care Sector in Asia: Saga Has Just Started. Opportunities Galore.

Asia pet care industry is in the early stages of growth. Attractive product white spaces for new entrants. Notable Asia based players profiled....

Devi Subhakesan

🇯🇵 JAPAN • Results & Revisions 11/06 - Autos Lead the Way

Results are evenly split between positive and neutral; however, TTM revenues are still falling by 3%, and operating margins are on average 1.6...

Campbell Gunn

🇯🇵 JAPAN • Results & Revisions 10/​​​​​02 DCM (Under)Bids for Shimachu, Zuiko>Unicharm, Ktk>Canon

• BEST & WORST • The release of earnings announcements, forecasts and revisions was unaffected, and our best and worst pair is medical wear...

Campbell Gunn

🇯🇵 JAPAN • Results & Revisions 10/02 DCM (Under)Bids for Shimachu, Zuiko>Unicharm, Ktk>Canon