'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)

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/126/362/original/File%202020-04-04%208%2045%2047.jpeg?1585957595" class="editor-image img-responsive" data-smartkarma-image-id="126362"></figure><div class="content-caption">Source • stopcovid19.jp</div><p><strong>OVERSHOOT</strong> - This Insight will be longer than usual with more above the paywall 'fold' as Friday saw several significant developments in Japan's response to COVID-19. The English-language word 'overshoot' is used widely in Japan to refer to the situation in which more than 100% of available intensive care hospital beds are in use. Although the occupancy rate for Japan is still only 48%, Kyoto and Kanagawa Prefectures are already in 'overshoot', and Tokyo is again close to being so even after increasing capacity by 50% this week. As can be seen above, the country has sufficient ventilator capacity to deal with ten times the current cases (28,197); the shortage is in hospital beds for infectious diseases (4,089). The Tokyo Metropolitan Government (TMG) is now aiming to secure over 4,000 beds for severe COVID-19 cases, including 3,300 with oxygen. Of the 635 patients currently hospitalised in the capital, 80% do not need intensive care. </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/126/377/original/IMG_1102.jpg?1585958777" class="editor-image img-responsive" data-smartkarma-image-id="126377"></figure><div class="content-caption">Source • NHK</div><p><strong>REGIME CHANGE</strong> - As we have noted in an earlier <a href="https://www.smartkarma.com/insights/japan-market-update-hit-the-boj-bid-and-wait-for-the-absolute-value-opportunity" target="_blank" data-smartkarma-citation="insights:37670" rel="noopener">Insight</a>, Japan has been slow to increase testing for COVID-19 as there was a Health Ministry guideline that all positive cases were to be hospitalised however mild the symptoms. Large-scale testing would result in the healthcare system being overwhelmed by a large number of relatively-mild cases. Also, the social convention of avoiding '<em>meiwaku</em>' or trouble to others has resulted in many of those with symptoms avoiding seeking confirmation. The Ministry is also resisting the designation of deaths from pneumonia as related to COVID-19 and is refusing to release data on the number of pneumonia deaths which are rumoured to be 'significantly higher' than in previous years in Tokyo. Whether by design or neglect, Japan lulled itself into a false sense of 'corona-superiority' which has delayed many of the responses that other developed countries have been taking. In the face of increased pressure from the medical profession, the bureaucrats have now relented and, at least in Tokyo, less-severe cases will be able to stay at home or will be billeted in hotels. The rule that patients could only be released from the hospital after two negative tests is also to be 'relaxed'. The rule that new cases must be reported to the Ministry by fax still, however, remains in place.</p><p><strong>HOTELS &amp; HOMES</strong> - Given the size of most homes in the capital, isolation in homes with multiple residents will be hazardous, The TMG is, therefore, moving quickly to requisition or acquire the necessary hotel space.  The infamously-xenophobic APA Hotel chain has been quick to offer their services to lightly-symptomatic patients and is offering a 50% discount to health care workers.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/126/380/original/2020-04-04_10-51-38.png?1585965120" class="editor-image img-responsive" data-smartkarma-image-id="126380"></figure><div class="content-caption">Source outbreak.info</div><p><strong>ASIAN OUTLIER</strong> - Japan is now the outlier in Asia in seeing an increasing rate of daily new cases (353 on April 3rd),  including a six-month-old baby against whom medical staff did not think to take any precautions forcing 44 staff into two weeks of self-isolation. Using a simple measure proposed by Messrs <a href="https://medium.com/@ekohlberg_47501/a-simple-score-to-tell-if-we-are-beating-the-virus-49e74b707e35" target="_blank" rel="noopener">Kohlberg, Neyman, and Tepper</a>, Japan's R Score is 2.09. With both Singapore and Hong Kong introducing stricter social constraints over the last two days, Japan's Swedish-style response is facing increasing domestic criticism. Several LDP politicians and supporters have distanced themselves from PM Abe's two-masks policy. Although far from disinterested parties, <a href="https://www.smartkarma.com/entities/rakuten-inc" target="_blank" data-smartkarma-citation="entities:31:1" rel="noopener">Rakuten (4755 JP)</a>'s @hmikitani and <a href="https://www.smartkarma.com/entities/softbank-group-corp" target="_blank" data-smartkarma-citation="entities:315:1" rel="noopener">Softbank Group (9984 JP)</a>'s @masason have both taken to Twitter to urge for the declaration of a state of emergency. The former has however been slow to prevent price-gouging for masks sold on the Rakuten platform. Even the influential Keidanren business federation has now accepted that a state of emergency is 'acceptable' on condition that 'vital services' are not too severely disrupted.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/126/396/original/File%202020-04-03%2019%2016%2000.jpeg?1585974026" class="editor-image img-responsive" data-smartkarma-image-id="126396"></figure><div class="content-caption">Source • NHK</div><p><strong>TOKYO AT THE TIPPING POINT</strong> - Even the normally-quiescent NHK fired up their graphic team for last night's '7 NEWS'  to illustrate that Tokyo is 18 days away from an exponential explosion unless there is an 80% reduction in social activities. </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/126/386/original/File%202020-04-04%200%2030%2052.jpeg?1585968614" class="editor-image img-responsive" data-smartkarma-image-id="126386"></figure><div class="content-caption">Source • NHK</div><p><strong>GOVERNOR KOIKE -</strong> Although firmly stating that a full lockdown of Tokyo is legally 'impossible', Gov. Koike is gently prodding the national government towards stricter measures and continues to warn businesses to make the necessary preparations as only grocery stores, bank and medical facilities would remain open. She has requested residents to stay at home this weekend and is recommending avoiding the three "<strong>C'</strong>s" - <strong>C</strong>rowded, <strong>C</strong>onfined spaces where <strong>C</strong>onversations take place until further notice. Taking a leaf from Governor Cuomo's book, she is now giving daily updates on YouTube, including one in English. Having harboured ambitions for higher office in the past, the contrast she is drawing with the apparently-hapless Prime Minister is being made abundantly clear. Many LDP officials, however, remain wary of her 'un-Japanese' opportunism and her authoritarian and unpredictable nature. As in the United States, personal and political rivalries are obstructing to sensible policy-making.   </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/126/387/original/2020-04-04_12-01-17.png?1585969302" class="editor-image img-responsive" data-smartkarma-image-id="126387"></figure><div class="content-caption">Source • Google</div><p><strong>PARTIAL LOCKDOWN</strong> - Many restaurant chains including <a href="https://www.smartkarma.com/entities/torikizoku-co-ltd" target="_blank" data-smartkarma-citation="entities:17718:1" rel="noopener">Torikizoku (3193 JP)</a>, <a href="https://www.smartkarma.com/entities/kushikatsu-tanaka-co" target="_blank" data-smartkarma-citation="entities:26733:1" rel="noopener">Kushikatsu Tanaka (3547 JP)</a>  and <a href="https://www.smartkarma.com/entities/hub-co-ltd" target="_blank" data-smartkarma-citation="entities:11892:1" rel="noopener">Hub (3030 JP)</a> and karaoke and entertainment facilities such as <a href="https://www.smartkarma.com/entities/daiichikosho-co-ltd" target="_blank" data-smartkarma-citation="entities:8629:1" rel="noopener">Daiichikosho (7458 JP)</a>, <a href="https://www.smartkarma.com/entities/koshidaka-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:14191:1" rel="noopener">Koshidaka (2157 JP)</a> and <a href="https://www.smartkarma.com/entities/round-one-corp" target="_blank" data-smartkarma-citation="entities:7057:1" rel="noopener">Round One (4680 JP)</a> have announced the closure of their facilities for several weeks and join the department stores and cinemas that closed last and will be so again this weekend. Even the Spring Sumo tournament has been delayed for at least two weeks. As confirmed by Google's excellent Community Mobility Reports above, Tokyo is gradually heeding the call. The March Services PMI for Japan suggests a year-on-year contraction of 8%. The onus will now pass to the national government to mitigate the losses.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/126/397/original/2020-04-04_13-51-59.png?1585975942" class="editor-image img-responsive" data-smartkarma-image-id="126397"></figure><div class="content-caption">Source • US Embassy, Tokyo</div><p><strong>'GET-OUT-OF-EDO-BABY-GO'</strong> - The US Embassy in Japan is recommending that any US citizens who are not prepared to stay in Japan for several months or who are concerned about not being able to receive appropriate medical care should leave immediately. Those who do will, however, not be allowed to return for an as-yet-unspecified period.  Even Japanese nationals are now required to spend fourteen days in quarantine. All residence visas that expire before the end of June be extended by three months. From April 3rd and until further notice, non-Japanese of any residence status, including permanent and spouses of Japanese nationals, are to be denied re-entry if they leave Japan. Welcome to the lock-in without a lockdown!</p><p><strong>RELIEF MEASURES</strong> - A potpourri of relief measures and new policies are doing the rounds in government circles including some or all of the following:- </p><ul>
<li>
<strong>¥300,000 </strong>- A one-time non-taxable payment will be made to qualified households that are suffering financially from a loss of income. About 10 million households are expected to qualify. It has already been necessary to make clear that the adult entertainment industry will not be eligible for public funds. ¥300,000 is equivalent to the annual amount spent on a pet dog in Japan.</li>
<li>
<strong>PREFERENCE SHARES</strong> - Large firms such as airlines, shippers and auto manufacturers may be eligible for rescue packages in the form of preference shares issued to the Development Bank of Japan of up to ¥400 billion each. The allocation of such funds will be a subject of much political jostling, while smaller businesses that lack the right connections may not be deemed eligible. We would now be wary of being aggressively 'short' these sectors.</li>
<li>
<strong>FIVE-YEAR INTEREST-FREE LOANS</strong> - While a welcome measure for some SMEs, this measure may not be sufficient for those already-indebted businesses with large numbers of regular employees operating out of rented accommodation, of which Japan's legion of wholesalers is a prime example.</li>
<li>
<strong>TAX MORATORIA</strong> - The government is to grant a moratorium on tax payments by companies that have seen their monthly revenues fall by more than 20% from the previous year due to COVID-19.</li>
<li>
<strong>WRITE-DOWNS</strong> - The Japanese ASB and the FSA have announced that companies will be allowed greater leniency regarding asset writedowns for idle plants and stores</li>
<li>
<strong>SUBSIDIES</strong> - The government will fully-subsidise the increase in production of <a href="https://www.smartkarma.com/entities/fujifilm-holdings-corp" target="_blank" data-smartkarma-citation="entities:16353:1" rel="noopener">Fujifilm (4901 JP)</a>'s Avigan drug and ventilators from a variety of manufacturers. Avigan will be offered for free to other countries.</li>
<li>
<strong>DE-GLOBALISATION</strong> - <a href="https://www.smartkarma.com/entities/toyota-motor-corp" target="_blank" data-smartkarma-citation="entities:73:1" rel="noopener">Toyota Motor (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 Motor (7267 JP)</a> are in talks with the Ministry of Economy, Trade and Industry to move some or all of their supply chains our of China. <a href="https://www.smartkarma.com/entities/nissan-motor-co-ltd" target="_blank" data-smartkarma-citation="entities:72:1" rel="noopener">Nissan Motor (7201 JP)</a> is seemingly no longer considered relevant in this regard. Japanese corporates will also begin a process of unwinding unprofitable overseas operations to support their domestic activities, a move that will help keep the Yen relatively stable over the medium term.</li>
</ul><p>While large Japanse corporations are relatively well-placed to weather this storm, the Japanese government is fiscally constrained and grossly indebted relative to GDP. Given the now-inflationary global outlook, we would expect the Bank of Japan to be the least generous of the central banks in response to COVID-19, which will also be supportive of the Yen.</p><p>In the <strong>DETAIL</strong> section below, we shall review our targets for our Results and Revisions Scores, and the market overall, look at our updated trailing aggregate actual profits and multiples and review Fridays' Results and Revisions. Finally, we shall suggest that Japan is well-placed for the emergent post-COVID economic world order and conclude that we would be buyers of Japanse equities into the second wave of the COVID-19 downturn.</p>

Source • stopcovid19.jpOVERSHOOT - This Insight will be longer than usual with more above the paywall 'fold' as Friday saw several significant developments in Japan's response to COVID-19. The English-language word 'overshoot' is used widely in Japan to refer to the situation in which more than 100% of available intensive care hospital beds are in use. Although the occupancy rate for Japan is still only 48%, Kyoto and Kanagawa Prefectures are already in 'overshoot', and Tokyo is again close to being so even after increasing capacity by 50% this week. As can be seen above, the country has sufficient ventilator capacity to deal with ten times the current cases (28,197); the shortage is in hospital beds for infectious diseases (4,089). The Tokyo Metropolitan Government (TMG) is now aiming to secure over 4,000 beds for severe COVID-19 cases, including 3,300 with oxygen. Of the 635 patients currently hospitalised in the capital, 80% do not need intensive care. Source • NHKREGIME CHANGE - As we have noted in an earlier Insight, Japan has been slow to increase testing for COVID-19 as there was a Health Ministry guideline that all positive cases were to be hospitalised however mild the symptoms. Large-scale testing would result in the healthcare system being overwhelmed by a large number of relatively-mild cases. Also, the social convention of avoiding 'meiwaku' or trouble to others has resulted in many of those with symptoms avoiding seeking confirmation. The Ministry is also resisting the designation of deaths from pneumonia as related to COVID-19 and is refusing to release data on the number of pneumonia deaths which are rumoured to be 'significantly higher' than in previous years in Tokyo. Whether by design or neglect, Japan lulled itself into a false sense of 'corona-superiority' which has delayed many of the responses that other developed countries have been taking. In the face of increased pressure from the medical profession, the bureaucrats have now relented and, at least in Tokyo, less-severe cases will be able to stay at home or will be billeted in hotels. The rule that patients could only be released from the hospital after two negative tests is also to be 'relaxed'. The rule that new cases must be reported to the Ministry by fax still, however, remains in place.HOTELS &amp; HOMES - Given the size of most homes in the capital, isolation in homes with multiple residents will be hazardous, The TMG is, therefore, moving quickly to requisition or acquire the necessary hotel space.  The infamously-xenophobic APA Hotel chain has been quick to offer their services to lightly-symptomatic patients and is offering a 50% discount to health care workers.Source outbreak.infoASIAN OUTLIER - Japan is now the outlier in Asia in seeing an increasing rate of daily new cases (353 on April 3rd),  including a six-month-old baby against whom medical staff did not think to take any precautions forcing 44 staff into two weeks of self-isolation. Using a simple measure proposed by Messrs Kohlberg, Neyman, and Tepper, Japan's R Score is 2.09. With both Singapore and Hong Kong introducing stricter social constraints over the last two days, Japan's Swedish-style response is facing increasing domestic criticism. Several LDP politicians and supporters have distanced themselves from PM Abe's two-masks policy. Although far from disinterested parties, Rakuten (4755 JP)'s @hmikitani and Softbank Group (9984 JP)'s @masason have both taken to Twitter to urge for the declaration of a state of emergency. The former has however been slow to prevent price-gouging for masks sold on the Rakuten platform. Even the influential Keidanren business federation has now accepted that a state of emergency is 'acceptable' on condition that 'vital services' are not too severely disrupted.Source • NHKTOKYO AT THE TIPPING POINT - Even the normally-quiescent NHK fired up their graphic team for last night's '7 NEWS'  to illustrate that Tokyo is 18 days away from an exponential explosion unless there is an 80% reduction in social activities. Source • NHKGOVERNOR KOIKE - Although firmly stating that a full lockdown of Tokyo is legally 'impossible', Gov. Koike is gently prodding the national government towards stricter measures and continues to warn businesses to make the necessary preparations as only grocery stores, bank and medical facilities would remain open. She has requested residents to stay at home this weekend and is recommending avoiding the three "C's" - Crowded, Confined spaces where Conversations take place until further notice. Taking a leaf from Governor Cuomo's book, she is now giving daily updates on YouTube, including one in English. Having harboured ambitions for higher office in the past, the contrast she is drawing with the apparently-hapless Prime Minister is being made abundantly clear. Many LDP officials, however, remain wary of her 'un-Japanese' opportunism and her authoritarian and unpredictable nature. As in the United States, personal and political rivalries are obstructing to sensible policy-making.   Source • GooglePARTIAL LOCKDOWN - Many restaurant chains including Torikizoku (3193 JP), Kushikatsu Tanaka (3547 JP)  and Hub (3030 JP) and karaoke and entertainment facilities such as Daiichikosho (7458 JP), Koshidaka (2157 JP) and Round One (4680 JP) have announced the closure of their facilities for several weeks and join the department stores and cinemas that closed last and will be so again this weekend. Even the Spring Sumo tournament has been delayed for at least two weeks. As confirmed by Google's excellent Community Mobility Reports above, Tokyo is gradually heeding the call. The March Services PMI for Japan suggests a year-on-year contraction of 8%. The onus will now pass to the national government to mitigate the losses.Source • US Embassy, Tokyo'GET-OUT-OF-EDO-BABY-GO' - The US Embassy in Japan is recommending that any US citizens who are not prepared to stay in Japan for several months or who are concerned about not being able to receive appropriate medical care should leave immediately. Those who do will, however, not be allowed to return for an as-yet-unspecified period.  Even Japanese nationals are now required to spend fourteen days in quarantine. All residence visas that expire before the end of June be extended by three months. From April 3rd and until further notice, non-Japanese of any residence status, including permanent and spouses of Japanese nationals, are to be denied re-entry if they leave Japan. Welcome to the lock-in without a lockdown!RELIEF MEASURES - A potpourri of relief measures and new policies are doing the rounds in government circles including some or all of the following:- 

¥300,000 - A one-time non-taxable payment will be made to qualified households that are suffering financially from a loss of income. About 10 million households are expected to qualify. It has already been necessary to make clear that the adult entertainment industry will not be eligible for public funds. ¥300,000 is equivalent to the annual amount spent on a pet dog in Japan.

PREFERENCE SHARES - Large firms such as airlines, shippers and auto manufacturers may be eligible for rescue packages in the form of preference shares issued to the Development Bank of Japan of up to ¥400 billion each. The allocation of such funds will be a subject of much political jostling, while smaller businesses that lack the right connections may not be deemed eligible. We would now be wary of being aggressively 'short' these sectors.

FIVE-YEAR INTEREST-FREE LOANS - While a welcome measure for some SMEs, this measure may not be sufficient for those already-indebted businesses with large numbers of regular employees operating out of rented accommodation, of which Japan's legion of wholesalers is a prime example.

TAX MORATORIA - The government is to grant a moratorium on tax payments by companies that have seen their monthly revenues fall by more than 20% from the previous year due to COVID-19.

WRITE-DOWNS - The Japanese ASB and the FSA have announced that companies will be allowed greater leniency regarding asset writedowns for idle plants and stores

SUBSIDIES - The government will fully-subsidise the increase in production of Fujifilm (4901 JP)'s Avigan drug and ventilators from a variety of manufacturers. Avigan will be offered for free to other countries.

DE-GLOBALISATION - Toyota Motor (7203 JP) and Honda Motor (7267 JP) are in talks with the Ministry of Economy, Trade and Industry to move some or all of their supply chains our of China. Nissan Motor (7201 JP) is seemingly no longer considered relevant in this regard. Japanese corporates will also begin a process of unwinding unprofitable overseas operations to support their domestic activities, a move that will help keep the Yen relatively stable over the medium term.
While large Japanse corporations are relatively well-placed to weather this storm, the Japanese government is fiscally constrained and grossly indebted relative to GDP. Given the now-inflationary global outlook, we would expect the Bank of Japan to be the least generous of the central banks in response to COVID-19, which will also be supportive of the Yen.In the DETAIL section below, we shall review our targets for our Results and Revisions Scores, and the market overall, look at our updated trailing aggregate actual profits and multiples and review Fridays' Results and Revisions. Finally, we shall suggest that Japan is well-placed for the emergent post-COVID economic world order and conclude that we would be buyers of Japanse equities into the second wave of the COVID-19 downturn.

🇯🇵 JAPAN MARKET UPDATE 5th April 2020 • Overshoot

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. 

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/117/756/original/2020-02-14_05-11-41.png?1581624901" class="editor-image img-responsive" data-smartkarma-image-id="117756"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/117/760/original/2020-02-14_05-38-10.png?1581626321" class="editor-image img-responsive" data-smartkarma-image-id="117760"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>13TH FEBRUARY ROUNDUP</strong> - The penultimate day of this results 'season' saw 402 results and 224 forecast or revision announcements.  Our results Score lost another 7 basis points; however, positive initial annual forecasts from several December year-end companies including <a href="https://www.smartkarma.com/entities/dentsu-inc" target="_blank" data-smartkarma-citation="entities:12434:1" rel="noopener">Dentsu  (4324 JP)</a>, <a href="https://www.smartkarma.com/entities/unicharm-corp" target="_blank" data-smartkarma-citation="entities:6246:1" rel="noopener">Unicharm (8113 JP)</a>, <a href="https://www.smartkarma.com/entities/asahi-group-holdings-ltd" target="_blank" data-smartkarma-citation="entities:10482:1" rel="noopener">Asahi Group (2502 JP)</a>, <a href="https://www.smartkarma.com/entities/coca-cola-bottlers-japan" target="_blank" data-smartkarma-citation="entities:20051:1" rel="noopener">Coca Cola Bottlers Japan (2579 JP)</a>, <a href="https://www.smartkarma.com/entities/suntory-beverage-food-ltd" target="_blank" data-smartkarma-citation="entities:8218:1" rel="noopener">Suntory Beverage &amp; Food (2587 JP)</a>, and <a href="https://www.smartkarma.com/entities/mcdonald-s-holdings-co-japan" target="_blank" data-smartkarma-citation="entities:985:1" rel="noopener">Mcdonald's Japan (2702 JP)</a> added 34 bps to the Forecast/Revision Score. <strong>The 'gap' between the two Scores is the largest since mid-2016, and a large gap is a precondition for setting a cycle low. </strong></p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/117/757/original/2020-02-14_05-14-40.png?1581625349" class="editor-image img-responsive" data-smartkarma-image-id="117757"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>SECTOR TIMELINE</strong> - These initial forecasts were the prime driver of the on-day changes in our Sector Timeline, which saw gains for <strong>Restaurants,</strong><strong>Media</strong>, <strong>Food, Beverages &amp; Tobacco</strong>, and <strong>Other Consumer Products</strong>. Time will tell if this optimism is well-founded or not.</p>

Source • Japan Analytics13TH FEBRUARY ROUNDUP - The penultimate day of this results 'season' saw 402 results and 224 forecast or revision announcements.  Our results Score lost another 7 basis points; however, positive initial annual forecasts from several December year-end companies including Dentsu  (4324 JP), Unicharm (8113 JP), Asahi Group (2502 JP), Coca Cola Bottlers Japan (2579 JP), Suntory Beverage &amp; Food (2587 JP), and Mcdonald's Japan (2702 JP) added 34 bps to the Forecast/Revision Score. The 'gap' between the two Scores is the largest since mid-2016, and a large gap is a precondition for setting a cycle low. Source • Japan AnalyticsSECTOR TIMELINE - These initial forecasts were the prime driver of the on-day changes in our Sector Timeline, which saw gains for Restaurants,Media, Food, Beverages &amp; Tobacco, and Other Consumer Products. Time will tell if this optimism is well-founded or not.

🇯🇵 JAPAN • Results & Revisions Daily Roundup - 13th February ▲2587 4612 8113 ▼ 7201 4004 4912

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/116/923/original/2020-02-08_18-15-45.png?1581196263" class="editor-image img-responsive" data-smartkarma-image-id="116923"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/116/924/original/2020-02-09_06-34-51.png?1581197706" class="editor-image img-responsive" data-smartkarma-image-id="116924"></figure><div class="content-caption">Source • Japan Analytics</div><div class="content-caption"></div><p><strong>OOOPS!</strong> - The 480 quarterly results announced on Friday subtracted a further 20 basis points from our Results Score. If the remaining 38% of companies continue this trend, the current quarter will equal CQ2019-1 and CQ2018-2 in seeing a 200 basis point Results Score decline. 169 forecasts or revision announcements added  5bps to the Forecast/Revision Score, supported by slight upward revisions from <a href="https://www.smartkarma.com/entities/softbank-corp" target="_blank" data-smartkarma-citation="entities:27445:1" rel="noopener">Softbank Corp (9434 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 Motor (7267 JP)</a>.  The Results Score has dipped below the Forecast/Revision Score for the first time since July 2016 and is a necessary precursor of the bottoming of the cycle. Japan is now in a recession and could see a decline in GDP for the calendar year. The market's current optimism (aided by the Bank of Japan's buy-the-dips support programme) is more appropriate to the middle of the cycle and, with two further poor earnings quarters ahead, suggests limited further upside. </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/116/925/original/2020-02-08_10-48-19.png?1581199859" class="editor-image img-responsive" data-smartkarma-image-id="116925"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>18x EARNINGS</strong> - Trailing-twelve-month (TTM) Operating Income for the composite of listed companies has declined to ¥57.4t, 10% below the peak of early 2019. TTM Net Income has declined by 20% over the same period, resulting in a 6.1 point increase in the market price-earnings ratio to 17.6 times.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/116/927/original/2020-02-08_10-55-21.png?1581200256" class="editor-image img-responsive" data-smartkarma-image-id="116927"></figure><div class="content-caption">Source • Japan Analytics</div><p style="text-align: left;"><strong>TTM RESULTS</strong> - TTM Operating Profits have been declining quarter-on-quarter for five straight quarters, and are 8.1% lower year-on-year. The Operating Margin has declined from 7.45% to 6.80%. TTM Revenues are now also falling and have only increased by 0.7% year-on-year.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/116/928/original/2020-02-08_10-59-00.png?1581200533" class="editor-image img-responsive" data-smartkarma-image-id="116928"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>FORECASTS</strong> - The year-on-year Operating Profit decline using current forecasts is 8.5%, while Revenues are flat. Revenue forecasts have been falling quarter-on-quarter for three quarters in a row. The 'uplift' from TTM to Forecast is just ¥3t for sales and ¥0.3t for OP. </p>

Source • Japan AnalyticsOOOPS! - The 480 quarterly results announced on Friday subtracted a further 20 basis points from our Results Score. If the remaining 38% of companies continue this trend, the current quarter will equal CQ2019-1 and CQ2018-2 in seeing a 200 basis point Results Score decline. 169 forecasts or revision announcements added  5bps to the Forecast/Revision Score, supported by slight upward revisions from Softbank Corp (9434 JP) and Honda Motor (7267 JP).  The Results Score has dipped below the Forecast/Revision Score for the first time since July 2016 and is a necessary precursor of the bottoming of the cycle. Japan is now in a recession and could see a decline in GDP for the calendar year. The market's current optimism (aided by the Bank of Japan's buy-the-dips support programme) is more appropriate to the middle of the cycle and, with two further poor earnings quarters ahead, suggests limited further upside. Source • Japan Analytics18x EARNINGS - Trailing-twelve-month (TTM) Operating Income for the composite of listed companies has declined to ¥57.4t, 10% below the peak of early 2019. TTM Net Income has declined by 20% over the same period, resulting in a 6.1 point increase in the market price-earnings ratio to 17.6 times.Source • Japan AnalyticsTTM RESULTS - TTM Operating Profits have been declining quarter-on-quarter for five straight quarters, and are 8.1% lower year-on-year. The Operating Margin has declined from 7.45% to 6.80%. TTM Revenues are now also falling and have only increased by 0.7% year-on-year.Source • Japan AnalyticsFORECASTS - The year-on-year Operating Profit decline using current forecasts is 8.5%, while Revenues are flat. Revenue forecasts have been falling quarter-on-quarter for three quarters in a row. The 'uplift' from TTM to Forecast is just ¥3t for sales and ¥0.3t for OP. 

🇯🇵 JAPAN • Results & Revisions Daily Roundup - 7th February ▲2121 7267 5713 ▼ 5401 9616 3407

Equity Analyst, LightStream Research

Shifara Samsudeen, ACMA, CGMA

Equity Analyst

Equity Bottom-Up

<p>This is the <strong>Final</strong> of a series of reports on Pigeon Corp and in this insight, we will be taking a close look at the company’s Domestic Baby and Mother Care business alongside the company’s current valuations. Pigeon’s domestic baby and mother care business generated about 34% of revenues in FY01/2019 and is the second largest OP generator for the company. The domestic business is ranked the market leader in Japan for a majority of the products the company sells. The business still generates a large share of consolidated revenues and has grown at a CAGR of around 7.8% over the last five years, we expect the segment’s growth to slow down over the next couple of years due to declining birth rates in Japan. In spite of declining revenue growth, we believe the segment will continue to be the cash cow for the company.</p><p>Pigeon has been trading at premium to its peers, Unicharm and Kao over the last 3-4 years and we expect the company to continue to trade at higher multiples than peers. Both Unicharm and Kao are forecasted to grow at higher rates than peers despite the two companies trading at discounts to Pigeon.</p><p>As we discussed in our previous insight, we expect the company’s overseas business (excl. China) to drive the company’s next phase of growth. Though there seems a slight decline in the Chinese business, we believe increasing penetration into Tier 3 cities and below in China should drive growth in the segment’s top line. Though it will take couple of more years for the market to witness any meaningful growth from the overseas business, we believe the current drop in share price offers a good entry to own the company shares.</p>

This is the Final of a series of reports on Pigeon Corp and in this insight, we will be taking a close look at the company’s Domestic Baby and Mother Care business alongside the company’s current valuations. Pigeon’s domestic baby and mother care business generated about 34% of revenues in FY01/2019 and is the second largest OP generator for the company. The domestic business is ranked the market leader in Japan for a majority of the products the company sells. The business still generates a large share of consolidated revenues and has grown at a CAGR of around 7.8% over the last five years, we expect the segment’s growth to slow down over the next couple of years due to declining birth rates in Japan. In spite of declining revenue growth, we believe the segment will continue to be the cash cow for the company.Pigeon has been trading at premium to its peers, Unicharm and Kao over the last 3-4 years and we expect the company to continue to trade at higher multiples than peers. Both Unicharm and Kao are forecasted to grow at higher rates than peers despite the two companies trading at discounts to Pigeon.As we discussed in our previous insight, we expect the company’s overseas business (excl. China) to drive the company’s next phase of growth. Though there seems a slight decline in the Chinese business, we believe increasing penetration into Tier 3 cities and below in China should drive growth in the segment’s top line. Though it will take couple of more years for the market to witness any meaningful growth from the overseas business, we believe the current drop in share price offers a good entry to own the company shares.

Pigeon: Domestic Business Growth Slows Down but Remains a Cash Cow

<p>This is the <strong>SECOND</strong> of a series of reports on Pigeon Corp (7956 JP) and in this insight, we will be taking a closer look at the company’s China Business. As we discussed in our previous insight, the China business has grown rapidly over the last four years and contributed 34% of consolidated revenues in FY01/2019. At the same time, the China segment is the largest profit generator for the company over the last five years. The Chinese segment’s growth historically was aided by the company’s expansion into several regions within China and the introduction of new products supported by a growing domestic baby care market. We expect the segment’s revenues to grow due to expanding into Tier 3 cities and below. At the same time, a growing baby care market alongside the company’s plan to introduce a new skincare baby product range should help further grow the segment’s topline. The China business continues to generate a large proportion of revenue from e-commerce and as a result, we expect the segment’s margin to be impacted negatively. Moreover, we expect the introduction of the new skincare product range to strain the segment’s margin initially, however, we expect the margins to recover thereafter with the growth in topline.</p>

This is the SECOND of a series of reports on Pigeon Corp (7956 JP) and in this insight, we will be taking a closer look at the company’s China Business. As we discussed in our previous insight, the China business has grown rapidly over the last four years and contributed 34% of consolidated revenues in FY01/2019. At the same time, the China segment is the largest profit generator for the company over the last five years. The Chinese segment’s growth historically was aided by the company’s expansion into several regions within China and the introduction of new products supported by a growing domestic baby care market. We expect the segment’s revenues to grow due to expanding into Tier 3 cities and below. At the same time, a growing baby care market alongside the company’s plan to introduce a new skincare baby product range should help further grow the segment’s topline. The China business continues to generate a large proportion of revenue from e-commerce and as a result, we expect the segment’s margin to be impacted negatively. Moreover, we expect the introduction of the new skincare product range to strain the segment’s margin initially, however, we expect the margins to recover thereafter with the growth in topline.

Pigeon’s China Business to Grow Driven Mainly by Expanding into Tier 3 Cities and Below

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)

🇯🇵 JAPAN MARKET UPDATE 5th April 2020 • Overshoot

OVERSHOOT - This Insight will be longer than usual with more above the paywall 'fold' as Friday saw several significant developments in Japan's...

Campbell Gunn

🇯🇵 JAPAN • Results & Revisions Daily Roundup - 13th February ▲2587 4612 8113 ▼ 7201 4004 4912

13TH FEBRUARY ROUNDUP - The penultimate day of this results 'season' saw 402 results and 224 forecast or revision announcements. Our results Score...

Campbell Gunn

🇯🇵 JAPAN • Results & Revisions Daily Roundup - 7th February ▲2121 7267 5713 ▼ 5401 9616 3407

OOOPS! - The 480 quarterly results announced on Friday subtracted a further 20 basis points from our Results Score. If the remaining 38% of...

Campbell Gunn

Pigeon: Domestic Business Growth Slows Down but Remains a Cash Cow

This is the Final of a series of reports on Pigeon Corp and in this insight, we will be taking a close look at the company’s Domestic Baby and...

Shifara Samsudeen, ACMA, CGMA

Pigeon’s China Business to Grow Driven Mainly by Expanding into Tier 3 Cities and Below

This is the SECOND of a series of reports on Pigeon Corp (7956 JP) and in this insight, we will be taking a closer look at the company’s China...

Shifara Samsudeen, ACMA, CGMA

Price Gauge

52-week Range

Market Cap (USDm)

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