Equity Analyst, LightStream Research

Oshadhi Kumarasiri

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Bottom-Up

<ul class="">
<li>Japanese sporting goods company <a href="https://www.smartkarma.com/entities/asics-corp" target="_blank" rel="noopener">Asics (7936 JP)</a> released its first-quarter results on Friday, May 22nd after a two-week delay due to COVID-19.</li>
<li>Revenue declined by 13.5% year-on-year due to store closures in multiple regions.</li>
</ul>
<table class="table table-striped">
<tbody>
<tr>
<td style="width: 112.25pt;"></td>
<td style="width: 99.45pt;">
Share of Total Revenue
</td>
<td style="width: 103.5pt;">
Revenue Growth/Decline
</td>
</tr>
<tr>
<td style="width: 112.25pt;">
Japan
</td>
<td style="width: 99.45pt;">
36%
</td>
<td style="width: 103.5pt;">
-8.3%
</td>
</tr>
<tr>
<td style="width: 112.25pt;">
North America
</td>
<td style="width: 99.45pt;">
18%
</td>
<td style="width: 103.5pt;">
-21.1%
</td>
</tr>
<tr>
<td style="width: 112.25pt;">
Europe
</td>
<td style="width: 99.45pt;">
25%
</td>
<td style="width: 103.5pt;">
-12.1%
</td>
</tr>
<tr>
<td style="width: 112.25pt;">
Greater China
</td>
<td style="width: 99.45pt;">
8%
</td>
<td style="width: 103.5pt;">
-17.2%
</td>
</tr>
<tr>
<td style="width: 112.25pt;">
Oceanian Region
</td>
<td style="width: 99.45pt;">
6%
</td>
<td style="width: 103.5pt;">
4.9%
</td>
</tr>
<tr>
<td style="width: 112.25pt;">
Southeast and South Asia
</td>
<td style="width: 99.45pt;">
3%
</td>
<td style="width: 103.5pt;">
-8.4%
</td>
</tr>
<tr>
<td style="width: 112.25pt;">
Others
</td>
<td style="width: 99.45pt;">
4%
</td>
<td style="width: 103.5pt;">
-29.0%
</td>
</tr>
</tbody>
</table>
<div class="content-caption">Source: Company Disclosures</div>
<div>
<div>
<ul>
<li>Q1 Operating Income fell by ¥7 billion year-on-year to an operating loss of ¥882 million. The first quarter has been Asics’s most profitable quarter over the past five years, generated 65% of the annual OP.</li>
<li>The company withdrew its initial forecasts for the year which were made in February which called for sales of ¥400 billion and operating profits of ¥9 billion.</li>
<li>ASICS also withdrew its previously-issued forecast of a ¥30 per share dividend.</li>
</ul>
</div>
</div>


Japanese sporting goods company Asics (7936 JP) released its first-quarter results on Friday, May 22nd after a two-week delay due to COVID-19.
Revenue declined by 13.5% year-on-year due to store closures in multiple regions.






Share of Total Revenue


Revenue Growth/Decline




Japan


36%


-8.3%




North America


18%


-21.1%




Europe


25%


-12.1%




Greater China


8%


-17.2%




Oceanian Region


6%


4.9%




Southeast and South Asia


3%


-8.4%




Others


4%


-29.0%




Source: Company Disclosures



Q1 Operating Income fell by ¥7 billion year-on-year to an operating loss of ¥882 million. The first quarter has been Asics’s most profitable quarter over the past five years, generated 65% of the annual OP.
The company withdrew its initial forecasts for the year which were made in February which called for sales of ¥400 billion and operating profits of ¥9 billion.
ASICS also withdrew its previously-issued forecast of a ¥30 per share dividend.




ASICS Withholds Guidance: Possibility of Full-Term Loss

<a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:751:1" rel="noopener">Fast Retailing (9983 JP)</a> (Uniqlo) has faced a number of challenges over the last 10 months:-
<ul>
<li>From October 2019, South Koreans began boycotting Japanese goods – South Korea is the company’s third-largest market, after Japan and China.</li>
<li class="">From January this year, China began its COVID-19 lockdowns severely restricting sales in Uniqlo’s fastest-growing market.</li>
<li class="">Lastly, as COVID-19 has become a global pandemic, almost all of the company’s markets have come under some form of lockdown.</li>
</ul>
Fast Retailing shares have declined by 43% from the peak of 25Th October 2019, but have recovered by 33% from their 19th March low.
We expect the Uniqlo brand to emerge from COVID-19 in a stronger position relative to peers than before, as the crisis has forced the company to address its previous weakness in E-commerce. We expect the shares to outperform TOPIX as the market’s perception of this weak link changes.

Fast Retailing (9983 JP) (Uniqlo) has faced a number of challenges over the last 10 months:-

From October 2019, South Koreans began boycotting Japanese goods – South Korea is the company’s third-largest market, after Japan and China.
From January this year, China began its COVID-19 lockdowns severely restricting sales in Uniqlo’s fastest-growing market.
Lastly, as COVID-19 has become a global pandemic, almost all of the company’s markets have come under some form of lockdown.

Fast Retailing shares have declined by 43% from the peak of 25Th October 2019, but have recovered by 33% from their 19th March low.
We expect the Uniqlo brand to emerge from COVID-19 in a stronger position relative to peers than before, as the crisis has forced the company to address its previous weakness in E-commerce. We expect the shares to outperform TOPIX as the market’s perception of this weak link changes.

Alternative Data: Fast Retailing’s E-Commerce Growth Suggests Limited Downside

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. 

Thematic (Sector/Industry)

No one really knows what will happen after the initial shock of the coronavirus fades away. Many observers in Japan, expert and otherwise, are already predicting a completely new world in one way or another, but the reality is likely more prosaic.What is certain is that the Japanese consumer economy will recover and it is just a question of when.The most likely effect of the crisis is that it will catalyse a period of change already in process and which also happens to be one of the most dramatic and far-reaching seen so far in retail.But there is one trend that may well reverse as more businesses go under or contract, providing relief for many retailers: the labour shortage and rise in wages.The following offers an in-depth review of both the impact of the current crisis and implications as well as the long-term trends in Japanese retailing, providing insight into which sectors, formats and specific companies will win and lose in the next three years.For a short read, we provide the conclusions and winners and losers first.

No one really knows what will happen after the initial shock of the coronavirus fades away. Many observers in Japan, expert and otherwise, are already predicting a completely new world in one way or another, but the reality is likely more prosaic.What is certain is that the Japanese consumer economy will recover and it is just a question of when.The most likely effect of the crisis is that it will catalyse a period of change already in process and which also happens to be one of the most dramatic and far-reaching seen so far in retail.But there is one trend that may well reverse as more businesses go under or contract, providing relief for many retailers: the labour shortage and rise in wages.The following offers an in-depth review of both the impact of the current crisis and implications as well as the long-term trends in Japanese retailing, providing insight into which sectors, formats and specific companies will win and lose in the next three years.For a short read, we provide the conclusions and winners and losers first.

After Covid: The Future for Japanese Retail: Winners & Losers

Most apparel firms and retailers suffered plummeting sales in March and expect a further wrenching in April.The only retailers to post higher sales were <a href="https://www.smartkarma.com/entities/workman-co-ltd" target="_blank" data-smartkarma-citation="entities:8467:1" rel="noopener">Workman Co Ltd (7564 JP)</a> and <a href="https://www.smartkarma.com/entities/nishimatsuya-chain-co-ltd" target="_blank" data-smartkarma-citation="entities:13375:1" rel="noopener">Nishimatsuya Chain (7545 JP).</a> The only good news is that many saw online sales surge as consumers switched to mobile purchases. While this wasn’t enough to offset lost sales in stores, it will catalyse the shift to online.

Most apparel firms and retailers suffered plummeting sales in March and expect a further wrenching in April.The only retailers to post higher sales were Workman Co Ltd (7564 JP) and Nishimatsuya Chain (7545 JP). The only good news is that many saw online sales surge as consumers switched to mobile purchases. While this wasn’t enough to offset lost sales in stores, it will catalyse the shift to online.

90% of Japanese Listed Apparel Firms Down but E-Commerce Powers Ahead

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/131/966/original/2020-05-08_05-43-09.png?1588884207" class="editor-image img-responsive" data-smartkarma-image-id="131966"></figure><div class="content-caption">Source • Japan Analytics</div>7TH MAY - As we pick up again after the Golden Week holidays, the results and revisions 'reality' will increasingly take over the market narrative. Our cap-weighted aggregate Results &amp; Revision Score continues to decline, reaching a fresh three-year low.  A new ten-year low will follow next week, which we expect will curb any upside enthusiasm.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/131/970/original/File%202020-05-07%204%2029%2028.jpeg?1588886994" class="editor-image img-responsive" data-smartkarma-image-id="131970"></figure><div class="content-caption">Source • SUTD Data-Driven Innovation Lab</div>THE ROAD TO ZERO - Having extended the nationwide state of emergency, the Japanese government is already relaxing restrictions in less-affected prefectures and has hinted that the measures limited activity in the remainder could be lifted before the end of the month. A simulation by the Singapore University of Technology and Design's Data-Driven Innovation Lab suggests that the goal of zero daily new confirmed new cases could be reached as early as 8th June. Testing is now being ramped up as the bureaucratic 'hurdles' are being overcome, and overly-strict preconditions have been relaxed. Nevertheless, the economic consequences of the extension are such that a second supplementary budget and an easing of the requirements for business interruption subsidies will be necessary.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/131/971/original/2020-05-08_06-52-52.png?1588888396" class="editor-image img-responsive" data-smartkarma-image-id="131971"></figure><div class="content-caption">Source • Japan Analytics</div>THE OTHER SHOE? - The strength of the yen against the US Dollar and by extension against most emerging market currencies is a factor that has received less attention but has a bearing on the earnings of many Japanese exporters. We are preparing an Insight on the likely impact and those companies whose absolute and relative share prices are most and least correlated.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/131/972/original/2020-05-08_06-59-20.png?1588888777" class="editor-image img-responsive" data-smartkarma-image-id="131972"></figure><div class="content-caption">Source • Japan Analytics</div>In the DETAIL below, we shall review the results, revisions and initial forecast announcements made by larger-cap companies yesterday.  On another relatively quiet day, the balance between positive/neutral/negative of the 51 results announcements was 15:6:30. The average change in Score was -83. For the 29 revisions/initial forecasts, the split was 11:1:17  and the average Score was -2. Of the 32 companies declaring full-year results, just nine made interim or annual forecasts for the current year. Two hundred twenty-three companies will announce today, the largest of which by market capitalisation will be <a href="https://www.smartkarma.com/entities/hoya-corp" target="_blank" data-smartkarma-citation="entities:8990:1" rel="noopener">Hoya (7741 JP)</a>, <a href="https://www.smartkarma.com/entities/mitsubishi-corp" target="_blank" data-smartkarma-citation="entities:20668:1" rel="noopener">Mitsubishi Corp (8058 JP)</a>, and <a href="https://www.smartkarma.com/entities/itochu-corp" target="_blank" data-smartkarma-citation="entities:18448:1" rel="noopener">Itochu (8001 JP)</a>.

Source • Japan Analytics7TH MAY - As we pick up again after the Golden Week holidays, the results and revisions 'reality' will increasingly take over the market narrative. Our cap-weighted aggregate Results &amp; Revision Score continues to decline, reaching a fresh three-year low.  A new ten-year low will follow next week, which we expect will curb any upside enthusiasm.Source • SUTD Data-Driven Innovation LabTHE ROAD TO ZERO - Having extended the nationwide state of emergency, the Japanese government is already relaxing restrictions in less-affected prefectures and has hinted that the measures limited activity in the remainder could be lifted before the end of the month. A simulation by the Singapore University of Technology and Design's Data-Driven Innovation Lab suggests that the goal of zero daily new confirmed new cases could be reached as early as 8th June. Testing is now being ramped up as the bureaucratic 'hurdles' are being overcome, and overly-strict preconditions have been relaxed. Nevertheless, the economic consequences of the extension are such that a second supplementary budget and an easing of the requirements for business interruption subsidies will be necessary.Source • Japan AnalyticsTHE OTHER SHOE? - The strength of the yen against the US Dollar and by extension against most emerging market currencies is a factor that has received less attention but has a bearing on the earnings of many Japanese exporters. We are preparing an Insight on the likely impact and those companies whose absolute and relative share prices are most and least correlated.Source • Japan AnalyticsIn the DETAIL below, we shall review the results, revisions and initial forecast announcements made by larger-cap companies yesterday.  On another relatively quiet day, the balance between positive/neutral/negative of the 51 results announcements was 15:6:30. The average change in Score was -83. For the 29 revisions/initial forecasts, the split was 11:1:17  and the average Score was -2. Of the 32 companies declaring full-year results, just nine made interim or annual forecasts for the current year. Two hundred twenty-three companies will announce today, the largest of which by market capitalisation will be Hoya (7741 JP), Mitsubishi Corp (8058 JP), and Itochu (8001 JP). 

🇯🇵 JAPAN • Results & Revisions Update 7th May - Yamaha, Misumi, FANCL, Workman, Nintendo

Japan

WORKMAN CO., LTD. designs, produces, and retails work uniforms and related goods including work gloves and safety shoes.  The Company operates its own stores and franchise stores located throughout eastern Japan.

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Workman Co Ltd (7564 JP)

ASICS Withholds Guidance: Possibility of Full-Term Loss

Japanese sporting goods company Asics (7936 JP) released its first-quarter results on Friday, May 22nd after a two-week delay due to...

Oshadhi Kumarasiri

Alternative Data: Fast Retailing’s E-Commerce Growth Suggests Limited Downside

Fast Retailing (9983 JP) (Uniqlo) has faced a number of challenges over the last 10 months:- From October 2019, South Koreans began boycotting...

Oshadhi Kumarasiri

After Covid: The Future for Japanese Retail: Winners & Losers

No one really knows what will happen after the initial shock of the coronavirus fades away. Many observers in Japan, expert and otherwise, are...

Michael Causton

90% of Japanese Listed Apparel Firms Down but E-Commerce Powers Ahead

Most apparel firms and retailers suffered plummeting sales in March and expect a further wrenching in April.The only retailers to post higher sales...

Michael Causton

🇯🇵 JAPAN • Results & Revisions Update 7th May - Yamaha, Misumi, FANCL, Workman, Nintendo

7TH MAY - As we pick up again after the Golden Week holidays, the results and revisions 'reality' will increasingly take over the market narrative....

Campbell Gunn

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