In this briefing:
- Japan: Winter Results & Revisions Flash – Cycle Earnings Peak Was December 26th
- *TW3/North Asia* That Was The Week That Was 🇰🇷 🇯🇵 11th-17th February 2019 @Smartkarma
1. Japan: Winter Results & Revisions Flash – Cycle Earnings Peak Was December 26th
![](https://static-prod.smartkarma.com/images/media/000/079/000/original/2019-02-16_10-06-13.png?1550279195)
WORST Q SINCE AUTUMN 2016 – Since our last Results Flash in November – Japan: Autumn Results & Revisions Flash – Flatlining + Weakest Quarter in Two Years – the operating and net profits of Japanese listed companies have peaked and declined by 2.0% and 7.5%, respectively while forecasts for the same have fallen by 1.7% and 4.1%. The stock market’s initial reaction to the peaking of earnings for this cycle was a sharp 15.5% decline which climaxed on Christmas Day. A softer tone from the US Federal Reserve and a weaker Yen have helped restore a degree of confidence and the recent 12.1% rally has taken aggregate market capitalisation back to early-December. As a result of the downturn in profits, trailing and forecast earnings multiples have reverted to August 2018 levels and can no longer be considered a bargain. For the restoration of a ‘normal’ market multiple (16.7x), either share prices have to rise by 18% (all else equal) or net income has to decline by a further 16%. Our money is on the latter being the more likely outcome.
![](https://static-prod.smartkarma.com/images/media/000/079/004/original/2019-02-16_10-43-29.png?1550281425)
Source: Japan Analytics
ROLLING TTMs – Our series of rolling trailing-twelve-month (TTM) quarterly aggregates of all listed companies confirm the profit peak. Revenues are still increasing by 5-6% a year, and by 1-2% a quarter, however, the rate of increase is slowing and the implied growth rate for the current quarter is just 0.5%. Operating Income declined by 1.9% qoq in the quarter just declared and will be flat this quarter, although, as few companies revise full-year forecasts with Q3 earnings results, this forecast should be considered optimistic. Operating margins are forecast to be 33bps lower than in TTM-3. TTM Net Income fell by 8% qoq, although yoy growth is still a positive 3%. The 1.6% forecast growth for this quarter implies that the most recent quarter had an excessive level of write-offs. We are not so sanguine.
SECTOR BREAKDOWNS – In the DETAIL section below we shall examine the trends in earnings results and forecasts for the 30 sectors that make up our Market Composite. Â
2. *TW3/North Asia* That Was The Week That Was 🇰🇷 🇯🇵 11th-17th February 2019 @Smartkarma
TW3 NORTH ASIA – This was a busy week for the North Asian team on Smartkarma. with 967 results announcements and 577 forecasts revisions in Japan and plenty of corporate activity in Korea including LG Uplus/CJ Hello. As is our wont here, we also had a number of providers take opposite sides on a number of issues (e.g. GMO Internet (9449 JP)).
Our Top 3 Insights of the week are Pelham Smithers Associates – SoftBank: Does Nvidia Show It Overpaid for ARM?,  Douglas Kim‘s A Surprising Finding of Outperformance & Quarterly Earnings Conference Call Recording in Korea, and  Michael Causton ‘s ZOZO: The Kingmaker Abandons His King
The format is a little different this week with Insights grouped by vertical and split between Bullish and Bearish with no country separation. Any feedback for further improvements is always welcome! Â
EVENT DRIVEN: BULLISH
Softbank Buyback More Than It Appears To Be
Poongsan Holdings Stub Trade: Current Status & Trade Approach
Stake in Quadric.io Denso Attempts to Keep Chip Makers CloseÂ
KDDI Tender Offer for Kabu.com (8703 JP)Â Decided
Nongshim Holdco/Sub Trade: Current Status & Trade Approach
LG Uplus/CJ Hello – CJH Overhang Concerns Will Push It Up
EVENT DRIVEN: BEARISH
LG Uplus – CJ Hello Acquisition: Current Status & Trade Approach
SoftBank: Does Nvidia Show It Overpaid for ARM?
LG Uplus to Acquire CJ Hellovision: What’s Next for Tbroad and D’Live?
Minebea-Mitsumi Underpriced Tender for U SHIN (6985 JP) Launched
Doosan Heavy & Doosan E&C Rights Offers: Assessment & Estimation
IPOs & PLACEMENTS: BULLISH
Ecopro BM IPO: Valuation AnalysisÂ
Nomura Real Estate Master Fund Placement
IPOs & PLACEMENTS: BEARISH
Daiwa House REIT Placement – Well-Flagged but Barely Accretive to DPU
Dreamtech IPO: Valuation Analysis
EQUITY BOTTOM UP: BULLISH
A War Between Netflix & Disney = $$$ for Studio Dragon
Sony: Mispriced, Misunderstood, or Both?
Parco: 4 New Shopping Centres This Year, 28% Rise in Revenue in 5 Years
Hana Financial: Hand It to Hana
EQUITY BOTTOM UP: BEARISH
Tokyo Kiraboshi Financial Group (7173 JP): Red Dwarf
ZOZO: The Kingmaker Abandons His King
Rakuten to Covertly Cut Merchant Commission Rates?
RESULTS COMMENTARY:Â BULLISH
Shimadzu (7701 JP): 3Q Results Suggest a Trading Range
NCsoft: Major Highlights of 4Q18 Earnings Conference Call
Tsubakimoto Chain Co (6371 JP) Double-Digit Growth Continues
NTT Corp: The Rising Dividend Story Is Playing Out
Fujimi (5384 JP): Silicon Slow, HDD & Industrial Down in 3Q
GMO Internet Reports Solid FY12/18 Despite Heavy Crypto Losses
RESULTS COMMENTARY:Â BEARISH
Shiseido: 2018 Results – Setting Expectations Too HighÂ
Concordia Financial Group (7186 JP): Out of Focus
Olympus: 3QFY03/19 Profits Decline on Litigation-Related Costs
Monex Group (8698 JP): Upside Unlikely on Weak Cryptocurrencies
Robotics: Nabtesco & HDS Results Strong; Still No Reason to Own Fanuc
Recruit Holdings Reports Strong 3Q Results; Remains Expensive
GMO internet FY2018 Results – The Shareholder’s [Re]Turn
THEMATIC & STRATEGY: BEARISH
Stock Outperformance & Earnings Conference Call Recording in Korea
MACRO: BEARISH
No Upside For Korean Companies – Underweight
TECHNICAL: BULLISH
Korea Circuit Long Support for Press Above Overhead Barriers
Fanuc Bullish Trade Points off of Base Line Support
TECHNICAL: BEARISH
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