In this briefing:
1. Suruga Bank Bottom Projection
Daily cycle indicators display a topside cap for Suruga Bank Ltd (8358 JP) and turn barrier to press for new lows with ideal downside projection the focus to align with RSI and MACD targeted supports.
The rise from December 2018 is labeled as corrective and biased for a new low. Price cap will act as resistance for those who favor the short side here.
Previous supports at 603 and 590 have been broken and are now upside hurdles to contend with and use as inflection points.
Oversold cycle readings are taking shape in the form of daily bull divergence from price as the weekly cycle attempts to find a foot hold in coming months.
2. Shimadzu (7701 JP): 3Q Results Suggest a Trading Range
Shimadzu’s 3Q results were good enough to reassure long-term investors, but not good enough to be called a buy signal. Sales and operating profit were up 4.5% and 4.6% year-on-year, respectively, in the three months to December, an improvement over 2Q but well below the double-digit increases recorded in 1Q and last fiscal year. Forex losses and other factors led to a 2.2% decline in net profit.
Sales were up in Japan, Europe and Asia ex-Japan and ex-China, but down in America, China and Other Regions. Sales of core Analytical & Measuring Instruments were up 2.4%, operating profit on those sales was up 4.1% and the operating margin rose to +15.4% from +15.1% the previous year.
Sales of Industrial Machinery were down 5.7%, but operating profit on those sales was up 2.7% and the division generated a +9.7% operating margin vs. +9.0% the previous year. Sales of turbo-molecular pumps, primarily to semiconductor equipment makers, were down 14.3%.
Medical System sales were up 10.6% and the division generated a +1.5% operating margin vs. + 0.1% the previous year. Aircraft Equipment sales were up 12.1% but the division made a -0.5% operating loss vs. +1.2% profit the previous year.
At ¥2,659 (Friday, February 8 closing price), the shares are selling at 24x our EPS estimate for FY Mar-19 and 12x EV/EBITDA. The five-year historical P/E range is 13x – 30x, the EV/EBITDA range is 6x – 16x. Over the next several quarters, we expect continued weakness in Industrial Machinery to offset single-digit growth in Instruments, keeping overall growth low.
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