Senior Technology Analyst, Japanese Equities, LightStream Research

Scott Foster

Securities analyst covering electronics, precision equipment & robotics, engineering, construction, transport and other sectors for more than 25 years in Japan and 3 years in Korea. Permanent resident of Japan.

Senior Technology Analyst, Japanese Equities

MonotaRO (3064 JP): Pandemic-Driven Growth Surge Fading

MonotaRO (3064 JP): COVID-19 Drives Growth, Efficiency Supports Margins

Japan Retail Review 2019-20 Part II: A Sector by Sector Review of Winners and Losers

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

Sales data for the month of September shows what may be the beginning of a long-delayed cyclical upturn. In particular, Factory Automation sales were up 5.1% year-on-year vs. declines of 9.2% and 6.4% in July and August. It was the first increase in almost two years. But in the three months to September (2Q of FY Mar-21), sales were down 6.7% and operating profit down 18.3%. The company's three product divisions - Factory Automation, Die Components and the VONA e-commerce business - all reported declines in sales and profits. There was a meaningful sales increase in China, but nowhere else.Furthermore, the operating margin on the VONA e-commerce business was 2.9% in the three months to September compared with 12.8% for MonotaRO. VONA has not reported a double-digit operating margin in more than three years. Misumi's share price appears to have discounted a return to peak profits. Up 71% from its 52-week low in March and up 24% since July, it was 59x management's EPS estimate for FY Mar-21 as of Friday's close.As the Western world goes back into lockdown, this looks like an opportunity for profit taking.

Sales data for the month of September shows what may be the beginning of a long-delayed cyclical upturn. In particular, Factory Automation sales were up 5.1% year-on-year vs. declines of 9.2% and 6.4% in July and August. It was the first increase in almost two years. But in the three months to September (2Q of FY Mar-21), sales were down 6.7% and operating profit down 18.3%. The company's three product divisions - Factory Automation, Die Components and the VONA e-commerce business - all reported declines in sales and profits. There was a meaningful sales increase in China, but nowhere else.Furthermore, the operating margin on the VONA e-commerce business was 2.9% in the three months to September compared with 12.8% for MonotaRO. VONA has not reported a double-digit operating margin in more than three years. Misumi's share price appears to have discounted a return to peak profits. Up 71% from its 52-week low in March and up 24% since July, it was 59x management's EPS estimate for FY Mar-21 as of Friday's close.As the Western world goes back into lockdown, this looks like an opportunity for profit taking.

Misumi Group (9962 JP): Upturn in Sales Already Discounted