The Must Read PSA Weekly Research Round-up (week to 15 June)

The PSA Must Read Weekly Research Round-Up: Reports published this week we look at Canon’s numbers (7751 JP) / SMC (6273 JP) / Pelham Smithers reports on the hits and misses at this year’s E3 / MonotaRO (3064 JP) is one of the FATMANG stocks Pelham Smithers favours / Julie Boote discusses Toyota’s (7203 JP) e-Palette mobilty service and its recent stake in Southeast Asia’s dominant car-hailing provider, Grab

The Weekly Comment by Pelham Smithers

As we do not cover financials unless there is a fintech angle, it had rather passed me by how poorly Japanese bank shares had performed of late. At one level this shouldn’t be surprising, what with interest rates being negative, but at another level it doesn’t feel that things are worse now than they were in mid-2016, when the world and his wife was panicking that monetary policy would bankrupt Japan’s banking industry. Indeed, not only did the 2H 2016 bounce in banking shares suggest a realization that we’d got into an oversold situation, but even if some of those 2H 2016 gains were reversed, it seemed unlikely that we’d reverse the lot. Yet we have reversed the move, at least in relative terms. Using 1983=100 as a base, Japanese banks relative to Topix fell to 34.28 today (15 June) versus 35.05 in June 2016. Now, in absolute terms, Japanese banks have done pretty well over the past two years, with the banking sector rising from 129.26 to 181.56 – that is a decent 40% increase. It is just that the Japanese stock market, overall has done better and for good reason: Japanese bank earnings have bounced in the two years, but not as much as most. Furthermore, the outlook for banking profits in FY18 are pretty poor, while those for the rest of the market are decent if not exceptional.

Banking shares aren’t alone in this regard. Other risk-on sectors, such as steel and shipping, are also at / close to relative lows, having more than given back their outperformance gains from 2H 2016. Not doing all that great either are asset-backed rather than earnings-driven sectors like real estate and warehousing. These sectors are not quite at their relative lows right now, but they have hit that point at some stage in 2018………..

Reports / Flash Notes Published This Week: Headlines at a Glance

1. Canon (7751 JP) Concerns Lead us to Trim our Forecasts

Company / Sector / Thematic Comments at a Glance

Technology: Consumer Electronics, Gaming

1. Sony (6758 JP) vs Microsoft at E3 2018
2. Nintendo (7974 JP) also Disappoints at E3
3. Square Enix (9684 JP) Sets Date for Kingdom Hearts III, Capcom (9697 JP) for Resident Evil 2
4. Blemishes Showing Up at Ya-Man (6630 JP)
5. Implications for Panasonic’s (6752 JP) Battery Business from CATL IPO

Technology: Electronic Components

6. Spotlight on MLCC-Plays: Murata (6981 JP) / TDK (67632 JP) / Taiyo Yuden (6976 JP)

Technology: Blockchain / Bitcoin / Cryptocurrency

7. Another Crypto Exchange Hack

Chemicals

8. Why Nissan Chemical (4021 JP) is Priced for Perfection
9. Ohara’s (5218 JP) Prospects Brighten Significantly
10. Taiyo Nippon Sanso’s (4091 JP) Odds to Acquire Assets Improve

Autos

11. Will Toyota (7203 JP) Kill the Barista?
12. Toyota (7203 JP) Acquires Grab Stake
13. Nissan-Renault-Mitsubishi Motors Alliance Reports an Increase in Synergies

Auto Parts / Machinery

14. Akebono’s (7238 JP) Exciting New Brake Caliper Design

Telecom / Media

15. KDDi’s (9433 JP) Stock Market Rehabilitation
16. US Media Assets Set for Further M&A Boom

Internet

17. Solid Numbers from Two Internet Support Firms
18. LINE (3938 JP) Introduces LIFF; Implications for LINE Pay
19. CyberAgent (4751 JP) Introduces REQU
20. Rakuten (4755 JP) to Cut Rakuten Mobile’s Prices

Miscellaneous

21. Are Sales at MonotaRO (3064 JP) Accelerating?

PSA Company Visits, Tours and Interviews

• Visited Nissan Chemical (4021 JP)
• Attended earnings meetings at Ohara Inc. (5218 JP)
• Attended information meeting at Konica Minolta (4902 JP)

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