The Must Read PSA Weekly Research Round-up (week to 29 June)

The PSA Must Read Weekly Research Round-Up: Reports published this week on Otsuka Holdings (4578 JP) / Hitachi Chemical (4217 JP) and Japan Pharma Strategy / Analyst Joel Scheiman looks at the Fujifilm – Xerox Spat, he also provides a reassuring overview at Hitachi Chem’s divulgence of Battery Data Falsifications / Pelham Smithers comments as the battle for Cross-Play heats up for Sony (6758 JP), Microsoft (MSFT US) and Nintendo (7974 JP)

The Weekly Comment by Pelham Smithers

Having oscillated between ¥5,000 and ¥5,500 since early Nov 2017, Sony (6758 JP) has just broken out on the upside. Though the move is overdue, various factors contributed to the lengthy consolidation period and it is probably worth looking to what degree these – or any new factors – should still come into play.
Three factors contributing to the recent uncertainty are:
1. Caution from the new CEO: There was a lot of disappointment when Sony brought out its underwhelming FY18 forecasts, and again when it failed to provide any hard targets for its three-year plan at Analysts Day. However, we all know the reason: new CEO Kenichiro Yoshida is not the sort of person to set flashy targets. However, his career shows that he is pretty good at achieving flashy targets; first at SoNET, and then latterly as CFO. As we head from the period of forecasts to the period of results, what Yoshida says becomes less important than what he does.
2. iPhone X disappointment: Our opinion is that Apple (AAPL US) made a bit of a hash with 2017 in general – the best thing to come out of the company that year was the Apple Watch 3 – and singling out the iPhone X is case of failing to see the wood for the trees. However, Apple’s early-2018 production has taken a knock – as has Apple’s confidence – and this is likely to impact initial orders for components for the 2018 iPhone range. Still, it is tough to see Apple selling fewer 2018 phones than the 2017 variety, and it could sell quite a few more if it gets its act together. With that in mind, Sony’s CMOS business may have a tough 1Q, and possibly even a tough 2Q, but things should pick up in the 3Q, while the 4Q obviously has a very easy base year comparison……….

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

1. Hitachi Chemical (4217 JP): Excellent Company – Why Not an Excellent Stock?
2. Otsuka Holdings (4578 JP): Pricing Advantage
3. Japan Pharma Strategy

Company / Sector / Thematic Comments at a Glance

Technology: Consumer Electronics, Gaming

1. Battle for Cross-Play Heats Up for Sony (6758 JP), Microsoft (MSFT US) and Nintendo (7974 JP)
2. How Well Have Sony’s (6758 JP) Media Assets Performed?
3. What to Do About Sharp (6753 JP) – If Anything?

Chemicals

4. Nissha (7915 JP) Buys Another Niche Medical Tech Company
5. Tokyo Ohka Kogyo (4186 JP) Begins to Recover
6. Japan Display (6740 JP) to Record Lower Equity Holding Losses
7. The Fujifilm (4901 JP) / Xerox (XRX US) Drama Continues
Jury Still Out on Fujifilm Versus Xerox
Fujifilm and Xerox Part One: Be Careful What You Wish For
Fujifilm, Xerox Part Two: Icahn, Deason’s Xerox Economics Start to Diverge
8. Rising Concerns over Used Car Prices in the US

Autos

9. Nissan’s (7201 JP) Alternative Powertrain Predicament
10. Bridgestone (5108 JP) Develops New Material

Auto Parts / Machinery

11. Fanuc (6954 JP) to Replace CORO Until Further Notice
12. Bottom Fishing for Mitsubishi Electric (6503 JP)

Internet

13. GungHo Online Entertainment (3765 JP) Launches Yokai Watch World

Telecom

14. Japan FTC on SoftBank (9984 JP) and KDDi’s (9433 JP) Backs Again

Pharma

15. Shionogi (4507 JP) Files US NDA for Influenza Treatment
16. Takeda (4502 JP) CEO “Comfortable” With Haemophilia Competition
17. Positive Drug Trials for Nippon Shinyaku (4516 JP)

PSA Company Visits, Tours and Interviews

• Visited Tokyo Ohka Kogyo (4186 JP); NOK (7240 JP)
• Interviewed Teijin (3401 JP)
• Information meeting at Hitachi Chemical (4217 JP)
• Conference call with Recruit Holdings (6098 JP)

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