The Weekly Comment by Pelham Smithers
Six years into the Abe era, we ought to be getting pretty late cycle. As we come near the end of the latest round of results, Pelham Smithers notes that the better earnings performance has not come from the late-cycle companies – indicators to take a more risk-on strategy – but rather it has favoured quality companies and that the current binary situation of the winners winning and the losers losing is set to continue. Among the winners, this is particularly good news for those in industries where the success is both unexpected and dramatic – for instance, carbon electrode and MLCCs – because what it suggests is that they won’t be hurt by copycat behaviour.
Reports / Flash Notes Published This Week: Headlines at a Glance
1. Toyota (7202 JP) FY18 Q2 Preview
2. Shin-Etsu Chemical (4063 JP): FY18 H1 Earnings Meeting – Revising Up Full Year Estimates
Company / Sector / Thematic Comments at a Glance
Technology: Consumer Electronics, Gaming
1. Sony (6758 JP): Q2 Preview and Near-Term vs Long-Term Outlook
2. Sony (6758 JP) 2Q OP +16% YoY, FY18 OP Raised from ¥670bil to ¥870 bil
3. Capcom (9697 JP): FY18 2Q OP +28% YoY but No Change to Full Year
4. Sega Sammy (6460 JP) FY18 2Q OP Slips 8% but Pachinko Seem to be on the Mend
Chemicals / Materials
5. SanBio (4592 JP), Sumitomo Dainippon Pharma (4506 JP) Up on Stroke Trials
6. Hitachi Chemical’s (4217 JP) IC Material Tests Questioned
7. JSR (4185 JP), Sekisui Chemical (4204 JP): Differing Results Reactions
8. TDK’s (6762 JP) Large Upward Revision
9. KH Neochem (4189 JP) Exits Taiwan Project
10. Central Glass (4044 JP) Posts Strong H1
11. Dexerials (4980 JP) Sees an Improving Trend
12. Maxell’s (6810 JP) Unexpected Downward Revision
13. Isuzu (7202 JP): Higher Expenses Hurt Q2 Results, but Positive Outlook for FY18
14. Suzuki (7269 JP) Q2 Results down on Weaker India Operations
15. Honda (7267 JP) FY18 Q2 Earnings Show Strong Core Operations
16. Mazda (7261 JP) Set to Lower FY18 Forecast
Auto Parts / Machinery
17. WLTP Delays New Model Intros
18. IHI (7013 JP) Flying High
19. Nabtesco (6268 JP) Looking to 2019 Recovery
20. Fanuc (6954 JP) Lowers Guidance
21. Yaskawa (6506 JP): Bullish Robotics Sales Targets for FY18 vs Fanuc (6954 JP)
22. Komatsu (6301 JP): Surprise Upward Revision to Full Year Guidance
23. Telco Horror on Nov 1
24. DoCoMo (9437 JP) Plays Politics – and Hardball
25. KDDi (9433 JP) FY18 2Q OP +5%
Internet / eCommerce
26. GungHo Entertainment (3765 JP) Up on New Growth Catalysts
27. GREE (3632 JP) Remains Uninteresting
28. ZOZO (3092 JP): Q2 Results Fall Short of Expectations
29. Yahoo Japan (4689 JP): FY18 Q2 Hurt by High Investment Costs
30. Results Reactions / Quick Comments
PSA Company Visits, Tours and Interviews
1. Attended earnings meeting at Sekisui Chemical (4204 JP), JSR (4185 JP), Dexerials (4980 JP), Maxell Holdings (6810 JP), Sumitomo Dainippon Pharma (4506 JP), Hoya Corp (7741 JP), Zeon Corp (4205 JP), TDK (6762 JP), Nitto Denko (6988 JP), Sumitomo Chemical (4005 JP), Mitsui Chemicals (4183 JP), Ube Industries (4208 JP), Mitsubishi Chemical Holdings (4188 JP), Asahi Kasei (3407 JP), Konica Minolta (4902 JP), Murata (6981 JP), Megachips (6875 JP), Nihon M&A (2121 JP), TIS (3626 JP),Fanuc (6954 JP), Denso (6902), Aisin (7259), NGK Spark Plug (5334), IHI (7013)
2. Interviewed / Conference Call with Nabtesco (6268), Yahoo Japan (4689 JP), ZOZO (3092 JP)
3. Visited Hitachi Chemical (4217 JP)
PSA PSA in the Press
1. Nov 2: Pelham Smithers is interviewed by CNBC (6:30am GMT) to discuss Alibaba’s (BABA US) results
Alibaba set to report second quarter earnings today – CNBC 2nd Nov
New Addition to the PSA Research Team: Lindsay Whipp (Enterprise Software)
We are pleased to announce that Lindsay Whipp (email: Lindsay@pelhamsmithers.com) will be joining the PSA Japanese equities research team (as of Nov 5) covering the fast-growing Japanese enterprise software sector. Lindsay worked for a decade in Japan for both Bloomberg and the Financial Times, but most recently was with the Financial Times in Chicago where she covered the emerging use of AI and big data by US corporations. With that same trend now happening in Japan, we believe she is best placed to identify the winners and losers in the Japanese enterprise software field.
We anticipate that Lindsay’s coverage will include established names in the field, such as TIS (3626 JP) and SCSK (9719 JP), extending to stocks such as Cybozu (4776 JP), Solxyz (4284 JP), Poletowin Pitcrew (3657 JP) and PKSHA Technology (3993 JP), which have only recently listed and are generally little known even in Japan.
Lindsay’s coverage dovetails with that of our capital goods analyst, Will Nestuk. Japan’s firms are finding themselves forced to use both hardware and software in order to increase production, bring down unit costs and make up for the intense labour shortage in the country.
PSA is one of the few research providers covering all three areas of software – enterprise, consumer & internet, and entertainment – with separate dedicated analysts.
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