PSA Japan Research Round-Up for the week ending 23 March, 2018

Contents at a Glance
The Weekly Comment
In what has been a torrid week for Facebook (FB US), Pelham Smithers considers Facebook and other FAANGs, extends his reflections to trade and Wall Street in general, and considers the attitude of Japanese investors; might the Japan stock market turn out to be a relative beneficiary of current events?
Company / Sector / Thematic Comments
1. Micro LEDs to the Fore for Apple
2. Sony (6758 JP): Concerns of Tough Comps Ahead / Positive Write-Up in Barrons and a Broker Upgrade
3. Infiltration Wins Street Fighter Tournament is Good News for Capcom (9697 JP) / Read-Across to Bandai Namco (7832 JP) and Square Enix (9684 JP)
4. US Video Game Sales Up 23% YoY in February – NPD
5. Aeon Fantasy (4343 JP) Revises Up
6. MLCC Market Grew Sharply in 2H 2017: Read-Across to Murata (6981 JP) / Apple Production / TDK (6762 JP)
7. Funai Electric (6839 JP) and the China Tariff Situation
8. Ricoh (7752 JP) Forecasts US$1.6bil Loss
9. Trade Policy Shifts Complicate Life for Materials Suppliers
10. Huawei Gets a Cold Shoulder in the US
11. Denso (6902 JP) to Invest in JOLED
12. Auto Sector Closes the Week Down 4.9%, Hurt by Currency, Trade Fears
13. Self-Driving Uber Car Kills Woman in the US / Toyota (7203 JP) Suspends Self-Driving Tests
14. Following Investment in Renesas (6723 JP), Denso (6902 JP) to Invest in JOLED
15. CyberAgent (4751 JP) Visit Feedback Confirms Our Positive View
16. Istyle (3660 JP) Continued Success Expected:
17. mixi (2121 JP): We Remain Unexcited Despite its eSports Initiative
18. SoftBank (9984 JP) to Relist ARM?
19. Astellas (4503 JP) Boosted by Analyst Report on JNJ’s Approval for Erleada
20. J-Power (6513 JP) / KEPCO (9503 JP) Nuclear Projects Approved
21. Kepco (9503 JP) to the Fore as Defensives Favoured; Is the Defensive Nature of Japan Tobacco (2914 JP) Under Threat from eCigarettes?
 PSA Company Visits, Tours and Interviews
• Visited: IHI (7013)
• Attended information meetings at: Fujifilm Holdings (4901 JP)
• Contacted / interviewed: KH Neochem (4189 JP)
PSA Company Visits, Tours and Interviews
Pelham Smithers on SoftBank (9984 JP): https://www.bloomberg.com/gadfly/articles/2018-03-15/son-is-rattling-bondholders-as-softbank-eyes-more-debt

Weekly Market Comment by Pelham Smithers
If Facebook (FB US) shares were cheaper, would they have slumped on the data usage story as much as they have? Given that we have had similar issues with Facebook in the past – be it helping ISIS promote itself, or by encouraging racist comments – but the shares then barely budged, one suspects the answer to be “no”. Now, this time is different because there is more of a grassroots element to the anti-Facebook campaign, but equally, there is a positive feedback loop at play here. Had Facebook shares slumped when the ISIS issues were swirling around, the grassroots campaign would have been able to claim success, and the situation would have snowballed – as it is today.
At the end of Dec 2016, with its market cap at US$512bil, Facebook was trading on 23.3x EV/OP, 20.3x EV/Ebitda – high valuations. However, earnings then were expected to grow 50% over the next two years, giving considerable credence to those valuations. Of course, those growth forecasts are reliant on an absence of a grassroots campaign that pulls the plug on Facebook’s attempts at revenue growth, so it makes sense that the shares are now slumping; but equally, if the shares were cheaper, then the damage done by the grassroots campaign could have been absorbed by increased valuations. Arguing that Cambridge Analytics has wiped US$50bil off Facebook’s market cap, therefore, is one of those potentially misleading statements, as the Cambridge Analytics issue simply could have been a trigger for something that could and should have happened anyway........