PSA Japan Research Round-Up for the week ending 25 May, 2018

PSA Japan Research Round-Up for the week ending 25 May, 2018
The Weekly Comment
For analyst Pelham Smithers, Sony’s Analyst Day provided a frustrating object lesson in how not to do it.
Reports / Flash Notes Summaries
1. Start Today (3092 JP): Suit Up
Company / Sector / Thematic Comments
1. Sony (6758 JP) Unveils First 3yr Plan Under Yoshida / Our First Thoughts / Market Response
2. Sony’s Kodera: Next PS is Three Years Away
3. Sony (6758 JP) to Acquire EMI Publishing
4. Konami (9766 JP) to Run eSports Tournament
5. Square Enix’s (9684 JP) Project Tokyo Dolls Attracting Attention
6. Building Consensus that Fortunes are Improving for Murata (6981 JP)
7. Nidec (6954 JP) in xEV Motor JV
8. GMO Internet (9449 JP) To Retail New Bitcoin Mining Machine
9. Better News for Diaper Markets and SAP
10. Where Fujifilm (4901 JP) Stands with Xerox (XRX US)
11. Sabre Rattling in the US on Threats of Tariffs
12. Lack of Support for Tariffs Suggests Stock Market Has Overreacted / Highlighting MMC (7211 JP)
13. China Import Tariff Cut from 25% to 15%: Impact on Toyota (7203 JP), Nissan (7201 JP) and Subaru (7270 JP)
14. Lacklustre Performance of Auto Sector despite Yen Weakness; Auto Financial Services Set to Deteriorate
15. Toyoda Gosei (7282 JP): Low Valuations and Upside to Auto Business Offsets Dull Analyst Meeting
16. Mitsubishi Electric (6503 JP) and Pioneer (6773 JP) as Partners
17. CyberAgent (4751 JP): AbemaTV Hits 30mil Downloads
18. Amazon (AMZN US) Expands in Japan, Impact on Start Today (3092 JP) and Fast Retailing (9983 JP)
19. Yahoo Japan’s (4689 JP) Boring IR Day
20. Kakaku.com (2371 JP) Near a One-year High
PSA Company Visits, Tours and Interviews
• Visited Fujifilm Holdings (4901 JP), Shin-Etsu Chemical (4063 JP), Sumco (3436 JP), Showa Denko (4004 JP), Japan Display (6740 JP), Asahi Kasei (3407 JP), Toray (3402 JP), Nippon Shokubai (4114 JP), Mitsui Chemicals (4183 JP)
• Attended earnings meetings at Kanto Denka (4047 JP), Stella Chemifa Corp (4109 JP), Adeka Corp (4401 JP), Toyoda Gosei (7283 JP)
• Attended information meeting at Nitto Denko (6988 JP)
• Call with SMC (6273 JP)
• Participated in Webcast for Yahoo Japan (4689 JP)
Weekly Market Comment by Pelham Smithers
Sony (6758 JP): How Not to Do an Analyst Day
This week provided a painful lesson about investor relations: it doesn’t matter how helpful you are, if you are not confident in your own capabilities. After a decade in the wilderness, Sony is emphatically back on the scene as one of Japan’s most successful companies. Not only did it generate over ¥700bil in OP last year; it has a contents library / IP portfolio worth billions of dollars. The company is successful across a range of industries, from finance to entertainment to semiconductors.
Earlier this week Sony hosted its annual Analyst Day. This is an American import gaining traction with those firms whose conglomerate nature means that they can fill at least a day with meetings (Pity Keyence (6861 JP). We only make sensors. We make them very well). Sony, with its diverse interests, has no trouble filling the day. Indeed, historically its biggest problem has been what to leave out rather than what to put in. Our problem with last year’s 2017 outing was that it was a little bit too much about the forthcoming twelve months, and not enough about mid-term strategy. For the most part, though, that was to quibble.
The big takeaway from the 2017 Analyst Day was that all Sony’s divisions were off to the races and it was all Hirai could do to keep hold of the leash. Confidence was evident everywhere and the question wasn’t whether analysts should up their forecasts, but by how much they should raise them.
Fast forward a year to 2018, and it’s a 180-degree U-turn. As another three-year plan is upon us, this meeting contains the mid-term planning which was annoyingly absent from last year. However, absent this time was the confidence that exuded from last year’s event – and nothing made up for that. There are pros and cons with three-year plans. The main negative is that you have less clarity, so you can’t be so definite. The main positive is that you have less clarity, so you can be more expansive. However, Sony’s presentations lacked definition and moreover failed to be expansive. Targets were low and unexciting.
Arguably, none of this should matter. It is quite possible that, come August and the 1Q results, it will be apparent to all and sundry that management was simply lowballing. However, management has successfully installed some doubts, especially over the gaming division; doubts that will last beyond the 1Q results. Hopefully, this will be seen as how not do an Analyst Day. The worry is that this will be seen as why you don’t do an Analyst Day.