Report
Joel Scheiman ...
  • Pelham Smithers
  • Thao Nguyen
  • William Nestuk

PSA Weekly Research Round-Up (week ending Feb 16, 2018)

The PSA Japan Research Round-Up for the week ending February 16, 2018
Contents at a Glance
 The Weekly Comment by Pelham Smithers: Surf’s up: Pelham Smithers considers whether we are starting to see a break in the link between the yen and the Japanese stock market.
 Reports / Flash Notes Summaries
1. Mitsubishi Electric (6503 JP): FA and Infrastructure Upturn
2. Sony (6758 JP): FY17 Outlook and SoTP5
 Company / Sector / Thematic Comments
1. Sony (6758 JP) Surprises, Irritates with Peter Rabbit / Overlooked in the Media – CNBC
2. NEC (6701 JP): Language Terminals Expected to be A Big Hit
3. Square Enix (9684 JP): Monsters Inc Comes to Kingdom Hearts III
4. Capcom (9697 JP) to Officially Enter the Japanese eSports Market
5. Casino Guidelines / Limitations Starting to Appear from the LDP Committee
6. Toshiba (6502 JP) Enters a New Era
7. Fujifilm (4901 JP) Shares Weaker after Xerox Takeover Resistance
8. Tokyo Ohka Kogyo (4186 JP) Disappoints in Several Areas
9. Nissha’s (7915 JP) Explanation Gets a Positive Reception
10. Showa Denko (4004 JP):, Profits Suddenly Reliant Upon Electrode Markets
11. Mitsui Chemicals (4183 JP): The Hurdles Keep Getting Higher
12. Nabtesco (6268 JP) Shares React to Disappointing Guidance
13. Daikin (6367 JP) Raises NP but is Below Consensus for FY17 Q3
14. Start Today (3092 JP) Launches “Personal Styling Subscription Service”
15. Avex (7860 JP): Both Sales and Profit Improved in FY17 Q3
16. Rakuten’s (4755 JP) Fundamentals: Less Impressive than the Headline Figures Represent
17. mixi (2121 JP) Continues to Lose its Wonder
18. Recruit’s (6098 JP) Good First Nine Months
19. Sumitomo Dainippon Pharma (4506 JP) and Nitto Denko (6988 JP) Deliver Positive P3 Data for Transdermal Patch Version of Lonasen
20. Cyberdyne (7779 JP): Mixed FY17 3Q Performance, but New Products Worth Noting
21. Japan Ekes Out Tiny 4Q GDP Gain

 List of PSA Published Reports Since Q3 2017 to Date

PSA Company Visits, Tours and Interviews
• Attended Results Meetings for Nissha (7915 JP), Tokyo Ohka Kogyo (4186 JP), Showa Denko (4004 JP), Kuraray (3405 JP), Japan Display Inc (6740 JP)
• Attended Small Meeting for Sumitomo Chemical (4005 JP)
• Conference call with Daikin (6367 JP)
• Visited Shin-Etsu Chemical (4063 JP), Zeon Corp (4205 JP), Hitachi Chemical (4217 JP), Mitsui Chemicals (4183 JP)
• Webcast: Rakuten (4755 JP)
Weekly Market Comment by Pelham Smithers
Having bought ¥1.1tril in Japanese shares in what essentially amounted to seven days at the start of the year, foreign investors have been steadily reversing that. In the four weeks subsequent, through to Feb 9, they have sold ¥0.86tril, leaving them net ¥0.24tril up this year. This “buyer’s remorse” style behaviour has been in evidence for some time. Indeed, almost every major move by foreigners over the past eighteen months, positive or negative, has almost immediately been reversed.

Underlyings
Avex

Avex Group Holdings is a holding company. Co. operates in three business segments. Music segment is engaged in the planning, producing and selling of music contents, as well as the digital distribution of music contents, and music publishing. Video segment is engaged in the planning and producing of video contents, as well as film distribution. Management/Live segment is engaged in the management of artists, actors, and athletes; planning, producing and management of live entertainments events; and the provision of merchandising.

Capcom Co. Ltd.

Capcom is engaged in the development, manufacture and sales of video games, online games, mobile games and arcade games, as well as the operation of amusement arcades. Co.'s business segments are digital contents, amusement facility and amusement equipment. Co. is engaged in the planning, development, manufacture and sales of home video games, online games and mobile games including "Rockman," "Monster Hunter World" and "Dragons Dogma"; the operation of "Plaza Capcom" amusement facilities in Japan; and the development, production and distribution of arcade games for amusement facilities. Co. is also engaged in the licensing business of game characters and the real estate leasing business.

CYBERDYNE Inc.

Cyberdyne Inc. CYBERDYNE, INC. is a Japanese robotics and technology company. The Company's Robot Suit hybrid assistive limb (HAL) products comprise medical robots, which are used for the improvement of physical function of patients in the medical and health care fields; personal care robots, which are used as life support and health training equipment for independent movement support in the nursing care and welfare fields, and work support robots. HAL Therapy is the medical service with Robot Suit HAL to provide medical treatments for functional improvement of patients with cerebral, nervous and muscle disorders including spinal cord injury and cerebral embolism. HAL FIT is a scientific fitness training, in which the wearer in Robot Suit HAL performs leg exercise, standing-up, sitting-down and gait training, in accordance with his or her will. ROBO CARE is a service that provides the motivating and comfortable training courses, for instance Robot Fitness HAL FIT 1 as a main training course.

DAIKIN INDUSTRIES LTD.

Daikin Industries is engaged in the manufacture and sale of air conditioning and refrigerating equipment. The Air Conditioning and Refrigeration Equipment segment offers housing equipment including split type air conditioners, air purifiers and air to water heat pump systems; commercial equipment including packaged air conditioners, multi-split type air conditioners, water cooled chillers, medium/low temperature refrigeration equipment, air handling units, rooftop systems and air filters; and marine air conditioning equipment. The Chemicals segment offers fluorocarbon gases, fluoroplastics, fluoroelastomers, fluoro coating agents, semiconductor-etching products and fluorinated oils.

FUJIFILM Holdings Corp

FUJIFILM Holdings is a holding company engaged in the manufacture and sale of imaging information products. Co.'s principal businesses are divided into three segments: imagining solution, information solution and document solution. Co.'s principal products and services are color films, digital cameras "FinePix," photofinishing equipment, color paper, as well as chemicals and services for photofinishing; equipment and materials for medical systems and life sciences, equipment and materials for graphic arts, flat panel display materials, recording media and optical devices; office copy machines/MFPs, printers, as well as production systems and services.

Hitachi Chemical Company Ltd.

Hitachi Chemical and its affiliates are mainly engaged in the manufacture, process, and sale of functional materials and advanced components and systems. Co.'s principal products include electronics materials, such as semiconductor epoxy molding compounds and die bonding paste and insulating varnishes; inorganic materials, such as lithium-ion batteries materials and carbon products; functional resin and adhesive film for display; photographic sensitive films; automotive products, such as molded plastics, friction materials and powder metal products; automotive batteries, industrial batteries and capacitor; electrical equipment, such as printed wiring boards; and diagnostics equipment.

Japan Display Inc.

Japan Display is engaged in the development, production and sale of small- and medium-sized display devices and related products. Co.'s display devices are mainly used for smartphone, tablet, in-vehicle equipment, medical equipment, game machine, and digital cameras, as well as wearable applications such as sports watches, healthcare equipment and action cameras. Co. provides flat panel displays including low temperature poly-silicon LCD for ultra-high resolution, IPS (In-Plane Switching) for wide viewing angle and high picture quality, WhiteMagic™ for power-saving, and Pixel Eyes™ for thin and light touch functionality.

Kuraray Co. Ltd.

Kuraray is mainly engaged in the manufacture and sale of chemical related products and materials. Co. operates in six business segments: vinyl acetate, isoprene, function materials, fibers and textiles, trading, and others. Co.'s principal products include poval (PVA) resin and film, EVOH resin called "EVAL," polyvinyl butyral (PVB), thermoplastic elastomers "SEPTON," isoprene related products, heat-resistant polyamide resin called "GENESTAR," methacrylic resin, man-made leather "CLARINO," medical products, synthetic fibers and textiles, and non-woven fabrics. Co. also provides high-performance materials, activated charcoal, as well as rubber and resin processed products.

Mitsubishi Electric Corp.

Mitsubishi Electric is engaged in the manufacture and sale of electrical and electronic equipment. Energy and Electronic Systems segment offers turbine generators, nuclear power plant equipment, transformers and motors. Industrial Automation Systems segment offers programmable logic controllers, inverters, human-machine interfaces and magnetic switches. Information and Communication Systems segment offers wireless and wired communications systems, surveillance cameras and satellite communications equipment. Electronic Devices segment offers power modules, high-frequency devices and optical devices. Home Appliances segment offers LCD televisions, room air conditioners and refrigerators.

Mitsui Chemicals Inc.

Mitsui Chemical is the parent company of a group engaged in the manufacture and sale of petrochemicals, basic chemicals, urethane, functional polymeric materials, functional chemicals and engineered materials. Co.'s principal products include optical lens materials, medical materials, catalysts, chemical products, agricultural products such as agricultural insecticide, fungicide, soil fumigation disinfectant, ant-repellent and disease prevention agents for use in living environments, as well as petrochemical raw materials, phenols, synthetic fiber raw materials, PET resin, industrial chemicals, polyethylene and polypropylene.

Mixi Inc.

Mixi is an information technology company with two business segments. Entertainment Segment is engaged in the development and distribution of Smartphone-native games. Media Platform Segment is engaged in the operation of SNSs under the site name "mixi" and recruitment site called "Find Job!" The site offers various services, such as Blog services, Internet discussion boards as well as the distribution of domestic and overseas news. In this Segment, Co. is also engaged in the Internet research business, the photo book service called "nohana" and the wedding support business.

Nabtesco Corporation

Nabtesco is engaged in the design, manufacture, sales, and repair of industrial machinery and components. Co. operates in three business segments: component solutions, transport solutions and accessibility solutions. Co.'s principal products are high precision reducers and actuators for industrial robots, construction machinery, solar tracking equipment, automatic door drive units, automobile air-break systems, automatic testing/training equipment, connecting device, various types of actuators, remote control systems for marine vessels, automatic door systems, smoke exhausting systems and platform safety system as well as nursing care equipment and industrial equipment.

NEC Corp.

NEC is the parent company of a group engaged in the manufacture and sale of computers, software, communications equipment, and electric devices. Co. operates in four business segments: public, enterprise, telecom carrier, and system platform. Co. supplies integration, maintenance and support, and outsourcing services and system equipment for government, public and enterprises; network infrastructure to telecom carriers; hardware such as servers and mainframes, software, enterprise networks solutions. In addition, Co. also provides smart energy such as electrodes and energy storage systems, as well as smartphones, mobile phones, "BIGLOBE" Internet services and lighting equipment.

Nissha Co.Ltd.

Nissha is engaged in the production of general printed matter in the fields of art and commercial printing as well as surface decoration of products technology. Co. manufactures IMD and IML, metallized paper, and heat transfer foils used for simultaneous molding and printing of plastic products and decorations for mobile phones, notebook PCs, automotive interiors and home appliances; and manufactures functional devices such as film based Touch Sensors "Fine Touch" used in tablet devices, smartphones, game consoles, industrial equipment and automotive. Co. also manufactures and sells its own brand products to medical institutions and provides marketing and sales promotion materials.

Nitto Denko Corp.

Nitto Denko and its subsidiaries are mainly engaged in the manufacture and sale of industrial materials, electronic materials and functional materials. Co.'s principal products include junction materials, surface protective materials, sealing materials, packing materials, and machinery; liquid crystal display ("LCD")-related materials, semiconductor-related materials, printed circuits materials and electronic processing materials; and medical-related materials, macro-molecular separation membranes used in seawater desalination and engineering plastic materials.

Rakuten Inc.

Rakuten is mainly engaged in the Internet-related business. Along with its affiliates, Co. operates in two business segments. The Internet Services segment is engaged in the operation of electronic commerce sites, including an Internet shopping mall "Rakuten Ichiba," an online cash back site, a travel booking site, portal sites and digital contents sites; the sale of advertising on Co.'s sites; the provision of messaging and communication services; and the management of a professional baseball team "Tohoku Rakuten Golden Eagles." FinTech segment is engaged in the provision of Internet banking services and online securities trading services, and the credit card and life insurance businesses.

Recruit Holdings Co. Ltd.

Recruit Holdings is a holding company. Through its affiliates, Co. operates in four business segments: marketing media, HR media, staffing, and other. Marketing Media segment is engaged in the provision of information on housing, bridal, post-secondary education for high school students, automobiles, lodging accommodation, restaurants, and beauty salons. HR Media segment is engaged in the provision of services that offer employment information to job seekers both in Japan and overseas. Staffing segment is engaged in the provision of staffing services in Japan and overseas. Other segment is engaged in the planning, operation, outsourcing, and other of digital content services.

Shin-Etsu Chemical Co Ltd

Shin-Etsu Chemical is mainly engaged in the manufacturing and sales of polyvinyl chloride and organic chemicals, silicon, functional chemicals, semiconductor silicon, electronic and functional materials, and others. Co.'s principal products include polyvinyl chloride, caustic soda products, methanol, chloromethane, silicon products, cellulose derivatives, silicon metal, poval (polyvinyl alcohol), synthetic pheromones, semiconductor silicon products, rare earth magnets, encapsulation materials, photoresists, photomask blanks, synthetic quartz products, epoxy molding compounds, pellicles, and resin processed products. Co. is also engaged in the export of plant equipment and others.

Showa Denko K.K.

Showa Denko is a chemical producer. Along with its affiliates Co. is mainly engaged in the manufacture and sale of petrochemicals, chemicals, electronics, inorganic materials and aluminum. Co.'s principal products include olefin, such as ethylene and propylene, as well as polyethylene and plastic products; industrial gases, including oxygen, nitrogen, argon and hydrogen gas; hard discs, compound semiconductors, rare earth magnetic alloys, and materials for lithium-ion battery; ceramics, such as alumina, abrasives and refractories; and carbons, such as graphite electrodes; ingots, sheets, extruded products, foils, beverage cans, building products and others.

Sony Corporation

Sony is engaged in the development, design, production, manufacture, offer and sale of various kinds of electronic equipment, instruments and devices for consumer, professional and industrial markets such as network services, game hardware and software, televisions, audio and video recorders and players, still and video cameras, mobile phones, and semiconductors. Co. is engaged in the development, production, manufacture, and distribution of recorded music and the management and licensing of the words and music of songs as well as the production and distribution of animation titles. Co. is also engaged in the production, acquisition and distribution of motion pictures and television.

Square Enix Holdings Co. Ltd.

Square Enix Holdings is a holding company that is mainly engaged in the entertainment industry. Co., through its subsidiaries, operates in four business segments. The Digital Entertainment business is engaged in the design, development, sale, licensed sale and operation of digital entertainment contents focusing on computer games. The Amusement segment is engaged in the operation of amusement facilities, the design, development, manufacture, sale and rental of amusement equipment. The Publishing segment is involved in the publication of comic magazines, books and game related books. The Rights Property segment is involved design, production, sale and grant of secondary works.

Sumitomo Chemical Co. Ltd.

Sumitomo Chemical is a chemical manufacturing company. Co.'s business is comprised of 5 sectors: Petrochemicals & Plastics Sector, Energy & Functional Materials Sector, IT-related Chemicals Sector, Health & Crop Sciences Sector, Pharmaceuticals Sector and Others. Co. is engaged in the manufacture and sale of inorganic and organic chemicals, synthetic fiber materials, metal acrylate, alumina and aluminum products, petrochemical, synthetic resin and rubber products, optical goods, color filters, materials for semiconductors, electronic materials, agrochemicals, fertilizers, agricultural materials, pesticide, dietary additives, pharmaceuticals and radioactive diagnostic products.

Sumitomo Dainippon Pharma Co. Ltd.

Sumitomo Dainippon Pharma is engaged in the manufacture, sale/purchase, and import/export of pharmaceuticals, food additives, veterinary products, diagnostic agents and research materials. Pharmaceutical segment manufactures and sells medical and general pharmaceuticals including hypertension and angina drugs, digestive tract function prokinetic agents, peripheral circulation stimulant, and carbapenem antibiotics. Other business segment manufactures, purchases and sale of veterinary medicines, food additives, industrial chemicals, extracts, diagnostic drugs and materials for research and inspection; purchases and sells feed and feed additives.

Tokyo Ohka Kogyo Co. Ltd.

Tokyo Ohka Kogyo is mainly engaged in the manufacture and sale of materials for electronics. Along with its subsidiaries and associated companies, Co. operates in two business segments: material and equipment. Material segment is engaged in the manufacture and sale of electronics functional materials and high purity chemicals. Equipment segment is engaged in the manufacture, sale and maintenance of process equipment for liquid crystal display ("LCD") panels and semiconductor manufacturing equipment. As of Dec 31 2017, Co. maintains five plants in Fukushima, Shizuoka, Kumamoto, Tochigi and Saitama, Japan, as well as its logistics center in Kanagawa, Japan.

Toshiba Corporation

Toshiba is engaged in the manufacture and sale of electronics and energy products. Along with its affiliates, Co. operates in six business segments: energy systems & solutions, infrastructure systems & solutions, retail & printing solutions, storage & electronic devices solutions, industrial ICT solutions, and others. Co. provides thermal power generation systems, nuclear power generation systems, water supply and sewerage systems, instrumentation and control systems, environmental systems, automatic railroad station equipment, transportation equipment, POS systems, small-signal devices, information technology ("IT") solution services, personal computers, tablets, televisions, and others.

Zeon Corporation

Zeon is the parent company of a group engaged in the manufacture and sale of chemical products. Along with its affiliates, Co. operates in three business segments: elastomer, specialty materials, and others. Co.'s principal products include synthetic rubbers; synthetic latices; chemicals, such as C5 petroleum resins and thermoplastic elastomers; specialty chemicals, such as synthetic aroma chemicals and industrial chemicals; information materials, such as elastromics materials and polymerized toners; specialty plastics, such as cyclo-olefin polymers; optical materials; medical products; RIM formulations; RIM products; paints; butadiene extraction technology; housing materials; and others.

ZOZO Inc.

Start Today is mainly engaged in the electronic commerce ("EC") business. Along with its subsidiaries, Co. operates in three principal businesses: ZOZOTOWN, B to B, and FURIMA. The ZOZOTOWN business operates brand's online shop on ZOZOTOWN by handling their inventory on a consignment based contract. Co. also purchases fashion items from brands and resell them on each brand's online shop on ZOZOTOWN. Additionally, Co. purchases/resales used fashion products from/to its users. The B to B business supports the brands to operate their individual online stores. The FURIMA business offers users a smartphone application called "ZOZO FURIMA" to sell and purchase personal fashion items.

Provider
Pelham Smithers Associates Ltd
Pelham Smithers Associates Ltd

Founded in 2009, Pelham Smithers Associates (PSA) provides market intelligence on Asian technology, focusing in particular on Japan. The industries covered by our team of specialists are: consumer electronics, telecomms, pharmaceuticals, internet, electronic parts and materials, automotive technology, retail and capital goods. 

PSA produces both company and sector reports. The focus of PSA’s research is to identify winners and losers as new technologies impact the top and bottom lines of corporations. Critical to our research is the clear explanation of how these new technologies work and how they impact companies and industries. 

The founding partners have worked closely together for twenty years and the team has more than doubled in size since 2012. 

Analysts
Joel Scheiman

Pelham Smithers

Thao Nguyen

William Nestuk

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