PSA Weekly Research Round-Up (week to March 16)

The PSA Japan Research Round-Up for the week ending 16 March, 2018
Contents at a Glance:
The Weekly Comment
Pelham Smithers this week focuses on the remarkable outperformance by expensive defensive names so far in 2018. While clarity about the global economy hangs in the balance, the market is clearly happy to pay up for dependability of growth. Pelham makes the case for choosing some of the cheaper names
Reports / Flash Notes Summaries
1. Mitsubishi Motors (7211 JP) – Getting Back into Shape
2. Weaker US Dollar to Hurt Automakers’ FY18 Profits
3. Gaming: eSports in Japan
Company / Sector / Thematic Comments
1. Panasonic (6752 JP): Mass Production of Lithium Batteries in China Starts
2. Sony (6758 JP) & EMI Music: Should I Stay or Should I Go Now?
3. Capcom (9697 JP): Broker Upgrade with Punchy FY18 Forecasts
4. Square Enix (9684 JP): Tomb Raider Movie Opens this Week to Dull Early Reviews
5. Nikkei eSports Article Underscores How Far Japan Has Slipped in eSports, but Also Highlights the Potential
6. Market Recovering Confidence in Electronic Parts Plays
7. Murata (6981 JP): Gets Bigger Win in S9 than Expected
8. Shin-Etsu Chemical (4063 JP) – a Lagging Technology Stock
9. Toray’s (3402 JP) Carbon Fiber M&A Makes Sense, but the Price May Not
10. Hitachi Chemical (4217 JP): Two Positives for a High-Quality Laggard
11. Miraial (4238 JP) Stands Out on the Down Side
12. Honda (7267 JP): What’s Going on with the Accord?
13. Toyota (7203 JP) to Present New RAV4 at New York Auto Show
14. KHI (7012 JP) Rebounds on Status Quo
15. Good iPhone 7, 8 Sales a Plus for NOK (7240 JP)
16. SoftBank (9984 JP): Still Going After Charter? / Clearer Car Hire Strategy
17. Sosei (4565 JP) Handed Back Rights to HTL0022562
PSA Company Visits, Tours and Interviews
• Conference calls with Toray (3402 JP), Ohara Inc. (5218 JP), Teijin (3401 JP)
• One on one meetings with: Yume no Machi Souzou Iinkai (2484 JP), CyberAgent (4751 JP), DeNA (2432 JP), istyle (3660 JP), Persol Holdings (2181 JP), Digital Garage (4819 JP), Start Today (3092) JP, Trend Micro (4704 JP), SBI Holdings (8473 JP), Rakuten (4755 JP), LINE (3938 JP), mixi (2121 JP), Kakaku.com (2371 JP), GREE (3632 JP), Recruit Holdings (6098 JP), Yahoo Japan (4689 JP), Avex (7860 JP), Intelligent Wave (4847 JP), GungHo Online Entertainment (3765 JP), GMO Internet (9449 JP), Systena Corp (2317 JP), Miraial (4238 JP) and Hitachi Chemical (4217 JP).
Weekly Market Comment by Pelham Smithers
After a somewhat troubled year in 2017, defensives have stormed back in 2018. Of the ten best performing stocks in the Topix 100 so far, five are pharmaceutical stocks, one is a consumer staple, and two are strong yen beneficiaries. What interests us about this group of defensives is that they are not cheap; in fact, none of the top ten performing stocks is cheap, and the simple average EV/OP for the group is an eye-watering 27x. Conversely, the EV/OP of the ten worst performing stocks in the index is a meagre 11.7x. What these defensives do offer, somewhat surprisingly, is growth. Between FY17 and FY19, Ono Pharmaceutical (4529 JP) is expected to see OP rise 49%, Shiseido (4911 JP) 42%, Otsuka (4578 JP) 43% and Yamato Transport (9064 JP) a heady 139%...........................