The PSA Japan Research Round-Up for the week ending February 09, 2018

Contents at a Glance
• The Weekly Comment by Pelham Smithers: Pelham Smithers discusses how, while we aren’t yet at the point where underweighting Japan is proving costly, we are certainly at the point where it is a key subject of debate.

• Reports / Flash Notes Summaries
1. Japan Stock Market Strategy as Wall Street "Wobbles"
• Company / Sector / Thematic Comments
1. Might Sony Sell Sony Pictures?
2. The Sony Opportunity Set
3. Capcom: Monster Hunter: World Sales Hit 6mil Copies
4. Square Enix Solid 3Q Performance
5. Changes to Pachislot, Pachinko Payout Ratios
6. Sega Sammy Hit by Pachislot Pay-out Change
7. MGM Resorts Boss in Tokyo
8. Evolution Drops Marvel vs Capcom
9. Taiyo Yuden Revises Up
10. Nikon Revises Up
11. Kaneka Responds Positively to a Better FY17 Q3
12. Toray’s FY17 Q3 Highlights Slow Carbon Fiber Adoption in Autos
13. Materials Stocks Were a Mixed Bag
14. Sumitomo Metal Mining Benefits from Cobalt
15. Toyota: Q3 Earnings Lifted by Currency
16. Mazda Reports Jump in Profit on Currency
17. Mitsubishi Motors: Q3 Earnings Lifted by Asian Operations
18. Suzuki Reports Strong Q3 Earnings
19. Isuzu: FY17 Q3 Earnings Rise on Currency, Non-Vehicle Operations
20. Subaru: FY17Q3 Earnings Hurt by US Operations
21. Nissan: FY17 Q3 Results Overshadowed by Two Negatives
22. Stunning earnings from IHI’s Aero-Engine Division and a surprise recovery in the Boiler business
23. Nabtesco’s Disappointing Guidance
24. SoftBank OP Slips, Enjoys Huge US Tax Windfall
25. SoftBank to Buy into Swiss Re?
26. Kakaku.com’s Numbers Struggle to Impress
27. GungHo Reports Another Year of Declines
28. Yahoo Japan: our positive stance remains despite Q3 results not being eye-catching
29. istyle report excellent Q2 results
30. Our Cautious Stance on GREE Remains
31. DeNA May Not be Able to Continue FY16’s Good Story in FY17
32. Nexon’s Shares Soar Despite Q4 Underperformance
• List of PSA Published Reports Since Q3 2017 to Date

PSA Company Visits, Tours and Interviews
• Attended Results Meetings for Sumco (3436 JP), Toray (3402 JP)
• Conference calls with Teijin (3401 JP), Taiyo Nippon Sanso (4091 JP), Sumitomo Chemical (4005 JP), Mitsubishi Chemical Holdings (4188 JP), Asahi Kasei (3407 JP), Sumitomo Metal Mining (5713 JP), Kaneka (4118 JP), DeNA (2432 JP)
• Visited Fujifilm (4901 JP), Nitto Denko (6988 JP), Dexerials (4980 JP), Hoya (7741 JP)
• Webcast with Nexon (3659 JP)
PSA In the Press
• Pelham Smithers makes an appearance in a Bloomberg Technology article on eSports (Feb 8): https://www.bloomberg.com/news/articles/2018-02-08/at-long-last-japan-finally-oks-video-gaming-as-a-profession
Weekly Market Comment by Pelham Smithers
Do we need to become US stock market experts at this stage – or can Japan decouple? Much as it would be nice to discuss issues specific to Japan – from the BoJ governorship to this weekend’s eSports tournament – the elephant in the room is the US stock market. From being one of those benign gorillas in the background, Wall Street has suddenly become a very aggressive and destructive King Kong character. As outlined in our Feb 6 Japanese stock market strategy report – Japan Stock Market Strategy as Wall Street “Wobbles” – there is a good case for Japan decoupling; and there was some evidence of this happening in Friday Feb 9’s trading. In dollar terms, Topix is down 1.6% for the year, which isn’t great, but you usually have to figure some weakness in Japanese equities in the Jan~Mar quarter anyway. Importantly, Tokyo is outperforming Wall Street and Hong Kong / China, and given that Tokyo is hardly a low beta market, that would suggest some relative alpha in there. This may come from relative valuations, earnings momentum or government policy, it doesn’t really matter. The interesting question is whether and when global equity investors do start to see Japanese equities as a safe haven, in the same way as currency traders have viewed the yen in the recent past.