Companies with new Guidance better than FY1 Consensus historically outperform

It is time to start up earnings again and as you know we have been sending out a daily comparing new guidance to FY3/17 consensus estimates. Over Golden Week, we back tested that theory and found that yes, historically Company that issue new Company guidance greater than new FY1 EPS consensus outperform. Companies that come in with new guidance 30% above consensus on average outperformed TOPIX by more than 8% in the most after the announcement. On the other side, Companies that issue new guidance 30% below FY1 consensus underperformed TOPIX by 4% on average.

Now 268 names announced before Golden Week and we ran the same analysis on the names that have reported. The results are very similar. Names that have reported new Guidance 30% more than FY3/17 consensus estimates are up on average 6%. Names that reported new guidance 30% below consensus are on average down 4% relative to TOPIX since they announced numbers.

Below is the historic average returns bucketed into the different groups. Please note that each bucket is not 0 to 10%, 10% to 20% etc…, but greater than 30% and then greater than 20% which also includes all results greater than 30%.

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What Worked Asia - 06 May 2016 - Value, Beta and Size were hurt across the region / Quality benefited

What Worked – Pretty good selloff in Size in China and a slight selloff in PBR names. FIH Mobile was down 24% and China New City Commercial Development was down 52%. Singapore also saw a selloff in Size but there was a bigger selloff in high Beta names. Noble Group was down 11% and Jardine Cycle & Carriage was down 9%. There was also a slight selloff in Beta and Size and a slight move into high Dividend Yield names in Hong Kong. KuangChi Science was down 10% and HNA International was down 11%.

In South Korea, Value and Beta were beaten up the most this week with Quality (ROE / Debt to Equity) names benefiting. Low PBR names that were hurt were SK Networks down 10% and Doosan Infracore was down 10%. Taiwan also had a good selloff in large-cap names with a rotation into high ROE names. Chunghwa Precision Test was up 13% and Sinbon Electronics was up 13%. In India, Beta and to a lesser degree Value were hurt this week. Adani Ports & Special Economics Zone was down 18% and Steel Authority of India was down 11%.

Who Moved – Only 66 names moved on volume this week. 66 is a pretty low number for Asia. With Hong Kong off on Monday, almost half of those names came in India. On the positive side, UPL Limited was up 11%, Sinbon Electronics was up 13% and K.P.R. Mill Limited was up 11%. On the other side, Adani Ports & Special Economics Zone was down 18%, Superblock Public was down 13% and Ssangyong Cement Industrial was down 12%.

Summary

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What Worked Asia - 29 Apr 2016 - In Asia Beta was hurt this week and in some regions Dividend Yield benefited

What Worked – While nothing else really stood out, there was a good selloff in high Beta names in Hong Kong this week.  Tianneng Power was down 18% and Beijing Enterprises Water down 12%. In China it was less about a selloff in Beta and more of a rotation into names with positive EPS revisions. China Maple Leaf Educational System was up 12% and Phoenix Healthcare Group was up 9%. Malaysia saw a huge selloff in high Beta names and a rotation into low Debt to Equity names. Genting Bhd. was down 7% and SapuraKencana Petroleum was down 7%.

Singapore also had a good selloff in Beta and low PE names, while high Dividend yield names benefited this week. Wilmar International was up 5% and Thai Beverage Public was up 4%. Beta names that were hurt in Singapore were Sembcorp Marine down 10% and CEFC International down 6%. In the Philippines, Beta and PBR were hurt and high Dividend yield names did well. Universal Robina was up 3% and Aboitiz Equity Ventures was up 2%.

Who Moved – 134 names moved on volume this week. Volume spikes look to be pretty evenly distributed across regions and sectors. On the positive side, Yungjin Pharm was up 35%, Superblock Public was up 26% and HNA International Investment Holdings was up 16%. On the other side, Philippine Trust was down 22%, Godfrey Phillips India was down 23% and Tianneng Power International was down 18%.

Summary

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What Worked Japan - 28 Apr 2016 - Nothing until this afternoon and then everything went to...well you know

What Worked – The only thing that mattered this week was Thursday afternoon. Yes, I will admit that we do a preliminary write-up before the close and then adjust the number as they change. Well things changed significantly today. Using preliminary number my subject line was “What Worked – Nothing.” Because up until this afternoon nothing stood out. However with the BOJ Announcement and Yen’s significant drop, things stood out.

This afternoon saw a huge sell off in high Beta, Value and 1-week momentum names. As a result, high beta names that were down were JFE down 16% on the week, 7% of that on the afternoon open, Jafco down 16%, 8% of that this afternoon.  Value names that were hurt were Hino Motors down 16%, 6% of that happened this afternoon. Mitsui OSK was down 16% this week, 7% of that on the afternoon open this afternoon.

Who Moved – There were 15 names that moved on volume this week. On the positive side, Japan Steel Works was up 10%, Coca-cola East was up 9% and Kokuyo was up 7%. On the other side, Hokuhoku Financial down 13%, Mitsubishi Motors was down 11% and CyberAgent was down 9%. All on strong volume.

Summary

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Big Differences in New OP Guidance and FY3/17 Consensus - Fanuc and Nintendo make the list

Here are the names that reported yesterday that gave new OP Guidance significantly lower than FY3/17 OP consensus estimates.

  • Ibiden’s (4062) new OP guidance is 56% below new FY1 consensus OP
  • Fanuc’s (6954) new OP guidance is 39% below new FY1 consensus OP
  • Fancl’s (4921) new OP guidance is 30% below new FY1 consensus OP
  • Nintendo’s (7974) new OP guidance is 27% below new FY1 consensus OP

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Names with still some confusion (Consensus Estimates with high Standard Deviation)

With Earnings season right upon us, we screened for names where the Street has not made up its mind. More specifically names where the standard deviation across Analyst estimates is greater than 20% of the mean estimate. I found it interesting that out of the 28 names that made the Screen, 36% did not have Company Guidance. For Example, OP consensus estimate for Mitsubishi Corp is 142,769.4 mm yen. However the Std Deviation is 46,258.4 so the OP range is from 189,028 mm to 96,511 mm yen. So it is pretty much anyone’s guess where Mitsubishi will come in at…. JX Holdings is even worse with a OP consensus range from positive 41,485 to negative 168,451 mm yen.

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What Worked Asia - 22 Apr 2016 - Not a lot really stood out across Asia this week

What Worked – It is very rare, but really nothing stood out across the region. In Hong Kong/China, PBR worked a little but was not really that strong. In Hong Kong, China Agri-Industries was up 8% and United Energy was up 8%. In Singapore, the only factor that really worked this week was Beta. China Everbright Water was up 8% and Yoma Strategic Holding was up 5%. In South Korea there was a slight bias to Value, but again it was not that strong. Daewoo Engineering & Construction was up 11% and Woori Bank was up 9%.

In India, Value actually did well relative to the other regions. Vedanta Limited was up 13% and Housing Development & Infrastructure was up 8%. Indonesia saw the strongest moves in Asia this week. Both Value and Beta did well in Indonesia this week. Bank Permata was up 31% and Aneka Tambang was up 10%. In Malaysia there was an slight sell off in large-cap names. Bumi Armada was up 10% and Fraser & Neave Holding was up 5%.

Who Moved – 137 names moved on Volume this week. Most of the Volume Spikes came in HK/China and were pretty well distributed across the different sectors. On the positive side, Bank Permata was up 31%, Intime Retail was up 19% and Hitachi Home & Life was up 18%. On the other side, Hanjin Shipping was down 24%, Biostime International was down 13% and ENN Energy Holdings was down 12%.

Summary

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What Worked Japan - 22 Apr 2016 - Value continued to do well but was not supported by Volume

What Worked – Basically everything that worked last week continued to work this week but to a slightly lesser degree. Value continued to be very strong with PBR leading the way. However PBR went from an incredibly strong information coefficient (IC) of 43% to just a very strong 30% IC. PBR has not worked two weeks in a row since last August. Low PBR names that did well this week are Idemitsu Kosa up 15%, Nippon Sheet Glass up 11% and Mitsui Mining and Smelting up 9%.  Names that were up over the last week continued to run this week.

Beta also continued to do well this week. As with Value it has been a long time since Beta has worked two weeks in a row. High Beta names that did well were Nippon Paint Holdings was up 15%, Kubota Corp was up 12% and Asics Corp was up 10%. We also saw a continued selloff in names with a high % of Retail Investors. Mitsubishi Motors was down 40%, GS Yuasa was down 11% and Kaken Pharma was down 9%.

Who Moved – However, as with last week Volume is not driving the market. Only 10 names moved on volume this week. On the positive side, Idemitsu Kosa was up 15%, Showa Shell Sekiyu was up 13% and Penta-Ocean Construction was up 6%. On the other side, Mitsubishi Motors was down 40%, KONAMI was down 6% and Yaskawa Electric was down 4%. All on strong volume.

Summary

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What Worked Asia - 15 Apr 2016 - What Worked and Who Moved - Beta and not really Value dominated Asia this week / Except for Taiwan where Size was the story

What Worked – Beta pretty much dominated in every market this week. Beta and Size were the strongest in Singapore with Sembcorp Marine up 14% and Keppel Corp up 6%. Beta was also really strong in HK and China. In China, China Railway Signal & Communication was up 22% and Phoenix Healthcare was up 21%. In Hong Kong, China Resource Cement was up 20% and TCC International Holdings was up 19%.

In HK/China PBR bounced a little, but this week’s move was mostly driven by just Beta. Value, particularly PBR, bounced in South Korea this week. Doosan Heavy Industries & Construction was up 20% and Doosan Corp was up 19%. In Korea, Value and Beta worked at the expense of Growth and Quality names. Joy City Property was down 6% and Yuexiu Real Estate was down 4%.  Taiwan was unaffected by the Beta bounce this week. Size was the driving factor in Taiwan. King Slide Works was up 13% and Taiwan Cement was up 11%.

Who Moved – Volume spikes were dominated by HK/China and Taiwanese names this week. At the Sector level, no one Sector seems to really stand out. On the positive side,  Hsin Chong Construction was up 53%, Golden Throat Holdings was up 24% and China Railway Signal & Communication was up 22%. On the other side, Biostime International Holdings was down 20%, Plaza Indonesia Realty was down 13% and Citychamp watch & Jewellery was down 11%.

Summary

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What Worked Japan - 15 Apr 2016 - Value bounced hard this week but was not supported by strong Volume

What Worked – After approx. 5 weeks of underperformance, low PBR and FY1 PE names bounced hard this week. The last time Value names did this well was in October 2015. After the October bounce, Value outperformed for the next month or so. However, after the most recent Value Bounce, Value immediately went back to underperforming. So not sure if this is signal in change or just a 1-week anomaly. Low PBR names that moved the most were Kobe Steel up 16%, Mitsui OSK up 16% and NTN Corp up 15%.

As with Value, Beta dominated this week as well. This was the best week for Beta in the last 2 years. High Beta names that did well were Hitachi Metals up 15%, Nippon Steel & Sumitomo Metal up 15% and Fukuoka Financial up 15%. 12-Month momentum came in with an incredible negative 57% Information Coefficient.  Names that were down over the last year that bounced up the most were Kobe Steel up 16%, Minebea up 16% and JFE Holdings up 14%. Growth suffered at the hands of Value. Growth names that were hurt this week were Tsuruha Holdings down 1% and Temp Holdings down 2%.

Who Moved – Unfortunately as with most of the recent bounces, this week’s bounce was not based on volume. Only 16 names bounced on Volume this week. On the positive side, DMG Mori was up 16%, Komeri was up 14% and Kawasaki Heavy Industries was up 12%. On the other side, Izumi was down 5%, Shimachu was down 4% and ITO EN was down 3%.

Summary

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