Tag: Japan Market
With name recognition across the globe, a market cap above $130 billion, and a history of profitability, we understand how some readers may be surprised at our no-moat rating of the company. However, at the same time, we must observe the competitive landscape in which the company operates. Ito asserts that Sony does not have an economic moat as a large percentage of its products have very low switching costs, even though we identify economic moats in some parts of its business. In particular, we believe that consumer electronic products (25% of revenue) will be exposed to fierce competition with Asian manufacturers.
With many products in this part of the business being commoditized, and a replacement cycle of digital appliances being three to six years, it is generally difficult for consumer electronic companies to build up an economic moat that generates sustainable excess returns on capital.
At the same time, however, Ito positively evaluates Sony’s efforts in building an ecosystem within its PlayStation business. While PlayStation 4 accumulated shipments reached approximately 97 million units by the end of fiscal 2019, the number of PS Plus users exceeded 36 million. This not only gives Sony solid cash flows with which to improve the profitability of its gaming segment but also provides a hook for customers, leading them to again purchase a PlayStation console in the next generation.
Ito also notes strength in Sony’s sensor business that focuses on improving picture quality. As a result, Sony has increased its market share, owing to growing demand from handsets. This strength can be quantitatively illustrated in Sony’s dominance in the global market share for image sensors. Sony’s global market share in this space is estimated to be in excess of 50% with the second-largest player, Samsung, holding 18% of the global market share. Security and automotive (autonomous driving) fields are the next growth drivers for Sony’s image sensor business. A critical factor for both fields is high sensitivity under various difficult conditions, and so we believe Sony could leverage its strength to expand this business in the near term.
General Advice Warning
Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.
• Medium-term growth could surprise the market to the upside if the integration of Sompo International continues smoothly.
• Sompo’s nursing-care business, while only a minor contributor to overall earnings at present, could provide a competitive advantage if it can be integrated with insurance products or if leveraging real-time data can allow it to generate new revenue sources.
Bears Say
• Sompo’s ambitious overseas expansion plans raise the risk of its overpaying for future mergers and acquisitions or acquiring targets that are difficult for it to manage.
• Because it is slightly smaller in domestic scale than Tokio Marine and MS&AD, this could be a cost disadvantage in the long term.
• Sompo’s historical connection to Nissan offers less advantage in developing future auto insurance products than competitors’ automaker ties, such as MS&AD’s connection to Toyota.
Company Profile
SOMPO Holdings, Inc. is a Japanese insurance holdings company. It is listed on the Nikkei 225. The firm is considered one of three top insurers in Japan. Sompo Holdings, Inc. provides property and casualty (P&C) insurance, life insurance, and nursing and health care services in Japan and internationally. It underwrites various P&C insurance products, including automobile and fire, as well as offers security, risk management, assistance, and warranty services; and life insurance products. The company also provides nursing care and healthcare services; and customer security, health, and wellbeing support services. In addition, it offers asset management services; home remodeling services; health support services comprising health guidance and health counseling, and employee assistance programs; and wellness communications services. The company was formerly known as Sompo Japan Nipponkoa Holdings, Inc. and changed its name to Sompo Holdings, Inc. in October 2016. Sompo Holdings, Inc. was founded in 2010 and is headquartered in Tokyo, Japan.
General Advice Warning
Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.
• Biologic therapy Entyvio is one of the best drugs for treating IBD and will likely see improved sales once a subcutaneous injection is approved.
• Takeda’s pipeline has many interesting early-stage pipeline candidates, some with first-in-class or best-inclass potential, and we could see a boost in sentiment if early data readouts are positive, especially around its orexin program for narcolepsy.
Bears Say
• Takeda’s pipeline is mostly early stage, and success or failure of clinical trials will be critical in determining the market’s perception of the company.
• Takeda’s top-selling drug Entyvio has strong growth, but loss of exclusivity is expected to start in 2024 (for the U.S. and the EU).
• Other important drugs facing loss of exclusivity events within the next few years include Vyvanse, Dexilant, and Velcade.
Company profile
Takeda Pharmaceutical Company Limited engages in the research, development, manufacturing, and marketing of pharmaceutical products, over-the-counter medicines and quasi-drug consumer products, and other healthcare products. It offers pharmaceutical products in the areas of gastroenterology; oncology; neuroscience; and rare diseases, such as rare metabolic and hematology, and heredity angioedema, as well as plasma-derived therapies and vaccines.
General Advice Warning
Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.