Thinking Points

  • Today, we’ll go over how you can read through Fisco Reports.
  • The key is to focus on the qualitative information. With reports ranging from 15 to 25 pages in length, however, reading the whole thing carefully shouldn’t add much to your workload.
  • That said, much of the useful qualitative information can be found in the company history and company strategy sections, if you want to keep your research focused.

Perhaps you’ve already taken a peek at a few Fisco research reports after our announcement a few days ago. If not, I’d recommend doing so, particularly since there aren’t many research services producing English reports on Japanese companies!

The reports are usually between 15 ~ 25 pages in length. If you’re looking for a quick way to learn about the basics of a company, you’ll enjoy these reports. You can find them either on Fisco’s website or through their Twitter account.

From here, I’d like to go over how to read the Fisco reports. As I mentioned in the announcement, however, I don’t often use the reports, mainly because I do all of my research in Japanese. But here is how you can extract useful information.

Forget the numbers

Often times, the pain point for foreign investors looking into Japan isn’t about finding financial data. In fact, it’s mostly about finding the qualitative data about a company to make sense of the financials.

Fortunately, Fisco reports contain both qualitative and quantitative information. For the most part, I’d disregard the sections that go over quarter-over-quarter or year-over-year financial performance and jump straight for the meat.

One of my favorites is the history section. Perhaps this is an undiscovered gem  in Japanese reporting for many foreign investors, but Japanese companies include a company history timeline with their annual filings. Typically, this is also available on their website. While not included in all Fisco reports, many of them have an English translation of the timeline. Here’s one from a recent report on oRo (TSE: 3983):

Source: Fisco Report

Additionally, the reports normally have some qualitative commentary which gives you an idea of what the business is all about. Here’s a snippet from a recent AOI TYO Holdings (TSE: 3975) report to give you an idea:

Source: Fisco Report

 

Nuts and bolts of company strategy

The other neat part of Fisco reports is that you get the overview of a company’s strategy. This information isn’t scarce when it comes to large caps. However, start looking into small caps and you’ll see how difficult it is to find any useful qualitative information in English. Fisco reports often succinctly close a healthy chunk of this Japanese/English information gap.

For example, a recent report covered Prospect (TSE: 3528), a condo sales and public works company with a market cap of about $210 million USD as of June 8, 2018 closing:

Source: Fisco report

If you can look past the occasional incomplete sentences and strange English, you’ll find some useful information here. Admittedly, the reports aren’t comprehensive, but they’re not meant to be. It’s a perfectly good reading screen for ideas.

Other

For the most part, Fisco reports come with a standard flow, but unstandardized format. In other words, the naming of items on the table of contents are different from report to report, but generally describe the same things in the same orders across reports (a little confusing, I know).

In general, the topics flow like this:

  • Summary
  • Company Profile
  • Business segments, competitors, etc
  • Recent financial performance
  • Outlook
  • Strategy
  • Shareholder return policy

The Outlook and Shareholder return policy sections often cover line-items easily found on the Kessan Tanshin (short form financials), and expand a little bit on each. The line-items are normally one year forecasts for revenues, operating income, net income, and dividends.

The bottom line

Fisco research reports are a nice way to quickly learn about the basics of a company. As a general approach, I suggest ignoring most of the quantitative information and sticking to the qualitative bits. Like I mentioned earlier, my personal favorite is the company history section, which help with understanding the company’s historical context. The company strategy section is useful in getting an idea of where the company is headed too.

 

Author: Kenkyo Investing

Kenkyo Investing applies a value investing approach to Japanese equities, providing insights that are often unavailable to non-Japanese speakers.