Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>Every year it's the same trade. This year it is Thursday and Friday. There is some funkiness to Monday too.</li>
<li>There is meaningful directional buying on one day, which then kind of gets stretched a bit. This year, circumstances suggest high confidence buying should be at the top end.</li>
<li>This year, because circumstances, I expect the trade is a lot larger than last year. I'd say ¥1.6trln. </li>
</ul>


Every year it's the same trade. This year it is Thursday and Friday. There is some funkiness to Monday too.
There is meaningful directional buying on one day, which then kind of gets stretched a bit. This year, circumstances suggest high confidence buying should be at the top end.
This year, because circumstances, I expect the trade is a lot larger than last year. I'd say ¥1.6trln. 


The Biggish Sep 2024 "Thursday-Friday Trade"

Senior Technology Analyst, Japanese Equities, LightStream Research

Scott Foster

Senior Technology Analyst, Japanese Equities

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Bottom-Up

<ul>
<li>Visibility is poor. Following excellent 1Q results, management raised FY Mar-25 sales guidance by 14%, operating profit guidance by 53% and net profit guidance by 57%. </li>
<li>Strong demand for AI processors and memory should support more than 35% growth in IC tester revenues and a doubling of operating profit in the two years to Mar-26.</li>
<li>The shares have dropped to the bottom of their recent trading range, but are still selling at more than 30x our EPS estimate for next fiscal year.</li>
</ul>


Visibility is poor. Following excellent 1Q results, management raised FY Mar-25 sales guidance by 14%, operating profit guidance by 53% and net profit guidance by 57%. 
Strong demand for AI processors and memory should support more than 35% growth in IC tester revenues and a doubling of operating profit in the two years to Mar-26.
The shares have dropped to the bottom of their recent trading range, but are still selling at more than 30x our EPS estimate for next fiscal year.


Advantest (6857 JP): High Valuation, Low Visibility

<ul>
<li>Advantest has dropped back 11.5% from its recent high but is still up 43% year-to-date and up 2.3X from a year ago. Consolidation is likely to continue.</li>
<li>Demand for High Bandwidth Memory (HBM) for use with AI processors could lift sales, profits and profit margins to new highs within the next two years.</li>
<li>That could bring the projected P/E ratio down from 75.5x FY Mar-24 EPS guidance to 31x FY Mar-26 EPS in a favorable but not unreasonably optimistic scenario. </li>
</ul>


Advantest has dropped back 11.5% from its recent high but is still up 43% year-to-date and up 2.3X from a year ago. Consolidation is likely to continue.
Demand for High Bandwidth Memory (HBM) for use with AI processors could lift sales, profits and profit margins to new highs within the next two years.
That could bring the projected P/E ratio down from 75.5x FY Mar-24 EPS guidance to 31x FY Mar-26 EPS in a favorable but not unreasonably optimistic scenario. 


Advantest (6857 JP): AI Speculation Discounted

Derivatives and Quantitative Strategist

Gaudenz Schneider

<ul>
<li>This strategy exploits relative value in implied volatilities and combines it with a long Nifty 50 vs. short Nikkei 225 directional view over a period of two months.</li>
<li>The strategy performs well if the Nifty 50 rises <em>and</em> outperforms the Nikkei 225. If both indices decline, neither profit nor loss is incurred.</li>
<li>Leverage increases both the strategy's payoff and probability of success.</li>
</ul>


This strategy exploits relative value in implied volatilities and combines it with a long Nifty 50 vs. short Nikkei 225 directional view over a period of two months.
The strategy performs well if the Nifty 50 rises and outperforms the Nikkei 225. If both indices decline, neither profit nor loss is incurred.
Leverage increases both the strategy's payoff and probability of success.


EQD | Long Nifty 50 Vs. Short Nikkei 225 - A Relative Value Option Strategy with a Kicker

Equity Long-Short, Semiconductors, Fabricated Knowledge

Douglas O'Laughlin

Equity Long-Short, Semiconductors

Fabricated Knowledge

Learn more about the world's most important manufactured product. Meaningful insight, timely analysis, and an occasional investment idea.

Thematic (Sector/Industry)

<ul><li>Japan is the darling of the moment. To those who haven’t kept track of the story, a series of <a href="https://www.jpx.co.jp/english/equities/improvements/follow-up/b5b4pj000004yqcc-att/dreu250000000uqc.pdf" target="_blank" rel="noopener">market reforms in January</a> encourages companies with a price-to-book ratio below one to create a plan to achieve capital efficiency.</li><li>Given that half of the companies at the time were trading below 1x P/B, this is a big deal.</li><li>And this has driven a massive wave of buybacks and changes, leading to the Nikkei finally breaking a 30-year high.</li></ul>

Japan is the darling of the moment. To those who haven’t kept track of the story, a series of market reforms in January encourages companies with a price-to-book ratio below one to create a plan to achieve capital efficiency.Given that half of the companies at the time were trading below 1x P/B, this is a big deal.And this has driven a massive wave of buybacks and changes, leading to the Nikkei finally breaking a 30-year high.

Japanese Semiconductor Stocks and AI "Winners" that Ain't So

Japan

ADVANTEST CORPORATION produces semiconductor testing devices and electronic measuring instruments.  The Company's products include large-scale integration (LSI) test systems, memory test systems, dynamic test handlers, network analyzers, electronic meters, optical testing devices, and signal sources.

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Advantest Corp (6857 JP)

The Biggish Sep 2024 "Thursday-Friday Trade"

This year, the September dividend trade is likely quite a bit larger than last year. Last year was likely reduced by de-allocation. Not this year....

Travis Lundy

Advantest (6857 JP): High Valuation, Low Visibility

Advantest's sales and profits are rebounding, but visibility is low and valuations relatively high. Now at the bottom of its trading range, it is...

Scott Foster

Advantest (6857 JP): AI Speculation Discounted

Cyclical recovery accelerated by demand for High Bandwidth Memory testers should take sales and profits to new highs, but this has been largely...

Scott Foster

EQD | Long Nifty 50 Vs. Short Nikkei 225 - A Relative Value Option Strategy with a Kicker

Option strategy: exploit relative value in implied volatilities combined with directional positioning for a leveraged payoff in a long Nifty 50 vs....

Gaudenz Schneider

Japanese Semiconductor Stocks and AI "Winners" that Ain't So

Another BSPDN name and some ABF ideas. Not every AI semiconductor stock is actually winning. This edition just so happens to be Japan focused

Fabricated Knowledge

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