Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

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.

Event-Driven

<ul>
<li>After initially grinding up slowly but underperforming the Nikkei our suggested skew trade gave up ground during the new year sell off.</li>
<li>It did so slowly, however and was outperforming Nikkei when last we checked despite being down slightly. </li>
<li>Thankfully, a lot of the idiosyncratic volatility hurting the skew trade has reversed now and it is positive and outperforming Nikkei consistently.</li>
</ul>


After initially grinding up slowly but underperforming the Nikkei our suggested skew trade gave up ground during the new year sell off.
It did so slowly, however and was outperforming Nikkei when last we checked despite being down slightly. 
Thankfully, a lot of the idiosyncratic volatility hurting the skew trade has reversed now and it is positive and outperforming Nikkei consistently.


TOPIX-Nikkei Skew Trade Starting to Work Nicely

Equity Bottom-Up

<ul>
<li>Keyence’s 3Q numbers were noticeably stronger than consensus with revenue at ¥190bn (just below our estimate of ¥192bn+) vs. consensus at ¥182bn. </li>
<li>OP also beat by 4.2% but was held back slightly by high SG&amp;A. </li>
<li>Nevertheless, this should move the outlook for 4Q up significantly setting up a reasonable full year beat and better prospects for next year.</li>
</ul>


Keyence’s 3Q numbers were noticeably stronger than consensus with revenue at ¥190bn (just below our estimate of ¥192bn+) vs. consensus at ¥182bn. 
OP also beat by 4.2% but was held back slightly by high SG&amp;A. 
Nevertheless, this should move the outlook for 4Q up significantly setting up a reasonable full year beat and better prospects for next year.


<ul>
<li>We are broadly negative the FA sector as we expect earnings to fall next FY for most players and valuations are extended. </li>
<li>Keyence is an exception in that we expect further growth next year although valuations are extended even for Keyence. </li>
<li>We believe this is because the market is pricing in its greater earnings resilience but maybe not quite enough.</li>
</ul>


We are broadly negative the FA sector as we expect earnings to fall next FY for most players and valuations are extended. 
Keyence is an exception in that we expect further growth next year although valuations are extended even for Keyence. 
We believe this is because the market is pricing in its greater earnings resilience but maybe not quite enough.


Keyence – Not a Gimme but Worth a Small Buy Into Earnings

<ul>
<li>A positive earnings surprise for Fast Retailing and Microsoft’s acquisition of Activision Blizzard hitting Sony have hurt the performance of our skew trade. </li>
<li>Despite this, the dramatic fall in the Nikkei means it is now outperforming the Nikkei since we first suggested the trade. </li>
<li>Looking forward we expect recent volatility to be absorbed over time and we retain conviction on our picks.</li>
</ul>


A positive earnings surprise for Fast Retailing and Microsoft’s acquisition of Activision Blizzard hitting Sony have hurt the performance of our skew trade. 
Despite this, the dramatic fall in the Nikkei means it is now outperforming the Nikkei since we first suggested the trade. 
Looking forward we expect recent volatility to be absorbed over time and we retain conviction on our picks.


TOPIX-Nikkei Skew Trade Hit by Sony and Fast Retailing but Outperforming Nikkei

<ul>
<li>We update on our TOPIX-Nikkei Skew Trade again as we head into the end of the year with markets remaining choppy.</li>
<li>Given likely drops in liquidity but continued choppiness in markets we feel that liquidity risk will be important over the next 2-3 weeks. </li>
<li>Given that, we quite like the risk-reward skew on offer here.</li>
</ul>


We update on our TOPIX-Nikkei Skew Trade again as we head into the end of the year with markets remaining choppy.
Given likely drops in liquidity but continued choppiness in markets we feel that liquidity risk will be important over the next 2-3 weeks. 
Given that, we quite like the risk-reward skew on offer here.


We Like the TOPIX-Nikkei Skew Trade Into End of Year Liquidity Drops

Japan

KEYENCE CORPORATION develops, manufactures, and sells sensors and measuring instruments used for factory automation (FA) and high technology hobby products. The Company's products include fiber optic sensors, photoelectric sensors, programmable logic controllers (PLC), laser scan micrometers, bar code readers, and radio-controlled model cars.

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Keyence Corp (6861 JP)

TOPIX-Nikkei Skew Trade Starting to Work Nicely

After initially grinding up slowly but underperforming the Nikkei our suggested skew trade gave up ground during the new year sell off. It is now...

Mio Kato

Keyence – Strong as We Suggested

Keyence’s 3Q numbers were noticeably stronger than consensus and should move the outlook for 4Q up significantly setting up a reasonable full year...

Mio Kato

Keyence – Not a Gimme but Worth a Small Buy Into Earnings

We are broadly negative the FA sector as we expect earnings to fall next FY for most players and valuations are extended. Keyence's prospects in...

Mio Kato

TOPIX-Nikkei Skew Trade Hit by Sony and Fast Retailing but Outperforming Nikkei

Volatility in Fast Retailing and Sony have hurt the performance of our skew trade but looking forward we expect recent volatility to be absorbed...

Mio Kato

We Like the TOPIX-Nikkei Skew Trade Into End of Year Liquidity Drops

Given likely drops in liquidity but continued choppiness in markets we feel that liquidity risk will be important over the next 2-3 weeks. Given...

Mio Kato

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