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.

Equity Bottom-Up

<p>With Toshiba CEO Kurumatani’s honeymoon period clearly at an end, the tussle between activist investors trying to extract a higher share price and Toshiba management trying to placate them long enough to deliver on that is starting to turn hostile. In December both <a href="https://www.toshiba.co.jp/about/ir/en/news/20201218_2.pdf" target="_blank" rel="noopener">Effissimo</a> and <a href="https://www.toshiba.co.jp/about/ir/en/news/20201225_1.pdf" target="_blank" rel="noopener">Farallon</a> (through Chinook) called for extraordinary general shareholder meetings to investigate Toshiba’s previous AGM where Kurumatani narrowly avoided replacement and to provide a clearer explanation of M&amp;A plans respectively. We do not think this bodes well for the stock.</p>

With Toshiba CEO Kurumatani’s honeymoon period clearly at an end, the tussle between activist investors trying to extract a higher share price and Toshiba management trying to placate them long enough to deliver on that is starting to turn hostile. In December both Effissimo and Farallon (through Chinook) called for extraordinary general shareholder meetings to investigate Toshiba’s previous AGM where Kurumatani narrowly avoided replacement and to provide a clearer explanation of M&amp;A plans respectively. We do not think this bodes well for the stock.

Senior Technology Analyst, Japanese Equities, LightStream Research

Scott Foster

Senior Technology Analyst, Japanese Equities

ja research

ja research is an independent research platform focused exclusively on Japanese equities. Leveraging data and graphic analysis provided by Japan Analytics, we provide insights on small and medium-sized companies that have been ignored by the sell-side as well as challenging conventional wisdom on larger companies. We also offer analyst and corporate access, the latter with translation if required. 

<p>Toshiba has come up with a future growth strategy that makes sense but that also requires investments in renewable energy and other infrastructure-related businesses amounting to about $10 billion over the next 5 years.</p><p>This would position Toshiba as a key part of Japan's new green energy plan, saving it from oblivion. Minister of the Environment Shinjiro Koizumi now wants to double the share of renewables in the nation's energy mix to 40% by 2030.</p><p>Management plans to finance the new investments through bank loans and by selling down its stake in NAND flash memory maker Kioxia. That would make Toshiba a long-term investment in infrastructure, more stable but with an overhead supply of tech investors waiting for an opportunity to exit. </p><p>Toshiba turned profitable in the three months to September. Management's operating profit guidance for FY Mar-21 looks over-optimistic, but the combination of cost cutting, restructuring and economic recovery should bring margins back to normal next fiscal year. </p><p>As pointed out by Campbell Gunn in <a href="https://www.smartkarma.com/insights/japan-results-revisions-12th-august-ppi-toshiba-mcdonald-s-eneos" target="_blank" data-smartkarma-citation="insights:42139" rel="noopener"></a><a href="https://www.smartkarma.com/insights/japan-results-revisions-11-11-mitsubishi-estate-toshiba-gmos" target="_blank" data-smartkarma-citation="insights:45202" rel="noopener">🇯🇵 JAPAN • Results &amp; Revisions 11/​​​​​​​​​​​​​​​​​​​​​​​​​​11 - Mitsubishi Estate, Toshiba, GMOs</a> , <em>Toshiba is the most-Oversold trillion yen market cap stock in Japan; however, the large activist weighting in the share register is a disincentive to other investor groups.</em></p><p>Mio Kato notes in <a href="https://www.smartkarma.com/insights/toshiba-on-track-to-hit-imaginary-if-only-covid-hadn-t-happened-guidance" target="_blank" data-smartkarma-citation="insights:45193" rel="noopener">Toshiba – On Track to Hit Imaginary “If Only COVID Hadn’t Happened” Guidance</a> , <em>we look at Toshiba as a truly long-term play that has significant value but will require time to realise that.</em></p>

Toshiba has come up with a future growth strategy that makes sense but that also requires investments in renewable energy and other infrastructure-related businesses amounting to about $10 billion over the next 5 years.This would position Toshiba as a key part of Japan's new green energy plan, saving it from oblivion. Minister of the Environment Shinjiro Koizumi now wants to double the share of renewables in the nation's energy mix to 40% by 2030.Management plans to finance the new investments through bank loans and by selling down its stake in NAND flash memory maker Kioxia. That would make Toshiba a long-term investment in infrastructure, more stable but with an overhead supply of tech investors waiting for an opportunity to exit. Toshiba turned profitable in the three months to September. Management's operating profit guidance for FY Mar-21 looks over-optimistic, but the combination of cost cutting, restructuring and economic recovery should bring margins back to normal next fiscal year. As pointed out by Campbell Gunn in 🇯🇵 JAPAN • Results &amp; Revisions 11/​​​​​​​​​​​​​​​​​​​​​​​​​​11 - Mitsubishi Estate, Toshiba, GMOs , Toshiba is the most-Oversold trillion yen market cap stock in Japan; however, the large activist weighting in the share register is a disincentive to other investor groups.Mio Kato notes in Toshiba – On Track to Hit Imaginary “If Only COVID Hadn’t Happened” Guidance , we look at Toshiba as a truly long-term play that has significant value but will require time to realise that.

Toshiba (6502 JP): New Role in Japan's Green Energy Plan. Oversold.

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Quantitative Analysis

<div><p>The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong Kong, Japan, Korea and Taiwan using the last available data published by the relevant authorities.</p></div><div><p>Hong Kong saw shorts rise on <a href="https://www.smartkarma.com/entities/ping-an-insurance-grp-co-of-china-ltd" target="_blank" data-smartkarma-citation="entities:12880:1" rel="noopener">Ping An Insurance (H) (2318 HK)</a>, <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a>, <a href="https://www.smartkarma.com/entities/haier-electronics-group-co" target="_blank" data-smartkarma-citation="entities:4877:1" rel="noopener">Haier Electronics Group Co (1169 HK)</a> and <a href="https://www.smartkarma.com/entities/ping-an-healthcare-and-technology-company-limited" target="_blank" data-smartkarma-citation="entities:27008:1" rel="noopener">Ping An Healthcare and Technology Company Limited (1833 HK)</a> while there was short covering on <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a>, <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a>, <a href="https://www.smartkarma.com/entities/sunny-optical-tech" target="_blank" data-smartkarma-citation="entities:13363:1" rel="noopener">Sunny Optical (2382 HK)</a> and <a href="https://www.smartkarma.com/entities/aia-group-ltd" target="_blank" data-smartkarma-citation="entities:14895:1" rel="noopener">AIA Group Ltd (1299 HK)</a>. Shorts increased in Financials and Health Care stocks, and decreased on Consumer Discretionary, Industrials, Communication Services, Information Technology and Real Estate names.</p></div><div><p>In Japan, stocks that saw the most shorts were <a href="https://www.smartkarma.com/entities/itochu-corp" target="_blank" data-smartkarma-citation="entities:18448:1" rel="noopener">Itochu Corp (8001 JP)</a>, <a href="https://www.smartkarma.com/entities/nippon-building-fund-inc" target="_blank" data-smartkarma-citation="entities:1900:1" rel="noopener">Nippon Building Fund (8951 JP)</a>, <a href="https://www.smartkarma.com/entities/mercari-inc" target="_blank" data-smartkarma-citation="entities:27149:1" rel="noopener">Mercari Inc (4385 JP)</a> and <a href="https://www.smartkarma.com/entities/miura-co-ltd" target="_blank" data-smartkarma-citation="entities:20185:1" rel="noopener">Miura Co Ltd (6005 JP)</a> while shorts decreased on <a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1" rel="noopener">Toshiba Corp (6502 JP)</a>, <a href="https://www.smartkarma.com/entities/fuji-corp-aichi" target="_blank" data-smartkarma-citation="entities:12942:1" rel="noopener">Fuji Machine Mfg (6134 JP)</a>, <a href="https://www.smartkarma.com/entities/casio-computer-co-ltd" target="_blank" data-smartkarma-citation="entities:18338:1" rel="noopener">Casio Computer (6952 JP)</a> and <a href="https://www.smartkarma.com/entities/ricoh-company-ltd" target="_blank" data-smartkarma-citation="entities:15359:1" rel="noopener">Ricoh Company Ltd (7752 JP)</a>. Sectorally, shorts increased on Consumer Discretionary, Real Estate and Financials, while shorts were covered on Consumer Staples.</p></div><div><p>In Korea, the biggest increase in shorts were seen on <a href="https://www.smartkarma.com/entities/hyundai-motor-co" target="_blank" data-smartkarma-citation="entities:155:1" rel="noopener">Hyundai Motor Co (005380 KS)</a>, <a href="https://www.smartkarma.com/entities/hyundai-heavy-industries" target="_blank" data-smartkarma-citation="entities:10155:1" rel="noopener">Hyundai Heavy Industries (009540 KS)</a> and <a href="https://www.smartkarma.com/entities/samsung-sdi-co-ltd" target="_blank" data-smartkarma-citation="entities:503:1" rel="noopener">Samsung SDI (006400 KS)</a> while shorts were covered on <a href="https://www.smartkarma.com/entities/amorepacific-corp" target="_blank" data-smartkarma-citation="entities:20854:1" rel="noopener">Amorepacific Corp (090430 KS)</a>, <a href="https://www.smartkarma.com/entities/sk-chemicals-co-ltd-new" target="_blank" data-smartkarma-citation="entities:26190:1" rel="noopener">Sk Chemicals Co Ltd/New (285130 KS)</a>, <a href="https://www.smartkarma.com/entities/s-oil-corp" target="_blank" data-smartkarma-citation="entities:1667:1" rel="noopener">S Oil Corp (010950 KS)</a> and <a href="https://www.smartkarma.com/entities/hmm-co-ltd" target="_blank" data-smartkarma-citation="entities:13494:1" rel="noopener">HMM Co., Ltd. (011200 KS)</a>. </p></div><div><p>Stocks in Taiwan that saw the highest increase in shorts were <a href="https://www.smartkarma.com/entities/asustek-computer-inc" target="_blank" data-smartkarma-citation="entities:13002:1" rel="noopener">Asustek Computer (2357 TT)</a>, <a href="https://www.smartkarma.com/entities/wiwynn-corp" target="_blank" data-smartkarma-citation="entities:27838:1" rel="noopener">Wiwynn Corp (6669 TT)</a>, <a href="https://www.smartkarma.com/entities/acer-inc" target="_blank" data-smartkarma-citation="entities:15726:1" rel="noopener">Acer Inc (2353 TT)</a> and <a href="https://www.smartkarma.com/entities/largan-precision-co-ltd" target="_blank" data-smartkarma-citation="entities:9126:1" rel="noopener">Largan Precision (3008 TT)</a> while shorts were covered on <a href="https://www.smartkarma.com/entities/unimicron-technology-corp" target="_blank" data-smartkarma-citation="entities:18778:1" rel="noopener">Unimicron Technology (3037 TT)</a>, <a href="https://www.smartkarma.com/entities/century-iron-steel-indus" target="_blank" data-smartkarma-citation="entities:8853:1" rel="noopener">Century Iron &amp; Steel Indus (9958 TT)</a>, <a href="https://www.smartkarma.com/entities/yageo-corporation" target="_blank" data-smartkarma-citation="entities:13212:1" rel="noopener">Yageo Corporation (2327 TT)</a> and <a href="https://www.smartkarma.com/entities/formosa-petrochemical-corp" target="_blank" data-smartkarma-citation="entities:20875:1" rel="noopener">Formosa Petrochemical (6505 TT)</a>. </p></div>

The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong Kong, Japan, Korea and Taiwan using the last available data published by the relevant authorities.Hong Kong saw shorts rise on Ping An Insurance (H) (2318 HK), Alibaba Group (9988 HK), Haier Electronics Group Co (1169 HK) and Ping An Healthcare and Technology Company Limited (1833 HK) while there was short covering on Meituan (3690 HK), Tencent Holdings (700 HK), Sunny Optical (2382 HK) and AIA Group Ltd (1299 HK). Shorts increased in Financials and Health Care stocks, and decreased on Consumer Discretionary, Industrials, Communication Services, Information Technology and Real Estate names.In Japan, stocks that saw the most shorts were Itochu Corp (8001 JP), Nippon Building Fund (8951 JP), Mercari Inc (4385 JP) and Miura Co Ltd (6005 JP) while shorts decreased on Toshiba Corp (6502 JP), Fuji Machine Mfg (6134 JP), Casio Computer (6952 JP) and Ricoh Company Ltd (7752 JP). Sectorally, shorts increased on Consumer Discretionary, Real Estate and Financials, while shorts were covered on Consumer Staples.In Korea, the biggest increase in shorts were seen on Hyundai Motor Co (005380 KS), Hyundai Heavy Industries (009540 KS) and Samsung SDI (006400 KS) while shorts were covered on Amorepacific Corp (090430 KS), Sk Chemicals Co Ltd/New (285130 KS), S Oil Corp (010950 KS) and HMM Co., Ltd. (011200 KS). Stocks in Taiwan that saw the highest increase in shorts were Asustek Computer (2357 TT), Wiwynn Corp (6669 TT), Acer Inc (2353 TT) and Largan Precision (3008 TT) while shorts were covered on Unimicron Technology (3037 TT), Century Iron &amp; Steel Indus (9958 TT), Yageo Corporation (2327 TT) and Formosa Petrochemical (6505 TT). 

Asia Short Interest Weekly: Haier, Sunny Optical, Itochu, Mercari, Toshiba, HMM, Asustek, Acer

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

Thematic (Sector/Industry)

<div><p style="text-align: center;"><strong>• BEST &amp; WORST •</strong></p></div><div>
<p style="text-align: left;">Wednesday's best and worst pairing is from the same corporate grouping - <a href="https://www.smartkarma.com/entities/gmo-payment-gateway-inc" target="_blank" data-smartkarma-citation="entities:1492:1" rel="noopener">GMO Payment Gateway (3769 JP)</a> and <a href="https://www.smartkarma.com/entities/gmo-internet-inc" target="_blank" data-smartkarma-citation="entities:13631:1" rel="noopener">GMO Internet (9449 JP)</a> and highlights the risks of investing in the latter to 'access' growth in the former.</p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/170/925/original/2020-11-12_06-02-15.png?1605128549" class="editor-image img-responsive" data-smartkarma-image-id="170925"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/170/926/original/2020-11-12_06-02-54.png?1605128586" class="editor-image img-responsive" data-smartkarma-image-id="170926"></figure></section><div style="text-align: center;"><div class="content-caption">Source for all charts &amp; tables: Japan Analytics</div></div>
<hr>
<div style="text-align: center;"><p><strong>DAILY STATS</strong></p></div>
<hr>
<div style="text-align: center;"><p><strong>227 Quarterly Results</strong></p></div>
<div style="text-align: center;"><ul style="list-style-type: disc;">
<li><p style="text-align: left;"><strong>Results Score:</strong> 42% Positive / 11% Neutral / 47% Negative</p></li>
<li><p style="text-align: left;"><strong>Average Results Score Change:</strong> -1.0 points</p></li>
<li><p style="text-align: left;"><strong>Average % Change in Revenue:</strong> -7.6% Quarter YoY / -5.0% Rolling TTM YoY </p></li>
<li><p style="text-align: left;"><strong>Average Operating Profit Margin Change:</strong> -1.3 ppt</p></li>
<li><p style="text-align: left;"><strong>Percentage Making Quarterly Losses:</strong> 20%</p></li>
</ul></div>
<hr>
<div><p style="text-align: center;"><strong>107 Annual • 18 Interim Forecasts/Revisions</strong></p></div>
<div><ul style="list-style-type: disc;">
<li><p><strong>Annual Forecast/Revision Score:</strong> 43% Positive / 9% Neutral / 48% Negative</p></li>
<li><p><strong>Interim Forecast/Revision Score Change:</strong> 50% Positive / 6% Neutral / 44% Negative</p></li>
<li><p><strong>Average Forecast/Revision Score Change:</strong> -1.5 points</p></li>
</ul></div>
</div>

• BEST &amp; WORST •
Wednesday's best and worst pairing is from the same corporate grouping - GMO Payment Gateway (3769 JP) and GMO Internet (9449 JP) and highlights the risks of investing in the latter to 'access' growth in the former.
Source for all charts &amp; tables: Japan Analytics

DAILY STATS

227 Quarterly Results

Results Score: 42% Positive / 11% Neutral / 47% Negative
Average Results Score Change: -1.0 points
Average % Change in Revenue: -7.6% Quarter YoY / -5.0% Rolling TTM YoY 
Average Operating Profit Margin Change: -1.3 ppt
Percentage Making Quarterly Losses: 20%


107 Annual • 18 Interim Forecasts/Revisions

Annual Forecast/Revision Score: 43% Positive / 9% Neutral / 48% Negative
Interim Forecast/Revision Score Change: 50% Positive / 6% Neutral / 44% Negative
Average Forecast/Revision Score Change: -1.5 points



🇯🇵 JAPAN • Results & Revisions 11/​​​​​​​​​​​​​​​​​​​​​​​​​​11 - Mitsubishi Estate, Toshiba, GMOs

<p>Toshiba’s 2Q results missed consensus estimates with revenue of ¥772bn undershooting by 5.6% while OP of ¥15.7bn undershot by 51%. The latter number is less of a concern than it looks given the heavy weighting of profitability towards 4Q but as we have been warning Toshiba appears to be trying to hit unrealistic OP targets to please activists and we believe it is increasingly clear that they are unlikely to succeed. It is, however, cheap and has underperformed of late.</p>

Toshiba’s 2Q results missed consensus estimates with revenue of ¥772bn undershooting by 5.6% while OP of ¥15.7bn undershot by 51%. The latter number is less of a concern than it looks given the heavy weighting of profitability towards 4Q but as we have been warning Toshiba appears to be trying to hit unrealistic OP targets to please activists and we believe it is increasingly clear that they are unlikely to succeed. It is, however, cheap and has underperformed of late.

Toshiba – On Track to Hit Imaginary “If Only COVID Hadn’t Happened” Guidance

Japan

Toshiba Corporation manufactures and markets electrical and electronic products. The Company's products include digital products such as PCs and televisions, NAND flash memories, and system LSIs (large-scale integrated), as well as social infrastructures such as power generators, medical equipment, and home appliances.

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Toshiba Corp (6502 JP)

Toshiba – The Drama Never Ends

The tussle between activist investors trying to extract a higher share price and Toshiba management trying to placate them long enough to deliver...

Mio Kato

Toshiba (6502 JP): New Role in Japan's Green Energy Plan. Oversold.

Toshiba is positioning itself as a contributor to meeting Japan's green energy targets. Realizing this potential will take time, but the shares are...

Scott Foster

Asia Short Interest Weekly: Haier, Sunny Optical, Itochu, Mercari, Toshiba, HMM, Asustek, Acer

This Insight looks at short interest movements in stocks across Asian markets and highlights stocks that have seen large increase/ decrease in...

Brian Freitas

🇯🇵 JAPAN • Results & Revisions 11/11 - Mitsubishi Estate, Toshiba, GMOs

Wednesday's best and worst pairing is from the same corporate grouping - GMO PG and GMO Internet and highlights the risks of investing in the...

Campbell Gunn

Toshiba – On Track to Hit Imaginary “If Only COVID Hadn’t Happened” Guidance

Toshiba's results continue to be presented in an overly optimistic fashion in our opinion. Nevertheless, share price underperformance appears to...

Mio Kato

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Toshiba – The Drama Never Ends

The tussle between activist investors trying to extract a higher share price and Toshiba management trying to placate them long enough to deliver...

Mio Kato

Toshiba (6502 JP): New Role in Japan's Green Energy Plan. Oversold.

Toshiba is positioning itself as a contributor to meeting Japan's green energy targets. Realizing this potential will take time, but the shares are...

Scott Foster

Asia Short Interest Weekly: Haier, Sunny Optical, Itochu, Mercari, Toshiba, HMM, Asustek, Acer

This Insight looks at short interest movements in stocks across Asian markets and highlights stocks that have seen large increase/ decrease in...

Brian Freitas

🇯🇵 JAPAN • Results & Revisions 11/​​​​​​​​​​​​​​​​​​​​​​​​​​11 - Mitsubishi Estate, Toshiba, GMOs

Wednesday's best and worst pairing is from the same corporate grouping - GMO PG and GMO Internet and highlights the risks of investing in the...

Campbell Gunn

Toshiba – On Track to Hit Imaginary “If Only COVID Hadn’t Happened” Guidance

Toshiba's results continue to be presented in an overly optimistic fashion in our opinion. Nevertheless, share price underperformance appears to...

Mio Kato

🇯🇵 JAPAN • Results & Revisions 11/11 - Mitsubishi Estate, Toshiba, GMOs