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

The <a href="https://asia.nikkei.com/Business/Automobiles/Suzuki-chairman-Osamu-Suzuki-to-step-down" target="_blank" rel="noopener">Nikkei announced today</a> that 91-year old Suzuki chairman, Osamu Suzuki would be stepping down in June. Osamu Suzuki was responsible for key strategic decisions such as targeting the mini-vehicle market in Japan and entering India long before competitors recognised its potential, demonstrating remarkable foresight. His departure leaves a vacuum in leadership that will be difficult to fill, but the foundation for the future has been laid in Suzuki’s strengthened relationship with Toyota.

The Nikkei announced today that 91-year old Suzuki chairman, Osamu Suzuki would be stepping down in June. Osamu Suzuki was responsible for key strategic decisions such as targeting the mini-vehicle market in Japan and entering India long before competitors recognised its potential, demonstrating remarkable foresight. His departure leaves a vacuum in leadership that will be difficult to fill, but the foundation for the future has been laid in Suzuki’s strengthened relationship with Toyota.

Suzuki – Osamu Suzuki Stepping Down Could Accelerate Move Into Toyota Group

Suzuki reported 4QFY21 results on Friday which saw revenues increase YoY by 4% and operating profits hit ¥64bn (+43% YoY) implying an OPM of 7.1%. The reported results were 6.8%% and 18.6% higher than consensus revenue and OP respectively.Despite better performance in 3QFY21, the company conservatively stuck with its previous guidance for FY21. Therefore, Suzuki is implying revenue of ¥824bn and OP of ¥21bn implying an OPM of just 2.6% in 4QFY21.<table class="table table-striped"><tbody>
<tr>
<td style="width: 44.28%;">In ¥bn</td>
<td style="width: 15.48%;">Revenue </td>
<td style="width: 22.88%;">OP</td>
<td style="width: 17.36%;">OPM</td>
</tr>
<tr>
<td style="width: 44.28%;">Actual Results - 3QFY21</td>
<td style="width: 15.48%;">905</td>
<td style="width: 22.88%;">64</td>
<td style="width: 17.36%;">5.2%</td>
</tr>
<tr>
<td style="width: 44.28%;">Consensus - 3QFY21</td>
<td style="width: 15.48%;">847</td>
<td style="width: 22.88%;">54</td>
<td style="width: 17.36%;">6.4%</td>
</tr>
<tr>
<td style="width: 44.28%;">Surprise</td>
<td style="width: 15.48%;">6.8%</td>
<td style="width: 22.88%;">18.6%</td>
<td style="width: 17.36%;">-1.2% points</td>
</tr>
<tr>
<td style="width: 44.28%;"> </td>
<td style="width: 15.48%;"> </td>
<td style="width: 22.88%;"> </td>
<td style="width: 17.36%;"> </td>
</tr>
<tr>
<td style="width: 44.28%;">Guidance</td>
<td style="width: 15.48%;">3,000</td>
<td style="width: 22.88%;">160</td>
<td style="width: 17.36%;">5.3%</td>
</tr>
<tr>
<td style="width: 44.28%;">Consensus</td>
<td style="width: 15.48%;">2,980</td>
<td style="width: 22.88%;">173</td>
<td style="width: 17.36%;">5.8%</td>
</tr>
<tr>
<td style="width: 44.28%;">Difference</td>
<td style="width: 15.48%;">0.7%</td>
<td style="width: 22.88%;">-7.7%</td>
<td style="width: 17.36%;">-0.5% points</td>
</tr>
<tr>
<td style="width: 44.28%;"> </td>
<td style="width: 15.48%;"> </td>
<td style="width: 22.88%;"> </td>
<td style="width: 17.36%;"> </td>
</tr>
<tr>
<td style="width: 44.28%;">Implied Guidance- 4QFY21</td>
<td style="width: 15.48%;">824</td>
<td style="width: 22.88%;">21</td>
<td style="width: 17.36%;">2.6%</td>
</tr>
<tr>
<td style="width: 44.28%;">Consensus - 4QFY21</td>
<td style="width: 15.48%;">906</td>
<td style="width: 22.88%;">56</td>
<td style="width: 17.36%;">6.2%</td>
</tr>
<tr>
<td style="width: 44.28%;">Difference</td>
<td style="width: 15.48%;">-9.0%</td>
<td style="width: 22.88%;">-62.1%</td>
<td style="width: 17.36%;">-3.6% points</td>
</tr>
</tbody></table><div style="text-align: left;" class="content-caption">Source: Company disclosures</div>

Suzuki reported 4QFY21 results on Friday which saw revenues increase YoY by 4% and operating profits hit ¥64bn (+43% YoY) implying an OPM of 7.1%. The reported results were 6.8%% and 18.6% higher than consensus revenue and OP respectively.Despite better performance in 3QFY21, the company conservatively stuck with its previous guidance for FY21. Therefore, Suzuki is implying revenue of ¥824bn and OP of ¥21bn implying an OPM of just 2.6% in 4QFY21.

In ¥bn
Revenue 
OP
OPM


Actual Results - 3QFY21
905
64
5.2%


Consensus - 3QFY21
847
54
6.4%


Surprise
6.8%
18.6%
-1.2% points


 
 
 
 


Guidance
3,000
160
5.3%


Consensus
2,980
173
5.8%


Difference
0.7%
-7.7%
-0.5% points


 
 
 
 


Implied Guidance- 4QFY21
824
21
2.6%


Consensus - 4QFY21
906
56
6.2%


Difference
-9.0%
-62.1%
-3.6% points

Source: Company disclosures

Suzuki – 3Q FY21 Momentum Continues and Guidance Overshoot Likely

Equity L/S Analyst | Forensic Accounting | India, Yellowstone Equity

Ankit Agrawal, CFA

Equity L/S Analyst | Forensic Accounting | India

<a href="https://www.smartkarma.com/entities/hero-motocorp-ltd" target="_blank" data-smartkarma-citation="entities:2391:1" rel="noopener">Hero Motocorp (HMCL IN)</a> announced its Q3FY21 earnings yesterday. It reported highest ever quarterly revenue. Key positive surprises were market share gain in the export market (90bp gain) and 25%+ growth in the spare parts business. Hero Motocorp also did well in the domestic market with 190bp market share gain. This coupled with low base effect helped Hero Motocorp post strong earnings. Revenues grew 40% YoY, EBITDA grew 36% YoY while PAT grew 23% YoY (losses at couple of associates tapered down the PAT growth). EBITDA margins at 14.5% came in within the medium-term guidance of 14-16% range.

Hero Motocorp (HMCL IN) announced its Q3FY21 earnings yesterday. It reported highest ever quarterly revenue. Key positive surprises were market share gain in the export market (90bp gain) and 25%+ growth in the spare parts business. Hero Motocorp also did well in the domestic market with 190bp market share gain. This coupled with low base effect helped Hero Motocorp post strong earnings. Revenues grew 40% YoY, EBITDA grew 36% YoY while PAT grew 23% YoY (losses at couple of associates tapered down the PAT growth). EBITDA margins at 14.5% came in within the medium-term guidance of 14-16% range.

Hero Motocorp Q3FY21 Earnings - Highest Ever Quarterly Revenue

Quantitative Analysis

<div>
In this Smartkarma Original, we bring to you a quantitative approach for identifying Asian companies that are likely to raise/cut buyback. Applying this approach to a universe of 920+ companies listed across Asia helped us identify 40+ and 50+ companies that have a high likelihood of raising and cutting buybacks, respectively, over the next five years.
</div>
<div>
<div>
<div class="content-highlight">
What's Original?
<ul style="list-style-type: disc;">
<li>We have two separate models, one for forecasting Buyback Raise and the other for Buyback Cut.</li>
<li>Our back test results are very encouraging with &gt;85% hit rate for our Buyback Raise model and &gt;94% hit rate for our Buyback Cut model.</li>
<li>For our Buyback Raise model, we differentiate from other quantitative buyback models by incorporating competing uses of cash like inorganic acquisitions through “Goodwill as % of Total Assets” parameter. Based on our analysis, we have also determined that, contrary to usual perception, any dividend payout is not a competing use of cash vs buyback but a healthy sign of capital return discipline and have incorporated it accordingly in our model. We also use long-term ROE vs growth trends to filter companies where the cash levels maybe low but the capability to do buyback with time can grow significantly. At the same time, we ensure to weed off very high growth companies that may have high re-investment needs through our carefully selected threshold for the "Long-term Revenue CAGR" parameter. </li>
</ul>
</div>
</div>
</div>
<div>
<h3>Insight Flow</h3>
</div>
<div>
<ul style="list-style-type: disc;">
<li>Live Dashboard</li>
<li> Methodology
<ul style="list-style-type: circle;">
<li>Buyback Raise Model</li>
<li>Buyback Cut Model</li>
</ul>
</li>
<li>Universe</li>
<li>Back Test Results
<ul style="list-style-type: circle;">
<li>Buyback Raise Model</li>
<li>Buyback Cut Model</li>
</ul>
</li>
<li>Model Results
<ul style="list-style-type: circle;">
<li>Summary Statistics</li>
<li>Companies with High Probability of Buyback Raise</li>
<li>Companies with High Probability of Buyback Cut</li>
</ul>
</li>
<li>Buyback Timing</li>
<li>Model Risks &amp; Limitations</li>
<li>Conclusion</li>
</ul>
</div>


In this Smartkarma Original, we bring to you a quantitative approach for identifying Asian companies that are likely to raise/cut buyback. Applying this approach to a universe of 920+ companies listed across Asia helped us identify 40+ and 50+ companies that have a high likelihood of raising and cutting buybacks, respectively, over the next five years.




What's Original?

We have two separate models, one for forecasting Buyback Raise and the other for Buyback Cut.
Our back test results are very encouraging with &gt;85% hit rate for our Buyback Raise model and &gt;94% hit rate for our Buyback Cut model.
For our Buyback Raise model, we differentiate from other quantitative buyback models by incorporating competing uses of cash like inorganic acquisitions through “Goodwill as % of Total Assets” parameter. Based on our analysis, we have also determined that, contrary to usual perception, any dividend payout is not a competing use of cash vs buyback but a healthy sign of capital return discipline and have incorporated it accordingly in our model. We also use long-term ROE vs growth trends to filter companies where the cash levels maybe low but the capability to do buyback with time can grow significantly. At the same time, we ensure to weed off very high growth companies that may have high re-investment needs through our carefully selected threshold for the "Long-term Revenue CAGR" parameter. 





Insight Flow



Live Dashboard
 Methodology

Buyback Raise Model
Buyback Cut Model


Universe
Back Test Results

Buyback Raise Model
Buyback Cut Model


Model Results

Summary Statistics
Companies with High Probability of Buyback Raise
Companies with High Probability of Buyback Cut


Buyback Timing
Model Risks &amp; Limitations
Conclusion



Asia Buyback Forecasting | Which Companies Are Likely to Raise/Cut Buybacks?

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Nexter's share price has moved in tandem with <a href="https://www.smartkarma.com/entities/geely-automobile-holdings-ltd" target="_blank" data-smartkarma-citation="entities:127:1" rel="noopener">Geely Auto (175 HK)</a> in the past half a year, which particularly have benefited from the rumor that they entered into a partnership with <a href="https://www.smartkarma.com/entities/baidu-inc" target="_blank" data-smartkarma-citation="entities:179:1" rel="noopener">Baidu (BIDU US)</a> to develop autonomous vehicles although it was denied by the companies yesterday. 
The management has repeatedly stated last year that they will make an effort to further grow the business in China but it will take some time and as per the latest interim report in 2020, the revenue from China still has not surpassed the US. Nexter bought a stake in Tactile Mobility, the leading tactile virtual sensing, and data company based in Israel, which will be a key element to win a mandate in autonomous vehicle projects. The stock may see another leg up tomorrow but after a 71% return (prior to today's) in 6 months, it is time to sell to lock in some profit.

Nexter's share price has moved in tandem with Geely Auto (175 HK) in the past half a year, which particularly have benefited from the rumor that they entered into a partnership with Baidu (BIDU US) to develop autonomous vehicles although it was denied by the companies yesterday. 
The management has repeatedly stated last year that they will make an effort to further grow the business in China but it will take some time and as per the latest interim report in 2020, the revenue from China still has not surpassed the US. Nexter bought a stake in Tactile Mobility, the leading tactile virtual sensing, and data company based in Israel, which will be a key element to win a mandate in autonomous vehicle projects. The stock may see another leg up tomorrow but after a 71% return (prior to today's) in 6 months, it is time to sell to lock in some profit. 

Japan

Suzuki Motor Corporation manufactures automobiles, motorcycles, and their related parts. The Company has production facilities in USA, Japan, Taiwan, India, Pakistan, Indonesia, Thailand, and Hungary.

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Suzuki Motor (7269 JP)

Suzuki – Osamu Suzuki Stepping Down Could Accelerate Move Into Toyota Group

The retirement of Chairman Osamu Suzuki could accelerate moves by Suzuki and Toyota to more closely integrate their operations

Mio Kato

Suzuki – 3Q FY21 Momentum Continues and Guidance Overshoot Likely

Suzuki's performance continues to strengthen against the backdrop of an auto sector gaining momentum. India and Maruti Suzuki drive performance but...

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Hero Motocorp Q3FY21 Earnings - Highest Ever Quarterly Revenue

Robust demand in domestic markets coupled with exponential growth potential across exports, spare parts in conjunction with margin expansion...

Ankit Agrawal, CFA

Asia Buyback Forecasting | Which Companies Are Likely to Raise/Cut Buybacks?

A predictive quantitative model for Asian companies to help determine which companies are likely to raise/cut buybacks in future.

Ankit Agrawal, CFA

Nexteer (1316): Time to Book Some Profit

Nexter's share price has moved in tandem with Geely Auto in the past 6m, which has benefited from the rumor on the partnership with Baidu to...

Henry Soediarko

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