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

Ankit Agrawal, CFA

Equity L/S Analyst | Forensic Accounting | India

Quantitative Analysis

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<p>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.</p>
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<div class="content-highlight">
<p><strong>What's Original?</strong></p>
<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>
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<h3>Insight Flow</h3>
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<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>
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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

Equity Bottom-Up

<p>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. </p>
<p>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, <strong>it is time to sell to lock in some profit</strong>. </p>

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/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.

<p>Positive news flow regarding Toyota’s ZEV strategy has driven the stock up 10.5% in the last four days. We have always maintained that Japanese automakers, and the Toyota group in particular, possessed the fundamental technologies necessary to launch EVs when they felt the timing was right. As they start to do so and join other major OEMs such as VW and GM, we believe the narrative bubble surrounding pure EV manufacturers will burst and valuations will collapse. Nevertheless, as the pure EV names are narrative rather than fact driven, timing such a collapse remains difficult. A simpler way of expressing this trade is through a long in traditional automakers with strong ZEV technology who are entering the EV space, where they will take mass market volume away from pure EV manufacturers just as VW has already done to Tesla in Europe.</p>

Positive news flow regarding Toyota’s ZEV strategy has driven the stock up 10.5% in the last four days. We have always maintained that Japanese automakers, and the Toyota group in particular, possessed the fundamental technologies necessary to launch EVs when they felt the timing was right. As they start to do so and join other major OEMs such as VW and GM, we believe the narrative bubble surrounding pure EV manufacturers will burst and valuations will collapse. Nevertheless, as the pure EV names are narrative rather than fact driven, timing such a collapse remains difficult. A simpler way of expressing this trade is through a long in traditional automakers with strong ZEV technology who are entering the EV space, where they will take mass market volume away from pure EV manufacturers just as VW has already done to Tesla in Europe.

Toyota – Solid State Batteries and Long Toyota as a Safer Short on the EV Bubble

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

<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/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a>, <a href="https://www.smartkarma.com/entities/xiaomi-corp" target="_blank" data-smartkarma-citation="entities:24409:1" rel="noopener">Xiaomi Corp (1810 HK)</a> and <a href="https://www.smartkarma.com/entities/anta-sports-products-ltd" target="_blank" data-smartkarma-citation="entities:10261:1" rel="noopener">Anta Sports Products (2020 HK)</a> while there was short covering on <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/china-construction-bank-h" target="_blank" data-smartkarma-citation="entities:45:1" rel="noopener">China Construction Bank H (939 HK)</a>, <a href="https://www.smartkarma.com/entities/sunac-china-holdings-ltd" target="_blank" data-smartkarma-citation="entities:240:1" rel="noopener">Sunac China Holdings (1918 HK)</a> and <a href="https://www.smartkarma.com/entities/hsbc-holdings-plc" target="_blank" data-smartkarma-citation="entities:516:1" rel="noopener">HSBC Holdings (5 HK)</a>. Shorts decreased in most sectors led by Communication Services, Financials, Industrials, Real Estate, Energy and Utilities.</p></div><div><p>In Japan, stocks that saw the most shorts were <a href="https://www.smartkarma.com/entities/ana-holdings-inc" target="_blank" data-smartkarma-citation="entities:5308:1" rel="noopener">Ana Holdings (9202 JP)</a>, <a href="https://www.smartkarma.com/entities/suzuki-motor-corp" target="_blank" data-smartkarma-citation="entities:732:1" rel="noopener">Suzuki Motor (7269 JP)</a>, <a href="https://www.smartkarma.com/entities/shionogi-co-ltd" target="_blank" data-smartkarma-citation="entities:19535:1" rel="noopener">Shionogi &amp; Co (4507 JP)</a> and <a href="https://www.smartkarma.com/entities/mitsubishi-ufj-financial-group" target="_blank" data-smartkarma-citation="entities:218:1" rel="noopener">Mitsubishi UFJ Financial (MUFG) (8306 JP)</a> while shorts decreased on <a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:751:1" rel="noopener">Fast Retailing (9983 JP)</a>, <a href="https://www.smartkarma.com/entities/tokyo-electron-ltd" target="_blank" data-smartkarma-citation="entities:280:1" rel="noopener">Tokyo Electron (8035 JP)</a>, <a href="https://www.smartkarma.com/entities/canon-inc" target="_blank" data-smartkarma-citation="entities:1:1" rel="noopener">Canon Inc (7751 JP)</a> and <a href="https://www.smartkarma.com/entities/tdk-corp" target="_blank" data-smartkarma-citation="entities:18847:1" rel="noopener">TDK Corp (6762 JP)</a>. Sectorally, shorts increased on Industrials, Health Care, Financials and Consumer Discretionary names.</p></div><div><p>In Korea, there was large short covering on <a href="https://www.smartkarma.com/entities/celltrion-inc" target="_blank" data-smartkarma-citation="entities:991:1" rel="noopener">Celltrion Inc (068270 KS)</a>, <a href="https://www.smartkarma.com/entities/samsung-biologics-co-ltd" target="_blank" data-smartkarma-citation="entities:22932:1" rel="noopener">Samsung Biologics Co., (207940 KS)</a>, <a href="https://www.smartkarma.com/entities/samsung-electronics-co-ltd" target="_blank" data-smartkarma-citation="entities:191:1" rel="noopener">Samsung Electronics (005930 KS)</a> and <a href="https://www.smartkarma.com/entities/sk-hynix-inc" target="_blank" data-smartkarma-citation="entities:16955:1" rel="noopener">SK Hynix (000660 KS)</a>. </p></div><div><p>Stocks in Taiwan that saw the highest increase in shorts were <a href="https://www.smartkarma.com/entities/evergreen-marine-corp-ltd" target="_blank" data-smartkarma-citation="entities:15428:1" rel="noopener">Evergreen Marine Corp (2603 TT)</a>, <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>, <a href="https://www.smartkarma.com/entities/united-microelectronics-corp" target="_blank" data-smartkarma-citation="entities:6450:1" rel="noopener">United Microelectronics Corp (2303 TT)</a> and <a href="https://www.smartkarma.com/entities/compeq-manufacturing-co-ltd" target="_blank" data-smartkarma-citation="entities:9306:1" rel="noopener">Compeq Manufacturing (2313 TT)</a> while shorts were covered on <a href="https://www.smartkarma.com/entities/taiwan-semiconductor-manufacturing-company" target="_blank" data-smartkarma-citation="entities:11230:1" rel="noopener">TSMC (2330 TT)</a>, <a href="https://www.smartkarma.com/entities/winbond-electronics-corp" target="_blank" data-smartkarma-citation="entities:9177:1" rel="noopener">Winbond Electronics (2344 TT)</a>, <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> and <a href="https://www.smartkarma.com/entities/nanya-technology-corp" target="_blank" data-smartkarma-citation="entities:3269:1" rel="noopener">Nanya Technology (2408 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), Meituan (3690 HK), Xiaomi Corp (1810 HK) and Anta Sports Products (2020 HK) while there was short covering on Tencent Holdings (700 HK), China Construction Bank H (939 HK), Sunac China Holdings (1918 HK) and HSBC Holdings (5 HK). Shorts decreased in most sectors led by Communication Services, Financials, Industrials, Real Estate, Energy and Utilities.In Japan, stocks that saw the most shorts were Ana Holdings (9202 JP), Suzuki Motor (7269 JP), Shionogi &amp; Co (4507 JP) and Mitsubishi UFJ Financial (MUFG) (8306 JP) while shorts decreased on Fast Retailing (9983 JP), Tokyo Electron (8035 JP), Canon Inc (7751 JP) and TDK Corp (6762 JP). Sectorally, shorts increased on Industrials, Health Care, Financials and Consumer Discretionary names.In Korea, there was large short covering on Celltrion Inc (068270 KS), Samsung Biologics Co., (207940 KS), Samsung Electronics (005930 KS) and SK Hynix (000660 KS). Stocks in Taiwan that saw the highest increase in shorts were Evergreen Marine Corp (2603 TT), Largan Precision (3008 TT), United Microelectronics Corp (2303 TT) and Compeq Manufacturing (2313 TT) while shorts were covered on TSMC (2330 TT), Winbond Electronics (2344 TT), Unimicron Technology (3037 TT) and Nanya Technology (2408 TT). 

Asia Short Interest: BIG Covering in HK & Korea

<p>Suzuki generated strong results in 2Q led by India which helped boost margins to their highest levels since late 2018. While the company raised guidance to a level above consensus, we believe there is still further upside and Suzuki’s traditional conservatism remains in evidence.</p>

Suzuki generated strong results in 2Q led by India which helped boost margins to their highest levels since late 2018. While the company raised guidance to a level above consensus, we believe there is still further upside and Suzuki’s traditional conservatism remains in evidence.

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)

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

Toyota – Solid State Batteries and Long Toyota as a Safer Short on the EV Bubble

A simpler and safer way of expressing a short trade on the EV bubble is a long trade in traditional automakers with the technology to transition to...

Mio Kato

Asia Short Interest: BIG Covering in HK & Korea

There was a big drop in short interest in Hong Kong and Korea while shorts rose in Japan mainly led by ANA on the back of the offering. Shorts in...

Brian Freitas

Suzuki Motor – Sharp OPM Increase

Suzuki's sharp rebound in operating margin bodes well for the remainder of the year, but given the dependence on India, monitoring the possibility...

Mio Kato

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