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>Early last year as COVID was breaking and the BOJ doubled its ETF purchases shifting to TOPIX ETFs from Nikkei ETFs we brought up this trade. </li>
<li>With a long weekend adding to the mix conditions were abnormal but our suggested trades generated 10-12% pure alpha within four trading days. </li>
<li>This trade is starting to look interesting to us again though returns are likely to be less explosive but more persistent this time.</li>
</ul>


Early last year as COVID was breaking and the BOJ doubled its ETF purchases shifting to TOPIX ETFs from Nikkei ETFs we brought up this trade. 
With a long weekend adding to the mix conditions were abnormal but our suggested trades generated 10-12% pure alpha within four trading days. 
This trade is starting to look interesting to us again though returns are likely to be less explosive but more persistent this time.


Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

iShares MSCI ACWI ETF / Technical Analysis

<ul>
<li>Market dynamics remain healthy and we are continuing to see signs that suggest global equities are entering a new broad-based bull market.</li>
<li>Led by strength from the US, the MSCI ACWI index (ACWI-US) recently broke out to new highs above the key $105.40 resistance level, a bullish sign for global equities.</li>
<li>Global sovereign yields have moved lower in recent weeks. We expect rates to find support near current levels, creating an opportunity to add to value Sectors.</li>
</ul>


Market dynamics remain healthy and we are continuing to see signs that suggest global equities are entering a new broad-based bull market.
Led by strength from the US, the MSCI ACWI index (ACWI-US) recently broke out to new highs above the key $105.40 resistance level, a bullish sign for global equities.
Global sovereign yields have moved lower in recent weeks. We expect rates to find support near current levels, creating an opportunity to add to value Sectors.


MSCI ACWI Breaking To New Highs; Buying Financials, Consumer Discretionary, Industrials, Materials

Equity Bottom-Up

Mitsubishi Motors 2QFY22 results were strong with revenues of ¥459bn (+6.2% QoQ, +32.8% YoY) and operating profit of ¥14.6bn (3.2% OPM compared to the 2.5% OPM of 1QFY22). Guidance was revised up to ¥60bn, just below our ¥65bn call from last quarter.

Mitsubishi Motors 2QFY22 results were strong with revenues of ¥459bn (+6.2% QoQ, +32.8% YoY) and operating profit of ¥14.6bn (3.2% OPM compared to the 2.5% OPM of 1QFY22). Guidance was revised up to ¥60bn, just below our ¥65bn call from last quarter.

Mitsubishi Motor reported 1QFY22 results on 27th July which saw revenues of ¥432bn (-14% QoQ, +88% YoY) and OP of ¥10.6bn (OPM of 2.5% compared to the OPM of -1.7% in 4QFY21).The reported revenue was 4.1% higher than consensus estimates while OP beat consensus estimates for a loss of ¥6.9bn. This is the first datapoint for Japanese automotive earnings this quarter and points to our call for broad beats across the industry being correct.Guidance was revised up from ¥30bn in OP to ¥40bn but remains conservative.<table class="table table-striped"><tbody>
<tr>
<td style="width: 40.92%;">In ¥bn</td>
<td style="width: 19.92%;">Revenue </td>
<td style="width: 22.06%;">OP</td>
<td style="width: 17.08%;">OPM</td>
</tr>
<tr>
<td style="width: 40.92%;">Results - 1QFY22</td>
<td style="width: 19.92%;">               432</td>
<td style="width: 22.06%;">                10.6</td>
<td style="width: 17.08%;">2.5%</td>
</tr>
<tr>
<td style="width: 40.92%;">Consensus - 1QFY22</td>
<td style="width: 19.92%;">415</td>
<td style="width: 22.06%;">              -6.9</td>
<td style="width: 17.08%;">-1.7%</td>
</tr>
<tr>
<td style="width: 40.92%;">Surprise</td>
<td style="width: 19.92%;">4.1%</td>
<td style="width: 22.06%;">NM</td>
<td style="width: 17.08%;">4.1% points</td>
</tr>
<tr>
<td style="width: 40.92%;"> </td>
<td style="width: 19.92%;"> </td>
<td style="width: 22.06%;"> </td>
<td style="width: 17.08%;"> </td>
</tr>
<tr>
<td style="width: 40.92%;">Guidance - FY22</td>
<td style="width: 19.92%;">           2,080</td>
<td style="width: 22.06%;">                    40</td>
<td style="width: 17.08%;">1.9%</td>
</tr>
<tr>
<td style="width: 40.92%;">Consensus - FY22</td>
<td style="width: 19.92%;">           1,889</td>
<td style="width: 22.06%;">2.5</td>
<td style="width: 17.08%;">0.1%</td>
</tr>
<tr>
<td style="width: 40.92%;">Difference</td>
<td style="width: 19.92%;">10.1%</td>
<td style="width: 22.06%;">1516.4%</td>
<td style="width: 17.08%;">1.8% points</td>
</tr>
</tbody></table><div style="text-align: left;" class="content-caption">Source: Company disclosures, CapIQ</div>

Mitsubishi Motor reported 1QFY22 results on 27th July which saw revenues of ¥432bn (-14% QoQ, +88% YoY) and OP of ¥10.6bn (OPM of 2.5% compared to the OPM of -1.7% in 4QFY21).The reported revenue was 4.1% higher than consensus estimates while OP beat consensus estimates for a loss of ¥6.9bn. This is the first datapoint for Japanese automotive earnings this quarter and points to our call for broad beats across the industry being correct.Guidance was revised up from ¥30bn in OP to ¥40bn but remains conservative.

In ¥bn
Revenue 
OP
OPM


Results - 1QFY22
               432
                10.6
2.5%


Consensus - 1QFY22
415
              -6.9
-1.7%


Surprise
4.1%
NM
4.1% points


 
 
 
 


Guidance - FY22
           2,080
                    40
1.9%


Consensus - FY22
           1,889
2.5
0.1%


Difference
10.1%
1516.4%
1.8% points

Source: Company disclosures, CapIQ

Mitsubishi Motors – Kicking Off 1QFY22 Auto Earnings in Style

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

Renesas Electronics / Equity Capital Markets

Renesas, along with INCJ, aims to raise around US$3.4bn via selling a mix of primary and secondary shares.The current deal would be of somewhat similar size as two of the past deals that we have covered for Renesas:<ul>
<li dir="ltr" aria-level="1">US$2.8bn bn in 2017 <a href="https://www.smartkarma.com/insights/renesas-electronics-placement-additional-thoughts-on-valuation-flotation-and-ownership" target="_blank" rel="noopener">Renesas Electronics Placement: Additional Thoughts on Valuation, Flotation, and Ownership</a></li>
<li dir="ltr" aria-level="1">US$2.4bn in 2018 <a href="https://www.smartkarma.com/insights/renesas-placement-tighter-effective-discount-and-placement-overhangs-but-statistic-supports-a-bid" target="_blank" rel="noopener">Renesas Placement: Tighter Effective Discount and Placement Overhangs but Statistic Supports a Bid</a></li>
</ul>In this insight, we'll run the deal through our ECM framework and talk about deal dynamics.

Renesas, along with INCJ, aims to raise around US$3.4bn via selling a mix of primary and secondary shares.The current deal would be of somewhat similar size as two of the past deals that we have covered for Renesas:
US$2.8bn bn in 2017 Renesas Electronics Placement: Additional Thoughts on Valuation, Flotation, and Ownership
US$2.4bn in 2018 Renesas Placement: Tighter Effective Discount and Placement Overhangs but Statistic Supports a Bid
In this insight, we'll run the deal through our ECM framework and talk about deal dynamics.

Renesas Placement - Very Well Flagged, past Deals Have Done Well but Large Size Warrants Correction

Japan

Mazda Motor Corporation manufactures and sells automobiles, trucks, auto parts, and its accessories.  The Company operates its business worldwide.

NISSAN SHATAI CO., LTD. develops, designs, and assembles automobiles including sedans, Recreational Vehicles(RV), station wagons, and buses for Nissan Motor. The Company also manufactures parts for motor vehicles.

The Yokohama Rubber Company Limited produces rubber products including automobile tires, tubes, and conveyor belt for industrial use.  The Company also produces golf clubs and passenger aircraft parts such as restroom units and tanks for drinking water.

KOITO MANUFACTURING CO., LTD. produces lighting equipments for automobiles such as head and tail lights, rear combination lamps, and fog lamps.  The Company has  its production facilities in Japan, the US, the UK, Czech, China, Thailand, Taiwan, and India.  Koito Manufacturing also manufactures electronics parts for aircrafts including lighting equipments and oil pressure gauges.

Stanley Electric Co., Ltd. manufactures lighting equipment including head lights, HID (High Intensity Discharge) assist lamps, and rear combination lamps for automobiles.  The Company also produces LCD (Liquid Cristal Display) and LED (Light Emitted Diode) lamps for communication equipment, office automation equipment, and information displays.

NGK SPARK PLUG Co., Ltd. manufactures and markets spark plugs for automobiles, motorcycles, agricultural machinery, ships, and aircrafts.  The Company also makes ceramic products for semiconductor and telecommunication equipment. NGK Spark Plug markets its products under the NGK and NTK brand names and has subsidiaries in the US, Canada, France, Germany, and South Korea.

NIFCO INC. manufactures synthetic resinous fasteners and plastic components for automobiles and home electronic appliances.  The Company has its subsidiaries in Korea, Hong Kong, Australia, Malaysia, Singapore, and the US.

NOK CORPORATION manufactures oil seals and industrial rubber products for automobiles.  The Company also produces electronic equipment used for cellular phones and PCs.  NOK has production facilities in Taiwan and Thailand.

Sumitomo Rubber Industries, Ltd. manufactures automobile and motorcycle tires, industrial rubber products and sports equipment.  The Company's products include golf balls, tennis rackets, rubber gloves, and artificial turf. Sumitomo Rubber sells its products under Dunlop brand around the world.

Toyo Tire Corporation manufactures and markets rubber and chemical goods.  The Company's products include motor vehicle tires, aluminum alloy wheels, office equipment parts, heat resistant board, and automobile parts such as bumpers and air bag systems.  Toyo Tire & Rubber has its  subsidiaries in the  US, Australia, Canada, Germany, and China.

Harley-Davidson, Inc. designs, manufactures, and sells motorcycles.  The Company's products include heavyweight touring, custom, and performance motorcycles, as well as a line of motorcycle parts, accessories, and general merchandise.  Harley-Davidson also provides motorcycle floor planning and parts and accessories financing to its North American and European dealers.

FAW Jiefang Group Co., Ltd, through joint ventures, manufactures and markets cars and auto parts.  The Company produces automobiles, transmission systems, and engines.  FAW Car also provides auto repair and customizing services.

Guangzhou Automobile Group Company, Ltd. manufactures, sells, and services automobiles. The Company is also involved in automobile parts and components, and auto finance and related services for both overseas and domestic markets.

Chongqing Changan Automobile Company Limited develops, manufactures, and markets mini cars, mini sedans, full size sedans, and engines.

Chongqing Changan Automobile Company (200625 CH)

Thor Industries, Inc. produces and sells a wide range of recreation vehicles.  The Company markets its products through independent dealers located throughout the United States and Canada.  Thor's products are sold under the Airstream Classic, Dutchmen, Skamper, Infinity, Four Winds, Citation, Signature, and other names.

Anhui Jianghuai Automobile Co., Ltd. manufactures and markets bus and truck chassis, gear boxes, other auto parts, and business automobiles.

Yadea Group is a leading electric two wheeler brand in China. The company produces electric bikes and scooters.

Tofas Turk Otomobil Fabrikasi AS manufactures cars and automobile parts under license from Fiat.  The Group also imports Alfa Romeo and Fiat cars for domestic market and provides financing services.

BAIC Motor Corporation Limited designs, researches, develops, manufactures and sells a variety of passenger vehicles in China.

Brilliance China Automotive Holdings Limited, through its subsidiaries, manufactures and distributes minibuses and sedans in the People's Republic of China.  The Company also manufactures and trades automotive components.

MITSUBISHI MOTORS CORPORATION develops and manufactures passenger cars and its related parts.  The Company has production facilities in Japan, the US, and Thailand.  Mitsubishi Motors Corp provides vehicle-related financing and leasing service through its subsidiary.

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Mitsubishi Motors (7211 JP)

Revisiting the Topix-Nikkei Skew Trade

Early last year we suggested trading this skew which would have generated 10-12% pure alpha within four trading days. This trade is starting to...

Mio Kato

MSCI ACWI Breaking To New Highs; Buying Financials, Consumer Discretionary, Industrials, Materials

Global sovereign yields have moved lower in recent weeks. We expect rates to find support near current levels, and recommend adding exposure to...

Vermilion Research

Mitsubishi Motors – Recovery Continues

Mitsubishi Motors 2QFY22 results were strong and guidance was revised up to ¥60bn, just below our ¥65bn call from last quarter.

Mio Kato

Mitsubishi Motors – Kicking Off 1QFY22 Auto Earnings in Style

Mitsubishi Motors posted a significant beat at 1Q signalling that auto sector earnings are likely to be extremely strong as we have been saying.

Mio Kato

Renesas Placement - Very Well Flagged, past Deals Have Done Well but Large Size Warrants Correction

Renesas, along with INCJ, aims to raise around US$3.4bn via selling a mix of primary and secondary shares. The current deal would be of somewhat...

Sumeet Singh

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