'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

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. 

Equity Bottom-Up

<div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/983/original/2019-04-26_11-52-57.png?1556247183" class="editor-image img-responsive" data-smartkarma-image-id="85983"></figure>Source: Japan Analytics
</div><a href="https://www.smartkarma.com/entities/18107" target="_blank" data-smartkarma-citation="entities:18107:1">ADVANTEST (6857 JP)</a> reported FY2019 on 25th April and released initial forecasts for the current year which suggest that Operating Income will decline by 54% on a 19% decline in sales and a 23% decline in new orders. For details, please see <a href="https://www.smartkarma.com/companies/909" target="_blank" data-smartkarma-citation="companies:909">LightStream Research</a>'s Insight <a href="https://www.smartkarma.com/insights/advantest-fy03-19-full-year-results-beat-consensus-4qfy03-19-declines-due-to-memory-downturn" target="_blank" data-smartkarma-citation="insights:29425">here</a>. This Insight will review the company's forecasting track record, update our Scoring Charts and, based on our valuation methodology, suggest the current downside risk or short 'potential' after today's near 9% decline.  We also highlight the 11% increase in net shares outstanding in the last five quarters.


Source: Japan Analytics
ADVANTEST (6857 JP) reported FY2019 on 25th April and released initial forecasts for the current year which suggest that Operating Income will decline by 54% on a 19% decline in sales and a 23% decline in new orders. For details, please see LightStream Research's Insight here. This Insight will review the company's forecasting track record, update our Scoring Charts and, based on our valuation methodology, suggest the current downside risk or short 'potential' after today's near 9% decline.  We also highlight the 11% increase in net shares outstanding in the last five quarters.

6857 🇯🇵 Advantest • Scoring & Valuation Update

Equity Analyst, LightStream Research

Shifara Samsudeen, ACMA, CGMA

Equity Analyst

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.

<ul>
<li>
<a href="https://www.smartkarma.com/entities/advantest-corp/overview" target="_blank">Advantest (6857 JP)</a> reported its 4QFY03/19 and Full-year FY03/19 results yesterday (25th of April). The company reported 36.3% YoY growth in revenue for the full-year while its operating profit more than doubled to JPY64.7bn during the year mainly due to strong performance witnessed during the first three quarters of the year.</li>
<li>On a quarterly basis, the 4QFY03/19 numbers were below our expectations. Both the revenue and the operating profit witnessed YoY declines during the quarter, with revenue declining by 5.7% YoY while operating profit declined by a significant 26.6% YoY driven by the slowdown in the global semiconductor market.</li>
<li>Furthermore, the management expects a decline in revenue and operating profit for full-year FY03/20 due to contraction in the global semiconductor tester market. That being said, the company is expecting the market to return to its growth trajectory again during CY2020 driven by the expansion of commercial 5G communication services.</li>
<li>We believe Advantest is still overvalued at its current price of JPY3,445 per share. As the memory market downturn has just started impacting Advantest, we feel the company share price will decline further with the earnings outlook deteriorating.</li>
</ul>



Advantest (6857 JP) reported its 4QFY03/19 and Full-year FY03/19 results yesterday (25th of April). The company reported 36.3% YoY growth in revenue for the full-year while its operating profit more than doubled to JPY64.7bn during the year mainly due to strong performance witnessed during the first three quarters of the year.
On a quarterly basis, the 4QFY03/19 numbers were below our expectations. Both the revenue and the operating profit witnessed YoY declines during the quarter, with revenue declining by 5.7% YoY while operating profit declined by a significant 26.6% YoY driven by the slowdown in the global semiconductor market.
Furthermore, the management expects a decline in revenue and operating profit for full-year FY03/20 due to contraction in the global semiconductor tester market. That being said, the company is expecting the market to return to its growth trajectory again during CY2020 driven by the expansion of commercial 5G communication services.
We believe Advantest is still overvalued at its current price of JPY3,445 per share. As the memory market downturn has just started impacting Advantest, we feel the company share price will decline further with the earnings outlook deteriorating.


Advantest: FY03/19 Full-Year Results Beat Consensus, 4QFY03/19 Declines Due to Memory Downturn

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Thomas Schroeder

Chart based progressive global trading strategies

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Chart Partners objective is to discover medium-term cycle turns and profit opportunities before they unfold, within structural trends while preserving capital with clear degrees of risk. We have real return ideas. 

Markets are dynamic and trading systems must reflect this. It is crucial to determine underlying correlations and lead-lag relationships within global markets and the impact on linked instruments. Our weekly Chartonics product gives you short-term trading strategies that can be applied within the medium and longer term macro trends that are mapped out in our strategy updates. 

Our methodology fuses global market variables and isolates drivers in trends. We specialize in FX, index trade in NY and Asia with a focus on Asian stocks. 

Technical Analysis

<a href="https://www.smartkarma.com/entities/18107" target="_blank" data-smartkarma-citation="entities:18107:1">Advantest Corp (6857 JP)</a> has accelerated in a high momentum move after breaking out from the flat congestive pattern resistance at 2,730. The immediate rise is becoming stretched as the daily RSI pushes into overbought territory (near 80) with risk of a pullback to retrace some recent gains. Weekly MACD cycle is confirming a new up cycle.Buy levels are outlined to accumulate Advantest on weakness. Macro projection implies a 30% rise is in store from the outlined buy support zone.

Advantest Corp (6857 JP) has accelerated in a high momentum move after breaking out from the flat congestive pattern resistance at 2,730. The immediate rise is becoming stretched as the daily RSI pushes into overbought territory (near 80) with risk of a pullback to retrace some recent gains. Weekly MACD cycle is confirming a new up cycle.Buy levels are outlined to accumulate Advantest on weakness. Macro projection implies a 30% rise is in store from the outlined buy support zone.

<ul>
<li>
<a href="https://www.smartkarma.com/entities/advantest-corp/overview" target="_blank">Advantest Corporation (6857 JP)</a>, based in Japan, manufactures and sells semiconductor testing equipment and electronic measuring systems. The company generates a majority of its revenue outside of Japan, where its products are mostly sold in countries where semiconductor volume production processes are concentrated, including South Korea, Taiwan and China.</li>
<li>The company’s revenues are highly correlated with memory demand and capital expenditure. The current oversupply in the DRAM and NAND memory markets has caused DRAM and NAND prices to decline. This has impacted the capital spending by large memory makers such as Samsung, Micron and SK Hynix.</li>
<li>Advantest has witnessed its revenue and operating profits growing at double digits since the beginning of the current semiconductor cycle. However, with the oversupply, memory price declines and capex halts, we expect the company revenue and profits to deteriorate starting in FY03/2020.</li>
<li>Based on our valuation, we believe Advantest is still overvalued at its current price of JPY2,510 per share. As the memory market has just started decelerating and the current cycle nears its worst, we feel the company share price will decline further with the gloomy outlook for company earnings.</li>
</ul>



Advantest Corporation (6857 JP), based in Japan, manufactures and sells semiconductor testing equipment and electronic measuring systems. The company generates a majority of its revenue outside of Japan, where its products are mostly sold in countries where semiconductor volume production processes are concentrated, including South Korea, Taiwan and China.
The company’s revenues are highly correlated with memory demand and capital expenditure. The current oversupply in the DRAM and NAND memory markets has caused DRAM and NAND prices to decline. This has impacted the capital spending by large memory makers such as Samsung, Micron and SK Hynix.
Advantest has witnessed its revenue and operating profits growing at double digits since the beginning of the current semiconductor cycle. However, with the oversupply, memory price declines and capex halts, we expect the company revenue and profits to deteriorate starting in FY03/2020.
Based on our valuation, we believe Advantest is still overvalued at its current price of JPY2,510 per share. As the memory market has just started decelerating and the current cycle nears its worst, we feel the company share price will decline further with the gloomy outlook for company earnings.


Advantest (6857 JP): Memory Downturn Yet to Impact Advantest

Quantitative Analysis

- MARKET COMPOSITE -
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/076/724/original/2019-01-26_17-35-03.png?1548496734" class="editor-image img-responsive" data-smartkarma-image-id="76724"></figure>
<div class="content-caption">Source: Japan Analytics</div>
SLOW &amp; STEADY RECOVERY - From December 25th's lows of 8% by number and 11% by value, the percentages of Japanese stocks above the weighted sum of moving averages have continued to recover to now 19% by number and 26% by value. Total Market Value has now risen by 11.2% from the Christmas Day low and is overdue a 'breather'.
<hr>
- SECTORS -
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/076/725/original/2019-01-26_17-29-21.png?1548497304" class="editor-image img-responsive" data-smartkarma-image-id="76725"></figure>
<div class="content-caption">
LEGEND: The 'sparklines' show the three-year trend in the weighted percentage above moving average relative to the Market Composite and the 'STDev' column is a measure of the variability of that relative measure. The table also provides averages for the breaks above and breaks below and the positive and negative crossovers.</div>
SECTOR BREAKDOWN - The top six sectors measured by their percentage above the weighted average of 5-240 Days remain domestic and defensive. REITs, Information Technology, Media, Healthcare and Utilities continue from our previous review with Restaurants replacing Transportation. Equally predictable is the bottom half-dozen - Banks, Autos, Metals, Building Materials, and Chemicals remain from two weeks ago, with Construction replacing Autos. 
<hr>
- COMPANIES -
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/076/763/original/2019-01-27_15-07-37.png?1548569281" class="editor-image img-responsive" data-smartkarma-image-id="76763"></figure>
<div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/076/775/original/2019-01-27_16-34-40.png?1548574490" class="editor-image img-responsive" data-smartkarma-image-id="76775"></figure>
Source: Japan Analytics
</div>
COMPANY MOVING AVERAGE OUTLIERS - As with the Market Composite and Sectors, the Moving Average Outlier indicator uses a weighted sum of each company's share price relative to its 5-day, 20-day, 60-day, 120-day and 240-day moving averages. 'Extreme' values are weighted sums greater than 100% and less than -100%. We would caution that this indicator is best used for timing shorter-term reversals and, in many cases, higher highs and lower lows will be seen. 
In the DETAIL section below, we highlight the current top and bottom twenty-five larger capitalisation outliers, as well as those companies that have seen the most significant positive and negative changes in their outlier percentage in the last two weeks and provide short comments on companies of particular note. <a href="https://www.smartkarma.com/entities/26722" target="_blank" data-smartkarma-citation="entities:26722:1">UUUM (3990 JP)</a> is currently the most 'extreme' positive outlier, and <a href="https://www.smartkarma.com/entities/20895" target="_blank" data-smartkarma-citation="entities:20895:1">Welcia (3141 JP)</a> the most 'extreme' negative outlier

- MARKET COMPOSITE -

Source: Japan Analytics
SLOW &amp; STEADY RECOVERY - From December 25th's lows of 8% by number and 11% by value, the percentages of Japanese stocks above the weighted sum of moving averages have continued to recover to now 19% by number and 26% by value. Total Market Value has now risen by 11.2% from the Christmas Day low and is overdue a 'breather'.

- SECTORS -


LEGEND: The 'sparklines' show the three-year trend in the weighted percentage above moving average relative to the Market Composite and the 'STDev' column is a measure of the variability of that relative measure. The table also provides averages for the breaks above and breaks below and the positive and negative crossovers.
SECTOR BREAKDOWN - The top six sectors measured by their percentage above the weighted average of 5-240 Days remain domestic and defensive. REITs, Information Technology, Media, Healthcare and Utilities continue from our previous review with Restaurants replacing Transportation. Equally predictable is the bottom half-dozen - Banks, Autos, Metals, Building Materials, and Chemicals remain from two weeks ago, with Construction replacing Autos. 

- COMPANIES -



Source: Japan Analytics

COMPANY MOVING AVERAGE OUTLIERS - As with the Market Composite and Sectors, the Moving Average Outlier indicator uses a weighted sum of each company's share price relative to its 5-day, 20-day, 60-day, 120-day and 240-day moving averages. 'Extreme' values are weighted sums greater than 100% and less than -100%. We would caution that this indicator is best used for timing shorter-term reversals and, in many cases, higher highs and lower lows will be seen. 
In the DETAIL section below, we highlight the current top and bottom twenty-five larger capitalisation outliers, as well as those companies that have seen the most significant positive and negative changes in their outlier percentage in the last two weeks and provide short comments on companies of particular note. UUUM (3990 JP) is currently the most 'extreme' positive outlier, and Welcia (3141 JP) the most 'extreme' negative outlier

Japan: Moving Average Outliers - Tech[nical] Rebound

Japan

Lasertec Corporation develops, designs, manufactures and markets photomask inspection systems to make semiconductor devices, confocal scanning laser microscopes and liquid crystal display (LCD) inspection systems.

DISCO CORPORATION manufactures abrasive and precision industrial machinery for cutting and grinding purposes.  The Company's products are applied in the semiconductor, electronics, and construction industries to produce consumer goods such as personal computers, digital cameras, video game systems, and Digital Video Disc (DVD) players.

Renesas Electronics Corporation researches, develops, designs and manufactures electronic components such as semiconductors and integrated devices.

SUMCO Corporation manufactures silicon wafers for the semiconductor industry. The Company produces silicon wafers used to produce solar batteries as well as ultra-high purity quartz used to produce vessels for silicon manufacturing process. SUMCO markets its products worldwide.

ROHM COMPANY LIMITED manufactures custom linear integrated circuits and semiconductor devices for use primarily in consumer electronics.  The Company has plants and sales offices worldwide.  Rohm's subsidiaries include Wako Electric and Apollo Electronics.

SCREEN Holdings Co Ltd.  manufactures and sell semiconductors, FPD devices, commercial printing and printed circuit boards(PCB). The company also provides additional services for its products.

SHINKO ELECTRIC INDUSTRIES CO., LTD. designs, manufactures, and markets advanced electronic materials, such as semiconductor packages, including leadframes, and PLP(Plastics Laminated Packages).  The Company markets its products worldwide through a network of sales offices in such places as the Philippines, Germany, and Hong Kong.

RORZE CORPORATION manufactures printed circuit board conveyers and wafer handlers for semiconductor manufacturing.  The Company also produces sorters and vacuum chamber robots, as well as controllers and stepping motor drivers used in various automation systems.  Rorze provides parts replacement and repair services for its products.

TOKYO SEIMITSU CO., LTD. manufactures and sells semiconductor manufacturing equipment and measuring instruments.  The Company produces wafer probing machines, wafer dicing machines, electron beam lithography systems, wafer inspection systems, and chemical mechanical planarizers (CMP) systems.

ULVAC, Inc. manufactures vacuum devices for industries such as semiconductor, electronics, chemical, pharmaceutical and food.  The Company's products include pumps, valves, gas analyzers, leak detectors, and surface profile measurement.

ASE Technology Holding Co., Ltd. offers assembly and testing services. The Company provides outsourced assembly, semiconductor testing, semiconductor packaging, and other related services. ASE Technology Holding operates in Taiwan.

Monolithic Power Systems Inc specializes in high-performance, integrated power solutions. The Company provides small, highly energy efficient, easy-to-use power solutions for systems found in industrial applications, telecom infrastructures, cloud computing, automotive, and consumer applications.

ON Semiconductor Corporation supplies analog, standard logic, and discrete semiconductors for data and power management. The Company's products include integrated circuits, and analog ICs. ON also offers discrete semiconductors in a variety of surface mount and standard packages.

Skyworks Solutions, Inc., a wireless semiconductor company, designs and manufactures radio frequency and complete semiconductor system solutions for mobile communications applications.  The Company provides front-end modules, radio frequency subsystems, and system solutions to wireless handset and infrastructure customers worldwide.

United Microelectronics Corporation designs, manufactures, and markets integrated circuits (ICs) and related electronic products.  The Company's main products are consumer electronic ICs, memory ICs, personal computer peripheral ICs, and communication ICs.

Microchip Technology Incorporated designs, manufactures, and markets microcontrollers, related mixed-signal and memory products, and application development systems for high-volume embedded control applications. The Company also designs, develops, and markets linear/mixed-signal, power management, and thermal management products.

Novatek Microelectronics Corporation designs, manufactures, and markets integrated circuits (ICs).  The Company's products are used in telecommunication, computer peripherals, and LCD (liquid crystal display) drivers.

Amkor Technology, Inc. provides semiconductor packaging and test services.  The Company offers deep submicron wafer fabrication, wafer probe testing, integrated circuit packaging assembly and design, final testing, reliability testing, burn-in, and electrical characterization.

Qorvo Inc, designs, develops, manufactures, and markets a variety of high performance analog and mixed signal integrated circuits for the communications markets. The Company's products are used for wireless communications applications such as cellular and PCS, cordless telephony, wireless LANs, industrial radios, wireless security and remote meter reading.

Entegris Inc. provides materials management products and services to the microelectronics industry on a worldwide basis.  The Company provides products such as wafer shippers, wafer transport and process carriers, pods, and work-in-process boxes.  Entegris also provides chemical delivery products such as valves, fittings, tubing, pipe, and containers.

ADVANTEST CORPORATION produces semiconductor testing devices and electronic measuring instruments.  The Company's products include large-scale integration (LSI) test systems, memory test systems, dynamic test handlers, network analyzers, electronic meters, optical testing devices, and signal sources.

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Advantest Corp (6857 JP)

6857 🇯🇵 Advantest • Scoring & Valuation Update

ADVANTEST (6857 JP) reported FY2019 on 25th April and released initial forecasts for the current year which suggest that Operating Income will...

Campbell Gunn

Advantest: FY03/19 Full-Year Results Beat Consensus, 4QFY03/19 Declines Due to Memory Downturn

Advantest (6857 JP) reported its 4QFY03/19 and Full-year FY03/19 results yesterday (25th of April). The company reported 36.3% YoY growth in...

Shifara Samsudeen, ACMA, CGMA

Advantest Macro Breakout Cycle

Advantest Corp (6857 JP) has accelerated in a high momentum move after breaking out from the flat congestive pattern resistance at 2,730. The...

Thomas Schroeder

Advantest (6857 JP): Memory Downturn Yet to Impact Advantest

Advantest Corporation (6857 JP), based in Japan, manufactures and sells semiconductor testing equipment and electronic measuring systems. The...

Shifara Samsudeen, ACMA, CGMA

Japan: Moving Average Outliers - Tech[nical] Rebound

- MARKET COMPOSITE - SLOW & STEADY RECOVERY - From December 25th's lows of 8% by number and 11% by value, the percentages of Japanese stocks...

Campbell Gunn

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