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

Softbank released better than expected results today, driven mostly by gains on the sale of its T-Mobile stake and strong stock market performance. Sadly, the Pega-Unicorns appear to have not survived the COVID crisis as there was not a single one in the presentation slides. We mourn their passing.Fortunately, they were replaced with Samurai stories to help clueless investors understand how undervalued Softbank’s investment genius is. Our gratitude knows no bounds.

Softbank released better than expected results today, driven mostly by gains on the sale of its T-Mobile stake and strong stock market performance. Sadly, the Pega-Unicorns appear to have not survived the COVID crisis as there was not a single one in the presentation slides. We mourn their passing.Fortunately, they were replaced with Samurai stories to help clueless investors understand how undervalued Softbank’s investment genius is. Our gratitude knows no bounds.

Softbank – Doubling Down on Their Investment Acumen as Arm Falters

Telco/Internet specialist

Kirk Boodry

Redex Research

Equity Bottom-Up

Softbank has sold a further block of Alibaba shares whilst a restructuring of ARM points the way to a reintroduction of that business to public markets by next year instead of 2023. There are a number of drivers for an accelerated time table on the latter including a top-level decision to proceed alone with Vision Fund 2, concerns that financial upside from IoT and other new businesses may take longer to materialize, and (at least so far) an open window for IPOs.It is unlikely that Softbank will proceed with a transaction that values the business at less than the $32bn it paid in 2016, Still, in the absence of detail on how a new ARM will looks financially, investors appear to have given Softbank the benefit of the doubt, with shares at 20-year highs whilst the discount has narrowed to the low 40s from 47% at the end of June and 68% back in March.

Softbank has sold a further block of Alibaba shares whilst a restructuring of ARM points the way to a reintroduction of that business to public markets by next year instead of 2023. There are a number of drivers for an accelerated time table on the latter including a top-level decision to proceed alone with Vision Fund 2, concerns that financial upside from IoT and other new businesses may take longer to materialize, and (at least so far) an open window for IPOs.It is unlikely that Softbank will proceed with a transaction that values the business at less than the $32bn it paid in 2016, Still, in the absence of detail on how a new ARM will looks financially, investors appear to have given Softbank the benefit of the doubt, with shares at 20-year highs whilst the discount has narrowed to the low 40s from 47% at the end of June and 68% back in March.

Softbank Group: Accelerated Asset Sales (Alibaba, ARM) Read Across to Vision Fund 2

Equity Capital Markets

After monetising stakes in Alibaba, TMobile and Softbank Corp, the next piggybank in Softbank Group’s crosshairs appears to be Arm. We have commented previously about the deteriorating financial performance and personnel departures from the company under Softbank’s watch and question whether the company was ever worth what Softbank paid for it, even in better times. Nevertheless, the company remains in an attractive space and has had some positive news flow recently. More interestingly, it appears to have offloaded the IoT-related business onto parent Softbank. We go through the details below.

After monetising stakes in Alibaba, TMobile and Softbank Corp, the next piggybank in Softbank Group’s crosshairs appears to be Arm. We have commented previously about the deteriorating financial performance and personnel departures from the company under Softbank’s watch and question whether the company was ever worth what Softbank paid for it, even in better times. Nevertheless, the company remains in an attractive space and has had some positive news flow recently. More interestingly, it appears to have offloaded the IoT-related business onto parent Softbank. We go through the details below.

Softbank's surprise announcement of a buy-back/de-leveraging program should continue to be well received and we expect that today's limit-up 19% gain can be followed by further upside tomorrow.  As opposed to the one announced ten days ago, Softbank's current buyback will be funded by selling assets that the market is discounting at 60%+ for full price, whilst de-leveraging should mitigate worries on balance sheet stress as private equity valuations fall. Memories from the collapse of the dot-com bubble and the Vodafone Japan/Lehman shock time were likely revived by a 53% share price decline in five weeks and whilst Softbank has been reluctant so far, this is the first time it had the financial firepower from its Alibaba investment to wield. That is likely what they sell to fund this program although monetization of the Sprint/TMUS shares is also possible.

Softbank's surprise announcement of a buy-back/de-leveraging program should continue to be well received and we expect that today's limit-up 19% gain can be followed by further upside tomorrow.  As opposed to the one announced ten days ago, Softbank's current buyback will be funded by selling assets that the market is discounting at 60%+ for full price, whilst de-leveraging should mitigate worries on balance sheet stress as private equity valuations fall. Memories from the collapse of the dot-com bubble and the Vodafone Japan/Lehman shock time were likely revived by a 53% share price decline in five weeks and whilst Softbank has been reluctant so far, this is the first time it had the financial firepower from its Alibaba investment to wield. That is likely what they sell to fund this program although monetization of the Sprint/TMUS shares is also possible. 

Softbank Group: Implications of an Unprecedented Buyback and Asset Sale Program

Asia and Global Semiconductor and Tech Research

Andrew Lu

Advanced Micro Devices / Equity Bottom-Up

<h2>What's new?</h2>According to Google Security Blog, Google's Project Zero team last year discovered serious security flaws caused by "speculative execution," a technique used by most modern CPUs to optimize performance. The Project Zero researcher, Jann Horn, demonstrated that malicious actors could take advantage of speculative execution to read system memory that should have been inaccessible. And, an unauthorized party may read sensitive information in the system’s memory such as passwords…

What's new?According to Google Security Blog, Google's Project Zero team last year discovered serious security flaws caused by "speculative execution," a technique used by most modern CPUs to optimize performance. The Project Zero researcher, Jann Horn, demonstrated that malicious actors could take advantage of speculative execution to read system memory that should have been inaccessible. And, an unauthorized party may read sensitive information in the system’s memory such as passwords…

Can Anyone Benefit from Intel CPU Design Flaws?

United Kingdom

IQE plc develops, manufactures, and sells advanced semiconductor materials worldwide. The company operates through Wireless, Photonics, Infrared, and CMOS++ segments. It manufactures compound semiconductor wafers or epiwafers using epitaxy process; and offers various products, including HBTs, pHEMTs, BiFETs/BiHEMTs, HFETs, LMHEMTs, LNHEMTs, and MESFETs for use in wireless devices, such as mobile phones, smartphones, mobile networks, Wi-Fi, smart metering, satellite navigation, and a plethora of connected devices. The company also provides a range of wafers comprising optical fiber communications optical storage solutions consisting of CDs and DVDs; optical networking solutions, including storage area networks; computing solutions, such as optical mouse devices and CD/DVD ROMs; office/professional solutions comprising laser printing/copying; and energy solutions consisting of solar cells for emitters and detectors, infrared, solar, optical interconnects, laser projection, gesture recognition, solid state lighting applications. In addition, it offers IR sensor, thermal imaging, night vision, and thermal photovoltaic products for infrared applications; and concentrated photovoltaic solar cells for utility scale electricity generation, satellite/space power generation, power generation, and power applications. Further, the company produces compound semiconductor on silicon wafers, as well as a range of engineered substrates, including germanium-on-insulator, germanium-on-silicon, and silicon-on-sapphire for next-generation microprocessors, and ultra high speed/density flash memory and MEMs devices. Additionally, it provides gallium nitride, a compound semiconductor, which includes a range of RF, photonic, and electronic properties. The company was founded in 1988 and is headquartered in Cardiff, the United Kingdom.

Kromek Group plc designs, develops, and manufactures x-ray and gamma ray detection and imaging, and radiation detection products for security screening, civil nuclear, and medical imaging markets in the United Kingdom, North America, South America, the Middle East, Asia, Europe, and Australasia. Its nuclear detection products include CPG, a CZT-based room temperature and high-resolution radiation detector; Kromek GR1, a gamma ray spectrometer; GR1-A, a USB-powered gamma spectrometer; SIGMA, a technology platform for scintillator products; TN15, a sensitivity thermal neutron scintillation detector; RENA-Mini, a platform for the development of pixelated detectors; Q4-GR1, a solution for mobile laboratory; RayMon10, a handheld radiation monitor; RadAngel for Schools, a portable gamma-ray spectrometer; QuantAir, a solution for in-field air monitoring; Quant for RayMon10, a quantitative activity analysis tool; and D3S for gamma and neutron detection. The company?s nuclear detection products also comprise MultiSpect Analysis Software; DMatrix, a gamma spectroscopy detector/imager and software; eV3500, a 2D imaging equipment; Sample Inspector, a monitor for detecting the presence of radioactive contaminants; RENA III and DANA II for x-ray and gamma ray spectroscopy; K102 Analyser, a USB-based multichannel analyser for use in nuclear spectroscopy applications; IMELDA for 2D array digital and multispectral imaging; and MARY and XENA for linear array multispectral detection and imaging. In addition, it offers security screening products, such as XRA, a 3D imaging equipment; Identifier to classify the presence of hazardous liquids, aerosols, and gels in containers; and liquid explosive algorithm delivering enhanced recognition. Further, the company provides medical imaging products comprising X-ray bone densitometers and CZT-based reusable medical probes, as well as ASICs. Kromek Group plc was incorporated in 2003 and is headquartered in Sedgefield, the United Kingdom.

Auto Trader Group PLC operates as a digital automotive marketplace. The Company's platform allows its users to buy and sell a range of vehicles, such as cars, trucks and vans.

Halma PLC is a health and safety sensor technology group which manufactures products that detect hazards and also protect assets and people at work in public and commercial buildings. Halma develops technologies and products that are used for analysis in safety, environmental and leisure related markets, including water, to improve personal and public health.

The Sage Group plc is a software publishing company. The Group develops, publishes and distributes accounting and payroll software for personal computer systems. Via its subsidiaries, Sage also maintains a registered user database which provides a market for their related products and services, including computer forms, software support contracts, program upgrades and training.

Computacenter plc provides distributed information technology and related services to corporate and public sector organizations.  The Group's services are divided into three sectors: logistical operations, consolidation and integration, and operational management.  Computacenter has operations in the UK, France, Luxembourg and Belgium.

Renishaw plc designs, develops, manufactures and sells high technology precision measuring and calibration equipment.  The Company's products include advanced metrology and inspection equipment, spectroscopy systems, and computer aided design and manufacturing systems.  Renishaw sells probes and other instruments to a wide range of sectors, internationally.

Softcat PLC provides information technology services. The Company offers commodity sourcing, software licensing, e-procurement, unified communications, and managed services. Softcat serves customers in the United Kingdom.

Spectris plc manufactures, designs and markets products for the electronic control and process instrumentation sectors.  The Company's products include digital indication and control products, industrial computer circuit boards, semiconductor related devices, infrared equipment for temperature measurement, flying controls, gas analysis products, and analytical x-ray systems.

Moneysupermarket.com Group Plc operates finance and travel price comparison websites.

Tokyo Electron Limited manufactures and sells industrial electronics products, such as semiconductor manufacturing machines, computer system, and electronic components.  The Company products are sold in US, Taiwan, and others as well as in Japan.

Applied Materials, Inc. develops, manufactures, markets, and services semiconductor wafer fabrication equipment and related spare parts for the worldwide semiconductor industry.  The Company's customers include semiconductor wafer and integrated circuit manufacturers, flat panel liquid crystal displays, solar photovoltaic cells and modules and other electronic devices manufacturers.

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.

MediaTek Inc. is a fabless semiconductor company for wireless communications and digital multimedia solutions. The company provides SOC system solutions for wireless communications, high-definition TV, optical storage, DVD and Blu-ray products.

QUALCOMM, Inc . manufactures digital wireless communications equipment.  The Company licenses its code division multiple access (CDMA) and orthogonal frequency division multiplexing access intellectual property to other companies, and produces CDMA-based integrated circuits; and produces equipment and software used to track workers and assets; and software for wireless content enablement.

KLA-Tencor Corporation manufactures yield management and process monitoring systems for the semiconductor industry.  The Company's systems are used to analyze product and process quality at critical steps in the manufacture of circuits and provide feedback so that fabrication problems can be identified. KLA-Tencor operates sales, service, and application centers worldwide.

Lam Research Corporation manufactures, markets, and services semiconductor processing equipment used in the making of integrated circuits.  The Company's products are used to deposit special films on a silicon wafer and etch away portions of various films to create a circuit design.  Lam sells its products around the world.

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.

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.

Arm Holdings US, Inc. operates as a holding company. The Company, through its subsidiaries, designs chips used in a range of electronic products. Arm Holdings serves customers worldwide.

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ARM Holdings (ARM US)

Softbank – Doubling Down on Their Investment Acumen as Arm Falters

Softbank released better than expected results today, driven mostly by gains on the sale of its T-Mobile stake and strong stock market performance....

Mio Kato

Softbank Group: Accelerated Asset Sales (Alibaba, ARM) Read Across to Vision Fund 2

Softbank has sold a further block of Alibaba shares whilst a restructuring of ARM points the way to a reintroduction of that business to public...

Kirk Boodry

Softbank – Lining Up an Arm IPO

After monetising stakes in Alibaba, TMobile and Softbank Corp, the next piggybank in Softbank Group’s crosshairs appears to be Arm. We have...

Mio Kato

Softbank Group: Implications of an Unprecedented Buyback and Asset Sale Program

Softbank's surprise announcement of a buy-back/de-leveraging program should continue to be well received and we expect that today's limit-up 19%...

Kirk Boodry

Can Anyone Benefit from Intel CPU Design Flaws?

What's new?According to Google Security Blog, Google's Project Zero team last year discovered serious security flaws caused by "speculative...

Andrew Lu

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