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.

Thematic (Sector/Industry)

<h2>1. Sony is Back!</h2><p>It's not everyday that you see a stock the size of Sony rise 11% in a day and 14.5% in two days, yet following a pretty stellar 2Q, that's exactly what happened and according to <a href="https://www.smartkarma.com/profiles/710" target="_blank" data-smartkarma-citation="accounts:710">Pelham Smithers</a> in <a href="https://www.smartkarma.com/insights/sony-6758-is-it-primed-for-lift-off" target="_blank" data-smartkarma-citation="insights:14960">Sony (6758) - Is It Primed for Lift-Off?</a> there could be even more to come. Pelham highlighted the lack of extraordinary gains or losses in the results which is a contrast to a troubled history featuring many quarters of "extraordinary" losses. He goes on to point out that adjustment and corporate costs still appeared conservative with some buffer baked in while the Music division and Semiconductor division could both still beat guidance. Could Sony start targeting JPY800bn in OP next year and could that drive a further doubling of the stock? That remains to be seen, but we are similarly bullish on the name and feel that company's culture has been revived and it is firing on all cylinders once again.</p><h2>2. Auto Related Earnings Were a Focus in Japan</h2><p><a href="https://www.smartkarma.com/profiles/988" target="_blank" data-smartkarma-citation="accounts:988">Noriaki Hirakata, CFA</a> (<a href="https://www.smartkarma.com/insights/honda-motor-2qfy17-progress-at-shareholder-return-and-the-same-concern" target="_blank" data-smartkarma-citation="insights:14958">Honda Motor: 2QFY17 Progress at Shareholder Return and the Same Concern</a>) and <a href="https://www.smartkarma.com/profiles/25" target="_blank" data-smartkarma-citation="accounts:25">Travis Lundy</a> (<a href="https://www.smartkarma.com/insights/honda-s-new-payout-policy-divs-a-buyback" target="_blank" data-smartkarma-citation="insights:14943">Honda’s New Payout Policy - Divs &amp; A Buyback</a>) came at Honda's earnings from slightly different perspectives as Norrie felt the results were overall positive, but mainly driven by the motorcycle segment's results in India and Vietnam. Norrie's comment regarding the low OPM of the automotive division (3.5%) despite an efficient model lineup with 75% of sales generate by 5 models and the lowest incentive spend per vehicle in the US was particularly insightful to me. Travis noted the change to Honda's payout policy from a 30% of NP target for both dividends and buyback to a 30% dividend payout ratio target with buybacks on top of this. Travis pointed out that a buyback of 1% of outstanding shares per year could push shareholder returns closer to 40-45%.</p><p>In <a href="https://www.smartkarma.com/insights/subaru-press-conference-takeaways" target="_blank" data-smartkarma-citation="insights:14813">SUBARU Press Conference Takeaways</a> Norrie delved into Subaru's uncertified inspector issue, concluding that while it was a serious governance issue, it appeared to be an accidental occurrence and that the JPY5bn in likely recall expenses would not have a particularly material impact on earnings. <a href="https://www.smartkarma.com/profiles/1542" target="_blank" data-smartkarma-citation="accounts:1542">Chacko Jacob</a> took a slightly bearish view on Yokohama Rubber in <a href="https://www.smartkarma.com/insights/yokohama-tire-to-focus-on-onboarding-new-oems-and-expanding-market-share-in-cv-tire-segment" target="_blank" data-smartkarma-citation="insights:14843">Yokohama Tire To Focus on Onboarding New OEMs and Expanding Market Share in CV Tire Segment</a> suggesting that while capacity expansions and the acquisition of Alliance Tire Group would be positive for the company, the positives were likely to be already priced in to the stock. <a href="https://www.smartkarma.com/profiles/713" target="_blank" data-smartkarma-citation="accounts:713">Mio Kato, CFA</a> was more positive on Toyoda Gosei in <a href="https://www.smartkarma.com/insights/toyoda-gosei-daicel-airbag-jv-adas-compatible-grilles-and-plastic-fuel-filler-pipe-are-the-future" target="_blank" data-smartkarma-citation="insights:14946">Toyoda Gosei: Daicel Airbag JV, ADAS Compatible Grilles and Plastic Fuel Filler Pipe Are the Future</a> noting that the rollout of products such as grilles and emblems that are compatible with millimetre wave radar and the new airbag JV with Daicel could put the company on a strong track for revenue growth over the next few years.</p><h2>3. Lotte and Samsung Restructuring</h2><p><a href="https://www.smartkarma.com/profiles/354" target="_blank" data-smartkarma-citation="accounts:354">Sanghyun Park</a>'s insight <a href="https://www.smartkarma.com/insights/lotte-group-restructuring-part-11-upside-potential-from-base-prices-on-oct-30" target="_blank" data-smartkarma-citation="insights:14795">Lotte Group Restructuring Part 11 - Upside Potential from Base Prices on Oct 30</a> that his top picks within the restructuring companies were Lotte Holdings first, Lotte Food second and Lotte Chilsung third. Please refer the notes for Sanghyun's split ratios and detailed breakdowns of his upside calculations. In <a href="https://www.smartkarma.com/insights/samsung-restructuring-update-new-scenario-attracts-local-institutions" target="_blank" data-smartkarma-citation="insights:15028">Samsung Restructuring Update - New Scenario Attracts Local Institutions</a>, Sanghyun provides coverage on a scenario developing in the local market where Samsung C&amp;T (together with the Lee family) would sell stakes in Samsung BioLogics, Samsung Life and Samsung SDS to raise about KRW22.2trn to purchase SamE shares from Samsung Life and Samsung Fire &amp; Marine.</p><h2>4. <a href="https://www.smartkarma.com/insights/netmarble-vs-ncsoft-valuation-disparity-analysis" target="_blank" data-smartkarma-citation="insights:15004">Netmarble Vs. NCsoft - Valuation Disparity Analysis</a></h2><p>Sanghyun contends that Netmarble's 70% valuation multiple premium to NCsoft may be difficult to justify given NCSoft's higher margins. He believes that Netmarbles higher foreign exposure and larger warchest for M&amp;A could justify a higher multiple than for NCsoft but feels that the degree of the disparity is too high. In particular, Sanghyun notes that the lockup for Netmarble ends on Nov 12 and that there is a large disparity in positioning between foreign and local investors with foreigners shorting NCsoft against Netmarble while locals adopt the opposite position. </p><h2>5.  <a href="https://www.smartkarma.com/insights/visit-to-the-first-unmanned-7-eleven-cvs-in-korea-powered-by-vein-recognition-system" target="_blank" data-smartkarma-citation="insights:14962">Visit to the First “Unmanned” 7-Eleven CVS in Korea, Powered by Vein-Recognition System</a></h2><p><a href="https://www.smartkarma.com/profiles/342" target="_blank" data-smartkarma-citation="accounts:342">Douglas Kim</a> continues his visits series to assess the quality of unmanned convenience store experience. Douglas provides an explanation of the vein recognition system used for customer registration and payment while noting that the provider of the conveyor system, <a href="https://www.smartkarma.com/entities/21176" target="_blank" data-smartkarma-citation="entities:21176:1">Datalogic SpA (DAL IM)</a> has seen a strong rise in its share price over the last year. </p><h2><a href="https://www.smartkarma.com/profiles/988" target="_blank" data-smartkarma-citation="accounts:988"></a>6. Kobe Steel Earnings Boost Stock Price</h2><p><a href="https://www.smartkarma.com/profiles/713" target="_blank" data-smartkarma-citation="accounts:713">Mio Kato, CFA</a> continues coverage of Kobe Steel as the share price continued to recover. Mio notes that the company's earnings were strong and that the downward revision to recurrent profit guidance was extremely conservative. With the steel and construction machinery segments likely to easily beat guidance and the impact of its scandal on products that did not have data falsified being limited so far, Mio expects up to JPY75bn in RP. The stock is up 17.8% since earnings.</p>

1. Sony is Back!It's not everyday that you see a stock the size of Sony rise 11% in a day and 14.5% in two days, yet following a pretty stellar 2Q, that's exactly what happened and according to Pelham Smithers in Sony (6758) - Is It Primed for Lift-Off? there could be even more to come. Pelham highlighted the lack of extraordinary gains or losses in the results which is a contrast to a troubled history featuring many quarters of "extraordinary" losses. He goes on to point out that adjustment and corporate costs still appeared conservative with some buffer baked in while the Music division and Semiconductor division could both still beat guidance. Could Sony start targeting JPY800bn in OP next year and could that drive a further doubling of the stock? That remains to be seen, but we are similarly bullish on the name and feel that company's culture has been revived and it is firing on all cylinders once again.2. Auto Related Earnings Were a Focus in JapanNoriaki Hirakata, CFA (Honda Motor: 2QFY17 Progress at Shareholder Return and the Same Concern) and Travis Lundy (Honda’s New Payout Policy - Divs &amp; A Buyback) came at Honda's earnings from slightly different perspectives as Norrie felt the results were overall positive, but mainly driven by the motorcycle segment's results in India and Vietnam. Norrie's comment regarding the low OPM of the automotive division (3.5%) despite an efficient model lineup with 75% of sales generate by 5 models and the lowest incentive spend per vehicle in the US was particularly insightful to me. Travis noted the change to Honda's payout policy from a 30% of NP target for both dividends and buyback to a 30% dividend payout ratio target with buybacks on top of this. Travis pointed out that a buyback of 1% of outstanding shares per year could push shareholder returns closer to 40-45%.In SUBARU Press Conference Takeaways Norrie delved into Subaru's uncertified inspector issue, concluding that while it was a serious governance issue, it appeared to be an accidental occurrence and that the JPY5bn in likely recall expenses would not have a particularly material impact on earnings. Chacko Jacob took a slightly bearish view on Yokohama Rubber in Yokohama Tire To Focus on Onboarding New OEMs and Expanding Market Share in CV Tire Segment suggesting that while capacity expansions and the acquisition of Alliance Tire Group would be positive for the company, the positives were likely to be already priced in to the stock. Mio Kato, CFA was more positive on Toyoda Gosei in Toyoda Gosei: Daicel Airbag JV, ADAS Compatible Grilles and Plastic Fuel Filler Pipe Are the Future noting that the rollout of products such as grilles and emblems that are compatible with millimetre wave radar and the new airbag JV with Daicel could put the company on a strong track for revenue growth over the next few years.3. Lotte and Samsung RestructuringSanghyun Park's insight Lotte Group Restructuring Part 11 - Upside Potential from Base Prices on Oct 30 that his top picks within the restructuring companies were Lotte Holdings first, Lotte Food second and Lotte Chilsung third. Please refer the notes for Sanghyun's split ratios and detailed breakdowns of his upside calculations. In Samsung Restructuring Update - New Scenario Attracts Local Institutions, Sanghyun provides coverage on a scenario developing in the local market where Samsung C&amp;T (together with the Lee family) would sell stakes in Samsung BioLogics, Samsung Life and Samsung SDS to raise about KRW22.2trn to purchase SamE shares from Samsung Life and Samsung Fire &amp; Marine.4. Netmarble Vs. NCsoft - Valuation Disparity AnalysisSanghyun contends that Netmarble's 70% valuation multiple premium to NCsoft may be difficult to justify given NCSoft's higher margins. He believes that Netmarbles higher foreign exposure and larger warchest for M&amp;A could justify a higher multiple than for NCsoft but feels that the degree of the disparity is too high. In particular, Sanghyun notes that the lockup for Netmarble ends on Nov 12 and that there is a large disparity in positioning between foreign and local investors with foreigners shorting NCsoft against Netmarble while locals adopt the opposite position. 5.  Visit to the First “Unmanned” 7-Eleven CVS in Korea, Powered by Vein-Recognition SystemDouglas Kim continues his visits series to assess the quality of unmanned convenience store experience. Douglas provides an explanation of the vein recognition system used for customer registration and payment while noting that the provider of the conveyor system, Datalogic SpA (DAL IM) has seen a strong rise in its share price over the last year. 6. Kobe Steel Earnings Boost Stock PriceMio Kato, CFA continues coverage of Kobe Steel as the share price continued to recover. Mio notes that the company's earnings were strong and that the downward revision to recurrent profit guidance was extremely conservative. With the steel and construction machinery segments likely to easily beat guidance and the impact of its scandal on products that did not have data falsified being limited so far, Mio expects up to JPY75bn in RP. The stock is up 17.8% since earnings.

The Week That Was in NorthAsia@Smartkarma: Sony Surges! Honda Ups Payouts, Lotte/Samsung Restructure

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

<div>
<strong>I visited Korea's first "unmanned" (no cashier) 7-Eleven CVS located on the 31st floor of Lotte World Tower.</strong> Although this CVS has been open to the Lotte employees in the past several months, it has only been open to the general public starting October 30th. The two major CVS related stocks in Korea including <a href="https://www.smartkarma.com/entities/3867" target="_blank" data-smartkarma-citation="entities:3867:1">Gs Retail Co Ltd (007070 KS)</a> and <a href="https://www.smartkarma.com/entities/5876" target="_blank" data-smartkarma-citation="entities:5876:1">BGF Retail Co Ltd (027410 KS)</a> have been wrecking crews in 2017 and they have been two of the worst performing stocks in the retail sector for the past six…</div>


I visited Korea's first "unmanned" (no cashier) 7-Eleven CVS located on the 31st floor of Lotte World Tower. Although this CVS has been open to the Lotte employees in the past several months, it has only been open to the general public starting October 30th. The two major CVS related stocks in Korea including Gs Retail Co Ltd (007070 KS) and BGF Retail Co Ltd (027410 KS) have been wrecking crews in 2017 and they have been two of the worst performing stocks in the retail sector for the past six…

Visit to the First "Unmanned" 7-Eleven CVS in Korea, Powered by Vein-Recognition System

Italy

Datalogic S.p.A. manufactures bar code readers and portable data collection terminals.  The Company's products include unattended scanning systems, hand-held readers, and portable data collection readers.  Datalogic also offers solutions for customer specific marketing and customer relationship management (CRM).

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Datalogic SpA (DAL IM)

The Week That Was in NorthAsia@Smartkarma: Sony Surges! Honda Ups Payouts, Lotte/Samsung Restructure

1. Sony is Back!It's not everyday that you see a stock the size of Sony rise 11% in a day and 14.5% in two days, yet following a pretty stellar 2Q,...

Mio Kato

Visit to the First "Unmanned" 7-Eleven CVS in Korea, Powered by Vein-Recognition System

I visited Korea's first "unmanned" (no cashier) 7-Eleven CVS located on the 31st floor of Lotte World Tower. Although this CVS has been open to...

Douglas Kim

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)