Japan Specialist

Mark Chadwick

Equity Bottom-Up

<ul>
<li>Consolidated net sales slipped 0.4% to ¥197 billion, while operating income slipped 14.6%, hitting ¥34.9 billion</li>
<li>The yen’s Q3 weakness erased ¥11 billion in unrealised inventory profits, dragging reported operating profit below expectations</li>
<li>Recovery in order book is key positive. However, given the stock's outperformance over the past 3 months, there is less upside. </li>
</ul>


Consolidated net sales slipped 0.4% to ¥197 billion, while operating income slipped 14.6%, hitting ¥34.9 billion
The yen’s Q3 weakness erased ¥11 billion in unrealised inventory profits, dragging reported operating profit below expectations
Recovery in order book is key positive. However, given the stock's outperformance over the past 3 months, there is less upside. 


IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Equity Capital Markets

<ul>
<li>
<a href="https://www.smartkarma.com/entities/dn-solutions" target="_blank" data-smartkarma-citation="entities:44474:1" rel="noopener">DN Solutions (298440 KS)</a>, the third-largest machining centre/turning centre machine tool manufacturer, seeks to raise US$1.1 billion in a KRX IPO.</li>
<li>We previously discussed the IPO in <a href="https://www.smartkarma.com/insights/dn-solutions-ipo-the-bull-case" target="_blank" data-smartkarma-citation="insights:180468" rel="noopener">DN Solutions IPO: The Bull Case</a> and <a href="https://www.smartkarma.com/insights/dn-solutions-ipo-the-bear-case" target="_blank" data-smartkarma-citation="insights:180606" rel="noopener">DN Solutions IPO: The Bear Case</a>.</li>
<li>I examine the syndicate's valuation methodology. My analysis suggests that DN Solutions is palatable in the low end of the IPO price range. </li>
</ul>



DN Solutions (298440 KS), the third-largest machining centre/turning centre machine tool manufacturer, seeks to raise US$1.1 billion in a KRX IPO.
We previously discussed the IPO in DN Solutions IPO: The Bull Case and DN Solutions IPO: The Bear Case.
I examine the syndicate's valuation methodology. My analysis suggests that DN Solutions is palatable in the low end of the IPO price range. 


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.

<ul>
<li>
<a href="https://www.smartkarma.com/entities/dn-solutions" target="_blank" data-smartkarma-citation="entities:44474:1" rel="noopener">DN Solutions (298440 KS)</a> (DNS) aims to raise around US$1.1bn in its Korea IPO via selling a mix of primary and secondary shares.</li>
<li>DNS is engaged in the manufacture and sale of machine tools and the business of automation solutions and services related thereto.</li>
<li>We have looked at its past performance in our earlier notes. In this note, we will talk about valuations.</li>
</ul>



DN Solutions (298440 KS) (DNS) aims to raise around US$1.1bn in its Korea IPO via selling a mix of primary and secondary shares.
DNS is engaged in the manufacture and sale of machine tools and the business of automation solutions and services related thereto.
We have looked at its past performance in our earlier notes. In this note, we will talk about valuations.


DN Solutions IPO - Thoughts on Valuations - Probably Needs a Price Cut

<ul>
<li>Fanuc’s Q2 operating income surged 25% year-on-year, but the beat was driven by a one-time 9 billion yen unrealized profit, raising concerns about sustainability.</li>
<li>Total orders fell from 198 billion yen to 186 billion yen, with a notable slowdown in Factory Automation orders, particularly in China.</li>
<li>Despite inventory reductions, Fanuc’s inventory/sales ratio remains elevated at 43%; shares down 9% since Q1 and underperforming the broader index for the year.</li>
</ul>


Fanuc’s Q2 operating income surged 25% year-on-year, but the beat was driven by a one-time 9 billion yen unrealized profit, raising concerns about sustainability.
Total orders fell from 198 billion yen to 186 billion yen, with a notable slowdown in Factory Automation orders, particularly in China.
Despite inventory reductions, Fanuc’s inventory/sales ratio remains elevated at 43%; shares down 9% since Q1 and underperforming the broader index for the year.


Fanuc (6954) | Q2 Profit Boost Masked by One-Time Gains

Derivatives and Quantitative Strategist

Gaudenz Schneider

Equity Derivatives

<ul>
<li>This strategy exploits relative value in implied volatilities and combines it with a long Nifty 50 vs. short Nikkei 225 directional view over a period of two months.</li>
<li>The strategy performs well if the Nifty 50 rises and outperforms the Nikkei 225. If both indices decline, neither profit nor loss is incurred.</li>
<li>Leverage increases both the strategy's payoff and probability of success.</li>
</ul>


This strategy exploits relative value in implied volatilities and combines it with a long Nifty 50 vs. short Nikkei 225 directional view over a period of two months.
The strategy performs well if the Nifty 50 rises and outperforms the Nikkei 225. If both indices decline, neither profit nor loss is incurred.
Leverage increases both the strategy's payoff and probability of success.


EQD | Long Nifty 50 Vs. Short Nikkei 225 - A Relative Value Option Strategy with a Kicker

Japan

FANUC CORPORATION manufactures factory automation (FA) systems and equipments, and robots. The Company's products include computerized numerically-controlled (CNC) equipment, servo motors, laser systems, industrial robots, wire-cut electric discharge machines, and CNC drill.  Fanuc participates in a joint venture with General Electric in the FA field.

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Fanuc Corp (6954 JP)

Fanuc (6594) | Robots in Reverse

Company's net sales and operating income decreased due to yen's weakness erasing inventory profits, but recovery in order book is a positive sign...

Mark Chadwick

DN Solutions IPO: Valuation Insights

I examine the syndicate's valuation methodology. My analysis suggests that DN Solutions is palatable in the low end of the IPO price range.

Arun George

DN Solutions IPO - Thoughts on Valuations - Probably Needs a Price Cut

DN Solutions (298440 KS) (DNS) aims to raise around US$1.1bn in its Korea IPO via selling a mix of primary and secondary shares. In this note we...

Sumeet Singh

Fanuc (6954) | Q2 Profit Boost Masked by One-Time Gains

Fanuc's Q2 operating income up 25% due to one-time profit, but concerns arise over sustainability. Orders down, inventory/sales ratio high, shares...

Mark Chadwick

EQD | Long Nifty 50 Vs. Short Nikkei 225 - A Relative Value Option Strategy with a Kicker

Option strategy: exploit relative value in implied volatilities combined with directional positioning for a leveraged payoff in a long Nifty 50 vs....

Gaudenz Schneider

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Fanuc (6594) | Robots in Reverse

​Company's net sales and operating income decreased due to yen's weakness erasing inventory profits, but recovery in order book is a positive sign...

Mark Chadwick

DN Solutions IPO: Valuation Insights

I examine the syndicate's valuation methodology. My analysis suggests that DN Solutions is palatable in the low end of the IPO price range.

Arun George

DN Solutions IPO - Thoughts on Valuations - Probably Needs a Price Cut

DN Solutions (298440 KS) (DNS) aims to raise around US$1.1bn in its Korea IPO via selling a mix of primary and secondary shares. In this note we...

Sumeet Singh

Fanuc (6954) | Q2 Profit Boost Masked by One-Time Gains

​Fanuc's Q2 operating income up 25% due to one-time profit, but concerns arise over sustainability. Orders down, inventory/sales ratio high, shares...

Mark Chadwick

EQD | Long Nifty 50 Vs. Short Nikkei 225 - A Relative Value Option Strategy with a Kicker

Option strategy: exploit relative value in implied volatilities combined with directional positioning for a leveraged payoff in a long Nifty 50 vs....

Gaudenz Schneider

Company's net sales and operating income decreased due to yen's weakness erasing inventory profits, but recovery in order book is a positive sign...

Fanuc's Q2 operating income up 25% due to one-time profit, but concerns arise over sustainability. Orders down, inventory/sales ratio high, shares...