Global Special Situations & Strategy, SR Services Ltd

David Lepper

Global Special Situations & Strategy

SR Services Ltd

SR Services provides Strategic Knowledge and Solutions services for Family Offices and Corporate Business. 

We deliver this via advisory services, strategic planning, opportunity analysis/sourcing, as well as solution implementation. 

Whilst, we create intellectual discipline and operational leverage for your projects or daily activities, our ultimate objective is to empower whilst enhancing your decision making. 

Strategic Knowledge and Solutions

Cross Asset Strategy

Growth as a style has been the “norm” for years, is the “norm” about to end? The continued strategies by Central Bank’s towards a “lower for longer stance around interest rates”, extended the underperformance of value for most of 2020. However, with the value/growth investment style ratio at 20-year lows, we present 27 names which hold characteristics worthy of further review.

Growth as a style has been the “norm” for years, is the “norm” about to end? The continued strategies by Central Bank’s towards a “lower for longer stance around interest rates”, extended the underperformance of value for most of 2020. However, with the value/growth investment style ratio at 20-year lows, we present 27 names which hold characteristics worthy of further review. 

Screening the Silk Road: Q1 2021 All Cap Screening - Free Cashflow (FCF)

'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. 

Quantitative Analysis

<div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/082/163/original/2019-03-17_07-32-23.png?1552775594" class="editor-image img-responsive" data-smartkarma-image-id="82163"></figure>Source: Japan Analytics
</div>SIDEWAYS - Japanese equities have gove up half of their late-February gains in US dollar terms over the last two weeks. Poised just 1.7% above the fifty-day moving average, last breached to the downside six months ago, the market needs fresh catalysts. <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/082/164/original/2019-03-17_07-54-56.png?1552777022" class="editor-image img-responsive" data-smartkarma-image-id="82164"></figure><div class="content-caption">Source: Japan Analytics</div>BOJ IS BACK - After almost a one-month hiatus, the Bank of Japan resumed purchases of exchange-traded funds, intervening four times in the last nine trading days. Further intervention is to be expected as the market adjusts to the continuing stream of weak macro data.  <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/082/165/original/2019-03-17_08-15-44.png?1552778203" class="editor-image img-responsive" data-smartkarma-image-id="82165"></figure><div class="content-caption">Source: Japan Analytics</div>THANK YOU, MIZUHO - <a href="https://www.smartkarma.com/entities/219" target="_blank" data-smartkarma-citation="entities:219:1">Mizuho' s (8411 JP)</a> ¥680b retail branch, software and foreign bond write down, and net profit forecast of ¥80b for FY 2018 has resulted in the market composite forecast for net income falling to ¥43.6t, 5.6% below the November peak. Forecast net income is now 1.2% below the level of one year ago, and seven sectors' forecasts are more than 10% lower than a year ago.   MARKET/SECTOR STRATEGY- We continue to recommend an underweight position in Japan in global portfolios and favour undervalued domestically-orientated companies in the Information Technology, Internet, Media, Transportation, Healthcare and Telecommunications sectors. We would avoid or short the financial sectors Banks, Non-Bank Finance and Multi-Industry. We would underweight the Auto, Machinery, Retail and Other Consumer Products sectors as consumer spending contracts further in the US, Europe, China and Japan. In the DETAIL section below, we will review Sector performance, company results, revisions and stock performance over the previous two weeks, as well as adding some brief comments on the Auto sector,  <a href="https://www.smartkarma.com/entities/1411" target="_blank" data-smartkarma-citation="entities:1411:1">Sumitomo Realty (8830 JP)</a>, <a href="https://www.smartkarma.com/entities/4508" target="_blank" data-smartkarma-citation="entities:4508:1">Sekisui House (1928 JP)</a>, <a href="https://www.smartkarma.com/entities/3294" target="_blank" data-smartkarma-citation="entities:3294:1">Pigeon (7956 JP)</a>, <a href="https://www.smartkarma.com/entities/8723" target="_blank" data-smartkarma-citation="entities:8723:1">Fuji Seal (7864 JP)</a>, and <a href="https://www.smartkarma.com/entities/3548" target="_blank" data-smartkarma-citation="entities:3548:1">Kawasaki Kisen (9107 JP)</a>


Source: Japan Analytics
SIDEWAYS - Japanese equities have gove up half of their late-February gains in US dollar terms over the last two weeks. Poised just 1.7% above the fifty-day moving average, last breached to the downside six months ago, the market needs fresh catalysts. Source: Japan AnalyticsBOJ IS BACK - After almost a one-month hiatus, the Bank of Japan resumed purchases of exchange-traded funds, intervening four times in the last nine trading days. Further intervention is to be expected as the market adjusts to the continuing stream of weak macro data.  Source: Japan AnalyticsTHANK YOU, MIZUHO - Mizuho' s (8411 JP) ¥680b retail branch, software and foreign bond write down, and net profit forecast of ¥80b for FY 2018 has resulted in the market composite forecast for net income falling to ¥43.6t, 5.6% below the November peak. Forecast net income is now 1.2% below the level of one year ago, and seven sectors' forecasts are more than 10% lower than a year ago.   MARKET/SECTOR STRATEGY- We continue to recommend an underweight position in Japan in global portfolios and favour undervalued domestically-orientated companies in the Information Technology, Internet, Media, Transportation, Healthcare and Telecommunications sectors. We would avoid or short the financial sectors Banks, Non-Bank Finance and Multi-Industry. We would underweight the Auto, Machinery, Retail and Other Consumer Products sectors as consumer spending contracts further in the US, Europe, China and Japan. In the DETAIL section below, we will review Sector performance, company results, revisions and stock performance over the previous two weeks, as well as adding some brief comments on the Auto sector,  Sumitomo Realty (8830 JP), Sekisui House (1928 JP), Pigeon (7956 JP), Fuji Seal (7864 JP), and Kawasaki Kisen (9107 JP)

🇯🇵 Japan • Fortnightly Update - Reverse Gear

Global Automotive Stocks/EV Focus/Event Driven, SC Capital

SC Capital

Global Automotive Stocks/EV Focus/Event Driven

Over 22 years covering Japanese equities on both the sell side and the buy side. 

Bottom-up Japan Equities Research

Equity Bottom-Up

<ul><li>FCC (7296) is a Honda-affiliated clutch supplier which had a blow-out Q2 result on October 27th, booking an OP of Y3.6bn, which beat the consensus estimates of Y2.8bn by 36%. The company raised its full-year estimates by 27% to Y13bn, which was only 1.7% above the consensus of Y12.8bn, but bullish given that FCC is usually more conservative than the Street.</li><li>The stock was up nearly 10% the day after the announcement, which is a big spike, given how well the stock had performed up until the announcement. Not only was the upward revision larger than expected, but the company's US operations--which has had weak profitability due to start-up costs related to new 10-speed clutches for Ford's F-150 truck series--generated a profit for a second quarter in a row.</li><li>Amid the electric vehicle (EV) boom, auto parts makers with high exposure to gasoline engine vehicles have seen their valuations decline. But FCC could stand to see its valuations expand as (a) over half of its profits come from its growing motorcycle clutch sales (with OP margins of 11%); (b) its competitive edge in clutches allows for better mileage and emissions for its customers' cars; and (c) its growth over the next 5 years comes from new orders to Ford and GM, for their gas-guzzling light truck series, which will most likely not go electric. </li><li>Furthermore, while there is lots of Tesla-related hype about all cars going electric some day, there is also the view that this will take time given the complexities with battery materials and EV-charging infrastructure, which could lead to hybrid cars filling the gap. FCC would benefit from such a trend, given its gas-saving clutch technology and existing track record for supplying Honda's hybrid cars.</li><li>While FCC is a small-cap stock ($1.3bn market-cap), it does trade at cheap valuations relative to other Japanese auto suppliers who stand to lose business if 100% of the cars on the road go electric. Most notably, its FY17 and FY18 PER of 13x and 10x (based on our estimates) appear cheap when compared to Aisin Seiki (7259)'s valuations of 12.6x and 11.6x, despite FCC being much more profitable (FCC should see 9% OP margins in FY18, whereas consensus sees Aisin at 6.8%). </li><li>Furthermore, the growth that FCC will see from supplying Ford and GM's large pick-up truck models makes FCC's growth trajectory not only more visible, but also most likely the highest in Japan's auto parts industry. The Ford F-150 series is the largest-selling vehicle in the US and GM's Silverado is the largest rival to the F-150. The recent floods in Texas and Florida--where the market share of large pick-up trucks is quite high--could provide further upside to FCC's FY17 US earnings. </li><li>While the growth prospects from higher sales of motorcycle clutches in India and Vietnam are huge, the sales from here on to Ford and GM of FCC's gas-saving clutches for their gas-guzzling large pick-ups should lead to over 50% revenue growth in the US over the next 3 years.   </li></ul>

FCC (7296) is a Honda-affiliated clutch supplier which had a blow-out Q2 result on October 27th, booking an OP of Y3.6bn, which beat the consensus estimates of Y2.8bn by 36%. The company raised its full-year estimates by 27% to Y13bn, which was only 1.7% above the consensus of Y12.8bn, but bullish given that FCC is usually more conservative than the Street.The stock was up nearly 10% the day after the announcement, which is a big spike, given how well the stock had performed up until the announcement. Not only was the upward revision larger than expected, but the company's US operations--which has had weak profitability due to start-up costs related to new 10-speed clutches for Ford's F-150 truck series--generated a profit for a second quarter in a row.Amid the electric vehicle (EV) boom, auto parts makers with high exposure to gasoline engine vehicles have seen their valuations decline. But FCC could stand to see its valuations expand as (a) over half of its profits come from its growing motorcycle clutch sales (with OP margins of 11%); (b) its competitive edge in clutches allows for better mileage and emissions for its customers' cars; and (c) its growth over the next 5 years comes from new orders to Ford and GM, for their gas-guzzling light truck series, which will most likely not go electric. Furthermore, while there is lots of Tesla-related hype about all cars going electric some day, there is also the view that this will take time given the complexities with battery materials and EV-charging infrastructure, which could lead to hybrid cars filling the gap. FCC would benefit from such a trend, given its gas-saving clutch technology and existing track record for supplying Honda's hybrid cars.While FCC is a small-cap stock ($1.3bn market-cap), it does trade at cheap valuations relative to other Japanese auto suppliers who stand to lose business if 100% of the cars on the road go electric. Most notably, its FY17 and FY18 PER of 13x and 10x (based on our estimates) appear cheap when compared to Aisin Seiki (7259)'s valuations of 12.6x and 11.6x, despite FCC being much more profitable (FCC should see 9% OP margins in FY18, whereas consensus sees Aisin at 6.8%). Furthermore, the growth that FCC will see from supplying Ford and GM's large pick-up truck models makes FCC's growth trajectory not only more visible, but also most likely the highest in Japan's auto parts industry. The Ford F-150 series is the largest-selling vehicle in the US and GM's Silverado is the largest rival to the F-150. The recent floods in Texas and Florida--where the market share of large pick-up trucks is quite high--could provide further upside to FCC's FY17 US earnings. While the growth prospects from higher sales of motorcycle clutches in India and Vietnam are huge, the sales from here on to Ford and GM of FCC's gas-saving clutches for their gas-guzzling large pick-ups should lead to over 50% revenue growth in the US over the next 3 years.   

FCC (7296)--Bright Spot in the Gloomy Automotive World

Japan

F.C.C. CO., LTD. manufactures and develops clutches and facings for motorcycles, automobiles, and lawn mowers.  The Company has its operating facilities in the US, Thailand, the Philippines, China, and the UK. FCC provides its products to Japanese motorcycle manufacturers including Honda Motor, Suzuki Motor, and Yamaha Motor.

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Fcc Co Ltd (7296 JP)

Screening the Silk Road: Q1 2021 All Cap Screening - Free Cashflow (FCF)

With the value/growth investment style ratio at 20-year lows, we present 27 names which hold characteristics worthy of further review.

David Lepper

🇯🇵 Japan • Fortnightly Update - Reverse Gear

SIDEWAYS - Japanese equities have gove up half of their late-February gains in US dollar terms over the last two weeks. Poised just 1.7% above the...

Campbell Gunn

FCC (7296)--Bright Spot in the Gloomy Automotive World

FCC (7296) is a Honda-affiliated clutch supplier which had a blow-out Q2 result on October 27th, booking an OP of Y3.6bn, which beat the consensus...

SC Capital

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