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

<p>We visited <a href="https://www.smartkarma.com/entities/17345" target="_blank" data-smartkarma-citation="entities:17345:1">Nihon Nohyaku (4997 JP)</a> ("Nichino") this week to discuss the company's longer-term strategy and gain a deeper understanding of its likely positioning within <a href="https://www.smartkarma.com/entities/3122" target="_blank" data-smartkarma-citation="entities:3122:1">Adeka Corp (4401 JP)</a> and future prospects. We came away feeling that there was significant potential for growth but that timelines could try the patience of investors.</p><ul>
<li>Nichino is particularly adept at finding applications for the compounds it develops, taking advantage of its smaller size to develop niche markets that industry majors ignore because they do not move the needle.</li>
<li>The company has a long history of serving global markets and after expanding operations in the US and Europe in FY13/14, the company has begun consolidating subsidiaries in India and Brazil, firmly turning its focus to emerging markets with significant potential.</li>
<li>China's move to allow GMO soybeans dramatically cut the company's royalty revenues which had surged thanks to Bayer leveraging Nichino's Phoenix insecticide in Brazil under the brand name Belt.</li>
<li>Nichino's success licencing Phoenix (Belt) to <a href="https://www.smartkarma.com/entities/26881" target="_blank" data-smartkarma-citation="entities:26881:1">Bayer AG (BAYN GY)</a> appears to have truly whet the company's appetite for emerging markets and it is now focusing on expanding sales there - a key reason for Adeka's investment in the company is to give it the financial muscle to expand and continue R&amp;D.</li>
<li>We expect steady and possibly accelerating growth as the company develops sales in Brazil and India but the company's vision stretches out to 2025 and beyond and much of the potential growth for the company is likely to come towards the end of that time horizon.</li>
<li>Conditions appear to have bottomed and we would expect gradual increases in revenue and OP going forward and multiples are in-line with peers, but industry multiples overall are relatively inflated and could pose some downside risks.</li>
</ul><p>We present our evaluation of longer term prospects and a valuation comparison below.</p>

We visited Nihon Nohyaku (4997 JP) ("Nichino") this week to discuss the company's longer-term strategy and gain a deeper understanding of its likely positioning within Adeka Corp (4401 JP) and future prospects. We came away feeling that there was significant potential for growth but that timelines could try the patience of investors.
Nichino is particularly adept at finding applications for the compounds it develops, taking advantage of its smaller size to develop niche markets that industry majors ignore because they do not move the needle.
The company has a long history of serving global markets and after expanding operations in the US and Europe in FY13/14, the company has begun consolidating subsidiaries in India and Brazil, firmly turning its focus to emerging markets with significant potential.
China's move to allow GMO soybeans dramatically cut the company's royalty revenues which had surged thanks to Bayer leveraging Nichino's Phoenix insecticide in Brazil under the brand name Belt.
Nichino's success licencing Phoenix (Belt) to Bayer AG (BAYN GY) appears to have truly whet the company's appetite for emerging markets and it is now focusing on expanding sales there - a key reason for Adeka's investment in the company is to give it the financial muscle to expand and continue R&amp;D.
We expect steady and possibly accelerating growth as the company develops sales in Brazil and India but the company's vision stretches out to 2025 and beyond and much of the potential growth for the company is likely to come towards the end of that time horizon.
Conditions appear to have bottomed and we would expect gradual increases in revenue and OP going forward and multiples are in-line with peers, but industry multiples overall are relatively inflated and could pose some downside risks.
We present our evaluation of longer term prospects and a valuation comparison below.

Nihon Nohyaku: Adeka Offer Price Seems Full, but Longer-Term Outlook Makes Valuation Fair

Japan

Fumakilla Ltd. manufactures pesticides and insecticides for household and agricultural use. The Company operates manufacturing plants in Indonesia and India, and markets its products in Japan, Korea, Malaysia, and China.

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Fumakilla Ltd (4998 JP)

Nihon Nohyaku: Adeka Offer Price Seems Full, but Longer-Term Outlook Makes Valuation Fair

We visited Nihon Nohyaku (4997 JP) ("Nichino") this week to discuss the company's longer-term strategy and gain a deeper understanding of its...

Mio Kato

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