Independent Insight Provider, Japanese equities, LightStream Research

Scott Foster

Independent Insight Provider, Japanese equities

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.

Equity Bottom-Up

Hamamatsu Photonics Kk / Equity Bottom-Up

<ul>
<li>The company has slashed FY Sep-24 guidance after missing 1H sales and profit targets by wide margins. Dividend maintained, 2-for-1 split planned and buyback under consideration.</li>
<li>Capex has been cut, reflecting lower growth expectations. R&amp;D also. Inventory adjustments will eventually be completed, but Chinese competiton will remain a problem.</li>
<li>The share price has dropped 30% in the past year and 10.5% since May 8, putting the shares on 27 times EPS guidance. Still not cheap, but getting there.</li>
</ul>


The company has slashed FY Sep-24 guidance after missing 1H sales and profit targets by wide margins. Dividend maintained, 2-for-1 split planned and buyback under consideration.
Capex has been cut, reflecting lower growth expectations. R&amp;D also. Inventory adjustments will eventually be completed, but Chinese competiton will remain a problem.
The share price has dropped 30% in the past year and 10.5% since May 8, putting the shares on 27 times EPS guidance. Still not cheap, but getting there.


Hamamatsu Photonics (6965 JP): Look Cautiously to the Long Term

<ul>
<li>FY Sep-22 results are likely to beat management's guidance, but this should be in the price. Recession and rising interest rates are probably not in the price.</li>
<li>Growth rates slowed in 3Q and are likely to decline further in 4Q. In the year ahead, we expect both sales and profits to decline.</li>
<li>The shares have rebounded by 21% since the 1st of July to 30x our EPS estimate for FY Sep-23. This does not look sustainable. Sell into current strength. </li>
</ul>


FY Sep-22 results are likely to beat management's guidance, but this should be in the price. Recession and rising interest rates are probably not in the price.
Growth rates slowed in 3Q and are likely to decline further in 4Q. In the year ahead, we expect both sales and profits to decline.
The shares have rebounded by 21% since the 1st of July to 30x our EPS estimate for FY Sep-23. This does not look sustainable. Sell into current strength. 


Hamamatsu Photonics (6965 JP): Difficult Year Ahead

<ul>
<li>The shares are down 27% from their May high, largely discounting excessive inventory and a decline in profits that is likely to continue through next March or June.</li>
<li>Inventory adjustment, the revival of semiconductor, factory automation and medical related demand, plus the leveling off of depreciation, should enable a return to growth after that. </li>
<li>Projected valuations are at the low end of their 10-year ranges. Buy into the current weakness, keeping in mind that 1Q results are likely to be weak.</li>
</ul>


The shares are down 27% from their May high, largely discounting excessive inventory and a decline in profits that is likely to continue through next March or June.
Inventory adjustment, the revival of semiconductor, factory automation and medical related demand, plus the leveling off of depreciation, should enable a return to growth after that. 
Projected valuations are at the low end of their 10-year ranges. Buy into the current weakness, keeping in mind that 1Q results are likely to be weak.


Hamamatsu Photonics (6965 JP): Buy into Current Weakness

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.

Event-Driven

<ul>
<li>With <a href="https://www.smartkarma.com/entities/toyota-motor-corp" target="_blank" data-smartkarma-citation="entities:73:1" rel="noopener">Toyota (7203 JP)</a> having sold some of its stake in <a href="https://www.smartkarma.com/entities/denso-corp" target="_blank" data-smartkarma-citation="entities:18703:1" rel="noopener">Denso</a>, <a href="https://www.smartkarma.com/entities/kddi-corp" target="_blank" data-smartkarma-citation="entities:639:1" rel="noopener">KDDI</a> and <a href="https://www.smartkarma.com/entities/harmonic-drive-systems-inc" target="_blank" data-smartkarma-citation="entities:10238:1" rel="noopener">Harmonic Drive</a> this year, it has firmly set the ball rolling for unwinding some of its cross-shareholding.</li>
<li>Toyota has a shareholding in around 60 listed companies, with its combined disposable stake worth over US$26bn.</li>
<li>In this note, we take a look at its stakes in various companies to see which ones could possibly be candidates for further selldowns.</li>
</ul>


With Toyota (7203 JP) having sold some of its stake in Denso, KDDI and Harmonic Drive this year, it has firmly set the ball rolling for unwinding some of its cross-shareholding.
Toyota has a shareholding in around 60 listed companies, with its combined disposable stake worth over US$26bn.
In this note, we take a look at its stakes in various companies to see which ones could possibly be candidates for further selldowns.


Toyota Cross-Shareholding - To Say a Whole Lot Is Left Would Be a US$26bn Understatement

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

<ul>
<li>There are a bunch of stocks that have underperformed the <a href="https://www.smartkarma.com/entities/nikkei-225" target="_blank" data-smartkarma-citation="entities:22909:1" rel="noopener">Nikkei 225 (NKY INDEX)</a> and their peers and could be deleted from global passive portfolios in August.</li>
<li>The deletion from passive portfolios will lead to a liquidity event at the end of August where passive trackers will need to sell multiple days of ADV.</li>
<li>Shorts have been built up on all the stocks over the last few months and the extent of the positioning varies across stocks.</li>
</ul>


There are a bunch of stocks that have underperformed the Nikkei 225 (NKY INDEX) and their peers and could be deleted from global passive portfolios in August.
The deletion from passive portfolios will lead to a liquidity event at the end of August where passive trackers will need to sell multiple days of ADV.
Shorts have been built up on all the stocks over the last few months and the extent of the positioning varies across stocks.


Japan - Yet Another Big Round of Passive Selling Expected in August

Japan

Azbil Corporation develops, manufactures, and markets total automation equipment used in industrial and commercial buildings. The Company's products include sensors, switches, recording meters, security systems, air conditioners, pressure transmitters, and flow meters.

Taiyo Yuden Co., Ltd. manufactures and markets electronic components such as, ceramic capacitors, inductors, hybrid integrated circuits (IC), and ferrite. The Company's products include power supplies, inverters, optical disks, filters, coils, and thermistors.

HIROSE ELECTRIC CO., LTD. develops and sells electronic equipment, specializing in connectors.  The Company's products include circular, rectangular and ribbon cables, printed circuit boards, integrated circuits, PC cards, nylon boards, and board connectors.

HORIBA, Ltd., manufactures and markets measuring instruments and analyzers.  The Company's main product lines are scientific analyzers, environment monitoring, medical analyzers, engine emission analyzers, and semiconductor test equipment. Horiba operates worldwide.

Nippon Electric Glass Co., Ltd. manufactures a wide range of glass related products.  The Company's products include fluorescent light tubes, lenses for light-emitting diodes (LEDs), ceramic integrated circuits (IC) packages, bulbs for cathode ray tube (CRT) displays, and precision sheet glass for liquid crystal displays (LCDs).

Amano Corporation manufactures electric time recorders and information systems. The Company also produces time stamps and parking lot traffic and fee collection management systems.  The Company produces environment related systems such as dust collectors, air filters, and gas/water cleaning equipment.

Alps Alpine Co., Ltd. manufactures and markets electronic parts used for car electronics, computer peripheral equipment, and communications and broadcasting related equipment. The Company's products include printers, switches, ceramic trimmer capacitors, sensors, transceiver units for cellular phones, drives, and magnetic heads. Alps Alpine also operates logistics businesses.

YOKOGAWA ELECTRIC CORPORATION develops, manufactures, and markets information technology (IT) solutions, measuring and control equipment, semiconductors, and electronic components.  The Company's products include IT controllers, flowmeters, pressure transmitters, analyzers, data recorder, switching power supplies, and AC (alternating current) adaptors.

MARUWA CO., LTD. develops, manufactures, and sells electronic ceramic components, resistors, and hybrid integrated circuits (IC).  The Company operates production facilities in Malaysia.

OMRON Corporation manufactures electronic components, equipment and systems used for factory automation. The Company provides products and services in a variety of fields including industrial automation, electronic components, automotive electronics, social systems such as ticket gate machines and traffic control, and healthcare.

Jentech Precision Industrial Company Ltd. provides tooling, precision metal stamping, custom insert molding, injection molding, and assembly solutions for medical, consumer electronics, semiconductor, automotive, appliance, and micro electronic markets to a wide variety of industries.

Nan Ya Printed Circuit Board Corporation manufactures and markets printed circuit boards (PCBs) and integrated circuit (IC) substrates.

Zhejiang Crystal-Optech Co., Ltd. researches, manufactures and markets photoelectric parts. The key products are OLPF, IR Cut Filter, IR Filter Housing Assembly, Thermal Diffusion Panel and Cover Glass.

Huagong Tech Co., Ltd. manufactures laser equipment, laser false-proof products, sensitive electronic components, optical telecommunication products, and biopharmaceuticals.  The Company also develops computer software and provides computer system integration services.

Vishay Intertechnology, Inc. manufactures a broad line of passive and discreet active electronic components, particularly resistors, capacitors, inductors, diodes, and transistors.  The Company's products are utilized in computers, telephones, televisions, automobiles, household appliance, medical equipment, satellites, and military and aerospace equipment.

Shenzhen Sunlord Electronics Co.,Ltd. manufactures and markets chip passive components including chip inductor, chip ferrite bead, chip varistor, NTC thermistor and chip common mode choke coil.

Shenzhen Sunlord Electronics Co, Ltd. (002138 CH)

Innolux Corporation manufactures TFT-LCD, LCD models and LCD monitors. The company also provides research, development, manufacturing and retails business.

LOTES Co., Ltd specialize in design and manufacture of connectors, CPU Socket, Coolers and Antenna for Notebook Computer, Personal Computer, Mobile electronic device and Ditial Video.

Synnex Technology International Corporation markets personal computers, computer peripherals, multi-media products, network products, computer application software, electronic parts, and telecommunication products.

Synnex Technology International (2347 TT)

AAC Technologies Holdings Inc designs, develops and manufactures a broad range of miniaturized components that include speakers, receivers and microphones in the acoustic segment and others such as haptics vibrators, RF and antennas, and optical lenses. AAC's products are found in mobile devices such as smartphones, tablets, wearables, ultrabooks, notebooks and electronic book-readers.

HAMAMATSU PHOTONICS K.K. manufactures electron tubes, semiconductors, and image processors.  The Company's products include photosensitive electronic tubes, optical/image sensors, X-ray related products, laser related products, photodiodes, light-emitting diodes (LED) and video camera used for measuring equipment.

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Hamamatsu Photonics Kk (6965 JP)

Hamamatsu Photonics (6965 JP): Look Cautiously to the Long Term

Management blindsided by weak 2Q, but sharp cut to guidance largely discounted. Dividend maintained, stock split coming, buyback possible. But...

Scott Foster

Hamamatsu Photonics (6965 JP): Difficult Year Ahead

Shares up 21% since July, but sales and profits likely to decline in FY Sep-23. Impact of recession and semiconductor downturn unavoidable. Rising...

Scott Foster

Hamamatsu Photonics (6965 JP): Buy into Current Weakness

Shares down 27%, largely discounting excessive inventory and falling profits. Profits should rebound with semiconductor and other demand as...

Scott Foster

Toyota Cross-Shareholding - To Say a Whole Lot Is Left Would Be a US$26bn Understatement

Toyota, Toyota Industries and Denso are tag teaming to unwind some of their stake in Aisin, in a deal worth over US$1bn. While the timing of the...

Sumeet Singh

Japan - Yet Another Big Round of Passive Selling Expected in August

There are a bunch of stocks in Japan that could be sold by passive global investors in August. Shorts have increased on all stocks and the extent...

Brian Freitas

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