Senior Technology Analyst, Japanese Equities, LightStream Research

Scott Foster

Senior Technology Analyst, 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

Hitachi Ltd.'s restructuring continues with the acquisition of Kyoto Robotics and the planned sale of Hitachi Metals. We regard both developments as positive. <ul><li>On April 8, the Nikkei reported that Hitachi Ltd. had given preferential negotiating rights for the sale of its 53.6% stake in Hitachi Metals metals to a consortium led by Bain Capital. The price was estimated at ¥800 billion (¥7.3 billion) or more, which could pay for most of Hitachi Ltd.'s recently announced purchase of GlobalLogic for $9.6 billion.</li></ul><ul><li>Also on April 8, Hitachi Ltd. announced that it had purchased 96% of Kyoto Robotics, a designer and producer of three-dimensional machine vision and AI control systems for handling robots. This gives Hitachi advanced robotics technology and expertise, enhancing its ability to provide integrated systems for logistics and factory automation.</li></ul>The removal of Hitachi Metals (5486 JP) from Hitachi Ltd.'s consolidated accounts would reduce total revenues by 9% compared with FY Mar-21 guidance but have a small but positive short-term impact on operating profit.

Hitachi Ltd.'s restructuring continues with the acquisition of Kyoto Robotics and the planned sale of Hitachi Metals. We regard both developments as positive. On April 8, the Nikkei reported that Hitachi Ltd. had given preferential negotiating rights for the sale of its 53.6% stake in Hitachi Metals metals to a consortium led by Bain Capital. The price was estimated at ¥800 billion (¥7.3 billion) or more, which could pay for most of Hitachi Ltd.'s recently announced purchase of GlobalLogic for $9.6 billion.Also on April 8, Hitachi Ltd. announced that it had purchased 96% of Kyoto Robotics, a designer and producer of three-dimensional machine vision and AI control systems for handling robots. This gives Hitachi advanced robotics technology and expertise, enhancing its ability to provide integrated systems for logistics and factory automation.The removal of Hitachi Metals (5486 JP) from Hitachi Ltd.'s consolidated accounts would reduce total revenues by 9% compared with FY Mar-21 guidance but have a small but positive short-term impact on operating profit.

Hitachi Ltd. (6501 JP): Buys Kyoto Robotics, Plans to Sell Hitachi Metals

Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

Event-Driven

The Nikkei reported today that Bain Capital’s bidding consortium has received preferential negotiating rights from Hitachi. The rumoured valuation is above ¥800bn which would put the premium at just 3.2% above the last close. As we said previously, the potential for a large hike to those terms seems limited and better returns may be on offer in trying to identify other potential buyout targets.

The Nikkei reported today that Bain Capital’s bidding consortium has received preferential negotiating rights from Hitachi. The rumoured valuation is above ¥800bn which would put the premium at just 3.2% above the last close. As we said previously, the potential for a large hike to those terms seems limited and better returns may be on offer in trying to identify other potential buyout targets.

Hitachi Metals – Limited Upside Despite Bain Capital News But Let’s Find the Offshoot Ideas

With Hitachi restructuring its listed holdings, the fate of Hitachi Metals has been speculated on for some time. Our own take on it has been that the unit would be sold and probably to a fund rather than a strategic buyer. This has implications for the potential valuation and we would reiterate our stance that current valuations may not offer much upside in the event of a purchase.

With Hitachi restructuring its listed holdings, the fate of Hitachi Metals has been speculated on for some time. Our own take on it has been that the unit would be sold and probably to a fund rather than a strategic buyer. This has implications for the potential valuation and we would reiterate our stance that current valuations may not offer much upside in the event of a purchase.

Hitachi Metals – If You Still Own This It May Be Worth Selling Prior to an Acquisition Announcement

Chart based progressive global trading strategies, Chart Partners

Thomas Schroeder

Chart based progressive global trading strategies

Chart Partners

Chart Partners objective is to discover medium-term cycle turns and profit opportunities before they unfold, within structural trends while preserving capital with clear degrees of risk. We have real return ideas. 

Markets are dynamic and trading systems must reflect this. It is crucial to determine underlying correlations and lead-lag relationships within global markets and the impact on linked instruments. Our weekly Chartonics product gives you short-term trading strategies that can be applied within the medium and longer term macro trends that are mapped out in our strategy updates. 

Our methodology fuses global market variables and isolates drivers in trends. We specialize in FX, index trade in NY and Asia with a focus on Asian stocks. 

Technical Analysis

<a href="https://www.smartkarma.com/entities/hitachi-metals-ltd" target="_blank" data-smartkarma-citation="entities:8561:1" rel="noopener">Hitachi Metals (5486 JP)</a> has cleared a major barrier from highs that have capped since 2017 and now set for upside acceleration toward projection targets with scope for future upgrades. Volumes are supportive but will need to improve.Breakout above 1,700/1,680 represents a macro degree breakout point for this value play and will now act as pivot support on any pullback attempt.Buy volume has picked up above 1,700 but needs to improve going forward.

Hitachi Metals (5486 JP) has cleared a major barrier from highs that have capped since 2017 and now set for upside acceleration toward projection targets with scope for future upgrades. Volumes are supportive but will need to improve.Breakout above 1,700/1,680 represents a macro degree breakout point for this value play and will now act as pivot support on any pullback attempt.Buy volume has picked up above 1,700 but needs to improve going forward.

Expert on Japan Retail and Consumer Markets, JapanConsuming

Michael Causton

Expert on Japan Retail and Consumer Markets

Real Insight on Japanese Consumer Markets

JapanConsuming

JapanConsuming is a specialist research firm producing intelligence on Japanese retail and consumer markets. Founded in 2000, JapanConsuming has become the leading provider of insights on Japanese retailers and consumer trends to retailers, brands, government agencies and investors. As well as a highly regarded monthly report on the market, JapanConsuming produces in-depth reports on retail sectors, seminars on key trends and telephone consulting to investors on trends and retailers.

JapanConsuming was founded by Michael Causton and Roy Larke. 

Thematic (Sector/Industry)

By 2019, many retailers and brands were already introducing new technology solutions to make up for labour shortages. Despite the crisis, shortages continue to be a major headache in the service sector and the downturn in trading since March has only accelerated efforts to replace staff with tech.This could create new problems as older employees lose their jobs although will also reduce pressure on the labour market and lessen labour shortages in retailing.

By 2019, many retailers and brands were already introducing new technology solutions to make up for labour shortages. Despite the crisis, shortages continue to be a major headache in the service sector and the downturn in trading since March has only accelerated efforts to replace staff with tech.This could create new problems as older employees lose their jobs although will also reduce pressure on the labour market and lessen labour shortages in retailing.

Surge in Calls for Retail Voluntary Redundancies Likely to Continue

Japan

Hitachi Metals Ltd. manufactures a wide range of specialty steel and metal products, including industrial machinery, magnetic and electronic materials and parts, and aluminium castings and wheels.  The Company's products are marketed to a variety of users including the automobile, aerospace, nuclear, and computer industries worldwide.  The Company is a subsidiary of Hitachi, Ltd.

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Hitachi Metals (5486 JP)

Hitachi Ltd. (6501 JP): Buys Kyoto Robotics, Plans to Sell Hitachi Metals

In our estimation, the planned sale of Hitachi Metals and acquisition of Kyoto Robotics are positive for both Hitachi Ltd.'s restructuring and the...

Scott Foster

Hitachi Metals – Limited Upside Despite Bain Capital News But Let’s Find the Offshoot Ideas

A rumoured ¥800bn valuation for Hitachi Metals would offer just 3.2% upside from current prices as we previously warned, but there may be other...

Mio Kato

Hitachi Metals – If You Still Own This It May Be Worth Selling Prior to an Acquisition Announcement

Jiji press has reported that Hitachi was in final talks to sell Hitachi Metals to a consortium headed by either Bain or KKR. We believe this could...

Mio Kato

Hitachi Metals Macro Breakout

Hitachi Metals (5486 JP) has cleared a major barrier from highs that have capped since 2017 and now set for upside acceleration toward projection...

Thomas Schroeder

Surge in Calls for Retail Voluntary Redundancies Likely to Continue

Japan's retail industry has been hit by labour shortages in the last 5 years but layoffs in the industry in the last year could end that, at least...

Michael Causton

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