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.

Equity Bottom-Up

<ul>
<li>MMC results beat with revenue at ¥623bn (+4.2% vs. consensus) and OP of ¥31.4bn (+38.4% vs. consensus). </li>
<li>FY23 guidance was also above consensus with revenue of ¥2,290bn (+1.6% vs. consensus at +% YoY) and OP of ¥90bn (+4.7% vs. consensus). </li>
<li>We believe OP guidance is somewhat conservative as volume growth and a weak yen should more than offset raw material costs.</li>
</ul>


MMC results beat with revenue at ¥623bn (+4.2% vs. consensus) and OP of ¥31.4bn (+38.4% vs. consensus). 
FY23 guidance was also above consensus with revenue of ¥2,290bn (+1.6% vs. consensus at +% YoY) and OP of ¥90bn (+4.7% vs. consensus). 
We believe OP guidance is somewhat conservative as volume growth and a weak yen should more than offset raw material costs.


Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>On Friday, a Bloomberg article suggested <a href="https://www.smartkarma.com/entities/renault-sa" target="_blank" data-smartkarma-citation="entities:21536:1" rel="noopener">Renault SA (RNO FP)</a> is considering selling some of its 43% stake in <a href="https://www.smartkarma.com/entities/nissan-motor-co-ltd" target="_blank" data-smartkarma-citation="entities:72:1" rel="noopener">Nissan Motor (7201 JP)</a> to help fund its efforts in EVs.</li>
<li>Sources were "people familiar with the matter." Since 2018, Bloomberg and Les Echos have been the outlets which do "scoops" on the Renault/Nissan relationship, but they are not always right.</li>
<li>However, it raises some interesting questions and possibilities. And given the prices, it makes the decision somewhat uncomfortable for both. </li>
</ul>


On Friday, a Bloomberg article suggested Renault SA (RNO FP) is considering selling some of its 43% stake in Nissan Motor (7201 JP) to help fund its efforts in EVs.
Sources were "people familiar with the matter." Since 2018, Bloomberg and Les Echos have been the outlets which do "scoops" on the Renault/Nissan relationship, but they are not always right.
However, it raises some interesting questions and possibilities. And given the prices, it makes the decision somewhat uncomfortable for both. 


Renault (RNO FP) To Sell Nissan (7201 JP) Shares? Not Yet, and Not Yet Positive Nissan.

<ul>
<li>The Nikkei is now down 9.57% vs. when we first recommended our skew trade (now up 0.40%). </li>
<li>Despite some frustrating idiosyncratic moves which have prevented the skew trade from outperforming more it has mostly held up. </li>
<li>Looking forward, we believe it is worthwhile assessing upside and downside macro risks for the components of the trade.</li>
</ul>


The Nikkei is now down 9.57% vs. when we first recommended our skew trade (now up 0.40%). 
Despite some frustrating idiosyncratic moves which have prevented the skew trade from outperforming more it has mostly held up. 
Looking forward, we believe it is worthwhile assessing upside and downside macro risks for the components of the trade.


TOPIX-Nikkei Skew Trade – Updates Factoring in Ukraine

<ul>
<li>After initially grinding up slowly but underperforming the Nikkei our suggested skew trade gave up ground during the new year sell off.</li>
<li>It did so slowly, however and was outperforming Nikkei when last we checked despite being down slightly. </li>
<li>Thankfully, a lot of the idiosyncratic volatility hurting the skew trade has reversed now and it is positive and outperforming Nikkei consistently.</li>
</ul>


After initially grinding up slowly but underperforming the Nikkei our suggested skew trade gave up ground during the new year sell off.
It did so slowly, however and was outperforming Nikkei when last we checked despite being down slightly. 
Thankfully, a lot of the idiosyncratic volatility hurting the skew trade has reversed now and it is positive and outperforming Nikkei consistently.


TOPIX-Nikkei Skew Trade Starting to Work Nicely

<ul>
<li>MMC reported its 3QFY22 results on 31st January which saw revenues of ¥526bn (+14.6% QoQ, +39.1% YoY) and OP of ¥30.8bn. </li>
<li>Revenue was in-line, only 0.3% higher than consensus estimates while OP beat consensus estimates by ¥15bn thanks to the 5.9% OPM. </li>
<li>The result bodes well for the auto sector overall but weak top line and a dependence on forex have us going… meh.</li>
</ul>


MMC reported its 3QFY22 results on 31st January which saw revenues of ¥526bn (+14.6% QoQ, +39.1% YoY) and OP of ¥30.8bn. 
Revenue was in-line, only 0.3% higher than consensus estimates while OP beat consensus estimates by ¥15bn thanks to the 5.9% OPM. 
The result bodes well for the auto sector overall but weak top line and a dependence on forex have us going… meh.


Japan

MITSUBISHI MOTORS CORPORATION develops and manufactures passenger cars and its related parts.  The Company has production facilities in Japan, the US, and Thailand.  Mitsubishi Motors Corp provides vehicle-related financing and leasing service through its subsidiary.

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