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

<a href="https://www.smartkarma.com/entities/752" target="_blank" data-smartkarma-citation="entities:752:1">Fanuc Corp (6954 JP)</a> shocked markets last Thursday by forecasting a 34% drop in OP, together with somewhat underwhelming results. Consensus forecasts prior to the announcement were calling for roughly 9% OP growth vs. the company's results, so this clearly took everyone by surprise. Even we were quite surprised by the extent of the forecast decline even though we have been warning of the potential of a cyclical top since the middle of last year. The stock initially opened down 13.5% on Friday…

Fanuc Corp (6954 JP) shocked markets last Thursday by forecasting a 34% drop in OP, together with somewhat underwhelming results. Consensus forecasts prior to the announcement were calling for roughly 9% OP growth vs. the company's results, so this clearly took everyone by surprise. Even we were quite surprised by the extent of the forecast decline even though we have been warning of the potential of a cyclical top since the middle of last year. The stock initially opened down 13.5% on Friday…

Factory Automation Earnings: Is the Fanuc Shock for Real?

Thematic (Sector/Industry)

Factory automation names are down today (Yaskawa -2.5%, Fanuc -3.2%, Nabtesco -2.4%, Harmonic Drive -4.9%, Omron -1.8%, Keyence -3.0%, SMC -1.3%, THK -3.5%, Nippon Thomson -1.7%) following continued news flow regarding additional tariffs on China. Surprisingly, machine tool names (Makino Milling +1.2%, DMG Mori +2.4%, Okuma -0.6% and Toshiba Machine +0.5%) are taking this much better. Or perhaps it's not so surprising given the PE valuations:<ul>
<li>Yaskawa - 25x</li>
<li>Fanuc - 25x</li>
<li>Nabtesco - 21x</li>
<li>Harmonic Drive -…</li>
</ul>

Factory automation names are down today (Yaskawa -2.5%, Fanuc -3.2%, Nabtesco -2.4%, Harmonic Drive -4.9%, Omron -1.8%, Keyence -3.0%, SMC -1.3%, THK -3.5%, Nippon Thomson -1.7%) following continued news flow regarding additional tariffs on China. Surprisingly, machine tool names (Makino Milling +1.2%, DMG Mori +2.4%, Okuma -0.6% and Toshiba Machine +0.5%) are taking this much better. Or perhaps it's not so surprising given the PE valuations:
Yaskawa - 25x
Fanuc - 25x
Nabtesco - 21x
Harmonic Drive -…


Kawasaki Heavy Industries / Equity Bottom-Up

KHI has positioned its aerospace and aero engine businesses as their biggest growth driver over the medium-term. Revenue and margins should be propelled by expanding production for the 787 and eventually the 777X on the civilian side while we also believe there is upside from overseas sales of the company P-1 maritime patrol aircraft and C-2 transport aircraft as well as a potential civilian cargo derivative of the C-2. Aero engines should be supported by expanding MRO business for the venerable…

KHI has positioned its aerospace and aero engine businesses as their biggest growth driver over the medium-term. Revenue and margins should be propelled by expanding production for the 787 and eventually the 777X on the civilian side while we also believe there is upside from overseas sales of the company P-1 maritime patrol aircraft and C-2 transport aircraft as well as a potential civilian cargo derivative of the C-2. Aero engines should be supported by expanding MRO business for the venerable…

Geared High-Bypass Turbofans Key to Aero Engine Efficiency Improvements

We visited Yaskawa last week to find the company in healthy spirits and with a strong outlook for next year. We have been concerned since the end of last year about high valuations, a large (unsustainable?) increase in margins this year and a deceleration in China posing downside risks. After our visit, we feel momentum on the servomotor side may be healthier than the surface picture from the company's order disclosures. The momentum on the AC drive/inverter side is also strong with US…

We visited Yaskawa last week to find the company in healthy spirits and with a strong outlook for next year. We have been concerned since the end of last year about high valuations, a large (unsustainable?) increase in margins this year and a deceleration in China posing downside risks. After our visit, we feel momentum on the servomotor side may be healthier than the surface picture from the company's order disclosures. The momentum on the AC drive/inverter side is also strong with US…

Increasingly Positive on Robots and Inverters, Hoping for a Servomotor Hiccup to Buy on a Dip

Founder and Strategist, Entext Economics & Strategy

Sean Maher

Founder and Strategist

Entext Economics & Strategy

Entext provides institutional investors with distinctive, actionable asset allocation and thematic research, which typically challenges the market consensus. Our clients range from credit, equity and multi-asset hedge and pension funds to family offices and sovereign funds. 
 
We focus on identifying key inflection points in macro data and relative asset performance amid the 'groupthink'  and confirmation bias that characterizes most investment bank analysis.

Macro Driven Investment Insight

<ul>
<li>The huge investment being made in autonomous vehicles will dramatically boost the use of robots in new sectors, as sensors such as Lidar give them real-time awareness of their environment.</li>
<li>Japan still dominates the industry and even as local Chinese brands benefit from state support, most value add in the form of actuators, servos and other key components will have to imported.</li>
<li>Amazon which has integrated Kiva, Midea which now owns Kuka, Honda which has teamed with SenseTime and UK online…</li>
</ul>


The huge investment being made in autonomous vehicles will dramatically boost the use of robots in new sectors, as sensors such as Lidar give them real-time awareness of their environment.
Japan still dominates the industry and even as local Chinese brands benefit from state support, most value add in the form of actuators, servos and other key components will have to imported.
Amazon which has integrated Kiva, Midea which now owns Kuka, Honda which has teamed with SenseTime and UK online…


Online Retail Boom and Autonomous Car Sensors Transforming Robotics…

Japan

Nabtesco Corporation manufactures Aircraft and Hydraulic products, Precision equipment, and transportation equipment. The Company's products include landing gear system for aircrafts, railroad vehicle brake system, and precision reduction gears for industrial robots.

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Nabtesco (6268 JP)

Factory Automation Earnings: Is the Fanuc Shock for Real?

Fanuc Corp (6954 JP) shocked markets last Thursday by forecasting a 34% drop in OP, together with somewhat underwhelming results. Consensus...

Mio Kato

Factory Automation and Trade Wars

Factory automation names are down today (Yaskawa -2.5%, Fanuc -3.2%, Nabtesco -2.4%, Harmonic Drive -4.9%, Omron -1.8%, Keyence -3.0%, SMC -1.3%,...

Mio Kato

Geared High-Bypass Turbofans Key to Aero Engine Efficiency Improvements

KHI has positioned its aerospace and aero engine businesses as their biggest growth driver over the medium-term. Revenue and margins should be...

Mio Kato

Increasingly Positive on Robots and Inverters, Hoping for a Servomotor Hiccup to Buy on a Dip

We visited Yaskawa last week to find the company in healthy spirits and with a strong outlook for next year. We have been concerned since the end...

Mio Kato

Online Retail Boom and Autonomous Car Sensors Transforming Robotics…

The huge investment being made in autonomous vehicles will dramatically boost the use of robots in new sectors, as sensors such as Lidar give them...

Sean Maher

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