APAC IPOs & Placements

Zhen Zhou, Toh

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.

Equity Capital Markets

Hua Hong Semiconductor / Equity Capital Markets

<p><a href="https://www.smartkarma.com/entities/nec-corp" target="_blank" data-smartkarma-citation="entities:17084:1" rel="noopener">NEC Corp (6701 JP)</a> is looking to sell its entire 7.6% stake in <a href="https://www.smartkarma.com/entities/hua-hong-semiconductor-ltd" target="_blank" data-smartkarma-citation="entities:7201:1" rel="noopener">Hua Hong Semiconductor (1347 HK)</a>. This is a clean-up trade.</p><p>In this note, we will discuss the recent Q4 2020 results from Hua Hong, share our thoughts on deal dynamics, and scores on our ECM framework.</p>

NEC Corp (6701 JP) is looking to sell its entire 7.6% stake in Hua Hong Semiconductor (1347 HK). This is a clean-up trade.In this note, we will discuss the recent Q4 2020 results from Hua Hong, share our thoughts on deal dynamics, and scores on our ECM framework.

Hua Hong Semiconductor Placement - NEC Selling Its 7.6% Stake in Hua Hong

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

<p>Operating profit doubled year-on-year on flat sales in the three months to December due to strong demand for 5G telecom equipment and submarine cable systems, restructuring, and a smaller negative impact from COVID-19.</p><p>New orders increased for the second quarter in a row led by 5G base stations and public infrastructure.</p><p>Management left full-year FY Mar-21 guidance unchanged, implying 36% year-on-year growth in operating profit on a 7% increase in sales in 4Q.</p><p>Sales and profits should continue to rise over the next 2-3 years supported by 5G, the digitalization of government and financial services, the Avaloq acquisition and improvements in the cost structure. </p><p>26% potential upside to our ¥8,000 price target. </p>

Operating profit doubled year-on-year on flat sales in the three months to December due to strong demand for 5G telecom equipment and submarine cable systems, restructuring, and a smaller negative impact from COVID-19.New orders increased for the second quarter in a row led by 5G base stations and public infrastructure.Management left full-year FY Mar-21 guidance unchanged, implying 36% year-on-year growth in operating profit on a 7% increase in sales in 4Q.Sales and profits should continue to rise over the next 2-3 years supported by 5G, the digitalization of government and financial services, the Avaloq acquisition and improvements in the cost structure. 26% potential upside to our ¥8,000 price target. 

NEC (6701 JP): Further Upside After Strong 3Q

<p>Japan's Open RAN 5G solution continues to gain traction.</p><ul>
<li>On December 16, NEC was selected by Telefonica as the system integrator for the first Open RAN pilot system in Germany.</li>
<li>Deutsche Telekom is working with NEC, Fujitsu, Dell, Nokia and others, targeting its first deployment of 4G and 5G Open RAN in 2021.</li>
<li>In late November, Malaysia's Communications and Multimedia Minister Gobind Singh Deo met with NEC, Fujitsu and Rakuten to discuss their 5G proposals.</li>
</ul><p>This follows the announcement of NEC's 5G Open RAN initiatives in the UK and India. <a href="https://www.smartkarma.com/insights/nec-6701-jp-open-ran-center-to-replace-huawei-5g-in-the-uk" target="_blank" data-smartkarma-citation="insights:45536" rel="noopener">NEC (6701 JP): Open RAN Center to Replace Huawei 5G in the UK</a> .</p><p>As for NEC's current business, new orders began to recover in 2Q of FY Mar-21. Sales and profits should follow in 2H, led by the Public Infrastructure and Enterprise segments.</p><p>Our profit forecast brings NEC's projected P/E ratio down to 14x in FY Mar-23, suggesting long-term upside potential of 40% or more. </p>

Japan's Open RAN 5G solution continues to gain traction.
On December 16, NEC was selected by Telefonica as the system integrator for the first Open RAN pilot system in Germany.
Deutsche Telekom is working with NEC, Fujitsu, Dell, Nokia and others, targeting its first deployment of 4G and 5G Open RAN in 2021.
In late November, Malaysia's Communications and Multimedia Minister Gobind Singh Deo met with NEC, Fujitsu and Rakuten to discuss their 5G proposals.
This follows the announcement of NEC's 5G Open RAN initiatives in the UK and India. NEC (6701 JP): Open RAN Center to Replace Huawei 5G in the UK .As for NEC's current business, new orders began to recover in 2Q of FY Mar-21. Sales and profits should follow in 2H, led by the Public Infrastructure and Enterprise segments.Our profit forecast brings NEC's projected P/E ratio down to 14x in FY Mar-23, suggesting long-term upside potential of 40% or more. 

NEC (6701 JP): Japan's Open RAN a Growing Alternative to Huawei

Telco/Internet specialist

Kirk Boodry

Redex Research

Thematic (Sector/Industry)

<p style="text-align: justify;">A new era in the Japanese telecom sector has arrived. If the Abe era was defined by better corporate governance and improved returns to shareholders, with Prime Minister Suga the focus may be shifting to national industrial policy. Reports from the <a href="https://www.nikkei.com/article/DGXMZO66833950Q0A131C2MM8000" target="_blank" rel="noopener">Nikkei</a> that DoCoMo will cut prices for high end plans by c. 50% are disruptive and deliver a political win for the current government just as NTT prepares to argue in front of the Ministry of Internal Affairs and Communications (MIC, the regulator) for deeper integration of its mobile and ICT businesses. </p><p style="text-align: justify;">Accelerated concerns from competitors in the wake of NTT’s acquisition of DoCoMo minorities makes a lot more sense now as the possibility that the MIC could decide cooperation with NTT to lower mobile prices is as effective as support for MVNOs and Rakuten. Winners include the government, NEC and (possibly) Apple whilst mobile operators get the short end of the stick. In particular, Rakuten looks fragile as its disruptive ¥2,980/month price point has been matched by Japan’s largest mobile operator less than a year after it launched service. </p>

A new era in the Japanese telecom sector has arrived. If the Abe era was defined by better corporate governance and improved returns to shareholders, with Prime Minister Suga the focus may be shifting to national industrial policy. Reports from the Nikkei that DoCoMo will cut prices for high end plans by c. 50% are disruptive and deliver a political win for the current government just as NTT prepares to argue in front of the Ministry of Internal Affairs and Communications (MIC, the regulator) for deeper integration of its mobile and ICT businesses. Accelerated concerns from competitors in the wake of NTT’s acquisition of DoCoMo minorities makes a lot more sense now as the possibility that the MIC could decide cooperation with NTT to lower mobile prices is as effective as support for MVNOs and Rakuten. Winners include the government, NEC and (possibly) Apple whilst mobile operators get the short end of the stick. In particular, Rakuten looks fragile as its disruptive ¥2,980/month price point has been matched by Japan’s largest mobile operator less than a year after it launched service. 

Japan Telecom Sector: DoCoMo Move Is More than a Price Reduction

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

<section class="figure"><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/175/629/original/2020-12-01_06-32-57.png?1606771992" class="editor-image img-responsive" data-smartkarma-image-id="175629"></figure></section><p><strong>FOUR QUADRANTS </strong>- By combining our two scoring methodologies - the Relative Price Score (RPS) and the Results &amp; Revision Score (RRS), we can assign companies into four quadrants:-</p></section><div><ul style="list-style-type: disc;">
<li>
<strong>CONTRARIAN BUYS </strong>- Low Results &amp; Revision and Relative Price Scores</li>
<li>
<strong>CONTRARIAN SELLS </strong>- High Results &amp; Revision and Relative Price Scores</li>
<li>
<strong>TURNAROUND BUYS </strong>- High Results &amp; Revision Scores &amp; low Relative Price Scores</li>
<li>
<strong>EX-GROWTH</strong><strong>SELLS</strong> - Low Results &amp; Revision Scores &amp; high Relative Price Scores</li>
</ul></div><div>
<p>Turnaround Buys are quite rare but tend to offer reasonable upside for relatively low risk. Examples from 2020 include <a href="https://www.smartkarma.com/entities/lixil-group-corp" target="_blank" data-smartkarma-citation="entities:454:1" rel="noopener">Lixil (5938 JP)</a> and <a href="https://www.smartkarma.com/entities/nec-corp" target="_blank" data-smartkarma-citation="entities:17084:1" rel="noopener">NEC (6701 JP)</a>.</p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/175/110/original/2020-11-30_09-39-21.png?1606696981" class="editor-image img-responsive" data-smartkarma-image-id="175110"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/175/111/original/2020-11-30_09-43-17.png?1606697029" class="editor-image img-responsive" data-smartkarma-image-id="175111"></figure></section><p><strong><a href="https://www.dropbox.com/s/7b61jl02dh0pzno/2020-11-25_12-43-55.png?dl=0" target="_blank" rel="noopener">TURNAROUND BUYS</a> -</strong> In the<strong> DETAIL </strong>section below, we shall review the current 'crop' of Turnaround Buys. The last Insight in this mini-series will look at Ex-Growth Sells before concluding with one '2021 High Conviction' recommendation. The first two Insights in the Series can be found at - <a href="https://www.smartkarma.com/insights/japan-four-quadrants-contrarian-buys" target="_blank" data-smartkarma-citation="insights:45688" rel="noopener">Contrarian Buys </a>and <a href="https://www.smartkarma.com/insights/japan-four-quadrants-contrarian-sells" target="_blank" data-smartkarma-citation="insights:45725" rel="noopener">Contrarian Sells</a>.  </p>
</div>

FOUR QUADRANTS - By combining our two scoring methodologies - the Relative Price Score (RPS) and the Results &amp; Revision Score (RRS), we can assign companies into four quadrants:-

CONTRARIAN BUYS - Low Results &amp; Revision and Relative Price Scores

CONTRARIAN SELLS - High Results &amp; Revision and Relative Price Scores

TURNAROUND BUYS - High Results &amp; Revision Scores &amp; low Relative Price Scores

EX-GROWTHSELLS - Low Results &amp; Revision Scores &amp; high Relative Price Scores

Turnaround Buys are quite rare but tend to offer reasonable upside for relatively low risk. Examples from 2020 include Lixil (5938 JP) and NEC (6701 JP).
TURNAROUND BUYS - In the DETAIL section below, we shall review the current 'crop' of Turnaround Buys. The last Insight in this mini-series will look at Ex-Growth Sells before concluding with one '2021 High Conviction' recommendation. The first two Insights in the Series can be found at - Contrarian Buys and Contrarian Sells.  


🇯🇵 JAPAN • Four Quadrants - Turnaround Buys

Japan

Canon Inc. is a professional and consumer imaging solutions company and patent-holder of digital imaging technologies. The Company's products include networked multifunction devices, digital and analog copiers, computer peripherals, facsimile machines, image filing systems, camcorders, cameras and lenses, semiconductor, and broadcast and medical equipment.

FUJIFILM Holdings Corporation develops, sells and services Imaging, Information, and Document Solutions.  Its products include color films, digital cameras, photofinishing products and equipment.  The Group also manufactures medical and graphic art use equipment and materials, FPD materials, and optical devices, and provides services on office copy machines, printers, and related equipment.

BROTHER INDUSTRIES, LTD. manufactures and markets communications and office equipment.  The Company's main products include facsimiles, digital copy machines, label printers, and word processors.  Brother Industries also manufactures and sells sewing machines and other tools.  The Company operates its business worldwide.

RICOH COMPANY, LTD. manufactures and markets office automation equipment, electronic devices, and photographic instruments.  The Company's diverse product line includes facsimiles, image scanners, printers, digital cameras, and personal computers, as well as a full range of analog, digital, and color copiers. Ricoh operates with a network of sales offices and tie-ups worldwide.

Seiko Epson Corporation manufactures communications equipment, electronic devices, and precision products.  The Company's products include printers, scanners, Liquid Crystal Projectors, semiconductors, quartz devices, and watches.

Konica Minolta Inc is mainly engaged in manufacturing office equipment and performance materials. It also operates health care businesses. The Company also makes copiers, personal computer peripherals, optical lenses, and measuring instruments.

Noritsu Koki Co., Ltd. manufactures various photo processors.  The Company specializes in high-speed mini-photo processing lab systems.  Noritsu Koki also produces OEM (original equipment manufacturer) supply for Kodak and Konica.

MCJ Co., Ltd. manufactures and markets personal computers and its related products.  The Company provides desktop and laptop computers, computer memories, printers, and hard drives.

TOSHIBA TEC CORPORATION manufactures electronic equipment for distribution system, document processing, and household use.  The Company's products include Point of Sale (POS) systems, bar code scanners, copy machines, printers, and vacuum cleaners.

ELECOM CO., LTD. designs, manufactures, and markets computer peripherals, supplies, and accessories.  The Company offers a diverse range of products including adapters, cables, switches, local area network (LAN) devices, paper, keyboard covers, and chairs.

Western Digital Corporation is a global provider of solutions for the collection, storage, management, protection and use of digital content, including audio and video. The Company's products include hard drives, solid-state drives, and home entertainment and networking products.

Wistron Corporation manufactures and markets notebook computers, personal computers, and other related information products.

Quanta Computer Inc. manufactures and markets notebook computers and related peripheral equipment.

HP Inc. provides imaging and printing systems, computing systems, mobile devices, solutions, and services for business and home. The Company offers products which includes laser and inkjet printers, scanners, copiers and faxes, personal computers, workstations, storage solutions, and other computing and printing systems. HP sells its products worldwide.

Advantech Co., Ltd. manufactures and markets embedded personal computers (PC), network computing products, industrial automation products, and panel PCs.

Seagate Technology Holdings Public Limited Company offers computer hardware products. The Company designs, manufactures, and markets hard disk drives for enterprise applications, client compute applications, client non-compute applications, personal data backup systems, portable external storage systems and digital media systems.

Asustek Computer Inc. manufactures and markets computer motherboards, interface cards, notebook computers, and other related products.

Lenovo Group Limited, through its subsidiaries, sells, and manufactures personal computers and handheld devices. The Company also provides Internet services and IT services, and contracting manufacturing business.

Focus Media Information Technology Co., Ltd. engages in media network for advertisements including within cinemas, posters and advertising displays in commercial offices or buildings.

Focus Media Information Technology Co, Ltd. (002027 CH)

Focus Media Information Technology Co, Ltd.

NetApp, Inc. provides storage and data management solutions. The Company's storage solutions include specialized hardware, software, and services that provide storage management for open network environments. NetApp  serves enterprises, government agencies, and universities worldwide.

NEC Corporation manufactures and markets computers, telecommunication equipment, electronic devices, semiconductors, and software.  The Company's products include printers, modems, cellular phones, plasma display panels (PDP), network systems, memory, integrated circuits (IC), thin film transistor-liquid crystal display (TFT-LCD), and printed circuit boards (PCB). NEC operates worldwide.

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NEC Corp (6701 JP)

Hua Hong Semiconductor Placement - NEC Selling Its 7.6% Stake in Hua Hong

NEC Corp (6701 JP) is looking to sell its entire 7.6% stake in Hua Hong Semiconductor (1347 HK). This is a clean-up trade.

Zhen Zhou, Toh

NEC (6701 JP): Further Upside After Strong 3Q

Operating and net profit more than doubled YoY in 3Q due to strong demand for 5G telecom equipment, restructuring and other factors that should...

Scott Foster

NEC (6701 JP): Japan's Open RAN a Growing Alternative to Huawei

New opportunities in Germany and Malaysia expand the potential for Japanese Open RAN telecom technology beyond Rakuten and the UK. NEC is likely to...

Scott Foster

Japan Telecom Sector: DoCoMo Move Is More than a Price Reduction

If the Abe era for telcos was defined by better corporate governance and improved returns to shareholders, with Prime Minister Suga the focus may...

Kirk Boodry

🇯🇵 JAPAN • Four Quadrants - Turnaround Buys

Turnaround Buys are quite rare but tend to offer reasonable upside for relatively low risk. Examples from 2020 include Lixil (5938 JP) and NEC...

Campbell Gunn

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