Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>The Nikkei 225 Annual Review is in September based on end-July data. Jumping the gun, I propose 3 additions and 3 deletions with granular data and details offered per sector.</li>
<li>I see ¥600bn to buy and a funding trade of 99% of that. There are 15+ names with more than 1 day of ADV to sell (funding only).</li>
<li>The impact on Real World Float is non-negligible. One name in particular is deserving of attention. </li>
</ul>


The Nikkei 225 Annual Review is in September based on end-July data. Jumping the gun, I propose 3 additions and 3 deletions with granular data and details offered per sector.
I see ¥600bn to buy and a funding trade of 99% of that. There are 15+ names with more than 1 day of ADV to sell (funding only).
The impact on Real World Float is non-negligible. One name in particular is deserving of attention. 


Nikkei 225 Sep Annual Review Predictions - 3 In, 3 Out

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>SMC 4QFY22 was in-line with consensus revenue estimates at ¥185bn, but missed at the OP level with ¥52.7bn (10% below consensus) in a now familiar pattern for the sector. </li>
<li>The company’s FY23 guidance was strong projecting revenue of ¥805bn (+4.5% vs. consensus) and OP of ¥265bn (+6.9% vs. consensus). </li>
<li>The problem is that this ignores the typical cyclicality for the company and we believe OP will in fact be down YoY.</li>
</ul>


SMC 4QFY22 was in-line with consensus revenue estimates at ¥185bn, but missed at the OP level with ¥52.7bn (10% below consensus) in a now familiar pattern for the sector. 
The company’s FY23 guidance was strong projecting revenue of ¥805bn (+4.5% vs. consensus) and OP of ¥265bn (+6.9% vs. consensus). 
The problem is that this ignores the typical cyclicality for the company and we believe OP will in fact be down YoY.


SMC – Guidance Ignores Potential For Down Cycle

<ul>
<li>
<a href="https://www.smartkarma.com/entities/smc-corp" target="_blank" data-smartkarma-citation="entities:20866:1" rel="noopener">SMC Corp (6273 JP)</a> announced better Q3 and an upward revision to still-below consensus for this year. Consensus is for up-and-to-the-right the next few years (but implied Q4 looks light).</li>
<li>The company raised its dividend so now it is 1% yield.</li>
<li>And the company announced a small but intriguing buyback. If you own the stock or trade in the space, it is worth understanding</li>
</ul>



SMC Corp (6273 JP) announced better Q3 and an upward revision to still-below consensus for this year. Consensus is for up-and-to-the-right the next few years (but implied Q4 looks light).
The company raised its dividend so now it is 1% yield.
And the company announced a small but intriguing buyback. If you own the stock or trade in the space, it is worth understanding


<ul>
<li>SMC’s 3Q revenue of ¥184bn (+4.5% QOQ, +31.3% YoY) OP of ¥57bn continued its strong recent trend. </li>
<li>Reported revenue and OP were 8.0% and 8.3% higher than consensus estimates and drove SMC to revise up FY22 revenue and OP guidance respectively to ¥715bn (+2.1%) and ¥228bn (+4.6%). </li>
<li>The main concern remains a momentum peak, however, and a decline in YoY growth does not help.</li>
</ul>


SMC’s 3Q revenue of ¥184bn (+4.5% QOQ, +31.3% YoY) OP of ¥57bn continued its strong recent trend. 
Reported revenue and OP were 8.0% and 8.3% higher than consensus estimates and drove SMC to revise up FY22 revenue and OP guidance respectively to ¥715bn (+2.1%) and ¥228bn (+4.6%). 
The main concern remains a momentum peak, however, and a decline in YoY growth does not help.


SMC – Consensus Estimates Ignore Potential Down Cycle

<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

Japan

SMC CORPORATION manufactures directional control devices such as power, hand, and air valves.  The Company also produces air filters, cylinders, and actuators along with other pneumatic equipment.  SMC seeks to become a comprehensive maker of automated equipment through the market demand of information and communications products.

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SMC Corp (6273 JP)

Nikkei 225 Sep Annual Review Predictions - 3 In, 3 Out

The September Nikkei 225 Rebal announcement is ~ 6 weeks away. Assuming the current plans go through, I see three adds, three deletes. The adds are...

Travis Lundy

SMC – Guidance Ignores Potential For Down Cycle

SMC guided for YoY growth in revenue but based on historical cyclical patterns we believe it is entirely likely that 3QFY22 was the peak for growth...

Mio Kato

SMC (6273) Buyback - Small Short Sharp

SMC announced Q3 below consensus but raised full-year to still-below consensus, but that creates an implied Q4 dip which is weird. There is also a...

Travis Lundy

SMC – Consensus Estimates Ignore Potential Down Cycle

SMC’s 3Q revenue of ¥184bn (+4.5% QOQ, +31.3% YoY) OP of ¥57bn continued its strong recent trend. The main concern remains a momentum peak,...

Mio Kato

TOPIX-Nikkei Skew Trade Starting to Work Nicely

After initially grinding up slowly but underperforming the Nikkei our suggested skew trade gave up ground during the new year sell off. It is now...

Mio Kato

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