Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/renesas-electronics-corp" target="_blank" data-smartkarma-citation="entities:15933:1" rel="noopener">Renesas Electronics (6723 JP)</a> on 8 February 2021 announced that they had signed an agreement to acquire <a href="https://www.smartkarma.com/entities/dialog-semiconductor-plc-664a1f83-2a21-4690-a91f-fb971832e7ad" target="_blank" data-smartkarma-citation="entities:21607:1" rel="noopener">Dialog Semiconductor (DLG GR)</a> for an equity value of €4.9bn. The company on the same day <a href="https://www.renesas.com/eu/en/about/press-room/notice-concerning-filing-shelf-registration-statement-issuance-new-shares" target="_blank" rel="noopener">announced</a> a shelf registration to issue up to ¥270bn of shares to pay for the deal.<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/211/854/original/Screenshot+2021-06-08+at+10.38.41+AM.png?1623120032" class="editor-image img-responsive" data-smartkarma-image-id="211854"></figure></section>Renesas shares fell on the news, bounced, then fell, and have traded in a range of ¥1,100-1,300/share since then. In the interim (it will take until the end of 2021 to get the Dialog deal past foreign review boards and anti-trust regulators), the company experienced <a href="https://www.renesas.com/eu/en/node/1509341" target="_blank" rel="noopener">a fire at its Naka Factory</a> which will cost a ¥24bn impact in H1, there is an ongoing global chip shortage affecting both semiconductor makers and their customers, and the end of May saw the company finally <a href="https://www.renesas.com/eu/en/about/press-room/renesas-announces-issuance-new-shares-and-secondary-offering-shares" target="_blank" rel="noopener">announce</a> its equity offering - large at nearly US$4bn. This seemed like an overhang, but has ended up not being so much of one.The interim period, while showing a sideways trend for Renesas, saw its Peers outperform dramatically. The announcement of the equity offering and its size looked like it would present significant overhang. It has not turned out to be the case. There has been a "buy the news" reaction. It is a big offering. There are a bunch of moving parts. And lots of index flow.

Renesas Electronics (6723 JP) on 8 February 2021 announced that they had signed an agreement to acquire Dialog Semiconductor (DLG GR) for an equity value of €4.9bn. The company on the same day announced a shelf registration to issue up to ¥270bn of shares to pay for the deal.Renesas shares fell on the news, bounced, then fell, and have traded in a range of ¥1,100-1,300/share since then. In the interim (it will take until the end of 2021 to get the Dialog deal past foreign review boards and anti-trust regulators), the company experienced a fire at its Naka Factory which will cost a ¥24bn impact in H1, there is an ongoing global chip shortage affecting both semiconductor makers and their customers, and the end of May saw the company finally announce its equity offering - large at nearly US$4bn. This seemed like an overhang, but has ended up not being so much of one.The interim period, while showing a sideways trend for Renesas, saw its Peers outperform dramatically. The announcement of the equity offering and its size looked like it would present significant overhang. It has not turned out to be the case. There has been a "buy the news" reaction. It is a big offering. There are a bunch of moving parts. And lots of index flow.

Renesas Equity Offering - Priced To Go With Index Demand Now and Later

Semiconductors, Memory and SSDs Specialist, Objective Analysis

Jim Handy

Semiconductors, Memory and SSDs Specialist

Objective Analysis

Objective Analysis offers third-party independent market research and data for the semiconductor industry and investors in the semiconductor industry.

Semiconductors, Memory and SSDs

Thematic (Sector/Industry)

While March semiconductor revenues reached record levels, a price downturn appears to have begun.  This downturn seems likely to have a short duration before the market resumes its good growth for the rest of the year.

While March semiconductor revenues reached record levels, a price downturn appears to have begun.  This downturn seems likely to have a short duration before the market resumes its good growth for the rest of the year.

The SIA released its semiconductor figures for January - sales were up 13.2% over January of 2020 and 0.9% over a record December.  The year is off to a good start, despite COVID issues, shortages, earthquakes, and extreme weather.

The SIA released its semiconductor figures for January - sales were up 13.2% over January of 2020 and 0.9% over a record December.  The year is off to a good start, despite COVID issues, shortages, earthquakes, and extreme weather.

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.

Automakers are starting to struggle with chip shortages as the Nikkei reports <a href="https://asia.nikkei.com/Business/Automobiles/Global-chip-shortage-threatens-automakers-worldwide" target="_blank" rel="noopener">here</a>, <a href="https://asia.nikkei.com/Business/Automobiles/Nissan-to-cut-car-production-due-to-lack-of-chips" target="_blank" rel="noopener">here</a> and <a href="https://asia.nikkei.com/Business/Automobiles/Honda-cuts-car-production-on-massive-chip-shortage" target="_blank" rel="noopener">here</a>. This is an extension of a broad chip shortage globally as WFH demand, the launch of new consoles, GPUs and CPUs and rapidly recovering auto sales pour some short-term fuel on the long-term fire of expanding electrification and digitalisation. No wonder then that TSMC is up 134% from its March lows, but Renesas is up an even more impressive 248% since its lows of 2020 and could continue to outperform.

Automakers are starting to struggle with chip shortages as the Nikkei reports here, here and here. This is an extension of a broad chip shortage globally as WFH demand, the launch of new consoles, GPUs and CPUs and rapidly recovering auto sales pour some short-term fuel on the long-term fire of expanding electrification and digitalisation. No wonder then that TSMC is up 134% from its March lows, but Renesas is up an even more impressive 248% since its lows of 2020 and could continue to outperform.

Renesas – Auto Chip Shortage Could Drive Further Gains

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

Our outlook remains bullish and we continue to believe that the path of least resistance is higher for global equities. We see global equities as being in a goldilocks scenario where market dynamics and technicals are arguably 100% bullish. Of course, at some point this almost too good to be true scenario is likely to result in a pullback, but for now we see no signs of this rally letting up.  In our December International Strategy, we highlight areas of the market where we see actionable opportunities in Technology, Consumer Discretionary, Materials and Manufacturing.

Our outlook remains bullish and we continue to believe that the path of least resistance is higher for global equities. We see global equities as being in a goldilocks scenario where market dynamics and technicals are arguably 100% bullish. Of course, at some point this almost too good to be true scenario is likely to result in a pullback, but for now we see no signs of this rally letting up.  In our December International Strategy, we highlight areas of the market where we see actionable opportunities in Technology, Consumer Discretionary, Materials and Manufacturing.

Global Equity Strategy: Bullish Outlook Intact

Switzerland

STMicroelectronics N.V. designs, develops, manufactures, and markets semiconductor integrated circuits and discrete devices. The Company's products are used in the telecommunications, consumer electronics, automotive, computer, and industrial sectors. Geographically, customers are located in North America, Europe, and the Asia Pacific region.

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STMicroelectronics NV (STM IM)

Renesas Equity Offering - Priced To Go With Index Demand Now and Later

Renesas will offer up to 373mm shares or what should be ~$4bn of new and used stock. Pricing (with pushing and shoving before) should be 9 June....

Travis Lundy

March Semiconductor Sales Up Yet Again

The SIA reported very positive semiconductor revenues for the first quarter, but leading indicators show that a correction has begun. This Insight...

Jim Handy

January Semiconductors Up 13.2% Y/Y

Semiconductor revenues broke records in both December and January, and the business seems poised to continue to fare very well over 2021. This...

Jim Handy

Renesas – Auto Chip Shortage Could Drive Further Gains

Renesas could continue to outperform despite a 248% rally from its 2020 lows as automotive electrification joins work from home demand to create a...

Mio Kato

Global Equity Strategy: Bullish Outlook Intact

Our outlook remains bullish and we continue to believe that the path of least resistance is higher for global equities. In this report, we...

Vermilion Research

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