Brief Japan: Continuing Positive Outlook for Last Mile Industrial Real Estate Supports New Financings Globally and more

In this briefing:

1. Continuing Positive Outlook for Last Mile Industrial Real Estate Supports New Financings Globally
2. Asia’s External Balances Signal Safety for Investors
3. Sharp MoM Decline In January Semi WFE Sales Casts A Spanner In Second Half Recovery Works.
4. Smartkarma’s Week That Was in JP/​​​​​​​KR: Aruhi, Rakuten-Lyft, Ecopro BM, & English Annual Reports
5. Another US LNG Project Goes Ahead: Positive for the Contractors; Negative for Others Looking to FID

1. Continuing Positive Outlook for Last Mile Industrial Real Estate Supports New Financings Globally

• We published a series of Insights explaining our positive outlook for the industrial segment of the global Real Estate sector.
• Currently, companies in this segment are capitalizing on strong fundamentals to raise new equity capital. They are using the proceeds from these deals to fund property acquisitions and developments, and to deleverage their balance sheets, thereby setting the stage for continuing growth.
• This trend is especially notable because it is taking place in a range of geographic locations, around the world.

2. Asia’s External Balances Signal Safety for Investors

Asian currencies are, in general, well supported by economic fundamentals in the form of external surpluses and interest rate differentials. Indeed, most Asian currencies display an appreciating bias, contrary to perceptions in 2018 when all of them lost ground to the US dollar. Over the last year the underlying external strength has been reflected in Asian currency appreciation against the US dollar.

3. Sharp MoM Decline In January Semi WFE Sales Casts A Spanner In Second Half Recovery Works.

According to SEMI, North American (NA) WFE sales for January 2019 fell to $1.9 billion, down ~10% sequentially and ~20% YoY. This was an abrupt reversal of the recovery trend implied by the December 2018 sales of $2.1 billion and is the biggest monthly sales YoY decline since June 2013.

Just as declining monthly WFE sales preceded the current semiconductor downturn by some six months, the continuation of December’s MoM WFE decline reversal trend was a prerequisite for a second half recovery in the broader semiconductor sector. With that trend well and truly broken,  we now anticipate a more delayed, gradual and prolonged recovery, one which is now unlikely to materialise until late third, early fourth quarter 2019. 

4. Smartkarma’s Week That Was in JP/​​​​​​​KR: Aruhi, Rakuten-Lyft, Ecopro BM, & English Annual Reports

KOSPI is up 9.4% and Nikkei is up 7.8% YTD. It has been an active first two months of 2019. Many stocks have retraced to the previous resistance levels in November/December 2018. In the past week, the following reports that are relevant for Japan and Korea have received a lot of interest among Smartkarma readers:

• Will Rakuten Get A Near-Term Lyft? 
• Value-Enhancing 5G Spectrum Allocations on the Way for KDDI, DoCoMo, Softbank and Rakuten
• Aruhi Placement – Bigger than the IPO but Good Track Record and Price Performance Should Help
• Nintendo Offering & Buyback: The Import & The Dynamics
• Celltrion Healthcare: Well, We Were Warned
• DHICO (Doosan Heavy) Rights Offer: Conditions & Timetable
• A Trading Strategy for EcoproBM Post IPO
• Korean Stubs Spotlight: Close the Pair Trade Between BGF Co. & BGF Retail

5. Another US LNG Project Goes Ahead: Positive for the Contractors; Negative for Others Looking to FID

US private LNG company Venture Global is starting construction on its 10 million ton per annum (mtpa) US LNG export facility in Louisiana after gaining approval from the US Federal Energy Regulatory Commission (FERC). This is positive for the LNG contractor market and we discuss the companies involved in the project. 

This follows final investment decision taken on Golden Pass (Exxon and Qatar Proceed with US$10bn Golden Pass LNG Terminal: Positive for Chiyoda and MDR US) and supports our thesis of a large wave of new projects that will be sanctioned in the coming months (A Huge Wave of New LNG Projects Coming in the Next 18 Months: Positive for The E&C Companies). This was viewed as a relatively speculative project and with aggressively low cost and timing estimates.