In this briefing:
- 2018 Was Not the Year for Value or Beta Names in Japan….
- Universal, SegaSammy & Dynam Sit Best Positioned Among Japan Companies in Race for IR Partnerships
- Global Markets Deteriorating…Except EM
- BAUTO (BAUTO MK): New Models to Keep Strong Sales Momentum
- Korean Government and Hyundai Motor Group’s Grand Ambitions to Expand Hydrogen Fuel Cell Vehicles
1. 2018 Was Not the Year for Value or Beta Names in Japan….
We looked back and identified which factors drove the Japanese market in 2018. We found that Value, which is historically strong in Japan, did poorly and really the only investment styles/factors that did well were large-cap and names with a high percent of retail investors.
2. Universal, SegaSammy & Dynam Sit Best Positioned Among Japan Companies in Race for IR Partnerships
- We’ve reviewed 10 companies in the sector. Of those, three are the consensus favorites of our Tokyo based panel of industry, financial and economics observers of the IR initiative over many years.
- Based on pachinko alone, the stocks of these companies are fully valued. Based on potential tailwind from a license award within 6 months, they could be vastly undervalued.
- Each of the three noted here brings strength to a bid less based on financials than corporate focus, outlook and experience in the field.
3. Global Markets Deteriorating…Except EM
With U.S. markets stumbling, the MSCI ACWI index is breaking down to new lows: defensive Sectors remain attractive. Relative to MSCI ACWI however, emerging markets are the place to be. China, Brazil, Hungary, Qatar, India, Poland, and Indonesia all display positive price and/or RS trends. In this report we recap technical important levels on all major indexes and highlight attractive stocks within Real Estate, Health Care/Pharma, Precious Metals Mining, and Utilities.
4. BAUTO (BAUTO MK): New Models to Keep Strong Sales Momentum
- Improving asset turnover, relatively strong analyst recommendations, and slow asset growth relative to its sector
- New launches in FY2019-20 e.g. CX-3 facelift and 7-seat SUV CX-8 should stimulate sales going forward. Sales were up by 24% in 1QFY19 YoY
- Equity income from JV with Mazda Motor (7261 JP) should increase as production volume ramps up to meet strong ASEAN demand. Production up by 40% YoY in FY2018
- Attractive at a 19CE* 0.4 PEG ratio versus ASEAN Consumer Discretionary at a PEG of 0.9 and BAUTO is net cash
- Risks: Regulations and sluggish consumer demand, FX risk JPY and PHP
* Consensus Estimates
5. Korean Government and Hyundai Motor Group’s Grand Ambitions to Expand Hydrogen Fuel Cell Vehicles
- On December 18th, the Korean government announced numerous measures to reduce fine dust levels, including a significant increase in the number of hydrogen powered vehicles, including expanding hydrogen vehicles to 65,000 units by 2022 (cumulative).
- The Korean government wants to encourage the growth of hydrogen powered economy and position the country as one of the global leaders in this segment. The Korean government plans to spend about 3.5 trillion won to support the Korean auto industry. The Korean government’s new plan is to expand the hydrogen vehicles to 65,000 units by 2022, which is a big increase from the previous plan of expanding the hydrogen vehicles to 15,000 units by 2022.
- The Hyundai Motor Group also recently announced a grand plan to expand its fuel cell vehicles with the announcement of its ‘FCEV Vision 2030.’ The Hyundai Motor Group plans to increase its annual production capacity for fuel cell systems to 0.7 million units by 2030, with plans to invest about $7 billion in the next 10 years to develop hydrogen fuel cell systems.