Japan/Asia Long-Short, LightStream Research

Mio Kato

Over 15 years analysing Japanese and Asian stocks from a long/short perspective

I focus on cyclically driven sectors such as Gaming, Factory Automation and Autos

An eclectic background as a long-short analyst, upper management at a financial data startup through its listing, and as the founder of a team analysing big/alternative data, all of which supports independent and differentiated views... we hope

An appreciation for Mathematics drives the development of a "Micro-Quantamental" process which can provide a data-driven, historically-informed and semi-automated foundation upon which to layer more qualitative and judgemental analysis, thus improving investment decision-making speed and accuracy

Japan/Asia Long-Short

Volkswagen’s TRATON to Dual List Just to Provide VW with Financial Flexibility (PART 1)

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 Capital Markets

<h2>TRATON (Part 2- Financial Outlook and Valuation):</h2><p>In our earlier report, we covered TRATON’s background, its business model, the growth prospects and risks it faces in the market. We concluded that the company has good long-term growth prospects with an attractive business model, although the IPO itself does not look especially attractive. This insight covers the financial performance and position of the company and its valuation based on …</p><ul>
<li>Revenue is likely to grow strongly over the next three years given the expected move towarsss the peak in demand for trucks across its key markets of operation.</li>
<li>Scania, as the premium brand, should remain a stable but modest revenue growth driver. VWCO is expected to witness double-digit growth in revenue supported by the increasing growth in sales volumes in emerging markets, while Man aims to turn around its operations with a refresh of its aging product lineup.</li>
<li>Profitability will be generated primarily from Scania. Man should improve profitability in FY19 simply through the drop out of one-off restructuring expenses. VWCO is likely to remain a weak contributor to profitability despite an attractive top line growth outlook and matching the margins of Scania and MAN is likely to take considerable time period.</li>
<li>TRATON’s financial position looks quite strong even before the IPO. Additional finance via an equity issue would have put Traton in a strong position to expand its scale through M&amp;A, but since the IPO is purely secondary shares this will not come to be. Instead, Traton will neither strengthen its balance sheet nor gain independence, leaving it and minority investors in a rather uninteresting position.</li>
<li>While we feel the quality of Scania should imply a premium vs. other truck manufacturers and the brand accounts for 75% of OP, ultimately this still does not justify what we calculate as an 11x EV/OP multiple when peers are trading at an average of 8.1x. Traton appears to be priced at mid-cycle multiples while the market is pricing peers for a peak in the cycle.</li>
</ul>

TRATON (Part 2- Financial Outlook and Valuation):In our earlier report, we covered TRATON’s background, its business model, the growth prospects and risks it faces in the market. We concluded that the company has good long-term growth prospects with an attractive business model, although the IPO itself does not look especially attractive. This insight covers the financial performance and position of the company and its valuation based on …
Revenue is likely to grow strongly over the next three years given the expected move towarsss the peak in demand for trucks across its key markets of operation.
Scania, as the premium brand, should remain a stable but modest revenue growth driver. VWCO is expected to witness double-digit growth in revenue supported by the increasing growth in sales volumes in emerging markets, while Man aims to turn around its operations with a refresh of its aging product lineup.
Profitability will be generated primarily from Scania. Man should improve profitability in FY19 simply through the drop out of one-off restructuring expenses. VWCO is likely to remain a weak contributor to profitability despite an attractive top line growth outlook and matching the margins of Scania and MAN is likely to take considerable time period.
TRATON’s financial position looks quite strong even before the IPO. Additional finance via an equity issue would have put Traton in a strong position to expand its scale through M&amp;A, but since the IPO is purely secondary shares this will not come to be. Instead, Traton will neither strengthen its balance sheet nor gain independence, leaving it and minority investors in a rather uninteresting position.
While we feel the quality of Scania should imply a premium vs. other truck manufacturers and the brand accounts for 75% of OP, ultimately this still does not justify what we calculate as an 11x EV/OP multiple when peers are trading at an average of 8.1x. Traton appears to be priced at mid-cycle multiples while the market is pricing peers for a peak in the cycle.


Traton IPO (Part 2): Valuation and Financial Outlook Just Reasonable

Traton SE

Traton IPO (Part 2): Valuation and Financial Outlook Just Reasonable