Japanese Turnaround Situations, Short-Ideas, Azabu Research

Michael Allen

Japanese Turnaround Situations, Short-Ideas

Azabu Research

Azabu Research is a publishing and consulting firm focused on distressed equities in the Japanese market. We specialize in turnaround strategies, corporate combinations, divestitures, and restructuring.

Publisher of the Tokyo Turnaround Letter, which conducts the most thorough research possible of publicly available information, including forensic tests for fraudulent overstatement of assets and understatement of liabilities, as well as rigorous market and industry analysis to assess the underlying strengths of the company’s products or services, the appropriateness of the company’s turnaround strategy, and the skill of its current management team. The average length of a report exceeds 25 pages of text and tables, excluding any disclosures or executive summaries.

We have more than 30 years of experience in applying this process to distressed equities in Japan. Additionally, subscribers have free access to detailed, yet easily navigated earnings models for the target company as well as the top five comparable companies, and unlimited access to the analyst for follow-up questions.

Azabu Research also conducts be-spoke research on a project basis, and provides consulting services to companies looking to restructure, divest, make acquisitions, go public, or improve investor sentiment toward their stock.

Independent Research and Consulting Firm

Equity Bottom-Up

<ul>
<li>Yamaha releases new guidance on May 8 for its fiscal year ending March 2025. The  previous Mid-term plan for OP was ¥68bn, while the consensus is looking for just ¥40.9bn.  </li>
<li>We expect ¥50bn, and think the shares are as much as 30% undervalued.</li>
<li>Analysts have responded to multiple downward revisions to current year guidance, driven by collapsing Piano sales to China, but haven’t responded to cost cutting or growth in other product lines.</li>
</ul>


Yamaha releases new guidance on May 8 for its fiscal year ending March 2025. The  previous Mid-term plan for OP was ¥68bn, while the consensus is looking for just ¥40.9bn.  
We expect ¥50bn, and think the shares are as much as 30% undervalued.
Analysts have responded to multiple downward revisions to current year guidance, driven by collapsing Piano sales to China, but haven’t responded to cost cutting or growth in other product lines.


Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Index Rebalance

<ul>
<li>There will be a bunch of rebalance announcements towards the start and at the end of the coming week. This includes the <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">HSI</a>, <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">HSCEI</a>, <a href="https://www.smartkarma.com/entities/hang-seng-tech-index" target="_blank" data-smartkarma-citation="entities:31367:1" rel="noopener">HSTECH</a>, HSCI, HSIII and global indices.</li>
<li>The review period for the March rebalance of the <a href="https://www.smartkarma.com/entities/s-p-asx-200" target="_blank" data-smartkarma-citation="entities:22901:1" rel="noopener">S&amp;P/ASX 200</a> and related indices ends on 16 February. The announcement of the changes will come couple of weeks later.</li>
<li>There were HUGE inflows to mainland China ETFs for yet another week as Central Huijin indicated that they would continue to buy/create ETFs units.</li>
</ul>


There will be a bunch of rebalance announcements towards the start and at the end of the coming week. This includes the HSI, HSCEI, HSTECH, HSCI, HSIII and global indices.
The review period for the March rebalance of the S&amp;P/ASX 200 and related indices ends on 16 February. The announcement of the changes will come couple of weeks later.
There were HUGE inflows to mainland China ETFs for yet another week as Central Huijin indicated that they would continue to buy/create ETFs units.


Index Rebalance & ETF Flow Recap: STAR100, NEXT50, LowVol30, KOSPI200, TW50, NWD, ITC, India Float

Event-Driven

<ul>
<li>There are some Japanese stocks that have dropped in price even as the broader market has powered higher. That could lead to the stocks being deleted from global portfolios.</li>
<li>The deletion from passive portfolios will lead to a liquidity event at the end of February where passive trackers will need to sell multiple days of ADV.</li>
<li>
<a href="https://www.smartkarma.com/entities/baycurrent-consulting-inc" target="_blank" data-smartkarma-citation="entities:25985:1" rel="noopener">BayCurrent Consulting (6532 JP)</a> is a dark horse for inclusion in the <a href="https://www.smartkarma.com/entities/nikkei-225" target="_blank" data-smartkarma-citation="entities:22909:1" rel="noopener">Nikkei 225 (NKY INDEX)</a> in March and this deletion could take the stock lower before the <a href="https://www.smartkarma.com/entities/nikkei-225" target="_blank" data-smartkarma-citation="entities:22909:1" rel="noopener">Nikkei 225</a> announcement.</li>
</ul>


There are some Japanese stocks that have dropped in price even as the broader market has powered higher. That could lead to the stocks being deleted from global portfolios.
The deletion from passive portfolios will lead to a liquidity event at the end of February where passive trackers will need to sell multiple days of ADV.

BayCurrent Consulting (6532 JP) is a dark horse for inclusion in the Nikkei 225 (NKY INDEX) in March and this deletion could take the stock lower before the Nikkei 225 announcement.


Japan - Increasing Shorts on Some Interesting** Stocks

Daiwa House Reit Investment / Event-Driven

<ul>
<li>There are a bunch of stocks that have underperformed the <a href="https://www.smartkarma.com/entities/nikkei-225" target="_blank" data-smartkarma-citation="entities:22909:1" rel="noopener">Nikkei 225 (NKY INDEX)</a> and their peers and could be deleted from global passive portfolios early next year.</li>
<li>The deletion from passive portfolios will lead to a liquidity event at the end of February where passive trackers will need to sell multiple days of ADV.</li>
<li>Shorts have started to increase on some of the stocks and there will be further positioning as we near the liquidity event.</li>
</ul>


There are a bunch of stocks that have underperformed the Nikkei 225 (NKY INDEX) and their peers and could be deleted from global passive portfolios early next year.
The deletion from passive portfolios will lead to a liquidity event at the end of February where passive trackers will need to sell multiple days of ADV.
Shorts have started to increase on some of the stocks and there will be further positioning as we near the liquidity event.


Japan - Increasing Shorts on Some Interesting Stocks

<ul>
<li>The review period for the <a href="https://www.smartkarma.com/entities/nikkei-225" target="_blank" data-smartkarma-citation="entities:22909:1" rel="noopener">Nikkei 225 (NKY)</a> September rebalance ended yesterday. There should be three index changes, potential stepwise inclusion, no <a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:751:1" rel="noopener">Fast Retailing</a> capping and a big funding trade.</li>
<li>There appears to be decent positioning on the potential adds, while it is the close adds that are spiking along with a big increase in traded volumes.</li>
<li>If the three changes are on expected lines, estimated one-way turnover at the rebalance is 2.01% resulting in a one-way trade of JPY 461bn (US$3.24bn). </li>
</ul>


The review period for the Nikkei 225 (NKY) September rebalance ended yesterday. There should be three index changes, potential stepwise inclusion, no Fast Retailing capping and a big funding trade.
There appears to be decent positioning on the potential adds, while it is the close adds that are spiking along with a big increase in traded volumes.
If the three changes are on expected lines, estimated one-way turnover at the rebalance is 2.01% resulting in a one-way trade of JPY 461bn (US$3.24bn). 


Nikkei 225 Index Rebalance Preview (Sep 2023): Final Look as Review Period Ends

Japan

YAMAHA CORPORATION mainly manufactures musical instruments, audio equipment, and golf equipment.  The Company also produces information & communication equipment and semiconductors.  Yamaha operates recreation business. The Company has many overseas subsidiaries.

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Yamaha Corp (7951 JP)

Yamaha (7951): Making Waves Again

Company has cut 10% of its workforce and demand for most of its products growing rapidly. Stock is 30% under-valued in our view.

Michael Allen

Index Rebalance & ETF Flow Recap: STAR100, NEXT50, LowVol30, KOSPI200, TW50, NWD, ITC, India Float

This recap highlights Insights covering Asian index rebalances (announcements/ forecasts/ IPO Fast Entry/ M&A driven changes). We also highlight...

Brian Freitas

Japan - Increasing Shorts on Some Interesting** Stocks

There are a lot of potential passive deletions in Japan later this month. Short interest has increased in nearly all stocks since November....

Brian Freitas

Japan - Increasing Shorts on Some Interesting Stocks

The potential deletes highlighted in the Insight are up 8.6% since the Insight was published, outperforming the Nikkei 225 TR Index by 3%. That...

Brian Freitas

Nikkei 225 Index Rebalance Preview (Sep 2023): Final Look as Review Period Ends

The review period for the NKY Sep rebal ended yesterday. There should be 3 index changes, potential stepwise inclusion, no Fast Retailing capping...

Brian Freitas

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