Executive Director, Metrical Inc

Aki Matsumoto

Executive Director

Independent Leading Corporate Governance Research

Metrical Inc

METRICAL INC. is an independent leading Corporate Governance research firm in Japan where Corporate Governance is increasingly recognized as an important element on corporate management in these days. Thus, CG research and solutions would become an essential component of global capital markets and play important to contribute to transparency of the markets and maximize shareholders’ value in Japan. 

METRICAL INC. provides Corporate Governance research and analysis including rating services, and  also offers investment research and IR services with solutions and customized profound research on CG and IR issues.

On Monday, August 23, different companies made interesting disclosures. Showa Denko (4004) posted its new capital issue, while Yamaha (7951) announced the sale of its policy stock holdings and repurchase of its own shares. In my recent article on equity finance and capital allocation, I would like to discuss the disclosures of two companies that are acting in opposite ways. In this article, I will discuss the case of Yamaha.

On Monday, August 23, different companies made interesting disclosures. Showa Denko (4004) posted its new capital issue, while Yamaha (7951) announced the sale of its policy stock holdings and repurchase of its own shares. In my recent article on equity finance and capital allocation, I would like to discuss the disclosures of two companies that are acting in opposite ways. In this article, I will discuss the case of Yamaha.

Japan's Governance: 2 Disclosures on August 23 (Case: Yamaha's Sale of Policy Shares & ShareBuyback)

Equity Analyst, LightStream Research

Oshadhi Kumarasiri

Equity Analyst

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.

Event-Driven

<a href="https://www.smartkarma.com/entities/roland-corp" target="_blank" data-smartkarma-citation="entities:30727:1" rel="noopener">Roland Corp (7944 JP)</a>, a global leader in the electronic musical instruments industry, has been shifting production away from China and Japan to concentrate most of the production activities to the Malaysian plant established in 2014 as a part of the business turnaround process that followed a vicious downward spiral in the post-global financial crisis (GFC) environment.While demand for musical instruments soars across the world, COVID-19 lockdowns in Malaysia continues to affect Roland’s production capabilities. We believe Roland may fail to meet demand amidst disruptions to the main production facility in Malaysia while <a href="https://www.smartkarma.com/entities/yamaha-corp" target="_blank" data-smartkarma-citation="entities:17841:1" rel="noopener">Yamaha Corp (7951 JP)</a> seems to be well placed to outperform the market through capturing Roland’s lost demand.

Roland Corp (7944 JP), a global leader in the electronic musical instruments industry, has been shifting production away from China and Japan to concentrate most of the production activities to the Malaysian plant established in 2014 as a part of the business turnaround process that followed a vicious downward spiral in the post-global financial crisis (GFC) environment.While demand for musical instruments soars across the world, COVID-19 lockdowns in Malaysia continues to affect Roland’s production capabilities. We believe Roland may fail to meet demand amidst disruptions to the main production facility in Malaysia while Yamaha Corp (7951 JP) seems to be well placed to outperform the market through capturing Roland’s lost demand.

Short Roland/Long Yamaha as Roland May Fail to Meet Demand Due to Production Shortages

SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Asia’s leading multi-asset exchange

Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

As Asia’s pioneering central counterparty, SGX is globally recognised for its risk management and clearing capabilities, and was one of the first globally to adopt the Principles for Financial Market Infrastructure.

Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/yamaha-corp" target="_blank" data-smartkarma-citation="entities:17841:1" rel="noopener">Yamaha Corp (7951 JP)</a>’s biggest competitor, <a href="https://www.smartkarma.com/entities/roland-corp" target="_blank" data-smartkarma-citation="entities:30727:1" rel="noopener">Roland Corp (7944 JP)</a>, is scheduled to make a return to the first section of Tokyo Stock Exchange on 16th December 2020. Roland is priced relatively cheaper than Yamaha’s inflated valuation multiples. Moreover, Roland is relisting after five consecutive years of relative outperformance in revenue and OP growth compared to Yamaha. We analyse the impact of Roland's return to the Tokyo Stock Exchange on Yamaha's share price below.

Yamaha Corp (7951 JP)’s biggest competitor, Roland Corp (7944 JP), is scheduled to make a return to the first section of Tokyo Stock Exchange on 16th December 2020. Roland is priced relatively cheaper than Yamaha’s inflated valuation multiples. Moreover, Roland is relisting after five consecutive years of relative outperformance in revenue and OP growth compared to Yamaha. We analyse the impact of Roland's return to the Tokyo Stock Exchange on Yamaha's share price below. 

Roland Returns at Cheaper Multiples: Not Going to Sing Well With Yamaha

Equity Capital Markets

<ul>
<li>The <a href="https://www.smartkarma.com/entities/roland-corp" target="_blank" data-smartkarma-citation="entities:30727:1" rel="noopener">Roland Corp (7944 JP)</a> IPO, which is scheduled to list on the first section of the Tokyo Stock Exchange on 16th December 2020, was priced at  ¥3,100 per share on 8th December. The application period started on 9th December and will remain open until 14th Monday.</li>
<li>After a woeful period following the global financial crisis, that resulted in a MBO and delisting from the Tokyo Stock Exchange in 2014, Roland has made a number of changes to its business and has outperformed the local peer <a href="https://www.smartkarma.com/entities/yamaha-corp" target="_blank" data-smartkarma-citation="entities:17841:1" rel="noopener">Yamaha Corp (7951 JP)</a> and the overall electronic musical instrument industry through 2015-20.</li>
<li>We prefer Roland over Yamaha on a relative value basis, since Roland has trimmed its fixed costs, streamlined operations, and stands in a strong financial position heading into a tough time period in the business cycle. Roland is priced at a discount to its closest peer, Yamaha. However, the domestic musical instruments industry is currently overvalued, considering the cyclical nature of the business. Therefore, we would avoid this IPO on long-term fundamentals.</li>
<li>Nonetheless, Roland could be an excellent hedge for a short position in Yamaha.</li>
</ul>


The Roland Corp (7944 JP) IPO, which is scheduled to list on the first section of the Tokyo Stock Exchange on 16th December 2020, was priced at  ¥3,100 per share on 8th December. The application period started on 9th December and will remain open until 14th Monday.
After a woeful period following the global financial crisis, that resulted in a MBO and delisting from the Tokyo Stock Exchange in 2014, Roland has made a number of changes to its business and has outperformed the local peer Yamaha Corp (7951 JP) and the overall electronic musical instrument industry through 2015-20.
We prefer Roland over Yamaha on a relative value basis, since Roland has trimmed its fixed costs, streamlined operations, and stands in a strong financial position heading into a tough time period in the business cycle. Roland is priced at a discount to its closest peer, Yamaha. However, the domestic musical instruments industry is currently overvalued, considering the cyclical nature of the business. Therefore, we would avoid this IPO on long-term fundamentals.
Nonetheless, Roland could be an excellent hedge for a short position in Yamaha.


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)

Japan's Governance: 2 Disclosures on August 23 (Case: Yamaha's Sale of Policy Shares & ShareBuyback)

Showa Denko posted its new capital issue, while Yamaha announced the sale of its policy stock holdings and repurchase of its own shares. In this...

Metrical Inc

Short Roland/Long Yamaha as Roland May Fail to Meet Demand Due to Production Shortages

While demand for musical instruments soars across the world, COVID-19 lockdowns in Malaysia continues to affect Roland’s production capabilities....

Oshadhi Kumarasiri

Asia Currencies and Commodities Insights

By Macro Hive SGX Asia Currencies Insights Highest real rates in EM indicate portfolio inflows and further yuan strength. Reduced mobility...

Singapore Exchange Ltd (SGX)

Roland Returns at Cheaper Multiples: Not Going to Sing Well With Yamaha

Yamaha’s biggest competitor, Roland, is scheduled to make a return to the first section of Tokyo Stock Exchange on 16th December 2020. Roland is...

Oshadhi Kumarasiri

Roland IPO: Valuation

We would avoid the Roland IPO on long term fundamentals. However, Roland is an excellent hedge for a short position in Yamaha, whose valuation...

Oshadhi Kumarasiri

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