Japan Specialist

Mark Chadwick

Thematic (Sector/Industry)

<ul>
<li>The Nikkei was up 4.2% over the past 5 days while the yen was slightly stronger (¥138.31 -&gt; ¥136.05 </li>
<li>Japan's core consumer inflation stayed above the BOJ target of 2% for a third straight month in June as energy prices remain high. No change to BOJ policy. </li>
<li>Japan warns of rising security threats in annual defense report, including technology supply chains, Russia and China/Taiwan</li>
</ul>


The Nikkei was up 4.2% over the past 5 days while the yen was slightly stronger (¥138.31 -&gt; ¥136.05 
Japan's core consumer inflation stayed above the BOJ target of 2% for a third straight month in June as energy prices remain high. No change to BOJ policy. 
Japan warns of rising security threats in annual defense report, including technology supply chains, Russia and China/Taiwan


Japan Stocks on the Move | Nikon, Renesas, Renova

Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

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.

<h3>What’s Original?</h3>
<p>In this original, we have discussed some of the key aspects highlighted in Kishida’s policy statements along with the current status of these policies and companies that are likely to benefit.</p>

What’s Original?
In this original, we have discussed some of the key aspects highlighted in Kishida’s policy statements along with the current status of these policies and companies that are likely to benefit.

Kishida as Prime Minister: The Path Ahead

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/172/203/original/2020-11-17_12-24-48.png?1605583510" class="editor-image img-responsive" data-smartkarma-image-id="172203"></figure><div class="content-caption">Source for all charts &amp; tables: Japan Analytics</div>
<p><strong>BRIGHTER, LATER</strong> - Forecast Aggregate Net Income for the universe of Japanese listed companies ended the quarter, higher than three months ago by ¥1.2 trillion. As a result, the market's forward multiple is unchanged at 31 times, despite a 7% rise in market capitalisation. Although this 'season' was the best in two years in terms of forecast profits, trailing earnings are still falling, by almost ¥3 trillion in the case of operating income. Much of the market optimism rests on a Japan experiencing a mild COVID winter and the impact of the incoming Biden administration's policy pronouncements on the US dollar. </p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/172/219/original/2020-11-17_13-33-54.png?1605587647" class="editor-image img-responsive" data-smartkarma-image-id="172219"></figure></section><p><strong>5.2% TTM OPERATING MARGINS</strong> - Aggregate Operating Income has declined by a third year-on-year on a 10% decline in revenues. The good news is that the pace of decline is slowing. Nevertheless, all of the Abe-era gains in earnings have now been unwound.</p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/172/230/original/2020-11-17_13-47-49.png?1605588488" class="editor-image img-responsive" data-smartkarma-image-id="172230"></figure><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/172/394/original/2020-11-18_07-24-55.png?1605651921" class="editor-image img-responsive" data-smartkarma-image-id="172394"></figure></section><p><strong>4.8% FORECAST OPERATING MARGINS</strong> - Operating margins are forecast to contract further over the next five months to 4.8%. Forecast revenues and operating income are both 3% lower than three months ago, the slowest rate of attrition in three quarters. The current market euphoria, which has taken total capitalisation to within 3% of the pre-COVID high is implying that the next 'print' of this data series, will be positive.    </p></section><section class="figure"></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/172/256/original/2020-11-17_14-22-29.png?1605590564" class="editor-image img-responsive" data-smartkarma-image-id="172256"></figure></section><p><strong>POSITIVE MOMENTUM</strong> - The sharp recovery in earnings momentum, which the market has been discounting is now materialising. Our Forecast/Revision Score has returned to March levels while the trailing Results Score has bottomed out well above the low of 2009. </p>
<section class="figure"><section class="figure"></section><div class="content-highlight"><p>In the <strong>DETAIL</strong> section below, we shall review the actual results and initial and revised forecasts by Sector and highlight the best and worst-performing companies by one-quarter revenue and margin changes. </p></div></section></section>

Source for all charts &amp; tables: Japan Analytics
BRIGHTER, LATER - Forecast Aggregate Net Income for the universe of Japanese listed companies ended the quarter, higher than three months ago by ¥1.2 trillion. As a result, the market's forward multiple is unchanged at 31 times, despite a 7% rise in market capitalisation. Although this 'season' was the best in two years in terms of forecast profits, trailing earnings are still falling, by almost ¥3 trillion in the case of operating income. Much of the market optimism rests on a Japan experiencing a mild COVID winter and the impact of the incoming Biden administration's policy pronouncements on the US dollar. 
5.2% TTM OPERATING MARGINS - Aggregate Operating Income has declined by a third year-on-year on a 10% decline in revenues. The good news is that the pace of decline is slowing. Nevertheless, all of the Abe-era gains in earnings have now been unwound.
4.8% FORECAST OPERATING MARGINS - Operating margins are forecast to contract further over the next five months to 4.8%. Forecast revenues and operating income are both 3% lower than three months ago, the slowest rate of attrition in three quarters. The current market euphoria, which has taken total capitalisation to within 3% of the pre-COVID high is implying that the next 'print' of this data series, will be positive.    POSITIVE MOMENTUM - The sharp recovery in earnings momentum, which the market has been discounting is now materialising. Our Forecast/Revision Score has returned to March levels while the trailing Results Score has bottomed out well above the low of 2009. 
In the DETAIL section below, we shall review the actual results and initial and revised forecasts by Sector and highlight the best and worst-performing companies by one-quarter revenue and margin changes. 

🇯🇵 JAPAN • IT’S A WRAP - Autumn 2020 Results & Revisions Review

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/rezil-inc" target="_blank" data-smartkarma-citation="entities:45661:1" rel="noopener">Rezil (176A JP)</a> has recommended a tender offer from Bain Capital at JPY2,750, a 57.1% premium to the undisturbed price of JPY1,750.</li>
<li>The offer is attractive as it aligns with the midpoint of the target IFA DCF valuation range, represents an all-time high and is 129.2% above the IPO price of JPY1,200. </li>
<li>This is a done deal as Hikari Tsushin, a cross-holder, tendering is sufficient to meet the minimum tendering condition. At the last close, the gross spread was 6.8%.</li>
</ul>



Rezil (176A JP) has recommended a tender offer from Bain Capital at JPY2,750, a 57.1% premium to the undisturbed price of JPY1,750.
The offer is attractive as it aligns with the midpoint of the target IFA DCF valuation range, represents an all-time high and is 129.2% above the IPO price of JPY1,200. 
This is a done deal as Hikari Tsushin, a cross-holder, tendering is sufficient to meet the minimum tendering condition. At the last close, the gross spread was 6.8%.


Rezil (176A JP): Bain’s Tender Offer Is a Done Deal

<ul>
<li>
<a href="https://www.smartkarma.com/entities/renewable-japan-co-ltd" target="_blank" data-smartkarma-citation="entities:35211:1" rel="noopener">Renewable Japan (9522 JP)</a> has recommended a <a href="https://www.smartkarma.com/entities/tokyu-fudosan-holdings-corp" target="_blank" data-smartkarma-citation="entities:8355:1" rel="noopener">Tokyu Fudosan Holdings (3289 JP)</a>-sponsored MBO at JPY1,250 per share, a 132.3% premium to the last close.</li>
<li>The high takeover premium reflects the 55% YTD decline in the share price. While the timing is opportunistic, the offer is attractive compared to peer multiples. </li>
<li>The irrevocables and low required minority acceptance rate ensure that this is a done deal. The tender runs from 15 November to 8 January 2025 (34 business days).</li>
</ul>



Renewable Japan (9522 JP) has recommended a Tokyu Fudosan Holdings (3289 JP)-sponsored MBO at JPY1,250 per share, a 132.3% premium to the last close.
The high takeover premium reflects the 55% YTD decline in the share price. While the timing is opportunistic, the offer is attractive compared to peer multiples. 
The irrevocables and low required minority acceptance rate ensure that this is a done deal. The tender runs from 15 November to 8 January 2025 (34 business days).


Renewable Japan (9522 JP): Tokyu Fudosan (3289 JP)-Sponsored MBO Set at a 132% Takeover Premium

Japan

RENOVA, Inc. is mainly engaged in operating and managing solar power, biomass power, wind power (onshore and offshore), and geothermal power generations.

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RENOVA Inc (9519 JP)

Japan Stocks on the Move | Nikon, Renesas, Renova

Japanese stocks were in buoyant mood last week despite persistent concerns over inflation and its impact on corporate earnings. Renesas and Nikon...

Mark Chadwick

Kishida as Prime Minister: The Path Ahead

In this original, we have discussed some of the key aspects highlighted in Kishida’s policy statements along with the current status of these...

Mio Kato

🇯🇵 JAPAN • IT’S A WRAP - Autumn 2020 Results & Revisions Review

BRIGHTER, LATER - Forecast Aggregate Net Income for the universe of Japanese listed companies ended the quarter, higher than three months ago by...

Campbell Gunn

Rezil (176A JP): Bain’s Tender Offer Is a Done Deal

The offer is attractive as it aligns with the midpoint of the target IFA DCF valuation range, represents an all-time high and is 129.2% above the...

Arun George

Renewable Japan (9522 JP): Tokyu Fudosan (3289 JP)-Sponsored MBO Set at a 132% Takeover Premium

The high takeover premium reflects the 55% YTD decline in the share price. The irrevocables and low required minority acceptance rate ensure that...

Arun George

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