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.

Equity Bottom-Up

<ul>
<li>TEL generated ¥169bn in OP in 4Q, well above consensus at ¥150bn and even our ¥160bn estimate. </li>
<li>The issue is that this was on ¥565bn in revenue, well above ourselves and consensus, due to ramping R&amp;D and depreciation expenses. </li>
<li>Those expenses also meant that guidance of ¥716bn in OP was just barely above consensus at ¥692bn.</li>
</ul>


TEL generated ¥169bn in OP in 4Q, well above consensus at ¥150bn and even our ¥160bn estimate. 
The issue is that this was on ¥565bn in revenue, well above ourselves and consensus, due to ramping R&amp;D and depreciation expenses. 
Those expenses also meant that guidance of ¥716bn in OP was just barely above consensus at ¥692bn.


Japan Specialist

Mark Chadwick

<ul>
<li>Tokyo Electron reports FY3/22 results on 12 May. We expect the company to meet guidance and analyst expectations  </li>
<li>But the outlook may disappoint. Management may guide FY3/23 more conservatively than analysts who are looking for operating profit to grow 20% to ¥700 bn </li>
<li>Despite favorable industry conditions and strong outlook for WFE, we think that the stock could continue to de-rate</li>
</ul>


Tokyo Electron reports FY3/22 results on 12 May. We expect the company to meet guidance and analyst expectations  
But the outlook may disappoint. Management may guide FY3/23 more conservatively than analysts who are looking for operating profit to grow 20% to ¥700 bn 
Despite favorable industry conditions and strong outlook for WFE, we think that the stock could continue to de-rate


Tokyo Electron (8035) | Fundamentals Don’t Matter...for Now

Senior Technology Analyst, Japanese Equities, LightStream Research

Scott Foster

Senior Technology Analyst, Japanese Equities

<ul>
<li>As of February, TEL expected the global wafer fab equipment market to grow by nearly 20% in calendar 2022. This seems increasingly unlikely.</li>
<li>Japanese data shows equipment demand leveling off while the economic situation deteriorates and semiconductor capacity expansion projects are delayed.</li>
<li>The shares have dropped 22% since the beginning of January and are now selling at 20x management's EPS guidance for FY Mar-22. Not cheap in historical terms.</li>
</ul>


As of February, TEL expected the global wafer fab equipment market to grow by nearly 20% in calendar 2022. This seems increasingly unlikely.
Japanese data shows equipment demand leveling off while the economic situation deteriorates and semiconductor capacity expansion projects are delayed.
The shares have dropped 22% since the beginning of January and are now selling at 20x management's EPS guidance for FY Mar-22. Not cheap in historical terms.


Tokyo Electron (8035 JP): Delays and Uncertainty

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

Event-Driven

NTT (Nippon Telegraph & Telephone) / Event-Driven

NTT (Nippon Telegraph & Telephone) (9432 JP)

<ul>
<li>On 7 April, the JPX announced the changes to the Free Float Weights (FFW) for the TOPIX Index. There are some big changes due to the updated FFW methodology.</li>
<li>From April to June, we see a one-way turnover of 2.87% and a one-way trade of ¥2,285bn. Some stocks have opposite way flows in different months.</li>
<li>Stocks with inflows outperformed stocks with outflows from Oct-Dec 2021 before giving up all the gains. These stocks have started to outperform and could continue outperforming over the next quarter.</li>
</ul>


On 7 April, the JPX announced the changes to the Free Float Weights (FFW) for the TOPIX Index. There are some big changes due to the updated FFW methodology.
From April to June, we see a one-way turnover of 2.87% and a one-way trade of ¥2,285bn. Some stocks have opposite way flows in different months.
Stocks with inflows outperformed stocks with outflows from Oct-Dec 2021 before giving up all the gains. These stocks have started to outperform and could continue outperforming over the next quarter.


TOPIX FFW Transition - Big Flows from April to June

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<ul>
<li>UMS Holdings' stock price has been oversold in the past several weeks. It posted excellent results in 4Q 2021 and its valuations have become more attractive. </li>
<li>If the global semiconductor cycle undergoes a major downtrend, UMS Holdings would not be immune from such downturn and the company is likely to experience lower sales and profit growth.</li>
<li>We believe that UMS Holdings has 20% to 40%+ upside from current levels over the next one year, based on historical valuation multiples in the past three years. </li>
</ul>


UMS Holdings' stock price has been oversold in the past several weeks. It posted excellent results in 4Q 2021 and its valuations have become more attractive. 
If the global semiconductor cycle undergoes a major downtrend, UMS Holdings would not be immune from such downturn and the company is likely to experience lower sales and profit growth.
We believe that UMS Holdings has 20% to 40%+ upside from current levels over the next one year, based on historical valuation multiples in the past three years. 


UMS Holdings: Excellent Results in 2021 & Valuation Has Become More Attractive After Recent Sell-Off

Japan

Tokyo Electron Limited manufactures and sells industrial electronics products, such as semiconductor manufacturing machines, computer system, and electronic components.  The Company products are sold in US, Taiwan, and others as well as in Japan.

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Tokyo Electron Ltd Unsp Adr (TOELY US)

TEL – Margin Disappointment

While TEL's momentum matched other WFE peers margins looked disappointing and we believe there is material downside to valuations as we approach...

Mio Kato

Tokyo Electron (8035) | Fundamentals Don’t Matter...for Now

Despite favorable industry conditions and strong outlook for wafer fab equipment, we think that the stock could continue to de-rate.

Mark Chadwick

Tokyo Electron (8035 JP): Delays and Uncertainty

Management sees 20% potential sales growth this year, but that looks over-optimistic. Demand shows signs of leveling off and margin expansion...

Scott Foster

TOPIX FFW Transition - Big Flows from April to June

Changes to the Topix FFW methodology will result in a turnover of 2.87% & trade of ¥2,285bn from April to June. There is a lot to trade on some...

Brian Freitas

UMS Holdings: Excellent Results in 2021 & Valuation Has Become More Attractive After Recent Sell-Off

UMS Holdings' stock price has been oversold in the past several weeks. It posted excellent results in 4Q 2021 and its valuations have become more...

Douglas Kim

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