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.

Event-Driven

<ul>
<li>At the beginning of the month, we suggested that setting up trades based on TOPIX outperforming Nikkei looked interesting. </li>
<li>This skew trade has a slight inherent short bias as Nikkei is more growth skewed but it has nevertheless generated a positive return. </li>
<li>That is despite Nikkei rising 3.8% since we published our initial note.</li>
</ul>


At the beginning of the month, we suggested that setting up trades based on TOPIX outperforming Nikkei looked interesting. 
This skew trade has a slight inherent short bias as Nikkei is more growth skewed but it has nevertheless generated a positive return. 
That is despite Nikkei rising 3.8% since we published our initial note.


Checking in on the Topix-Nikkei Skew Trade

<ul>
<li>Early last year as COVID was breaking and the BOJ doubled its ETF purchases shifting to TOPIX ETFs from Nikkei ETFs we brought up this trade. </li>
<li>With a long weekend adding to the mix conditions were abnormal but our suggested trades generated 10-12% pure alpha within four trading days. </li>
<li>This trade is starting to look interesting to us again though returns are likely to be less explosive but more persistent this time.</li>
</ul>


Early last year as COVID was breaking and the BOJ doubled its ETF purchases shifting to TOPIX ETFs from Nikkei ETFs we brought up this trade. 
With a long weekend adding to the mix conditions were abnormal but our suggested trades generated 10-12% pure alpha within four trading days. 
This trade is starting to look interesting to us again though returns are likely to be less explosive but more persistent this time.


Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

<ul>
<li>UMS Holdings is a beneficiary of continued strong global demand for semiconductor chips and equipment. </li>
<li>The company had excellent results in 3Q 2021. Its total sales rose by 50% YoY to SGD 67.6 million net profit also increased by 17% YoY in 3Q 2021.</li>
<li>There has been an increasing bullish sentiment on the global aerospace sector and the company's tuck-in acquisitions in the aerospace sector in the past several years now appear more attractive.</li>
</ul>


UMS Holdings is a beneficiary of continued strong global demand for semiconductor chips and equipment. 
The company had excellent results in 3Q 2021. Its total sales rose by 50% YoY to SGD 67.6 million net profit also increased by 17% YoY in 3Q 2021.
There has been an increasing bullish sentiment on the global aerospace sector and the company's tuck-in acquisitions in the aerospace sector in the past several years now appear more attractive.


UMS Holdings: Attractive Valuations & Continued Strong Global Demand for Semiconductor Equipment

Senior Technology Analyst, Japanese Equities, LightStream Research

Scott Foster

Senior Technology Analyst, Japanese Equities

Strong demand for cleaning equipment and other semiconductor production equipment (SPE) from foundry and logic makers provided the main impetus for a 31% year-on-year increase in consolidated sales and a 3.7x increase in operating profit in the six months to September.Supported by  efficiency gains, the company beat 1H sales and profit guidance and raised guidance for 2H of FY Mar-22.New SPE orders were up 89% and the order backlog reached a record high. This points to further growth in sales and profits next fiscal year, bringing the projected P/E ratio down to 9.4x. We continue to recommend Screen as a lagging alternative to Tokyo Electron. 30% potential upside.

Strong demand for cleaning equipment and other semiconductor production equipment (SPE) from foundry and logic makers provided the main impetus for a 31% year-on-year increase in consolidated sales and a 3.7x increase in operating profit in the six months to September.Supported by  efficiency gains, the company beat 1H sales and profit guidance and raised guidance for 2H of FY Mar-22.New SPE orders were up 89% and the order backlog reached a record high. This points to further growth in sales and profits next fiscal year, bringing the projected P/E ratio down to 9.4x. We continue to recommend Screen as a lagging alternative to Tokyo Electron. 30% potential upside.

Screen Holdings (7735 JP): Beat 1H and Raised 2H Guidance

Sales and profits hit record highs in the three months to June, but were inflated by a change in the timing of revenue recognition. On the other hand, strong underlying demand for semiconductor production equipment led to a large upward revision to FY Mar-22 guidance. Management is now forecasting a 32% increase in sales, a 58% increase in operating profit and a 52% increase in net profit in the year to next March. This is consistent with SEMI's forecast of 34% growth in semiconductor production equipment (SPE) sales in calendar 2021.The new, higher guidance for 1H of FY Mar-22 also implies lower profits in 2Q. This, according to management, is due to the fact that most of the one-off gains attributable to the accounting change were recorded in 1Q. Room for another upward revision to guidance appears to be limited.For 2022, SEMI is forecasting a 5% increase in SPE demand to exactly $100 billion. The round number indicates that some additional growth may be needed to overcome the worldwide shortage of semiconductors, but that supply and demand are likely to come back into balance sometime next year.Tokyo Electron's sales and profits are likely to peak at the same time, in our estimation, while support for share prices from central bank QE fades away. Reduce holdings.

Sales and profits hit record highs in the three months to June, but were inflated by a change in the timing of revenue recognition. On the other hand, strong underlying demand for semiconductor production equipment led to a large upward revision to FY Mar-22 guidance. Management is now forecasting a 32% increase in sales, a 58% increase in operating profit and a 52% increase in net profit in the year to next March. This is consistent with SEMI's forecast of 34% growth in semiconductor production equipment (SPE) sales in calendar 2021.The new, higher guidance for 1H of FY Mar-22 also implies lower profits in 2Q. This, according to management, is due to the fact that most of the one-off gains attributable to the accounting change were recorded in 1Q. Room for another upward revision to guidance appears to be limited.For 2022, SEMI is forecasting a 5% increase in SPE demand to exactly $100 billion. The round number indicates that some additional growth may be needed to overcome the worldwide shortage of semiconductors, but that supply and demand are likely to come back into balance sometime next year.Tokyo Electron's sales and profits are likely to peak at the same time, in our estimation, while support for share prices from central bank QE fades away. Reduce holdings.

Tokyo Electron (8035 JP): As Good as It Gets

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)

Checking in on the Topix-Nikkei Skew Trade

Our TOPIX-Nikkei skew trade has a slight inherent short bias as Nikkei is more growth skewed but it has nevertheless generated a positive return...

Mio Kato

Revisiting the Topix-Nikkei Skew Trade

Early last year we suggested trading this skew which would have generated 10-12% pure alpha within four trading days. This trade is starting to...

Mio Kato

UMS Holdings: Attractive Valuations & Continued Strong Global Demand for Semiconductor Equipment

Three key catalysts of UMS Holdings include continued strong global demand for semiconductor chips, bullish sentiment on the global aerospace...

Douglas Kim

Screen Holdings (7735 JP): Beat 1H and Raised 2H Guidance

Screen beat 1H guidance and raised 2H guidance. Record SPE orders driven by foundry, logic and other IC capex points to further growth in FY Mar...

Scott Foster

Tokyo Electron (8035 JP): As Good as It Gets

Earnings momentum has peaked. Semiconductor equipment sales and profits should peak next year. Reduce holdings as the semiconductor shortage is...

Scott Foster

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