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>Komatsu’s 3Q results hit revenue of ¥723bn (+12.5% QoQ, +30.1% YoY) and OP of ¥87.5bn. </li>
<li>They beat consensus by 9.8% and 19.0% at the revenue and OP levels respectively. </li>
<li>That puts it on track to hit the high end of our ¥305-325bn OP estimate for the FY but upside is relatively moderate compared to HCM.</li>
</ul>


Komatsu’s 3Q results hit revenue of ¥723bn (+12.5% QoQ, +30.1% YoY) and OP of ¥87.5bn. 
They beat consensus by 9.8% and 19.0% at the revenue and OP levels respectively. 
That puts it on track to hit the high end of our ¥305-325bn OP estimate for the FY but upside is relatively moderate compared to HCM.


Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Hitachi Construction Machinery / Event-Driven

<ul>
<li>On Thursday we saw news of a Hitachi sale of half its stake in HCM. Friday the stock traded down hard. Friday night saw news that underwhelmed further. </li>
<li>The deal is big, but it is basically a deal to get Hitachi out as parent. There is no Capital Alliance and there is no Strategic Alliance yet. </li>
<li>There simply is not much there, there yet. And the stock is less liquid than it looks, and that won't get better any time soon.</li>
</ul>


On Thursday we saw news of a Hitachi sale of half its stake in HCM. Friday the stock traded down hard. Friday night saw news that underwhelmed further. 
The deal is big, but it is basically a deal to get Hitachi out as parent. There is no Capital Alliance and there is no Strategic Alliance yet. 
There simply is not much there, there yet. And the stock is less liquid than it looks, and that won't get better any time soon.


Hitachi Construction Machinery Deal To Change "Parent" - There's Not Much There There

<ul>
<li>An NHK report today post-close said <a href="https://www.smartkarma.com/entities/hitachi-ltd" target="_blank" data-smartkarma-citation="entities:7797:1" rel="noopener">Hitachi Ltd (6501 JP)</a> would sell "about half" its stake in sub <a href="https://www.smartkarma.com/entities/hitachi-construction-machinery" target="_blank" data-smartkarma-citation="entities:19433:1" rel="noopener">Hitachi Construction Machinery (6305 JP)</a> to Itochu and Japan Industrial Partners.</li>
<li>That is quite similar to the announcement 15 months ago in the Nikkei which precipitated a large drop. While unconfirmed, it smells like there is fire behind the smoke.</li>
<li>The big question is What Next? and What Impact for shareholders? That's a tough couple of questions. </li>
</ul>


An NHK report today post-close said Hitachi Ltd (6501 JP) would sell "about half" its stake in sub Hitachi Construction Machinery (6305 JP) to Itochu and Japan Industrial Partners.
That is quite similar to the announcement 15 months ago in the Nikkei which precipitated a large drop. While unconfirmed, it smells like there is fire behind the smoke.
The big question is What Next? and What Impact for shareholders? That's a tough couple of questions. 


Hitachi Finally Bailing on Hitachi Construction (6305); Too Early To Buy

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.

<ul>
<li>Komatsu's "Business and ESG Presentation" provided us with an opportunity to confirm our leading technology and global business development.</li>
<li>Komatsu's advantage in the electrification of construction machinery will increase because of the high technological barriers for large machines with high profit margins.</li>
<li>Komatsu's corporate governance is generally higher than Universe's in each of the criteria, but there are still some major challenges to be addressed.</li>
</ul>


Komatsu's "Business and ESG Presentation" provided us with an opportunity to confirm our leading technology and global business development.
Komatsu's advantage in the electrification of construction machinery will increase because of the high technological barriers for large machines with high profit margins.
Komatsu's corporate governance is generally higher than Universe's in each of the criteria, but there are still some major challenges to be addressed.


Japan's Governance: Komatsu (6301) ESG Presentation

Komatsu is benefitting from the commodity boom like peer HCM and could potentially see greater support from North American mining in the short-term thanks to its greater exposure there. However, the degree of conservatism in its forecasts is not as extreme as for HCM implying a smaller potential beat.

Komatsu is benefitting from the commodity boom like peer HCM and could potentially see greater support from North American mining in the short-term thanks to its greater exposure there. However, the degree of conservatism in its forecasts is not as extreme as for HCM implying a smaller potential beat. 

Japan

KOMATSU LTD. manufactures and sells construction and mining machinery, including excavators, bulldozers, and wheel loaders.  The Company, operating on a global scale, also produces forklift trucks and engineering equipment such as press system.

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Komatsu Ltd (6301 JP)

Komatsu – Strong but Mostly Priced In

Komatsu’s 3Q results hit revenue of ¥723bn (+12.5% QoQ, +30.1% YoY) and OP of ¥87.5bn. That puts it on track to hit the high end of our ¥305-325bn...

Mio Kato

Hitachi Construction Machinery Deal To Change "Parent" - There's Not Much There There

The Hitachi deal to sell a 26% stake in Hitachi Construction Machinery to Itochu and Japan Industrial Partners is deceptive. It is just a trade...

Travis Lundy

Hitachi Finally Bailing on Hitachi Construction (6305); Too Early To Buy

NHK had an article out post-close saying Hitachi would sell "About half" it's stake in Hitachi Construction Machinery to Itochu and JIP. It will be...

Travis Lundy

Japan's Governance: Komatsu (6301) ESG Presentation

"Business and ESG Presentation" helped to confirm its leading technology and global business development, but there are some challenges in...

Metrical Inc

Komatsu – Mining Away

Komatsu is benefitting from the commodity boom like peer HCM but the degree of conservatism in its forecasts is not as extreme as for HCM implying...

Mio Kato

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