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>Advantest results were relatively uneventful with a marginal beat at the top line and a marginal miss at the OP level. </li>
<li>Guidance was decent however with both revenue and OP above consensus and some lowballing on margins suggesting some upside to guidance. </li>
<li>The company also said that it would no longer disclose orders because changing lead times made them less comparable because of course they do…</li>
</ul>


Advantest results were relatively uneventful with a marginal beat at the top line and a marginal miss at the OP level. 
Guidance was decent however with both revenue and OP above consensus and some lowballing on margins suggesting some upside to guidance. 
The company also said that it would no longer disclose orders because changing lead times made them less comparable because of course they do…


Advantest – That Time in the Cycle When Orders Apparently Stop Being Important

Taiwan Tech Focused Senior Analyst

Patrick Liao

ASE Technology Holding   / Equity Bottom-Up

<ul>
<li>Hope we could be wrong, but the outlook of 1Q22 could be a bit bearish since we believe ASE Holding (ASEH) revenue/GM will reach ~NT$165bn/19.4% and ~NT$150bn/19.5% in 4Q21/1Q22 respectively. </li>
<li>China has massive local efforts on OSAT business because of low entry barrier. In our views, China can exist very well in lower profit margin to compete.</li>
<li>The worldwide OSAT (Outsourced Semiconductor Assembly and Testing) companies of scale are majorly centered in Asia Pacific area.</li>
</ul>


Hope we could be wrong, but the outlook of 1Q22 could be a bit bearish since we believe ASE Holding (ASEH) revenue/GM will reach ~NT$165bn/19.4% and ~NT$150bn/19.5% in 4Q21/1Q22 respectively. 
China has massive local efforts on OSAT business because of low entry barrier. In our views, China can exist very well in lower profit margin to compete.
The worldwide OSAT (Outsourced Semiconductor Assembly and Testing) companies of scale are majorly centered in Asia Pacific area.


ASE Holding (ASX.US, 3711.TT): The Outlook of 1Q22 Could Be a Bit Bearish as Actionable

Event-Driven

<ul>
<li>After initially grinding up slowly but underperforming the Nikkei our suggested skew trade gave up ground during the new year sell off.</li>
<li>It did so slowly, however and was outperforming Nikkei when last we checked despite being down slightly. </li>
<li>Thankfully, a lot of the idiosyncratic volatility hurting the skew trade has reversed now and it is positive and outperforming Nikkei consistently.</li>
</ul>


After initially grinding up slowly but underperforming the Nikkei our suggested skew trade gave up ground during the new year sell off.
It did so slowly, however and was outperforming Nikkei when last we checked despite being down slightly. 
Thankfully, a lot of the idiosyncratic volatility hurting the skew trade has reversed now and it is positive and outperforming Nikkei consistently.


TOPIX-Nikkei Skew Trade Starting to Work Nicely

<ul>
<li>Advantest shares are down 19% from their Jan 4th high after a post earnings rally on Friday. </li>
<li>While order momentum remains strong it has moderated slightly since 2Q and longer-term risks are a concern. </li>
<li>What remains to be seen is how sustainable Chinese demand is given its steady rise since 2016.</li>
</ul>


Advantest shares are down 19% from their Jan 4th high after a post earnings rally on Friday. 
While order momentum remains strong it has moderated slightly since 2Q and longer-term risks are a concern. 
What remains to be seen is how sustainable Chinese demand is given its steady rise since 2016.


Advantest – Upside and Downside Scenarios

Senior Technology Analyst, Japanese Equities, LightStream Research

Scott Foster

Senior Technology Analyst, Japanese Equities

<ul>
<li>New orders dropped back QoQ in 3Q, but were up 43% YoY and 1.2x greater than sales. The order backlog hit another record high.</li>
<li>FY Mar-22 sales and profit guidance was raised for the third time. Further growth seems likely next fiscal year.</li>
<li>The share price has dropped to the bottom of its recent trading range. We expect a short-term rebound while the market assesses longer-term risks.</li>
</ul>


New orders dropped back QoQ in 3Q, but were up 43% YoY and 1.2x greater than sales. The order backlog hit another record high.
FY Mar-22 sales and profit guidance was raised for the third time. Further growth seems likely next fiscal year.
The share price has dropped to the bottom of its recent trading range. We expect a short-term rebound while the market assesses longer-term risks.


Advantest (6857 JP): 3Q Results Point to Further Growth in 2022

Japan

ADVANTEST CORPORATION produces semiconductor testing devices and electronic measuring instruments.  The Company's products include large-scale integration (LSI) test systems, memory test systems, dynamic test handlers, network analyzers, electronic meters, optical testing devices, and signal sources.

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Advantest Corp (6857 JP)

Advantest – That Time in the Cycle When Orders Apparently Stop Being Important

Advantest results were unsurprising and guidance was on the positive side but the company decided to stop disclosing orders and that means it is...

Mio Kato

ASE Holding (ASX.US, 3711.TT): The Outlook of 1Q22 Could Be a Bit Bearish as Actionable

Hope we could be wrong, but the outlook of 1Q22 could be a bit bearish since we believe ASE Holding (ASEH) revenue/GM will reach ~NT$165bn/19.4%...

Patrick Liao

TOPIX-Nikkei Skew Trade Starting to Work Nicely

After initially grinding up slowly but underperforming the Nikkei our suggested skew trade gave up ground during the new year sell off. It is now...

Mio Kato

Advantest – Upside and Downside Scenarios

While Advantest's order momentum remains strong it has moderated slightly since 2Q and longer-term risks are a concern as Chinese demand which has...

Mio Kato

Advantest (6857 JP): 3Q Results Point to Further Growth in 2022

Order backlog hit another record high in 3Q as the share price dropped to the bottom of its trading range. FY Mar-22 guidance raised again and...

Scott Foster

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