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.

Equity Capital Markets

Daiwa House Reit Investment / Equity Capital Markets

<p><a href="https://www.smartkarma.com/entities/daiwa-house-reit-investment-cb077099-8006-45e4-83cf-6ac7f19cd384" target="_blank" data-smartkarma-citation="entities:11283:1" rel="noopener">Daiwa House Reit Investment (8984 JP)</a> (DHR) unveiled plans to raise up to JPY34.3 billion ($313 million) through a primary offering (121,000 units), a secondary offering (9,000 units) and third-party allotment (9,000 units). The pricing date is between 19 February and 26 February 2020. </p><div class="content-highlight"><p>The proceeds from the placement will be used to will partly fund the JPY70.8 billion ($645 million) acquisitions of three properties. Overall, we would be tempted to participate in the placement as DHR’s valuation more than compensates for the modest DPU accretion.</p></div>

Daiwa House Reit Investment (8984 JP) (DHR) unveiled plans to raise up to JPY34.3 billion ($313 million) through a primary offering (121,000 units), a secondary offering (9,000 units) and third-party allotment (9,000 units). The pricing date is between 19 February and 26 February 2020. The proceeds from the placement will be used to will partly fund the JPY70.8 billion ($645 million) acquisitions of three properties. Overall, we would be tempted to participate in the placement as DHR’s valuation more than compensates for the modest DPU accretion.

Daiwa House REIT Placement: Valuation Rather Accretion Is the Key Positive

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

TSE Tokyo Price Index TOPIX / Technical Analysis

<p>Despite EAFE’s YTD outperformance relative to EM, EAFE and EM returns have generally been equal since August, shown by the stalemate in the EAFE vs. EM ratio. The U.S. dollar (DXY) is currently trading near support within the 16-17 month uptrend channel. Technicals suggest the most likely scenario is for the DXY uptrend to continue and for support to hold -- which would likely result in EAFE reasserting as leadership.  In this publication we highlight attractive investment themes and individual ideas across developed markets, with special attention given to Japan, Germany, Sweden, Italy, Spain, and Switzerland.</p>

Despite EAFE’s YTD outperformance relative to EM, EAFE and EM returns have generally been equal since August, shown by the stalemate in the EAFE vs. EM ratio. The U.S. dollar (DXY) is currently trading near support within the 16-17 month uptrend channel. Technicals suggest the most likely scenario is for the DXY uptrend to continue and for support to hold -- which would likely result in EAFE reasserting as leadership.  In this publication we highlight attractive investment themes and individual ideas across developed markets, with special attention given to Japan, Germany, Sweden, Italy, Spain, and Switzerland.

Developed Markets Strategy: Stick with Japan

<p>After failing to break above resistance, global equities (MSCI ACWI) have had a rough start to the third quarter. Continued weakness in global manufacturing and the U.S.-EU tariff escalation raises the potential for a breakdown in global equities, however our outlook remains neutral as long as the MSCI ACWI remains confined to its horizontal range. In today's report we highlight attractive and actionable set-ups within technology, construction and engineering, and real estate.</p>

After failing to break above resistance, global equities (MSCI ACWI) have had a rough start to the third quarter. Continued weakness in global manufacturing and the U.S.-EU tariff escalation raises the potential for a breakdown in global equities, however our outlook remains neutral as long as the MSCI ACWI remains confined to its horizontal range. In today's report we highlight attractive and actionable set-ups within technology, construction and engineering, and real estate.

Global Equity Strategy: Prevailing Trends Persist

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

ja research

ja research is an independent research platform focused exclusively on Japanese equities. Leveraging data and graphic analysis provided by Japan Analytics, we provide insights on small and medium-sized companies that have been ignored by the sell-side as well as challenging conventional wisdom on larger companies. We also offer analyst and corporate access, the latter with translation if required. 

Quantitative Analysis

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/347/original/2019-04-20_09-59-40.png?1555722056" class="editor-image img-responsive" data-smartkarma-image-id="85347"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>UnCh</strong> - Japanese equities are unchanged in US dollar terms over both three and six months. The Bank of Japan has intervened on 42 of the 121 trading days since October 22nd or an average of 1.6 times a week as foreigners remain underweight. As corporate results and macro data continue to disappoint, the outlook for the market is muted ahead of the upcoming ten-day holiday which combines the traditional Golden Week holidays with the accession of the new Emperor and the beginning of the Reiwa era (令和時代).  </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/405/original/2019-04-21_07-28-03.png?1555799330" class="editor-image img-responsive" data-smartkarma-image-id="85405"></figure><div class="content-caption">Source: Investing.com</div><p><strong>CURRENCY RISK?</strong> - "UnCh" also applies to <a href="https://www.smartkarma.com/entities/22826" target="_blank" data-smartkarma-citation="entities:22826:1">JPY (USDJPY CURNCY)</a>  Implied volatility for 9-month USDJPY options reached a new 25-year low last week of 6.11. The previous two lows were in 2006 and 2015 and were followed by periods of sustained Yen strength. The equity market currently appears to be discounting precisely the opposite.   </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/350/original/2019-04-20_10-21-58.png?1555723331" class="editor-image img-responsive" data-smartkarma-image-id="85350"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>VTR</strong> - The ratio of the value of stocks traded to the total market value continues to decline. The average for 2019 is 11% below that for the same period last year and is unchanged at 39bps in each month year-to-date.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/381/original/2019-04-20_14-34-11.png?1555738458" class="editor-image img-responsive" data-smartkarma-image-id="85381"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>VOLUME SCORE TIMELINE</strong> - Volumes have been highest in the <strong>Internet</strong>, <strong>Retail</strong>, and<strong> Telecoms</strong> sectors, while the <strong>Materials</strong>,<strong> Transportation</strong>, <strong>Utilities</strong> and<strong> Real Estate</strong> Sectors have seen the lowest.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/352/original/2019-04-20_10-29-59.png?1555723806" class="editor-image img-responsive" data-smartkarma-image-id="85352"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>LOWS &gt; HIGHS</strong> - With a deficit of positive news at the individual company level, the number of new 52-week highs has exceeded the number of new 52-week lows on only one-third of the last 31 trading days. </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/363/original/2019-04-20_12-34-06.png?1555731278" class="editor-image img-responsive" data-smartkarma-image-id="85363"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>DRIFTING LOWER</strong> - TTM and Forecasts Aggregate Operating and Net Income continue to drift lower ahead of the full-year results for March year-end companies which are due in a more-concentrated-than-usual period either side of the long break.   </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/384/original/2019-04-20_17-30-47.png?1555749055" class="editor-image img-responsive" data-smartkarma-image-id="85384"></figure><div class="content-caption">Source: Japan Analytics <p></p>
</div><p><strong>MIND THE GAP</strong> - Based on our Scoring methodology for aggregate Results &amp; Revisions, the 'gap' between total market value and earnings momentum is now as wide as at the two previous 'peaks' in January 2018 and September 2018.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/435/original/File%202019-04-21%2015%2055%2018.jpeg?1555829876" class="editor-image img-responsive" data-smartkarma-image-id="85435"></figure><div class="content-caption">Source: Bank of America Merrill Lynch</div><p><strong>GLOBAL WAVE</strong> - The market is implying that the earnings cycle is close to a bottom which is in accord with BAML's Global Earnings Revision Ratio having ticked up last month for the first time in 14 months. BAML has yet to call a Trough in their Global Wave and, were they to do so, such a Trough would be the first above '50' since 2006.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/378/original/2019-04-20_14-00-43.png?1555736454" class="editor-image img-responsive" data-smartkarma-image-id="85378"></figure><p><strong>FORECASTS LEADING EARNINGS LOWER</strong> - Separating our the Results Score and the Forecast &amp; Revision Score, the latter is continuing to lead the former to the downside, although both Scores are in aggregate still positive. Reported earnings and forecasts are still growing year-on-year; however, the momentum is slowing rapidly.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/379/original/2019-04-20_14-04-23.png?1555736670" class="editor-image img-responsive" data-smartkarma-image-id="85379"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>INTERIM LEADING ANNUAL LOWER</strong> -  Between February and September in each year, there is a statistically significant number of Interim Forecasts that they can be compared to the Annual Forecasts with which they are combined to derive the score in the previous chart. Interim Forecasts are often prepared by the divisional heads are not accorded the same 'reverence' as the Annual Forecasts. As a result, the Interim numbers offer a good leading indicator of short-term trends. In recent weeks, the aggregate Interim Forecast/Revision Score has turned sharply lower and is now at the lowest point in almost two years.   </p><p>In the <strong>DETAIL</strong> section below, we will review Sector performance, company results, revisions and stock performance over the previous two weeks, as well as adding some brief comments on <a href="https://www.smartkarma.com/entities/14191" target="_blank" data-smartkarma-citation="entities:14191:1">Koshidaka (2157 JP)</a>, <a href="https://www.smartkarma.com/entities/2765" target="_blank" data-smartkarma-citation="entities:2765:1">Ryohin Keikaku (7453 JP)</a>, <strong>Drugstores</strong>, <a href="https://www.smartkarma.com/entities/237" target="_blank" data-smartkarma-citation="entities:237:1">Daiwa House (1925 JP)</a>, <strong>Toyota Parts companies</strong>, and <a href="https://www.smartkarma.com/entities/2" target="_blank" data-smartkarma-citation="entities:2:1">Yamato Holdings (9064 JP)</a>.</p>

Source: Japan AnalyticsUnCh - Japanese equities are unchanged in US dollar terms over both three and six months. The Bank of Japan has intervened on 42 of the 121 trading days since October 22nd or an average of 1.6 times a week as foreigners remain underweight. As corporate results and macro data continue to disappoint, the outlook for the market is muted ahead of the upcoming ten-day holiday which combines the traditional Golden Week holidays with the accession of the new Emperor and the beginning of the Reiwa era (令和時代).  Source: Investing.comCURRENCY RISK? - "UnCh" also applies to JPY (USDJPY CURNCY)  Implied volatility for 9-month USDJPY options reached a new 25-year low last week of 6.11. The previous two lows were in 2006 and 2015 and were followed by periods of sustained Yen strength. The equity market currently appears to be discounting precisely the opposite.   Source: Japan AnalyticsVTR - The ratio of the value of stocks traded to the total market value continues to decline. The average for 2019 is 11% below that for the same period last year and is unchanged at 39bps in each month year-to-date.Source: Japan AnalyticsVOLUME SCORE TIMELINE - Volumes have been highest in the Internet, Retail, and Telecoms sectors, while the Materials, Transportation, Utilities and Real Estate Sectors have seen the lowest.Source: Japan AnalyticsLOWS &gt; HIGHS - With a deficit of positive news at the individual company level, the number of new 52-week highs has exceeded the number of new 52-week lows on only one-third of the last 31 trading days. Source: Japan AnalyticsDRIFTING LOWER - TTM and Forecasts Aggregate Operating and Net Income continue to drift lower ahead of the full-year results for March year-end companies which are due in a more-concentrated-than-usual period either side of the long break.   Source: Japan Analytics 
MIND THE GAP - Based on our Scoring methodology for aggregate Results &amp; Revisions, the 'gap' between total market value and earnings momentum is now as wide as at the two previous 'peaks' in January 2018 and September 2018.Source: Bank of America Merrill LynchGLOBAL WAVE - The market is implying that the earnings cycle is close to a bottom which is in accord with BAML's Global Earnings Revision Ratio having ticked up last month for the first time in 14 months. BAML has yet to call a Trough in their Global Wave and, were they to do so, such a Trough would be the first above '50' since 2006.FORECASTS LEADING EARNINGS LOWER - Separating our the Results Score and the Forecast &amp; Revision Score, the latter is continuing to lead the former to the downside, although both Scores are in aggregate still positive. Reported earnings and forecasts are still growing year-on-year; however, the momentum is slowing rapidly.Source: Japan AnalyticsINTERIM LEADING ANNUAL LOWER -  Between February and September in each year, there is a statistically significant number of Interim Forecasts that they can be compared to the Annual Forecasts with which they are combined to derive the score in the previous chart. Interim Forecasts are often prepared by the divisional heads are not accorded the same 'reverence' as the Annual Forecasts. As a result, the Interim numbers offer a good leading indicator of short-term trends. In recent weeks, the aggregate Interim Forecast/Revision Score has turned sharply lower and is now at the lowest point in almost two years.   In the DETAIL section below, we will review Sector performance, company results, revisions and stock performance over the previous two weeks, as well as adding some brief comments on Koshidaka (2157 JP), Ryohin Keikaku (7453 JP), Drugstores, Daiwa House (1925 JP), Toyota Parts companies, and Yamato Holdings (9064 JP).

🇯🇵 Japan • Fortnightly Update - "UnCh"

Thematic (Sector/Industry)

<p><strong>TATTERED</strong> - After rising 1.6% in four days at the start of the week before last, our Market Composite then fell by 3%, ended the period down 1.3% and only 1% above the one-year 'low' of March 23rd 2018. Japanese equities are currently trading on a trailing-twelve-month (TTM) earnings multiple of just 13.9x - a three-year low. Of the factors driving prices lower, we highlight 'Trust' and 'Trade' and focus on <a href="https://www.smartkarma.com/entities/23714" target="_blank" data-smartkarma-citation="entities:23714:1">Tateru (1435)</a> and <a href="https://www.smartkarma.com/entities/6267" target="_blank" data-smartkarma-citation="entities:6267:1">Suruga Bank (8358)</a> concerning the former.</p><p><strong>OUTLOOK</strong> - The rally we envisaged based on recent volume patterns lasted only for a week. The market is now overdue a bounce, at least in terms of the five-day relative strength index. Further, seasonality trends - <a href="https://www.smartkarma.com/insights/japan-seasonality-sell-in-july-and-say-goodbye-please-come-back-on-culture-day" target="_blank" data-smartkarma-citation="insights:23682">Japan: Seasonality - "Sell in July and Say Goodbye...Please Come Back on Culture Day"</a> - favour a rising equity market and weaker Yen into the end of the month, absent any adverse developments on the trade front.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/063/229/original/2018-09-08_21-25-10.png?1536481486" class="editor-image img-responsive" data-smartkarma-image-id="63229"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>SECTOR RECOMMENDATIONS</strong> - Our sector recommendations have an implicit 3 'unit' market short by being overweight five sectors and underweight eight and have 'outperformed' by 2.3% over two weeks and by 12.3% over the last three months. </p><p><strong>COMPANIES</strong> - Our results and revision and stock performance reviews contain short comments on <a href="https://www.smartkarma.com/entities/3294" target="_blank" data-smartkarma-citation="entities:3294:1">Pigeon Corp (7956)</a> <a href="https://www.smartkarma.com/entities/4508" target="_blank" data-smartkarma-citation="entities:4508:1">Sekisui House (1928)</a> <a href="https://www.smartkarma.com/entities/11074" target="_blank" data-smartkarma-citation="entities:11074:1">Takara (2531)</a> <a href="https://www.smartkarma.com/entities/391" target="_blank" data-smartkarma-citation="entities:391:1">Sharp (6753)</a> <a href="https://www.smartkarma.com/entities/8467" target="_blank" data-smartkarma-citation="entities:8467:1">Workman (7564)</a> <a href="https://www.smartkarma.com/entities/9145" target="_blank" data-smartkarma-citation="entities:9145:1">Tokai Carbon (5301)</a> <a href="https://www.smartkarma.com/entities/237" target="_blank" data-smartkarma-citation="entities:237:1">Daiwa House (1925)</a> <a href="https://www.smartkarma.com/entities/4481" target="_blank" data-smartkarma-citation="entities:4481:1">Shin Etsu Chemical (4063)</a> <a href="https://www.smartkarma.com/entities/379" target="_blank" data-smartkarma-citation="entities:379:1">Sumco (3436)</a> <a href="https://www.smartkarma.com/entities/280" target="_blank" data-smartkarma-citation="entities:280:1">Tokyo Electron (8035)</a> <a href="https://www.smartkarma.com/entities/2" target="_blank" data-smartkarma-citation="entities:2:1">Yamato Holdings (9064)</a> and <a href="https://www.smartkarma.com/entities/22772" target="_blank" data-smartkarma-citation="entities:22772:1">LINE (3938)</a>.</p>

TATTERED - After rising 1.6% in four days at the start of the week before last, our Market Composite then fell by 3%, ended the period down 1.3% and only 1% above the one-year 'low' of March 23rd 2018. Japanese equities are currently trading on a trailing-twelve-month (TTM) earnings multiple of just 13.9x - a three-year low. Of the factors driving prices lower, we highlight 'Trust' and 'Trade' and focus on Tateru (1435) and Suruga Bank (8358) concerning the former.OUTLOOK - The rally we envisaged based on recent volume patterns lasted only for a week. The market is now overdue a bounce, at least in terms of the five-day relative strength index. Further, seasonality trends - Japan: Seasonality - "Sell in July and Say Goodbye...Please Come Back on Culture Day" - favour a rising equity market and weaker Yen into the end of the month, absent any adverse developments on the trade front.Source: Japan AnalyticsSECTOR RECOMMENDATIONS - Our sector recommendations have an implicit 3 'unit' market short by being overweight five sectors and underweight eight and have 'outperformed' by 2.3% over two weeks and by 12.3% over the last three months. COMPANIES - Our results and revision and stock performance reviews contain short comments on Pigeon Corp (7956) Sekisui House (1928) Takara (2531) Sharp (6753) Workman (7564) Tokai Carbon (5301) Daiwa House (1925) Shin Etsu Chemical (4063) Sumco (3436) Tokyo Electron (8035) Yamato Holdings (9064) and LINE (3938).

Japan

DAIWA HOUSE INDUSTRY CO., LTD. designs and builds residential, commercial, and institutional buildings.  The Company constructs single-family houses, collective housings, condominiums, stores, office buildings, factories, and hospitals. DAIWA HOUSE INDUSTRY also operates real estate businesses. The Company, through its subsidiaries, manages hotels and golf country clubs.

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Daiwa House Industry (1925 JP)

Daiwa House REIT Placement: Valuation Rather Accretion Is the Key Positive

Daiwa House Reit Investment (8984 JP) (DHR) unveiled plans to raise up to JPY34.3 billion ($313 million) through a primary offering (121,000...

Arun George

Developed Markets Strategy: Stick with Japan

Despite EAFE’s YTD outperformance relative to EM, EAFE and EM returns have generally been equal since August, shown by the stalemate in the EAFE...

Vermilion Research

Global Equity Strategy: Prevailing Trends Persist

After failing to break above resistance, global equities (MSCI ACWI) have had a rough start to the third quarter. Continued weakness in global...

Vermilion Research

🇯🇵 Japan • Fortnightly Update - "UnCh"

UnCh - Japanese equities are unchanged in US dollar terms over both three and six months. The Bank of Japan has intervened on 42 of the 121 trading...

Campbell Gunn

Japan Fortnightly Update: Tattered

TATTERED - After rising 1.6% in four days at the start of the week before last, our Market Composite then fell by 3%, ended the period down 1.3%...

Campbell Gunn

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