Japanese Turnaround Situations, Short-Ideas, Azabu Research

Michael Allen

Japanese Turnaround Situations, Short-Ideas

Azabu Research

Azabu Research is a publishing and consulting firm focused on distressed equities in the Japanese market. We specialize in turnaround strategies, corporate combinations, divestitures, and restructuring.

Publisher of the Tokyo Turnaround Letter, which conducts the most thorough research possible of publicly available information, including forensic tests for fraudulent overstatement of assets and understatement of liabilities, as well as rigorous market and industry analysis to assess the underlying strengths of the company’s products or services, the appropriateness of the company’s turnaround strategy, and the skill of its current management team. The average length of a report exceeds 25 pages of text and tables, excluding any disclosures or executive summaries.

We have more than 30 years of experience in applying this process to distressed equities in Japan. Additionally, subscribers have free access to detailed, yet easily navigated earnings models for the target company as well as the top five comparable companies, and unlimited access to the analyst for follow-up questions.

Azabu Research also conducts be-spoke research on a project basis, and provides consulting services to companies looking to restructure, divest, make acquisitions, go public, or improve investor sentiment toward their stock.

Independent Research and Consulting Firm

Equity Bottom-Up

<ul>
<li>Fujikura’s shares dropped 19% following a mid-day announcement of EBIT 8% below consensus and guidance that was 32% below consensus.</li>
<li>Worse, the company warned that its guidance does not account for any potential disruptions resulting from closure of the Strait of Hormuz. In other words, the guidance is not conservative.</li>
<li>The market priced the stock as a pure play on datacenters, but only half of its business relies on data centers, which are slowing down, and the rest is declining.</li>
</ul>


Fujikura’s shares dropped 19% following a mid-day announcement of EBIT 8% below consensus and guidance that was 32% below consensus.
Worse, the company warned that its guidance does not account for any potential disruptions resulting from closure of the Strait of Hormuz. In other words, the guidance is not conservative.
The market priced the stock as a pure play on datacenters, but only half of its business relies on data centers, which are slowing down, and the rest is declining.


<ul>
<li>Rapidly shifting technology could cause cable demand to plunge by 50% per unit of data center capacity as 800g becomes standard.</li>
<li>We don’t anticipate any negative surprises in the coming 1-2 quarters, but we think consensus is overestimating post-3/26 EBIT by at least 20%.</li>
<li>Even after a tech-led sell-off, at 25x EV/EBITDA, there is still no room for this kind of error. </li>
</ul>


Rapidly shifting technology could cause cable demand to plunge by 50% per unit of data center capacity as 800g becomes standard.
We don’t anticipate any negative surprises in the coming 1-2 quarters, but we think consensus is overestimating post-3/26 EBIT by at least 20%.
Even after a tech-led sell-off, at 25x EV/EBITDA, there is still no room for this kind of error. 


Japanese Equity Specialist, Ortus Advisors

Andrew Jackson

Japanese Equity Specialist

Ortus Advisors

Thematic (Sector/Industry)

<ul>
<li>Even a slight disappointment from NVDA could trigger a big correction in Japanese SPE names who have already started to waver in the last few days post-earnings. </li>
<li>Lasertec, Disco and Advantest retreating but merely a blip on their 1-year charts with room for more profit taking.</li>
<li>Space names Synspective and Axelspace still look attractive ahead of SpaceX pricing in 3 weeks.</li>
</ul>


Even a slight disappointment from NVDA could trigger a big correction in Japanese SPE names who have already started to waver in the last few days post-earnings. 
Lasertec, Disco and Advantest retreating but merely a blip on their 1-year charts with room for more profit taking.
Space names Synspective and Axelspace still look attractive ahead of SpaceX pricing in 3 weeks.


Japan Morning Connection: NVDA Numbers Tomorrow Loom Over Already Wavering SPE Names

<ul>
<li>Tech laggards bought in the US showing many in the market scrambling to catch the upside after the rapid snapback from last weeks drop.</li>
<li>Server related strength after Cisco numbers may see sentiment for Nidec finally improving with its cooling modules business emerging as an earnings driver.</li>
<li>Strong numbers for Coherent confirm the positive trends for its optical transceiver business which points to continued upside for AI data center plays</li>
</ul>


Tech laggards bought in the US showing many in the market scrambling to catch the upside after the rapid snapback from last weeks drop.
Server related strength after Cisco numbers may see sentiment for Nidec finally improving with its cooling modules business emerging as an earnings driver.
Strong numbers for Coherent confirm the positive trends for its optical transceiver business which points to continued upside for AI data center plays


Japan Morning Connection: Sanken Electric, Nidec, Asahi Intecc

<ul>
<li>Disco, Kokusai and Softbank among the biggest tech laggards set to scramble higher on ceasefire news.</li>
<li>Intel joining Musk's Terafab and generating interest from Google and Amazon a positive for the main Intel suppliers such as Lasertec and Ibiden.</li>
<li>Defensive outperformers set to lose their recent upside momentum on the risk-on shift.</li>
</ul>


Disco, Kokusai and Softbank among the biggest tech laggards set to scramble higher on ceasefire news.
Intel joining Musk's Terafab and generating interest from Google and Amazon a positive for the main Intel suppliers such as Lasertec and Ibiden.
Defensive outperformers set to lose their recent upside momentum on the risk-on shift.


Japan Morning Connection: Ceasefire Set to Send Tech and AI Laggards Surging Higher

Japan

Fujikura Ltd. manufactures and sells wires and cables such as optical fiber cables and coaxial cables. The Company's products include optical transmission system, electronic materials, and telecommunication cables.

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Fujikura Ltd (5803 JP)

Fujikura (5803): Elephants Can’t Fly

Fujikura's shares plummeted 19% after disappointing EBIT and guidance below consensus, with added concern over potential disruptions from the...

Michael Allen

Fujikura (5803): The Math Doesn’t Work

Rapidly advancing technology may lead to a 50% drop in cable demand for data centers as 800g becomes the norm, potentially impacting EBIT...

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Japan Morning Connection: NVDA Numbers Tomorrow Loom Over Already Wavering SPE Names

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Japan Morning Connection: Ceasefire Set to Send Tech and AI Laggards Surging Higher

A 2-week ceasefire has been agreed, subject to the straits being reopened, sending oil sharply lower and futures sharply higher. Will be a more...

Andrew Jackson

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Fujikura (5803): Elephants Can’t Fly

​Fujikura's shares plummeted 19% after disappointing EBIT and guidance below consensus, with added concern over potential disruptions from the...

Michael Allen

Fujikura (5803): The Math Doesn’t Work

​Rapidly advancing technology may lead to a 50% drop in cable demand for data centers as 800g becomes the norm, potentially impacting EBIT...

Michael Allen

Japan Morning Connection: NVDA Numbers Tomorrow Loom Over Already Wavering SPE Names

SPE names brace for NVDA numbers tomorrow after already wavering post earnings. Market remains gun-shy on mainstay AI plays making it likely for...

Andrew Jackson

Japan Morning Connection: Sanken Electric, Nidec, Asahi Intecc

​US tech laggards are now catching up after a rapid rebound, server-related strength boosts Nidec's sentiment, and Coherent's strong numbers...

Andrew Jackson

Japan Morning Connection: Ceasefire Set to Send Tech and AI Laggards Surging Higher

A 2-week ceasefire has been agreed, subject to the straits being reopened, sending oil sharply lower and futures sharply higher. Will be a more...

Andrew Jackson

Fujikura's shares plummeted 19% after disappointing EBIT and guidance below consensus, with added concern over potential disruptions from the...

Rapidly advancing technology may lead to a 50% drop in cable demand for data centers as 800g becomes the norm, potentially impacting EBIT...

US tech laggards are now catching up after a rapid rebound, server-related strength boosts Nidec's sentiment, and Coherent's strong numbers...