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>While Inpex has almost tripled from its late 2020 bottom the stock is up just 17.5% compared to the beginning of Jan 2020. </li>
<li>With crude prices 77% higher than at that time that suggests that there is plenty of upside left in this trade. </li>
<li>This is further supported by plans for volume expansion and relatively healthy reserves.</li>
</ul>


While Inpex has almost tripled from its late 2020 bottom the stock is up just 17.5% compared to the beginning of Jan 2020. 
With crude prices 77% higher than at that time that suggests that there is plenty of upside left in this trade. 
This is further supported by plans for volume expansion and relatively healthy reserves.


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

Petroleo Brasileiro  / Technical Analysis

<ul>
<li>Our neutral outlook has come down to price supports holding on the broad global indexes, including $54 on MSCI ACWIex-US (ACWX-US), $76.50 on EAFE (EFA-US), and $99 on ACWI (ACWI-US).</li>
<li>These support levels are now breaking which tilts our stance to bearish at the index level as long as the aforementioned indexes remain below their previous support levels.</li>
<li>We still see the EURO STOXX 50 and TOPIX as holding above support, while the Hang Seng and Bovespa appear to be bottoming, none of which paint a bearish picture.</li>
</ul>


Our neutral outlook has come down to price supports holding on the broad global indexes, including $54 on MSCI ACWIex-US (ACWX-US), $76.50 on EAFE (EFA-US), and $99 on ACWI (ACWI-US).
These support levels are now breaking which tilts our stance to bearish at the index level as long as the aforementioned indexes remain below their previous support levels.
We still see the EURO STOXX 50 and TOPIX as holding above support, while the Hang Seng and Bovespa appear to be bottoming, none of which paint a bearish picture.


Broad Indexes Violate Support But Bright Spots Remain; Buying Energy, Staples, and Utilities

<ul>
<li>Commodities (ex. precious metals) and global yields are on the rise as the US dollar (DXY) deteriorates. Additionally, EM equities (EEM-US) display a bullish RS reversal relative to MSCI ACWI. </li>
<li>These are all important risk-on signals for global equities that continue to support our neutral yet constructive outlook. We expect more consolidation and mixed markets ahead.</li>
<li>Two Sectors that stand to benefit most from rising rates include Energy and Financials. We recommend adding exposure to these Sectors as we see a shift in favor of value.</li>
</ul>


Commodities (ex. precious metals) and global yields are on the rise as the US dollar (DXY) deteriorates. Additionally, EM equities (EEM-US) display a bullish RS reversal relative to MSCI ACWI. 
These are all important risk-on signals for global equities that continue to support our neutral yet constructive outlook. We expect more consolidation and mixed markets ahead.
Two Sectors that stand to benefit most from rising rates include Energy and Financials. We recommend adding exposure to these Sectors as we see a shift in favor of value.


Value Sectors Take The Lead On Rising Global Yields; Buying Energy and Financials

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Japan Petroleum Exploration / Event-Driven

When the <a href="https://www.smartkarma.com/entities/inpex-corp" target="_blank" data-smartkarma-citation="entities:20665:1" rel="noopener">Inpex Corp (1605 JP)</a> buyback programme was announced last Friday, and the ToSTNeT-3 buyback was announced with the footnote that <a href="https://www.smartkarma.com/entities/japan-petroleum-exploration" target="_blank" data-smartkarma-citation="entities:12219:1" rel="noopener">Japan Petroleum Exploration (1662 JP)</a> intended to sell shares to the tune of ¥50bn, I wrote about the outlook post ToSTNeT-3 buyback for both companies in...<ul>
<li>
<a href="https://www.smartkarma.com/insights/inpex-buyback-offers-2-opportunities-inpex-1605-jp" target="_blank" data-smartkarma-citation="insights:60204" rel="noopener">INPEX Buyback Offers 2 Opportunities - INPEX (1605 JP)</a> and</li>
<li>
<a href="https://www.smartkarma.com/insights/inpex-buyback-offers-2-opportunities-japex-1662-jp" target="_blank" data-smartkarma-citation="insights:60225" rel="noopener">INPEX Buyback Offers 2 Opportunities - JAPEX (1662 JP)</a> </li>
</ul>In the piece on JAPEX, I noted that the combination of higher oil prices since the August announcement of expected losses this year, the price of crude and natgas was higher so the actual losses would likely be lower than forecast, and the sale of half JAPEX' stake in INPEX would lead to a near-record amount of excess non-operating capital (net cash+securities, etc) against a sharp reduction in cash burn at its Canadian units, which were to be sold. I recommended buying JAPEX suggesting the best way to apply that cash was a buyback. After the INPEX buyback, JAPEX <a href="https://www.japex.co.jp/uploads/pdf/JAPEX20211108_INPEXStocksTrade_e.pdf" target="_blank" rel="noopener">announced</a> that the sale of INPEX shares would mean booking extraordinary income of JPY 39.8bn. This was to be expected. Yesterday, JAPEX announced H1 results, with...<ul>
<li>H1 OP at ¥9.54bn against the 10 August full year estimate at ¥11.9bn.</li>
<li>H1 Ordinary Profit (including equity affiliate income) at ¥19.35bn vs full-year estimate on 10 August of ¥26.16bn. </li>
<li>H1 Net Profit of -¥119.7bn vs full-year estimate of -¥114.0bn. This was expected because the full hit of securities sales losses (selling JACOS, etc), writedowns, and additional contingent liabilities on debt guarantees associated with the asset sales) would hit in H1, whereas H2 would see additional profit.</li>
</ul>Higher crude and gas prices and slightly higher USD/yen helped, and the company upped its full-year forecast for OP (up another 40%) and Ordinary Profit (up another 9%) yet again. With crude at current levels or hedge-able levels, those two numbers are light. The company also raised its net profit estimate for the full year to March 2022 from -¥114bn to -¥69.8bn, adding ¥44bn compared to the ¥39.8bn extraordinary gain (pre-tax) from the INPEX sale. JAPEX also announced a buyback. Bingo.More below the fold.

When the Inpex Corp (1605 JP) buyback programme was announced last Friday, and the ToSTNeT-3 buyback was announced with the footnote that Japan Petroleum Exploration (1662 JP) intended to sell shares to the tune of ¥50bn, I wrote about the outlook post ToSTNeT-3 buyback for both companies in...

INPEX Buyback Offers 2 Opportunities - INPEX (1605 JP) and

INPEX Buyback Offers 2 Opportunities - JAPEX (1662 JP) 
In the piece on JAPEX, I noted that the combination of higher oil prices since the August announcement of expected losses this year, the price of crude and natgas was higher so the actual losses would likely be lower than forecast, and the sale of half JAPEX' stake in INPEX would lead to a near-record amount of excess non-operating capital (net cash+securities, etc) against a sharp reduction in cash burn at its Canadian units, which were to be sold. I recommended buying JAPEX suggesting the best way to apply that cash was a buyback. After the INPEX buyback, JAPEX announced that the sale of INPEX shares would mean booking extraordinary income of JPY 39.8bn. This was to be expected. Yesterday, JAPEX announced H1 results, with...
H1 OP at ¥9.54bn against the 10 August full year estimate at ¥11.9bn.
H1 Ordinary Profit (including equity affiliate income) at ¥19.35bn vs full-year estimate on 10 August of ¥26.16bn. 
H1 Net Profit of -¥119.7bn vs full-year estimate of -¥114.0bn. This was expected because the full hit of securities sales losses (selling JACOS, etc), writedowns, and additional contingent liabilities on debt guarantees associated with the asset sales) would hit in H1, whereas H2 would see additional profit.
Higher crude and gas prices and slightly higher USD/yen helped, and the company upped its full-year forecast for OP (up another 40%) and Ordinary Profit (up another 9%) yet again. With crude at current levels or hedge-able levels, those two numbers are light. The company also raised its net profit estimate for the full year to March 2022 from -¥114bn to -¥69.8bn, adding ¥44bn compared to the ¥39.8bn extraordinary gain (pre-tax) from the INPEX sale. JAPEX also announced a buyback. Bingo.More below the fold.

On Friday, as discussed in <a href="https://www.smartkarma.com/insights/inpex-buyback-offers-2-opportunities-inpex-1605-jp" target="_blank" data-smartkarma-citation="insights:60204" rel="noopener">INPEX Buyback Offers 2 Opportunities - INPEX (1605 JP)</a>, INPEX announced decent earnings and a buyback. A large chunk of that buyback comes Monday morning on 8 November. The announcement of the buyback is split into the <a href="https://www.inpex.co.jp/english/news/assets/pdf/20211105.pdf" target="_blank" rel="noopener">programme announcement</a> (up to 80mm shares (5.48%), up to ¥70bn between now and end-January and the <a href="https://www.inpex.co.jp/english/news/assets/pdf/20211105_d.pdf" target="_blank" rel="noopener">ToSTNeT-3 buyback announcement</a> (53.447mm shares at ¥946/share on Monday morning).The last line of that announcement indicated that <a href="https://www.smartkarma.com/entities/inpex-corp" target="_blank" data-smartkarma-citation="entities:20665:1" rel="noopener">Inpex Corp (1605 JP)</a> had received notice from <a href="https://www.smartkarma.com/entities/japan-petroleum-exploration" target="_blank" data-smartkarma-citation="entities:12219:1" rel="noopener">Japan Petroleum Exploration (1662 JP)</a> - longtime second-largest shareholder - that JAPEX "has the intention to sell a portion of the INPEX shares that it holds." Conveniently, 53.447mm shares is exactly half what JAPEX holds, or 3.65% of shares out. This is not huge, but for long-time observers of JAPEX, it represents an interesting development. More below.

On Friday, as discussed in INPEX Buyback Offers 2 Opportunities - INPEX (1605 JP), INPEX announced decent earnings and a buyback. A large chunk of that buyback comes Monday morning on 8 November. The announcement of the buyback is split into the programme announcement (up to 80mm shares (5.48%), up to ¥70bn between now and end-January and the ToSTNeT-3 buyback announcement (53.447mm shares at ¥946/share on Monday morning).The last line of that announcement indicated that Inpex Corp (1605 JP) had received notice from Japan Petroleum Exploration (1662 JP) - longtime second-largest shareholder - that JAPEX "has the intention to sell a portion of the INPEX shares that it holds." Conveniently, 53.447mm shares is exactly half what JAPEX holds, or 3.65% of shares out. This is not huge, but for long-time observers of JAPEX, it represents an interesting development. More below. 

INPEX Buyback Offers 2 Opportunities - JAPEX (1662 JP)

Japan

INPEX CORPORATION is a holding company established through the reorganization of INPEX Corp and Teikoku Oil.  The Company manages subsidiaries that explores, produces, and sells oil and natural gas.

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Inpex Corp (1605 JP)

Inpex – Plenty of Headroom Left

While Inpex has almost tripled from its late 2020 bottom the stock is up just 17.5% compared to the beginning of Jan 2020 with crude prices 77%...

Mio Kato

Broad Indexes Violate Support But Bright Spots Remain; Buying Energy, Staples, and Utilities

We are highlighting Energy again because it is easily our favorite Sector. Additionally, defensive Sectors including Staples and Utilities display...

Vermilion Research

Value Sectors Take The Lead On Rising Global Yields; Buying Energy and Financials

Two Sectors that stand to benefit most from rising rates include Energy and Financials. We recommend adding exposure to these Sectors as we see a...

Vermilion Research

JAPEX Profit and BUYBACK - More To Go

JAPEX sold INPEX shares, raised forecasts, and announced its own buyback. What is not to like? There is a fair bit more to go here.

Travis Lundy

INPEX Buyback Offers 2 Opportunities - JAPEX (1662 JP)

INPEX will buy back 53+mm shares Monday AM in a ToSTNeT-3 deal. JAPEX (1662) will likely sell all of those. JAPEX reports 10 Nov and should clarify...

Travis Lundy

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