Equity Analyst, LightStream Research

Oshadhi Kumarasiri

Equity Analyst

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

Pan Pacific International Holdings / Equity Bottom-Up

<ul>
<li>With momentum behind defensive/semi defensive names in the Japanese market, <a href="https://www.smartkarma.com/entities/pan-pacific-international-holdings-corporation" target="_blank" data-smartkarma-citation="entities:13475:1" rel="noopener">Pan Pacific International Holdings (7532 JP)</a>’ seems to have one of the best risk reward ratios among Japanese retail players.</li>
<li>PPI’s undervaluation is visible in valuation multiples across the board with all multiples trading near the past 10-year low level.</li>
<li>Thus, we would buy PPI with a target of 40% upside in the short term.</li>
</ul>


With momentum behind defensive/semi defensive names in the Japanese market, Pan Pacific International Holdings (7532 JP)’ seems to have one of the best risk reward ratios among Japanese retail players.
PPI’s undervaluation is visible in valuation multiples across the board with all multiples trading near the past 10-year low level.
Thus, we would buy PPI with a target of 40% upside in the short term.


Pan Pacific International Valuation: All Signs Points to a Large Upside in the Short Term

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

Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

<ul>
<li>In 2020 and 2021 we had nine conviction calls, four of which returned over 50% within just over a year.</li>
<li>Three more returned close to 40%, one returned 15% and just one was an abject failure returning -39%. </li>
<li>On average, alpha generation was 24.3% and our 2022 names are off to a good start putting up 14.7% in alpha in just over a month and a half.</li>
</ul>


In 2020 and 2021 we had nine conviction calls, four of which returned over 50% within just over a year.
Three more returned close to 40%, one returned 15% and just one was an abject failure returning -39%. 
On average, alpha generation was 24.3% and our 2022 names are off to a good start putting up 14.7% in alpha in just over a month and a half.


A Belated Look Back at Our 2020 and 2021 Conviction Calls and a Look Ahead to 2022

<ul>
<li>After declining for more than five years, <a href="https://www.smartkarma.com/entities/japan-tobacco-inc" target="_blank" data-smartkarma-citation="entities:13498:1" rel="noopener">Japan Tobacco (2914 JP)</a>’s earnings momentum shifted after COVID-19 with both domestic and international segments expected to return to achieving growth in 2021.</li>
<li>The company is expected to make an EBIT of around ¥580-600bn in 2021, which is more than JT’s 2016 EBIT.</li>
<li>With profitability surpassing the 2016 level during the next few years, we think JT’s share price could return to the 2016 level of around ¥4,000 per share.</li>
</ul>


After declining for more than five years, Japan Tobacco (2914 JP)’s earnings momentum shifted after COVID-19 with both domestic and international segments expected to return to achieving growth in 2021.
The company is expected to make an EBIT of around ¥580-600bn in 2021, which is more than JT’s 2016 EBIT.
With profitability surpassing the 2016 level during the next few years, we think JT’s share price could return to the 2016 level of around ¥4,000 per share.


2022 High Conviction - Japan Tobacco: The Comeback Story

<ul>
<li>
<a href="https://www.smartkarma.com/entities/japan-tobacco-inc" target="_blank" data-smartkarma-citation="entities:13498:1" rel="noopener">Japan Tobacco (2914 JP)</a>’s 3Q21 results were just as excellent as we suggested in <a href="https://www.smartkarma.com/insights/japan-tobacco-turning-a-corner" target="_blank" rel="noopener">Japan Tobacco: Turning a Corner</a>, with revenue and adjusted operating profit increasing 10.6% and 20.0% YoY respectively to ¥621.5bn (consensus ¥574.7bn) and ¥184.7bn (consensus ¥123.7bn).</li>
<li>The annual dividend was raised by ¥10.0 (7.6%) to ¥140 per share but remains around ¥14-20 per share below our previous estimate. We think this leaves options open for JT to raise the 2021 dividend yet again in the fourth quarter.</li>
</ul>



Japan Tobacco (2914 JP)’s 3Q21 results were just as excellent as we suggested in Japan Tobacco: Turning a Corner, with revenue and adjusted operating profit increasing 10.6% and 20.0% YoY respectively to ¥621.5bn (consensus ¥574.7bn) and ¥184.7bn (consensus ¥123.7bn).
The annual dividend was raised by ¥10.0 (7.6%) to ¥140 per share but remains around ¥14-20 per share below our previous estimate. We think this leaves options open for JT to raise the 2021 dividend yet again in the fourth quarter.


Japan Tobacco: Ploom X Is Taking the Fight to IQOS

Japan

Japan Tobacco, Inc. operates as an tobacco product company. The Company manufactures, markets and sells cigarettes and other tobacco products internationally. Japan Tobacco is also engaged in pharmaceutical and food businesses.

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Japan Tobacco (2914 JP)

Pan Pacific International Valuation: All Signs Points to a Large Upside in the Short Term

With momentum shifting positive, we think PPI has the largest upside potential among the Japanese semi defensive names with a possible 40% upside...

Oshadhi Kumarasiri

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

A Belated Look Back at Our 2020 and 2021 Conviction Calls and a Look Ahead to 2022

We take a look back at our conviction calls from 2020 and 2021 to assess performance and put the strong start to our 2022 names in context.

Mio Kato

2022 High Conviction - Japan Tobacco: The Comeback Story

With the change in earnings momentum helping JT to surpass the 2016 EBIT, there’s a possibility that JT’s share price could reach ¥4,000 per share...

Oshadhi Kumarasiri

Japan Tobacco: Ploom X Is Taking the Fight to IQOS

We believe JT’s 2021 DPS estimate remains conservative and there’s room for around ¥14-20 per share upside in 4Q21, especially considering that...

Oshadhi Kumarasiri

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