Japan Specialist

Mark Chadwick

Equity Bottom-Up

<ul>
<li>Global LNG supply is structurally impaired, while BAHX manufacturing is concentrated among few players, creating a multi-year bottleneck where engineering capacity, not gas availability, constrains recovery. </li>
<li>With leaders like Linde Engineering and Chart Industries fully utilised, secondary suppliers absorb overflow demand, benefiting from tight capacity, long lead times, and improving pricing dynamics. </li>
<li>Kobe Steel trades on steel multiples despite BAHX exposure; its ALEX business sits in high-margin segments, offering leveraged upside to LNG repair and energy infrastructure demand. </li>
</ul>


Global LNG supply is structurally impaired, while BAHX manufacturing is concentrated among few players, creating a multi-year bottleneck where engineering capacity, not gas availability, constrains recovery. 
With leaders like Linde Engineering and Chart Industries fully utilised, secondary suppliers absorb overflow demand, benefiting from tight capacity, long lead times, and improving pricing dynamics. 
Kobe Steel trades on steel multiples despite BAHX exposure; its ALEX business sits in high-margin segments, offering leveraged upside to LNG repair and energy infrastructure demand. 


Kobe Steel (5406) | Hidden Cold Box & LNG Optionality

Global Materials | Industrials | Commodities

Rahul Jain

<ul>
<li>Kobelco has delivered ~20–25% returns over the past three months, reflecting investor interest in stable domestic steel demand and growing overseas engineering orders.</li>
<li>Q1–Q2 FY2025 showed steady operational performance with stable steel margins and moderate growth in engineering and construction segments, supporting management’s guidance for the full year.</li>
<li>Stock trades at a modest forward P/E of ~7× with an attractive dividend yield (~4%), though risks include steel margin volatility, global semi-cycle fluctuations, and potential project execution delays.</li>
</ul>


Kobelco has delivered ~20–25% returns over the past three months, reflecting investor interest in stable domestic steel demand and growing overseas engineering orders.
Q1–Q2 FY2025 showed steady operational performance with stable steel margins and moderate growth in engineering and construction segments, supporting management’s guidance for the full year.
Stock trades at a modest forward P/E of ~7× with an attractive dividend yield (~4%), though risks include steel margin volatility, global semi-cycle fluctuations, and potential project execution delays.


Kobelco (5406.T) – Diversified Japanese Industrial with Stable Steel and Engineering Exposure

Asian Hedge Fund Manager, Long Short Equity, Macro

David Mudd

Cross Asset Strategy

<ul>
<li>The Asian Alpha Hedge Portfolio performance in 1Q26 was +17.83% versus its benchmark performance of +1.79% for an outperformance of 16.04%.</li>
<li>Over the last year, AAHP's Sharpe ratio is 4.39 with a mean excess annualized return of 69%.  The portfolio has a gross and net exposure of 132% and +30%, respectively.</li>
<li>The war has changed outlooks for economies and markets in the region.  Accordingly, we reduced risk in the portfolio and adjusted our long/short exposures to reflect this new reality.</li>
</ul>


The Asian Alpha Hedge Portfolio performance in 1Q26 was +17.83% versus its benchmark performance of +1.79% for an outperformance of 16.04%.
Over the last year, AAHP's Sharpe ratio is 4.39 with a mean excess annualized return of 69%.  The portfolio has a gross and net exposure of 132% and +30%, respectively.
The war has changed outlooks for economies and markets in the region.  Accordingly, we reduced risk in the portfolio and adjusted our long/short exposures to reflect this new reality.


Asian Alpha Hedge Portfolio (March, 2026)

<ul>
<li>Earnings stable over 3 years as machinery and power offset weak steel margins; ROIC gradually improving.</li>
<li>Focus on KOBEMAG®, machinery expansion, and carbon-neutral projects with disciplined capex.</li>
<li>Trades at ~5x P/E due to low ROIC, past governance issues, and misperception as a pure steel cyclical.</li>
</ul>


Earnings stable over 3 years as machinery and power offset weak steel margins; ROIC gradually improving.
Focus on KOBEMAG®, machinery expansion, and carbon-neutral projects with disciplined capex.
Trades at ~5x P/E due to low ROIC, past governance issues, and misperception as a pure steel cyclical.


Kobelco (5406.T) – Diversified Industrial at Deep Value

Thematic (Sector/Industry)

<ul>
<li>China’s steel exports have surged to multi-year highs, flooding global markets and forcing a wave of trade-defense actions across Asia.</li>
<li>Weak domestic demand, squeezed margins, and policy shifts have pushed Chinese mills to lean heavily on exports — prompting Beijing to cap output and link cuts to carbon goals.</li>
<li>Clear winners: Integrated Indian producers and Japan/Korea premium mills, which gain pricing power and margin upside as safeguards and curbs tighten supply.</li>
</ul>


China’s steel exports have surged to multi-year highs, flooding global markets and forcing a wave of trade-defense actions across Asia.
Weak domestic demand, squeezed margins, and policy shifts have pushed Chinese mills to lean heavily on exports — prompting Beijing to cap output and link cuts to carbon goals.
Clear winners: Integrated Indian producers and Japan/Korea premium mills, which gain pricing power and margin upside as safeguards and curbs tighten supply.


China’s Steel Curbs + Asian Safeguards: Pricing Tailwinds for Premium Mills

Japan

Kobe Steel, Ltd. is a steelmaker, as well as a supplier of aluminum and copper products.  The products include steel plates and steel rods.  The Company also operates other businesses such as welding consumables, urban infrastructure, plant engineering, and industrial & construction machinery.  Kobe Steel has operating offices in the US, Europe, and Asia.

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Kobe Steel Ltd (5406 JP)

Kobe Steel (5406) | Hidden Cold Box & LNG Optionality

Global LNG supply bottleneck due to limited BAHX manufacturing capacity, creating opportunities for secondary suppliers like Kobe Steel in high...

Mark Chadwick

Kobelco (5406.T) – Diversified Japanese Industrial with Stable Steel and Engineering Exposure

Kobelco's strong performance driven by stable steel demand and overseas orders, with potential risks in steel margin volatility and project delays.

Rahul Jain

Asian Alpha Hedge Portfolio (March, 2026)

While we do not believe that the Iran conflict is close to a resolution, we believe that the U.S. side needs to reach one, and that will eventually...

David Mudd

Kobelco (5406.T) – Diversified Industrial at Deep Value

Company's stable earnings over 3 years are supported by machinery and power, with improving ROIC, despite low valuation due to past governance...

Rahul Jain

China’s Steel Curbs + Asian Safeguards: Pricing Tailwinds for Premium Mills

China's steel exports surge, prompting trade-defense actions; Indian and Japanese/Korean mills benefit from tightening supply.

Rahul Jain

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Kobe Steel (5406) | Hidden Cold Box & LNG Optionality

​Global LNG supply bottleneck due to limited BAHX manufacturing capacity, creating opportunities for secondary suppliers like Kobe Steel in high...

Mark Chadwick

Kobelco (5406.T) – Diversified Japanese Industrial with Stable Steel and Engineering Exposure

​Kobelco's strong performance driven by stable steel demand and overseas orders, with potential risks in steel margin volatility and project delays.

Rahul Jain

Asian Alpha Hedge Portfolio (March, 2026)

While we do not believe that the Iran conflict is close to a resolution, we believe that the U.S. side needs to reach one, and that will eventually...

David Mudd

Kobelco (5406.T) – Diversified Industrial at Deep Value

​Company's stable earnings over 3 years are supported by machinery and power, with improving ROIC, despite low valuation due to past governance...

Rahul Jain

China’s Steel Curbs + Asian Safeguards: Pricing Tailwinds for Premium Mills

​China's steel exports surge, prompting trade-defense actions; Indian and Japanese/Korean mills benefit from tightening supply.

Rahul Jain

Global LNG supply bottleneck due to limited BAHX manufacturing capacity, creating opportunities for secondary suppliers like Kobe Steel in high...

Kobelco's strong performance driven by stable steel demand and overseas orders, with potential risks in steel margin volatility and project delays.

Company's stable earnings over 3 years are supported by machinery and power, with improving ROIC, despite low valuation due to past governance...

China's steel exports surge, prompting trade-defense actions; Indian and Japanese/Korean mills benefit from tightening supply.