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.

Event-Driven

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<li>
<a href="https://www.smartkarma.com/entities/kirin-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:16977:1" rel="noopener">Kirin Holdings (2503 JP)</a>’s NAV discount has narrowed from around 30% in July 2021 to 17% by November 2021.</li>
<li>Institutional investors have started to increase their ownership of Kirin after trimming their stakes during the first half of the year.</li>
<li>We think that NAV discount will continue to narrow over the next few months as institutional investors come back to own Kirin following the issues with the Myanmar business.</li>
</ul>



Kirin Holdings (2503 JP)’s NAV discount has narrowed from around 30% in July 2021 to 17% by November 2021.
Institutional investors have started to increase their ownership of Kirin after trimming their stakes during the first half of the year.
We think that NAV discount will continue to narrow over the next few months as institutional investors come back to own Kirin following the issues with the Myanmar business.


Kirin: Holdco Discount Is Starting to Unwind Alongside The Return of Institutional Investors

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<li>
<a href="https://www.smartkarma.com/entities/kirin-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:16977:1" rel="noopener">Kirin Holdings (2503 JP)</a>’s 2Q21 results, released yesterday was rather disappointing with revenue and operating profit falling below the consensus by 1.5% and 67% respectively.</li>
<li>The company’s revenue grew 1.5% YoY to ¥454.7bn compared to -3.6%, -2.7%, -4.1% and -9.6% in 1Q21, 4Q20, 3Q20 and 2Q20, respectively.</li>
<li>The operating profit decreased 40.9% YoY to ¥13.8bn, compared to ¥28.0bn, ¥23.6bn, ¥54.9bn and ¥23.4bn in 1Q21, 4Q20, 3Q20 and 2Q20, respectively.</li>
<li>The full-year revenue and normalised operating profit guidance were lowered by 0.5% and 5.6% respectively and the new 2021 revenue and normalised operating profit guidance stood at ¥1,870bn and ¥170bn compared to consensus revenue and OP of ¥1,862bn and ¥152.2bn, respectively.</li>
<li>Nevertheless, the price reaction to the earnings miss was rather subdued with shares only falling around 2.1%. This would normally concern us. However, Kirin is currently trading near the 52-week low and it appears that downside risks such as the troubles regarding the Myanmar JV and the overall market weaknesses due to COVID-19 are mostly priced in the current share price. Therefore, we would buy Kirin at these levels.</li>
</ul>



Kirin Holdings (2503 JP)’s 2Q21 results, released yesterday was rather disappointing with revenue and operating profit falling below the consensus by 1.5% and 67% respectively.
The company’s revenue grew 1.5% YoY to ¥454.7bn compared to -3.6%, -2.7%, -4.1% and -9.6% in 1Q21, 4Q20, 3Q20 and 2Q20, respectively.
The operating profit decreased 40.9% YoY to ¥13.8bn, compared to ¥28.0bn, ¥23.6bn, ¥54.9bn and ¥23.4bn in 1Q21, 4Q20, 3Q20 and 2Q20, respectively.
The full-year revenue and normalised operating profit guidance were lowered by 0.5% and 5.6% respectively and the new 2021 revenue and normalised operating profit guidance stood at ¥1,870bn and ¥170bn compared to consensus revenue and OP of ¥1,862bn and ¥152.2bn, respectively.
Nevertheless, the price reaction to the earnings miss was rather subdued with shares only falling around 2.1%. This would normally concern us. However, Kirin is currently trading near the 52-week low and it appears that downside risks such as the troubles regarding the Myanmar JV and the overall market weaknesses due to COVID-19 are mostly priced in the current share price. Therefore, we would buy Kirin at these levels.


Kirin: An End to Troubles in Myanmar JV Could Unwind the Multi-Year Low Holdco Discount

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

TOPIX is constructed differently than other major indices. It has no fixed number of constituents like S&amp;P500, and it has reasonably loose rules on membership, which will soon get tighter as the TOPIX spends a few years matching the TSE Prime market section which launches 1 April 2022, but it probably will still not be tight enough to be a legitimate blue chip index. But it is what we got.There is a slew of TOPIX rebalance trades every year. There are monthly "company data" changes. Then there are quarterly changes for FFW. And there is an annual liquidity factor adjustment rebalance. On the 7th last week, the TSE announced the July FFW changes. They are bigger than many expected. And more numerous (15 dozen changes). I see a bit over US$2.5bn to sell on the down-weights. And some large trades are reasonably impactful. More below the fold.

TOPIX is constructed differently than other major indices. It has no fixed number of constituents like S&amp;P500, and it has reasonably loose rules on membership, which will soon get tighter as the TOPIX spends a few years matching the TSE Prime market section which launches 1 April 2022, but it probably will still not be tight enough to be a legitimate blue chip index. But it is what we got.There is a slew of TOPIX rebalance trades every year. There are monthly "company data" changes. Then there are quarterly changes for FFW. And there is an annual liquidity factor adjustment rebalance. On the 7th last week, the TSE announced the July FFW changes. They are bigger than many expected. And more numerous (15 dozen changes). I see a bit over US$2.5bn to sell on the down-weights. And some large trades are reasonably impactful. More below the fold. 

<ul>
<li>
<a href="https://www.smartkarma.com/entities/kirin-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:16977:1" rel="noopener">Kirin Holdings (2503 JP)</a> reported its 1Q21 results last week, with revenue and operating profit falling broadly in line with consensus estimates.</li>
<li>The company’s revenue declined by 3.6% YoY to ¥409.3bn, compared to 2.3%, 9.6%, 4.1% and 2.7% YoY in 1Q20, 2Q20, 3Q20, and 4Q20 respectively.</li>
<li>The operating profit increased by 7.5% YoY to ¥28.1bn, compared to ¥26.1bn, ¥23.4bn, ¥54.9bn, and ¥-1.4bn in 1Q20, 2Q20, 3QY20, and 4Q20 respectively. This was mainly due to lower SG&amp;A and other operating expenses.</li>
<li>The full year revenue and profit guidance remained unchanged at a revenue of ¥1,880bn and an operating profit of ¥151bn compared to consensus revenue and OP of ¥1,856bn and ¥151.4bn respectively. However, the company is still evaluating options regarding its Myanmar JV, which could lead to a significant impact on Kirin’s 2021 guidance.</li>
</ul>



Kirin Holdings (2503 JP) reported its 1Q21 results last week, with revenue and operating profit falling broadly in line with consensus estimates.
The company’s revenue declined by 3.6% YoY to ¥409.3bn, compared to 2.3%, 9.6%, 4.1% and 2.7% YoY in 1Q20, 2Q20, 3Q20, and 4Q20 respectively.
The operating profit increased by 7.5% YoY to ¥28.1bn, compared to ¥26.1bn, ¥23.4bn, ¥54.9bn, and ¥-1.4bn in 1Q20, 2Q20, 3QY20, and 4Q20 respectively. This was mainly due to lower SG&amp;A and other operating expenses.
The full year revenue and profit guidance remained unchanged at a revenue of ¥1,880bn and an operating profit of ¥151bn compared to consensus revenue and OP of ¥1,856bn and ¥151.4bn respectively. However, the company is still evaluating options regarding its Myanmar JV, which could lead to a significant impact on Kirin’s 2021 guidance.


Kirin Seems Enticing from a Holdco Perspective, but Myanmar JV Still Poses Reputational & ESG Risks

<a target="_blank">Norges Bank </a>manages the Norwegian sovereign fund, which is the world’s largest sovereign wealth funds, with AUM of around $1.3 trillion. The fund is the 12th largest shareholder of the Japanese beverage company <a href="https://www.smartkarma.com/entities/kirin-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:16977:1" rel="noopener">Kirin Holdings (2503 JP)</a> with an ownership of 1.4% of Kirin’s share capital.Yesterday, the Norwegian central bank said that it had put Kirin on a watchlist for possible exclusion from the sovereign wealth fund over Kirin’s ties with Myanmar Economic Holdings (MEHL).

Norges Bank manages the Norwegian sovereign fund, which is the world’s largest sovereign wealth funds, with AUM of around $1.3 trillion. The fund is the 12th largest shareholder of the Japanese beverage company Kirin Holdings (2503 JP) with an ownership of 1.4% of Kirin’s share capital.Yesterday, the Norwegian central bank said that it had put Kirin on a watchlist for possible exclusion from the sovereign wealth fund over Kirin’s ties with Myanmar Economic Holdings (MEHL).

Norges Bank Puts Kirin On a Watchlist Over Ties with Myanmar Military Linked JV

Japan

Kyowa Hakko Kirin Co.,Ltd. develops, manufactures, and markets pharmaceuticals. The Company's products include a protein produced by genetic recombination technology, an anti-anemia agent that attaches new sugar chains through partial modification of the amino acid sequence of human erythropoietin (EPO), and a glycoprotein, human erythropoietin.

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Kyowa Kirin Co Ltd (4151 JP)

Kirin: Holdco Discount Is Starting to Unwind Alongside The Return of Institutional Investors

Even though Kirin's listed holdings have gained more than 200% since 2019, Kirin's share price has failed to reflect that significant increase in...

Oshadhi Kumarasiri

Kirin: An End to Troubles in Myanmar JV Could Unwind the Multi-Year Low Holdco Discount

Kirin is currently trading at ¥1,982 per share, 5.5% above the past 52 week low just 7.2% above the COVID sell-off level. The market value of...

Oshadhi Kumarasiri

July TOPIX FFW Rebalancing Trade

The TOPIX July FFW rebalance is large this year, on what is generally an overlooked rebalance trade. There are several multi-hundred million...

Travis Lundy

Kirin Seems Enticing from a Holdco Perspective, but Myanmar JV Still Poses Reputational & ESG Risks

We think the market has already overreacted to Myanmar’s JV troubles, but with the Myanmar coup still in the news, there is a chance that Kirin...

Oshadhi Kumarasiri

Norges Bank Puts Kirin On a Watchlist Over Ties with Myanmar Military Linked JV

We believe the market has already factored in the worst-case scenario for Kirin. That said, The Norges Bank putting Kirin on a watchlist could...

Oshadhi Kumarasiri

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