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>Lixil increased operating profit by 15.7% YoY, to ¥20.6bn, compared to consensus estimates for an 18% decline. The stock trades at 80% of book value.</li>
<li>TEPCO earned ¥112bn compared to a consensus forecast of a ¥3bn loss. It trades at 35% of book value.</li>
<li>Lasertec increased EBIT by 122% to ¥47.7bn compared to consensus estimates for ¥27bn, and the stock trading at the lowest multiples relative to Topix in seven years.  </li>
</ul>


Lixil increased operating profit by 15.7% YoY, to ¥20.6bn, compared to consensus estimates for an 18% decline. The stock trades at 80% of book value.
TEPCO earned ¥112bn compared to a consensus forecast of a ¥3bn loss. It trades at 35% of book value.
Lasertec increased EBIT by 122% to ¥47.7bn compared to consensus estimates for ¥27bn, and the stock trading at the lowest multiples relative to Topix in seven years.  


Unloved Japan Round-Up: Some Massive Results Surprises

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Index Rebalance

Hong Kong Exchanges and Clearing / Index Rebalance

Hong Kong Exchanges and Clearing (388 HK)

<ul>
<li>The FRTIB benchmark switch from the EAFE Index to the ACWI IMI ex-USA ex-China ex-Hong Kong Index will result in a round trip trade of around US$56bn.</li>
<li>The changes for the <a href="https://www.smartkarma.com/entities/shanghai-shenzhen-csi-300-inde" target="_blank" data-smartkarma-citation="entities:22906:1" rel="noopener">CSI 300</a>, <a href="https://www.smartkarma.com/entities/csi-smallcap-500-index-shang" target="_blank" data-smartkarma-citation="entities:35347:1" rel="noopener">CSI 500</a>, <a href="https://www.smartkarma.com/entities/sse-science-and-technology-innovation-board-50-index" target="_blank" data-smartkarma-citation="entities:29279:1" rel="noopener">STAR50</a>, <a href="https://www.smartkarma.com/entities/shanghai-stock-exchange-sse-50-a-share-index" target="_blank" data-smartkarma-citation="entities:31073:1" rel="noopener">SSE50</a> and a bunch of other mainland China indices will be announced after market close on Friday.</li>
<li>Relatively quiet week for ETF flows with no major creations or redemptions during the week.</li>
</ul>


The FRTIB benchmark switch from the EAFE Index to the ACWI IMI ex-USA ex-China ex-Hong Kong Index will result in a round trip trade of around US$56bn.
The changes for the CSI 300, CSI 500, STAR50, SSE50 and a bunch of other mainland China indices will be announced after market close on Friday.
Relatively quiet week for ETF flows with no major creations or redemptions during the week.


Index Rebalance & ETF Flow Recap: FRTIB, Japan, CSI300, CSI500, STAR50, WuXi XDC, Asahi

Japanese Equity Specialist, Ortus Advisors

Andrew Jackson

Japanese Equity Specialist

Ortus Advisors

Thematic (Sector/Industry)

<ul>
<li>SMCI strong after showcasing its latest server products, while BESI drops -7.5% with its earnings beat not big enough.</li>
<li>AI plays in unlikely places: Oji Paper and Toto emerging from the bathroom to the cleanroom.</li>
<li>JSW +9.2% yesterday on US infrastructure potential, but likely we see more upside for Heavies as further conflict in the Middle East looms.</li>
</ul>


SMCI strong after showcasing its latest server products, while BESI drops -7.5% with its earnings beat not big enough.
AI plays in unlikely places: Oji Paper and Toto emerging from the bathroom to the cleanroom.
JSW +9.2% yesterday on US infrastructure potential, but likely we see more upside for Heavies as further conflict in the Middle East looms.


Japan Morning Connection: Markets Spooked by the Specter of Attacks on Iran

<ul>
<li>Big jump in US homebuilders and chemical names involved in PVC/housing should jump start Shin Etsu.</li>
<li>Toto increasing its US production capacity aligns with its pivot away from China and makes this more interesting as housing play.</li>
<li>Meta's huge capex spending plans not enough to satisfy its need for AI computing as it buys capacity from Google.</li>
</ul>


Big jump in US homebuilders and chemical names involved in PVC/housing should jump start Shin Etsu.
Toto increasing its US production capacity aligns with its pivot away from China and makes this more interesting as housing play.
Meta's huge capex spending plans not enough to satisfy its need for AI computing as it buys capacity from Google.


Japan Morning Connection: Japan Set to Rise with the Rhetoric from Powell More Dovish than Expected

<ul>
<li>AMAT pricing in weak numbers sent semi-cap lower, while Intel bought its gains to 23% for the week.</li>
<li>Housing name starting to cut through the daily static of Treasury moves as sentiment improves ahead of Sep cut.</li>
<li>Home improvement/suppliers such as Toto and Lixil may see increased interest as global rates outside of Japan trend lower.</li>
</ul>


AMAT pricing in weak numbers sent semi-cap lower, while Intel bought its gains to 23% for the week.
Housing name starting to cut through the daily static of Treasury moves as sentiment improves ahead of Sep cut.
Home improvement/suppliers such as Toto and Lixil may see increased interest as global rates outside of Japan trend lower.


Japan Morning Connection: Markets Calm with No Further Tariffs for China

Japan

LIXIL Group Corporation produces aluminum housing materials such as doors, windows,curtain walls, and screens.  The Company also sells interior materials and a variety of housing equipment.

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Lixil Group (5938 JP)

Unloved Japan Round-Up: Some Massive Results Surprises

Lixil, TEPCO, and Lasertec all outperformed consensus estimates with strong operating profits and low stock valuations relative to book value and...

Michael Allen

Index Rebalance & ETF Flow Recap: FRTIB, Japan, CSI300, CSI500, STAR50, WuXi XDC, Asahi

This recap highlights Insights covering Asian index rebalances (announcements/ forecasts/ IPO Fast Entry/ M&A driven changes). We also highlight...

Brian Freitas

Japan Morning Connection: Markets Spooked by the Specter of Attacks on Iran

Markets spooked by the specter of attacks on Iran as Trump looks for ways to force a deal. Power and industrial semi’s underperformed while Tech...

Andrew Jackson

Japan Morning Connection: Japan Set to Rise with the Rhetoric from Powell More Dovish than Expected

Housing stocks surged after Powell'a comments in Wyoming, Toto should benefit from this improved sentiment. Meta struck a deal with Google for AI...

Andrew Jackson

Japan Morning Connection: Markets Calm with No Further Tariffs for China

Housing sector sentiment improves and forecast to continue with rate cutting cycle ahead. Intel continued to outperform following the prospect of...

Andrew Jackson

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Unloved Japan Round-Up: Some Massive Results Surprises

​Lixil, TEPCO, and Lasertec all outperformed consensus estimates with strong operating profits and low stock valuations relative to book value and...

Michael Allen

Index Rebalance & ETF Flow Recap: FRTIB, Japan, CSI300, CSI500, STAR50, WuXi XDC, Asahi

This recap highlights Insights covering Asian index rebalances (announcements/ forecasts/ IPO Fast Entry/ M&A driven changes). We also highlight...

Brian Freitas

Japan Morning Connection: Markets Spooked by the Specter of Attacks on Iran

Markets spooked by the specter of attacks on Iran as Trump looks for ways to force a deal. Power and industrial semi’s underperformed while Tech...

Andrew Jackson

Japan Morning Connection: Japan Set to Rise with the Rhetoric from Powell More Dovish than Expected

Housing stocks surged after Powell'a comments in Wyoming, Toto should benefit from this improved sentiment. Meta struck a deal with Google for AI...

Andrew Jackson

Japan Morning Connection: Markets Calm with No Further Tariffs for China

Housing sector sentiment improves and forecast to continue with rate cutting cycle ahead. Intel continued to outperform following the prospect of...

Andrew Jackson

Lixil, TEPCO, and Lasertec all outperformed consensus estimates with strong operating profits and low stock valuations relative to book value and...