Independent Asian Credit Research, Bondcritic

Warut Promboon

Independent Asian Credit Research

Asian Fixed Income/Frontier Market Research

Bondcritic

Bondcritic, established in 2009, is designed to be an independent credit research voice that helps investors gain insights and unbiased analyses on Asian fixed income market. Our mission is to discover deep-value Asian high-yield and distressed bonds with a bottom-up approach, together with the help of our proprietary ESG (Environmental, Social Development, and Governance) model. At the same time, we focus on bringing investment cases of unrated and unloved issuers to the general public.

Thematic (Sector/Industry)

A month after we pointed out the risk emanating from the new strain of a Corona virus (COVID-19) to the global economic recovery, the market still cannot fathom how bad this crisis will be. We were worried on the local outbreak outside China and here we are, the outbreaks in the US, Italy, France, Germany, Spain, and Iran; away from Asia where it all started.
Though we heard it could take anywhere from 12-18 months to develop the vaccine and the situation in China is improving, the situation in the western hemisphere is no nowhere near the peak. Assuming China has gone over the peak in 2 months (mid-January to mid-March) and it will take the western hemisphere and Iran to go over the peak in exactly the same duration, 2 months is a long time and anything can happen, in our view. Then after mid-May when the “carpet bombing” will have finished, we still need to re-assess the damage which could take months to know factually. The two unknowns are (1) how bad the infection would be in the US and Europe, given the level of unpreparedness, and (2) how much damage this virus will be on the global economy.
We are of the opinion that the damage will be very difficult to gauge as the proportion of the virus infection has never happened in recent history. We are of the opinion that COVID-19 fears will be here to stay until the vaccine is successfully developed. The return of COVID-19 in September after the summer in northern hemisphere cannot be ruled out.
We believe central banks are seeing what we see and will come out with more quantitative easing measures and fiscal stimulus in such a large scale, following the US Federal Reserve (Fed) and Bank of England’s recent 50-bp cut. A failure to stimulate the global economy at the scale of Lehman default crisis in September 2008 could see a further adjustment, in our view. What makes it harder for central banks this time around is that consumer confidence is affected by the fear of infection and death caused by COVID-19 which money cannot help alleviate. As a result, the failure to reassure public safety will make the QE or the fiscal stimulus package ineffective, in our judgment.
We are bracing for a global recession this year and expect volatility to persist for another 2 months as a result of pandemic conditions in the US and Europe. We do not believe risky assets should be accumulated at the time of this report on too many uncertainties. In the longer run, lower oil prices on Saudi-Russia conflict will benefit Asia as a net oil importer. We expect further spread widening for emerging markets bonds as defaults are expected to rise significantly.

A month after we pointed out the risk emanating from the new strain of a Corona virus (COVID-19) to the global economic recovery, the market still cannot fathom how bad this crisis will be. We were worried on the local outbreak outside China and here we are, the outbreaks in the US, Italy, France, Germany, Spain, and Iran; away from Asia where it all started.
Though we heard it could take anywhere from 12-18 months to develop the vaccine and the situation in China is improving, the situation in the western hemisphere is no nowhere near the peak. Assuming China has gone over the peak in 2 months (mid-January to mid-March) and it will take the western hemisphere and Iran to go over the peak in exactly the same duration, 2 months is a long time and anything can happen, in our view. Then after mid-May when the “carpet bombing” will have finished, we still need to re-assess the damage which could take months to know factually. The two unknowns are (1) how bad the infection would be in the US and Europe, given the level of unpreparedness, and (2) how much damage this virus will be on the global economy.
We are of the opinion that the damage will be very difficult to gauge as the proportion of the virus infection has never happened in recent history. We are of the opinion that COVID-19 fears will be here to stay until the vaccine is successfully developed. The return of COVID-19 in September after the summer in northern hemisphere cannot be ruled out.
We believe central banks are seeing what we see and will come out with more quantitative easing measures and fiscal stimulus in such a large scale, following the US Federal Reserve (Fed) and Bank of England’s recent 50-bp cut. A failure to stimulate the global economy at the scale of Lehman default crisis in September 2008 could see a further adjustment, in our view. What makes it harder for central banks this time around is that consumer confidence is affected by the fear of infection and death caused by COVID-19 which money cannot help alleviate. As a result, the failure to reassure public safety will make the QE or the fiscal stimulus package ineffective, in our judgment.
We are bracing for a global recession this year and expect volatility to persist for another 2 months as a result of pandemic conditions in the US and Europe. We do not believe risky assets should be accumulated at the time of this report on too many uncertainties. In the longer run, lower oil prices on Saudi-Russia conflict will benefit Asia as a net oil importer. We expect further spread widening for emerging markets bonds as defaults are expected to rise significantly.

Senior Technology Analyst, Japanese Equities, LightStream Research

Scott Foster

Senior Technology Analyst, Japanese Equities

ja research

ja research is an independent research platform focused exclusively on Japanese equities. Leveraging data and graphic analysis provided by Japan Analytics, we provide insights on small and medium-sized companies that have been ignored by the sell-side as well as challenging conventional wisdom on larger companies. We also offer analyst and corporate access, the latter with translation if required. 

Equity Bottom-Up

Mitsubishi Electric has dropped almost 25% in five weeks, falling to the bottom of its recent trading range. A substantial downward revision to FY Mar-20 guidance - which does not incorporate the impact of COVID-19 on the company's operations in China or elsewhere - seems to be in the price. But uncertainty over next fiscal year may not be.The Chinese are already starting to go back to work, so the operating environment in China should start to improve. But the situation in Europe and America is deteriorating, pointing to additional weakness over the next several months. If sales start to recover in 2H of FY Mar-21, this plus cost cutting could result in single-digit profit growth in the year as a whole. And if the economy can adapt to COVID-19, operating profit could rise by close to 20% in FY Mar-22.This would bring the projected P/E ratio down to 12x, in our  estimation, EV/EBITDA to 5x and the PBR to just under 1.0x. Long-term investors should take another look at Mitsubishi Electric

Mitsubishi Electric has dropped almost 25% in five weeks, falling to the bottom of its recent trading range. A substantial downward revision to FY Mar-20 guidance - which does not incorporate the impact of COVID-19 on the company's operations in China or elsewhere - seems to be in the price. But uncertainty over next fiscal year may not be.The Chinese are already starting to go back to work, so the operating environment in China should start to improve. But the situation in Europe and America is deteriorating, pointing to additional weakness over the next several months. If sales start to recover in 2H of FY Mar-21, this plus cost cutting could result in single-digit profit growth in the year as a whole. And if the economy can adapt to COVID-19, operating profit could rise by close to 20% in FY Mar-22.This would bring the projected P/E ratio down to 12x, in our  estimation, EV/EBITDA to 5x and the PBR to just under 1.0x. Long-term investors should take another look at Mitsubishi Electric

Mitsubishi Electric (6503 JP): Start Looking to the Long Term

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/116/176/original/2020-02-04_04-48-54.png?1580759358" class="editor-image img-responsive" data-smartkarma-image-id="116176"></figure><div class="content-caption">Source • Japan Analytics</div>3RD FEBRUARY ROUNDUP - The 107 Results and 44 Forecast/Revision announcements yesterday nudged both our Scores lower again as the Total Market Value reached a three-month low. We expect the Results Score to break below 0.58 and the Forecast/Revision Score to turn negative later in the week.<hr>• ALL-MARKET COMPOSITE •<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/116/180/original/2020-02-04_05-29-59.png?1580761820" class="editor-image img-responsive" data-smartkarma-image-id="116180"></figure><div class="content-caption">Source • Japan Analytics</div>ALL-MARKET COMPOSITE - As of Friday's close. the aggregate forecast for Operating Income is now ¥800 billion below the TTM results, while the Net Income forecast trails by ¥400 billion. The market's forward PE is still an elevated 16.9x based on a Total Market Value (TMV) of ¥666 trillion.  TTM Net income has declined by 18% in the last twelve months, while the TMV has risen by 19%.<hr>• SECTOR TIMELINE •<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/116/177/original/2020-02-04_04-59-01.png?1580759983" class="editor-image img-responsive" data-smartkarma-image-id="116177"></figure><div class="content-caption">Source • Japan Analytics</div>TIMELINE - The largest on-day move was from Non-Bank Finance following <a href="https://www.smartkarma.com/entities/orix-corp" target="_blank" data-smartkarma-citation="entities:9936:1" rel="noopener">Orix (8591 JP)</a>'s return to positive earnings momentum. <a href="https://www.smartkarma.com/entities/shionogi-co-ltd" target="_blank" data-smartkarma-citation="entities:19535:1" rel="noopener">Shionogi (4507 JP)</a>' s downward revision continued the downtrend in the Healthcare Sector, while <a href="https://www.smartkarma.com/entities/mitsubishi-electric-corp" target="_blank" data-smartkarma-citation="entities:11171:1" rel="noopener">Mitsubishi Electric (6503 JP)</a> put a 'dent' in the recovery of the Electrical Equipment Sector.  The Information Technology Sector is also losing momentum, as shown in <a href="https://www.smartkarma.com/entities/otsuka-corp" target="_blank" data-smartkarma-citation="entities:7327:1" rel="noopener">Otsuka (4768 JP)</a>' full-year results and FY2020 forecasts with revenue expected to decline by 3%.

Source • Japan Analytics3RD FEBRUARY ROUNDUP - The 107 Results and 44 Forecast/Revision announcements yesterday nudged both our Scores lower again as the Total Market Value reached a three-month low. We expect the Results Score to break below 0.58 and the Forecast/Revision Score to turn negative later in the week.• ALL-MARKET COMPOSITE •Source • Japan AnalyticsALL-MARKET COMPOSITE - As of Friday's close. the aggregate forecast for Operating Income is now ¥800 billion below the TTM results, while the Net Income forecast trails by ¥400 billion. The market's forward PE is still an elevated 16.9x based on a Total Market Value (TMV) of ¥666 trillion.  TTM Net income has declined by 18% in the last twelve months, while the TMV has risen by 19%.• SECTOR TIMELINE •Source • Japan AnalyticsTIMELINE - The largest on-day move was from Non-Bank Finance following Orix (8591 JP)'s return to positive earnings momentum. Shionogi (4507 JP)' s downward revision continued the downtrend in the Healthcare Sector, while Mitsubishi Electric (6503 JP) put a 'dent' in the recovery of the Electrical Equipment Sector.  The Information Technology Sector is also losing momentum, as shown in Otsuka (4768 JP)' full-year results and FY2020 forecasts with revenue expected to decline by 3%.

🇯🇵 JAPAN • Results & Revisions Daily Roundup - 3rd February ▲8591 6752 3064 ▼6503 4768 6920

Semiconductors, Memory and SSDs Specialist, Objective Analysis

Jim Handy

Semiconductors, Memory and SSDs Specialist

Objective Analysis

Objective Analysis offers third-party independent market research and data for the semiconductor industry and investors in the semiconductor industry.

Semiconductors, Memory and SSDs

Monthly chip revenues declined slightly in November, according to the SIA.  This SmartKarma Insight examines recently-reported industry revenues to see how they compare with the long-term trend and to understand whether or not the current uptick is likely to continue.  The conclusion is that today's market is higher than it would be if the China-US trade war were not a concern.  A mid-2020 collapse is more than likely.

Monthly chip revenues declined slightly in November, according to the SIA.  This SmartKarma Insight examines recently-reported industry revenues to see how they compare with the long-term trend and to understand whether or not the current uptick is likely to continue.  The conclusion is that today's market is higher than it would be if the China-US trade war were not a concern.  A mid-2020 collapse is more than likely.

November Semiconductor Stats Good, But China Inventory Build May Be Misleading

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

<a href="https://www.smartkarma.com/entities/7797" target="_blank" data-smartkarma-citation="entities:7797:1">Hitachi Ltd (6501 JP)</a> announced the acquisition of an 80.1% stake in <a href="https://www.smartkarma.com/entities/22568" target="_blank" data-smartkarma-citation="entities:22568:1">ABB Ltd (ABBN VX)</a>’s power grids business for $6.4 billion. ABB will retain the remaining stake in the divested unit, which is valued at an EV of $11 billion. ABB’s power grids is a global #1 player and makes transformers, long distance electricity-transmission systems and energy storage units.<div class="content-highlight">Setting aside the huge cultural and integration challenges, we believe that Hitachi’s acquisition of ABB’s power grids is a bold but a risky move.</div>

Hitachi Ltd (6501 JP) announced the acquisition of an 80.1% stake in ABB Ltd (ABBN VX)’s power grids business for $6.4 billion. ABB will retain the remaining stake in the divested unit, which is valued at an EV of $11 billion. ABB’s power grids is a global #1 player and makes transformers, long distance electricity-transmission systems and energy storage units.Setting aside the huge cultural and integration challenges, we believe that Hitachi’s acquisition of ABB’s power grids is a bold but a risky move.

Hitachi (6501 JP): A Bold but Risky Acquisition of ABB’s Power Grids

Japan

Mitsubishi Electric Corporation develops, manufactures, and markets electronic equipment.  The Company's products include industrial machinery, heavy electric machinery, data communications systems, electronic devices, and consumer electronics.

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Mitsubishi Electric (6503 JP)

Market Monitor: Friday 13th Pandemic

A month after we pointed out the risk emanating from the new strain of a Corona virus (COVID-19) to the global economic recovery, the market still...

Bondcritic