Senior Technology Analyst, Japanese Equities, LightStream Research

Scott Foster

Senior Technology Analyst, Japanese Equities

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

<ul>
<li>NEC' is up almost 90% year-to-date to 16X EPS guidance for this fiscal year and 12x targeted EPS three years out. It now looks fairly valued.</li>
<li>Profit growth is led by IT Services for the private and public sectors, with strength in finance and system integration. </li>
<li>Social Infrastructure is growing, but in the red. Aerospace and national security are profitable, but margins are low.</li>
</ul>


NEC' is up almost 90% year-to-date to 16X EPS guidance for this fiscal year and 12x targeted EPS three years out. It now looks fairly valued.
Profit growth is led by IT Services for the private and public sectors, with strength in finance and system integration. 
Social Infrastructure is growing, but in the red. Aerospace and national security are profitable, but margins are low.


Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>Toshiba is trading at a 12-13% annualised return on the arb when using the expected Tender Offer Start Date proposed in the Takeover Announcement on 23 March 2023.</li>
<li>On Day 1-2 post-announcement, Toshiba traded at an 11-13% annualised spread. Since the announcement, a 12-name Peer Basket is up 11+% meaning Toshiba back end risk has shrunk.</li>
<li>Forward consensus EPS ratios have fallen, in part due to the shift forward one fiscal year by comps. We'll see where those lie in a week when earnings come.</li>
</ul>


Toshiba is trading at a 12-13% annualised return on the arb when using the expected Tender Offer Start Date proposed in the Takeover Announcement on 23 March 2023.
On Day 1-2 post-announcement, Toshiba traded at an 11-13% annualised spread. Since the announcement, a 12-name Peer Basket is up 11+% meaning Toshiba back end risk has shrunk.
Forward consensus EPS ratios have fallen, in part due to the shift forward one fiscal year by comps. We'll see where those lie in a week when earnings come.


<ul>
<li>Upward trend in new orders suggest that guidance is conservative.</li>
<li>Long-Term prospects good with digitalization, 5G and optical-electronic technology for 6G.</li>
<li>Lagging share price offers attractive valuations and 42% potential upside to previous high.</li>
</ul>


Upward trend in new orders suggest that guidance is conservative.
Long-Term prospects good with digitalization, 5G and optical-electronic technology for 6G.
Lagging share price offers attractive valuations and 42% potential upside to previous high.


NEC (6701 JP): Positive Orders Trend, Lagging Share Price

Japan Specialist

Mark Chadwick

<ul>
<li>We remain bullish on NEC as we believe that the company is one of the key beneficiaries of the shift to standalone 5G</li>
<li>NEC’s Network Services registered double-digit revenue and profit gains in Q3 on the back of growth in 5G equipment sales and IP income.</li>
<li>We believe that the current share price (+4% over the past 12m) and valuation (10x PE, 0.8x PB) do not reflect the positive mid-term outlook</li>
</ul>


We remain bullish on NEC as we believe that the company is one of the key beneficiaries of the shift to standalone 5G
NEC’s Network Services registered double-digit revenue and profit gains in Q3 on the back of growth in 5G equipment sales and IP income.
We believe that the current share price (+4% over the past 12m) and valuation (10x PE, 0.8x PB) do not reflect the positive mid-term outlook


<ul>
<li>On 28 April 2022, with full-year earnings, <a href="https://www.smartkarma.com/entities/fujitsu-ltd" target="_blank" data-smartkarma-citation="entities:16968:1" rel="noopener">Fujitsu Ltd (6702 JP)</a> announced a buyback programme to buy back up to 12mm shares (6.11% of shares out) for up to ¥150bn</li>
<li>That was when the shares were ¥18,540. The shares popped 10% in 2 days. Then fell 25% into end-September. Yesterday, they announced they'd bought back 1.9mm shares in November.</li>
<li>Those were the first shares bought back under the Programme. And that leaves 4 months and a lot of stock to buy. </li>
</ul>


On 28 April 2022, with full-year earnings, Fujitsu Ltd (6702 JP) announced a buyback programme to buy back up to 12mm shares (6.11% of shares out) for up to ¥150bn
That was when the shares were ¥18,540. The shares popped 10% in 2 days. Then fell 25% into end-September. Yesterday, they announced they'd bought back 1.9mm shares in November.
Those were the first shares bought back under the Programme. And that leaves 4 months and a lot of stock to buy. 


Fujitsu (6702) Buyback Just Getting Started

Japan

NEC Corporation manufactures and markets computers, telecommunication equipment, electronic devices, semiconductors, and software.  The Company's products include printers, modems, cellular phones, plasma display panels (PDP), network systems, memory, integrated circuits (IC), thin film transistor-liquid crystal display (TFT-LCD), and printed circuit boards (PCB). NEC operates worldwide.

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NEC Corp (6701 JP)

NEC (6701 JP): Enough for Now

NEC's share price is up almost 90% since January, but sales and profit growth has declined. Valuations look reasonable. Take profit and wait to see...

Scott Foster

Toshiba (6502) - Thinking About the Arb

Toshiba has seen shares rise a bit since Day1 post-anncmt ~6 weeks ago, but Peers have risen further and the earnings shift on forward consensus is...

Travis Lundy

NEC (6701) | Strong Network Revenues

We remain bullish on NEC as we believe that the company is one of the key beneficiaries of the shift to standalone 5G. The stock price is...

Mark Chadwick

Fujitsu (6702) Buyback Just Getting Started

Fujitsu announced their buyback many months ago (late April 2022) but bought nothing til last month when they were 15%. Expect 11-15% of volume...

Travis Lundy

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

NEC (6701 JP): Enough for Now

NEC's share price is up almost 90% since January, but sales and profit growth has declined. Valuations look reasonable. Take profit and wait to see...

Scott Foster

Toshiba (6502) - Thinking About the Arb

Toshiba has seen shares rise a bit since Day1 post-anncmt ~6 weeks ago, but Peers have risen further and the earnings shift on forward consensus is...

Travis Lundy

NEC (6701 JP): Positive Orders Trend, Lagging Share Price

Orders trend positive through Q3. FY Mar-23 guidance looks conservative. Digitalization and 5G/6G trends positive for mid- to long-term growth....

Scott Foster

NEC (6701) | Strong Network Revenues

We remain bullish on NEC as we believe that the company is one of the key beneficiaries of the shift to standalone 5G. The stock price is...

Mark Chadwick

Fujitsu (6702) Buyback Just Getting Started

Fujitsu announced their buyback many months ago (late April 2022) but bought nothing til last month when they were 15%. Expect 11-15% of volume...

Travis Lundy