Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

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.

Thematic (Sector/Industry)

<a href="https://asia.nikkei.com/Business/Energy/Japan-taps-Australia-and-Brunei-for-hydrogen-import-goal" target="_blank" rel="noopener">Momentum is building within East Asia to propel the Hydrogen economy forward</a> as Japan, Korea and China have demonstrated interest in investing heavily in the technology, a call that is being answered by a variety of players through the supply chain. We examine below the key investment opportunities and timelines for these players.

Momentum is building within East Asia to propel the Hydrogen economy forward as Japan, Korea and China have demonstrated interest in investing heavily in the technology, a call that is being answered by a variety of players through the supply chain. We examine below the key investment opportunities and timelines for these players.

Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Tracking Traffic

Focusing on Asian logistics, transportation, and travel companies

Equity Bottom-Up

Our research suggests average container rates rose by 6% in September, boosted by improved Transpacific volumes. While inbound to US demand appears strong through October, estimates from the Port of LA suggest early November will see a modest YoY decline in throughput. 
Bunker (ship fuel) prices remain below year-ago levels and carrier profitability in Q3 (and early Q4) likely remains high compared to 2019. Germany's <a href="https://www.smartkarma.com/entities/hapag-lloyd-ag" target="_blank" data-smartkarma-citation="entities:21649:1" rel="noopener">Hapag-Lloyd AG (HLAG GR)</a> lifted full-year guidance this week, reflecting confidence in near-term market conditions. 
After almost tripling earlier in 2020 on a combination of strong demand and limited capacity, it appears air cargo pricing for key Asian carriers has moderated compared versus peak levels in Q2. 
While current conditions appear buoyant, we believe the sharpest YoY improvements in profitability for container carriers (and air cargo) are probably already behind us.

Our research suggests average container rates rose by 6% in September, boosted by improved Transpacific volumes. While inbound to US demand appears strong through October, estimates from the Port of LA suggest early November will see a modest YoY decline in throughput. 
Bunker (ship fuel) prices remain below year-ago levels and carrier profitability in Q3 (and early Q4) likely remains high compared to 2019. Germany's Hapag-Lloyd AG (HLAG GR) lifted full-year guidance this week, reflecting confidence in near-term market conditions. 
After almost tripling earlier in 2020 on a combination of strong demand and limited capacity, it appears air cargo pricing for key Asian carriers has moderated compared versus peak levels in Q2. 
While current conditions appear buoyant, we believe the sharpest YoY improvements in profitability for container carriers (and air cargo) are probably already behind us. 

TRACKING TRAFFIC/Containers & Air Cargo: Box Rates Firm | LA Down in Nov? | Air Cargo Pricing Eases

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

• BEST &amp; WORST •Our best and worst pair from yesterday is <a href="https://www.smartkarma.com/entities/hirose-electric-co-ltd" target="_blank" data-smartkarma-citation="entities:13513:1" rel="noopener">Hirose Electric (6806 JP)</a> with a 41% upward revision to interim operating income, and leisure and travel conglomerate <a href="https://www.smartkarma.com/entities/seibu-holdings-inc" target="_blank" data-smartkarma-citation="entities:458:1" rel="noopener">Seibu (9024 JP)</a> which revised down both for the interim and full-year, the latter scoring a maximum negative -30.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/161/651/original/2020-09-25_06-15-33.png?1600982296" class="editor-image img-responsive" data-smartkarma-image-id="161651"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/161/652/original/2020-09-25_06-14-28.png?1600982419" class="editor-image img-responsive" data-smartkarma-image-id="161652"></figure><div class="content-caption">Source for all charts &amp; tables: Japan Analytics</div>DAILY STATS <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/161/650/original/2020-09-25_06-07-47.png?1600981686" class="editor-image img-responsive" data-smartkarma-image-id="161650"></figure><a href="https://www.smartkarma.com/entities/oracle-corp-japan" target="_blank" data-smartkarma-citation="entities:16787:1" rel="noopener">Oracle Japan (4716 JP)</a>- Seasonally, the first quarter is the low point of Oracle's annual cycle following the fourth quarter high. This first quarter was unusually subdued as revenue growth was flat for the second quarter in a row. As revenues slow to a single-digit pace, the company has focused on cost reductions, resulting in a Q1 year-on-year 50bps operating margin improvement. OJ is becoming more of an annuity. As such and noting the ¥225b in Net Financial Assets on the Balance Sheet and no debt, it is time for another extraordinary dividend.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/161/653/original/2020-09-25_06-29-09.png?1600982967" class="editor-image img-responsive" data-smartkarma-image-id="161653"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/161/654/original/2020-09-25_06-28-42.png?1600983014" class="editor-image img-responsive" data-smartkarma-image-id="161654"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/161/655/original/2020-09-25_06-33-14.png?1600983265" class="editor-image img-responsive" data-smartkarma-image-id="161655"></figure><hr><div>
 12 Annual • 13 Interim Forecasts/Revisions
The trend in forecasts and revisions has turned down again - only four of 25 announcements made yesterday scored positively and the average score change was -11: -
</div><div><ul style="list-style-type: disc;">
<li>Annual Forecast/Revision Score: 17% Positive / 0% Neutral / 83% Negative</li>
<li>Interim Forecast/Revision Score Change: 15% Positive / 8% Neutral / 77% Negative</li>
<li>Average Forecast/Revision Score Change: -11.2 points</li>
</ul></div>

• BEST &amp; WORST •Our best and worst pair from yesterday is Hirose Electric (6806 JP) with a 41% upward revision to interim operating income, and leisure and travel conglomerate Seibu (9024 JP) which revised down both for the interim and full-year, the latter scoring a maximum negative -30.Source for all charts &amp; tables: Japan AnalyticsDAILY STATS Oracle Japan (4716 JP)- Seasonally, the first quarter is the low point of Oracle's annual cycle following the fourth quarter high. This first quarter was unusually subdued as revenue growth was flat for the second quarter in a row. As revenues slow to a single-digit pace, the company has focused on cost reductions, resulting in a Q1 year-on-year 50bps operating margin improvement. OJ is becoming more of an annuity. As such and noting the ¥225b in Net Financial Assets on the Balance Sheet and no debt, it is time for another extraordinary dividend.
 12 Annual • 13 Interim Forecasts/Revisions
The trend in forecasts and revisions has turned down again - only four of 25 announcements made yesterday scored positively and the average score change was -11: -

Annual Forecast/Revision Score: 17% Positive / 0% Neutral / 83% Negative
Interim Forecast/Revision Score Change: 15% Positive / 8% Neutral / 77% Negative
Average Forecast/Revision Score Change: -11.2 points


🇯🇵 JAPAN • Results & Revisions 09/​​​​​​​​​​​​24 - A Quieter Oracle, Hirose, Shippers, NGK, Seibu

August numbers show a spike in container volumes on key routes, but average achieved freight rates were still just so-so (but improving compared to Q2 2020).
Forward data from the Port of Los Angeles (PoLA) shows strength in rest of September and into the October peak season. Carriers are also benefitting from relatively low fuel prices. 
Conclusions: We still have not seen the strong bump in rates reported by the mainstream financial media, but container pricing is better than in Q2 and volumes have clearly firmed and fuel prices are reasonable -- all positives for the carriers. But the biggest gains -- in both carrier profitability and share prices -- are likely already behind us.

August numbers show a spike in container volumes on key routes, but average achieved freight rates were still just so-so (but improving compared to Q2 2020).
Forward data from the Port of Los Angeles (PoLA) shows strength in rest of September and into the October peak season. Carriers are also benefitting from relatively low fuel prices. 
Conclusions: We still have not seen the strong bump in rates reported by the mainstream financial media, but container pricing is better than in Q2 and volumes have clearly firmed and fuel prices are reasonable -- all positives for the carriers. But the biggest gains -- in both carrier profitability and share prices -- are likely already behind us. 

TRACKING TRAFFIC: Containers & Air Cargo: August Volumes Jump | New PoLA Data Firm Through October

AP Moeller - Maersk A/S / Equity Bottom-Up

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/152/406/original/BANNER-CARGO.png?1597348509" class="editor-image img-responsive" data-smartkarma-image-id="152406"></figure>
July container volumes in key markets showed a strong improvement compared to momentum in the first half of the year. Rates appeared to firm, but only compared to weak May-June numbers.
Q2 earnings results from <a href="https://www.smartkarma.com/entities/ap-moeller-maersk-a-s" target="_blank" data-smartkarma-citation="entities:22428:1" rel="noopener">AP Moeller - Maersk A/S (MAERSKB DC)</a> and <a href="https://www.smartkarma.com/entities/evergreen-marine-corp-ltd" target="_blank" data-smartkarma-citation="entities:15428:1" rel="noopener">Evergreen Marine Corp (2603 TT)</a> showed a dramatic YoY improvement in core shipping profitability, driven almost wholly by a reduction in fuel costs. These gains are likely to moderate in H2.
Container names Maersk and Evergreen are representative of the industry and their shares have recovered 75% and 67% since the trough in March this year. Both shares have surpassed 100% of stated book value, and we now believe further significant gains will be harder to come by.


July container volumes in key markets showed a strong improvement compared to momentum in the first half of the year. Rates appeared to firm, but only compared to weak May-June numbers.
Q2 earnings results from AP Moeller - Maersk A/S (MAERSKB DC) and Evergreen Marine Corp (2603 TT) showed a dramatic YoY improvement in core shipping profitability, driven almost wholly by a reduction in fuel costs. These gains are likely to moderate in H2.
Container names Maersk and Evergreen are representative of the industry and their shares have recovered 75% and 67% since the trough in March this year. Both shares have surpassed 100% of stated book value, and we now believe further significant gains will be harder to come by. 

TRACKING TRAFFIC/Containers & Air Cargo: July Volume & Rates Better | Q2 Profits Soar on Costs

Japan

Nippon Yusen Kabushiki Kaisha mainly provides marine transportation services and transportation management solution from international hub ports to both domestic and international ports. The Company operates container transportation, tramp and specialized carriers, and logistics and cruise lines. Nippon Yusen offers scheduled and unscheduled transportation services around the world.

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Nippon Yusen Kk (9101 JP)

Asia’s Hydrogen Economy

China's increasing favour towards hydrogen is starting to generate investor interest in potential hydrogen economy and FCV plays. We examine...

Mio Kato

TRACKING TRAFFIC/Containers & Air Cargo: Box Rates Firm | LA Down in Nov? | Air Cargo Pricing Eases

Container volumes and pricing firmed in September, and fuel prices remain relatively low, but trading conditions are unlikely to improve much from...

Tracking Traffic

🇯🇵 JAPAN • Results & Revisions 09/24 - A Quieter Oracle, Hirose, Shippers, NGK, Seibu

• BEST WORST • DAILY STATS

Campbell Gunn

TRACKING TRAFFIC: Containers & Air Cargo: August Volumes Jump | New PoLA Data Firm Through October

August numbers show better volumes, rates just so-so (but improving) Forward data from P

Tracking Traffic

TRACKING TRAFFIC/Containers & Air Cargo: July Volume & Rates Better | Q2 Profits Soar on Costs

July container volumes in key markets showed a strong improvement compared to momentum in the first half of the year. Rates appeared to firm, but...

Tracking Traffic

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Asia’s Hydrogen Economy

China's increasing favour towards hydrogen is starting to generate investor interest in potential hydrogen economy and FCV plays. We examine...

Mio Kato

TRACKING TRAFFIC/Containers & Air Cargo: Box Rates Firm | LA Down in Nov? | Air Cargo Pricing Eases

Container volumes and pricing firmed in September, and fuel prices remain relatively low, but trading conditions are unlikely to improve much from...

Tracking Traffic

🇯🇵 JAPAN • Results & Revisions 09/​​​​​​​​​​​​24 - A Quieter Oracle, Hirose, Shippers, NGK, Seibu

• BEST WORST • DAILY STATS

Campbell Gunn

TRACKING TRAFFIC: Containers & Air Cargo: August Volumes Jump | New PoLA Data Firm Through October

August numbers show better volumes, rates just so-so (but improving) Forward data from P

Tracking Traffic

TRACKING TRAFFIC/Containers & Air Cargo: July Volume & Rates Better | Q2 Profits Soar on Costs

July container volumes in key markets showed a strong improvement compared to momentum in the first half of the year. Rates appeared to firm, but...

Tracking Traffic

🇯🇵 JAPAN • Results & Revisions 09/24 - A Quieter Oracle, Hirose, Shippers, NGK, Seibu