Founder & CEO Bond Angle, LLC, Bond Angle, LLC

Vicki Bryan

Founder & CEO Bond Angle, LLC

Bond Angle, LLC

Insightful commentary and analysis on bond markets and market movers, including financial, economic, and industry catalysts and management shenanigans. 

High yield market investment research

Credit

<a href="https://www.smartkarma.com/entities/tesla-motors-inc" target="_blank" data-smartkarma-citation="entities:20279:1" rel="noopener">Tesla Motors (TSLA US)</a> filed its 10-Q for the second quarter on Monday which, as usual, raised new questions and concerns without really filling in all the gaps in disclosure left hanging after its disappointing earnings report last week (see "<a href="https://www.smartkarma.com/insights/tesla-q2-results-diminishing-returns" target="_blank" data-smartkarma-citation="insights:31300" rel="noopener">Tesla Q2 Results: Diminishing Returns")</a>.
<ul>
<li>I warned again in <a href="https://www.smartkarma.com/insights/tesla-q2-deliveries-beat-demand-and-profit-trends-less-clear" target="_blank" data-smartkarma-citation="insights:30907" rel="noopener">Tesla Q2 Deliveries Beat; Demand and Profit Trends Less Clear</a> that underlying demand trends in 2019 have been marked with escalatingweakness that drastic pricing discounts haven't fixed. The 10-Q revealed more clues that Tesla may have needed another white knight to land its record second-quarter deliveries at the last minute, likely at severe price discounts. 
</li>
<li>Tesla ended the quarter with a big increase in cash, but the 10-Q <a href="https://www.smartkarma.com/insights/tesla-q2-results-diminishing-returns" target="_blank" rel="noopener">confirmed my concerns</a> that operations actually generated almost none of it--again. This is bad news given Tesla's sizable and still unsupported cash drain in operations every quarter plus its massively underfunded pipeline obligations--including one likely expensive surprise project it's yet to disclose.
</li>
<li>We also learned what Tesla sacrificed to get the Shanghai factory dealin China and how it could lose it all. </li>
<li>One critical loss Tesla will suffer more immediately is JB Straubel, longtime Chief Technology Officer and the company's last co-founder besides CEO Elon Musk who surprised the market last week by announcing he is leaving. An amended agreement with Panasonic disclosed in the 10-Q offers hints about why now, after sixteen years of helping to build a company he clearly loved, Straubel decided to leave as Tesla is supposedly on the brink of fruition with so many vital projects under his stewardship.
</li>
</ul>
Read on for Bond Angle analysis.

Tesla Motors (TSLA US) filed its 10-Q for the second quarter on Monday which, as usual, raised new questions and concerns without really filling in all the gaps in disclosure left hanging after its disappointing earnings report last week (see "Tesla Q2 Results: Diminishing Returns").

I warned again in Tesla Q2 Deliveries Beat; Demand and Profit Trends Less Clear that underlying demand trends in 2019 have been marked with escalatingweakness that drastic pricing discounts haven't fixed. The 10-Q revealed more clues that Tesla may have needed another white knight to land its record second-quarter deliveries at the last minute, likely at severe price discounts. 

Tesla ended the quarter with a big increase in cash, but the 10-Q confirmed my concerns that operations actually generated almost none of it--again. This is bad news given Tesla's sizable and still unsupported cash drain in operations every quarter plus its massively underfunded pipeline obligations--including one likely expensive surprise project it's yet to disclose.

We also learned what Tesla sacrificed to get the Shanghai factory dealin China and how it could lose it all. 
One critical loss Tesla will suffer more immediately is JB Straubel, longtime Chief Technology Officer and the company's last co-founder besides CEO Elon Musk who surprised the market last week by announcing he is leaving. An amended agreement with Panasonic disclosed in the 10-Q offers hints about why now, after sixteen years of helping to build a company he clearly loved, Straubel decided to leave as Tesla is supposedly on the brink of fruition with so many vital projects under his stewardship.


Read on for Bond Angle analysis.

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

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. 

Quantitative Analysis

• RELATIVE PRICE SCORE • <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/090/226/original/2019-06-13_16-47-07.png?1560412038" class="editor-image img-responsive" data-smartkarma-image-id="90226"></figure><div class="content-caption">Source: Japan Analytics</div>INTRODUCTION - The Relative Price Score (RPS) is a measure of stock price performance relative to TOPIX calculated by comparing the current deviation with the mean absolute deviation of monthly and daily relative share prices. As all companies are thus on a comparable scale, 'Overbought' and 'Oversold' outliers and changes in scoring can reveal short-term and longer-term trading opportunities. Company outlier thresholds are set at +4 &amp; -2 and equate to the top and bottom first-to-second percentiles of historical observations from which mean reversion takes a matter of months. RPS outliers with a Score of greater than 10.0 are rare outside of the 2000 tech 'bubble'. <a href="https://www.smartkarma.com/entities/goldwin-inc" target="_blank" data-smartkarma-citation="entities:410:1">Goldwin (8111 JP)</a> has the distinction of being one of only two large-cap RPS 'ten-baggers' since that time.This insight updates our list of Overbought and Oversold companies, reviews the best and worst performing companies in terms of RPS over the last three months and adds some specific comments on stocks on each category.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/090/196/original/2019-06-13_11-15-27.png?1560392157" class="editor-image img-responsive" data-smartkarma-image-id="90196"></figure><div class="content-caption">Source: Japan Analytics</div>STATISTICS - Currently, of the 3,832 listed companies for which daily RPS data is available, 94 companies are 'Overbought', and 131 are 'Oversold' - 2.5% and 3.4%, respectively of the total. For the 758 companies with a market capitalisation of over ¥100b, there are 50 'Overbought' and 18 'Oversold' companies, 6.6% and 5.0%, respectively. As noted the companion Insight, <a href="https://www.smartkarma.com/insights/japan-june-relative-price-scores-market-sectors-peer-groups-more-of-the-same" target="_blank" data-smartkarma-citation="insights:30323">🇯🇵 Japan • June Relative Price Scores: Market, Sectors &amp; Peer Groups - More of The Same</a>, these numbers and percentages are unusual and were last seen in the Japanese market in 2000. <hr>• RELATIVE PRICE SCORE TOPS •<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/090/202/original/2019-06-13_13-06-49.png?1560398835" class="editor-image img-responsive" data-smartkarma-image-id="90202"></figure><div class="content-caption">Source: Japan Analytics</div>RPS 'TOPS' - In the last two years, 444 companies have achieved an RPS of '4' or more and the average Overbought 'persistence' is 43 days. 1.4% of the total of 1.29 million traded stock days were by companies with an RPS of over 4. For companies with a market capitalisation higher than ¥100b, the numbers are 96 companies and 75 days - demonstrating the superior persistence of large capitalisation companies in this regard. Some examples of RPS mean reversion in the last three months have been <a href="https://www.smartkarma.com/entities/descente-ltd" target="_blank" data-smartkarma-citation="entities:8225:1">Descente (8114 JP)</a>, <a href="https://www.smartkarma.com/entities/alfresa-holdings-corp" target="_blank" data-smartkarma-citation="entities:10610:1">Alfresa (2784 JP)</a>, <a href="https://www.smartkarma.com/entities/320" target="_blank" data-smartkarma-citation="entities:320:1">FamilyMart Uny (8028 JP)</a>, <a href="https://www.smartkarma.com/entities/kikkoman-corp" target="_blank" data-smartkarma-citation="entities:11720:1">Kikkoman (2801 JP)</a>, <a href="https://www.smartkarma.com/entities/kobayashi-pharmaceutical-co" target="_blank" data-smartkarma-citation="entities:14930:1">Kobayashi Pharmaceutical (4967 JP)</a>, and <a href="https://www.smartkarma.com/entities/eiken-chemical-co-ltd" target="_blank" data-smartkarma-citation="entities:12675:1">Eiken Chemical (4549 JP)</a>.  <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/090/201/original/2019-06-13_13-04-38.png?1560398780" class="editor-image img-responsive" data-smartkarma-image-id="90201"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/090/203/original/2019-06-13_13-08-46.png?1560398945" class="editor-image img-responsive" data-smartkarma-image-id="90203"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/090/204/original/2019-06-13_13-09-37.png?1560399049" class="editor-image img-responsive" data-smartkarma-image-id="90204"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/090/205/original/2019-06-13_13-12-01.png?1560399142" class="editor-image img-responsive" data-smartkarma-image-id="90205"></figure><div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/090/316/original/2019-06-15_19-45-47.png?1560595558" class="editor-image img-responsive" data-smartkarma-image-id="90316"></figure>Source: Japan Analytics
</div>RPS 'BOTTOMS' - 372 companies have seen their RPS fall to '-2' or below in the last two years, and the average Oversold 'persistence' is 61 days. 1.5% of the total of 1.29 million traded stock days were by companies with an RPS of less than -2.  For larger capitalisation companies, the numbers are 85 companies and 89 days. A recent example of positive RPS mean reversion is <a href="https://www.smartkarma.com/entities/k-o-energy-group-inc" target="_blank" data-smartkarma-citation="entities:17701:1">K&amp;O Energy (1663 JP)</a>.<div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/090/207/original/2019-06-13_13-14-03.png?1560399270" class="editor-image img-responsive" data-smartkarma-image-id="90207"></figure>Source: Japan Analytics
</div><div class="content-highlight">In the DETAIL section below, we list the current very overbought (RPS&gt;5), too late to buy (RPS &gt;4&lt;5) and oversold (RPS &lt;-2) stocks as well as the most substantial three-month positive and negative changes in RPS.</div>

• RELATIVE PRICE SCORE • Source: Japan AnalyticsINTRODUCTION - The Relative Price Score (RPS) is a measure of stock price performance relative to TOPIX calculated by comparing the current deviation with the mean absolute deviation of monthly and daily relative share prices. As all companies are thus on a comparable scale, 'Overbought' and 'Oversold' outliers and changes in scoring can reveal short-term and longer-term trading opportunities. Company outlier thresholds are set at +4 &amp; -2 and equate to the top and bottom first-to-second percentiles of historical observations from which mean reversion takes a matter of months. RPS outliers with a Score of greater than 10.0 are rare outside of the 2000 tech 'bubble'. Goldwin (8111 JP) has the distinction of being one of only two large-cap RPS 'ten-baggers' since that time.This insight updates our list of Overbought and Oversold companies, reviews the best and worst performing companies in terms of RPS over the last three months and adds some specific comments on stocks on each category.Source: Japan AnalyticsSTATISTICS - Currently, of the 3,832 listed companies for which daily RPS data is available, 94 companies are 'Overbought', and 131 are 'Oversold' - 2.5% and 3.4%, respectively of the total. For the 758 companies with a market capitalisation of over ¥100b, there are 50 'Overbought' and 18 'Oversold' companies, 6.6% and 5.0%, respectively. As noted the companion Insight, 🇯🇵 Japan • June Relative Price Scores: Market, Sectors &amp; Peer Groups - More of The Same, these numbers and percentages are unusual and were last seen in the Japanese market in 2000. • RELATIVE PRICE SCORE TOPS •Source: Japan AnalyticsRPS 'TOPS' - In the last two years, 444 companies have achieved an RPS of '4' or more and the average Overbought 'persistence' is 43 days. 1.4% of the total of 1.29 million traded stock days were by companies with an RPS of over 4. For companies with a market capitalisation higher than ¥100b, the numbers are 96 companies and 75 days - demonstrating the superior persistence of large capitalisation companies in this regard. Some examples of RPS mean reversion in the last three months have been Descente (8114 JP), Alfresa (2784 JP), FamilyMart Uny (8028 JP), Kikkoman (2801 JP), Kobayashi Pharmaceutical (4967 JP), and Eiken Chemical (4549 JP).  
Source: Japan Analytics
RPS 'BOTTOMS' - 372 companies have seen their RPS fall to '-2' or below in the last two years, and the average Oversold 'persistence' is 61 days. 1.5% of the total of 1.29 million traded stock days were by companies with an RPS of less than -2.  For larger capitalisation companies, the numbers are 85 companies and 89 days. A recent example of positive RPS mean reversion is K&amp;O Energy (1663 JP).
Source: Japan Analytics
In the DETAIL section below, we list the current very overbought (RPS&gt;5), too late to buy (RPS &gt;4&lt;5) and oversold (RPS &lt;-2) stocks as well as the most substantial three-month positive and negative changes in RPS.

🇯🇵 Japan • Relative Price Scores - Overbought & Oversold Companies - June 2019

Equity Analyst, LightStream Research

Aqila Ali

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.

Equity Bottom-Up

Contemporary Amperex Technology (CATL) / Equity Bottom-Up

Contemporary Amperex Technology (CATL) (300750 CH)

On Friday, the Nikkei reported that <a href="https://www.smartkarma.com/entities/toyota-motor-corp" target="_blank" data-smartkarma-citation="entities:73:1">Toyota Motor (7203 JP)</a> had signed a memorandum of understanding (MOU) with <a href="https://www.smartkarma.com/entities/contemporary-amperex-techn-a" target="_blank" data-smartkarma-citation="entities:24404:1">CATL (A) (300750 CH)</a> to supply batteries for their EVs that are to be released in China as well as in other markets. The deal was made on the back of the company’s intention to accelerate its EV plan by 5 years. The Nikkei also reported that, apart from CATL, Toyota has also signed deals with China’s <a href="https://www.smartkarma.com/entities/byd-co-ltd" target="_blank" data-smartkarma-citation="entities:26048:1">BYD Co Ltd (002594 CH)</a>, and Japan’s <a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1">Toshiba Corp (6502 JP)</a> and <a href="https://www.smartkarma.com/entities/gs-yuasa-corp" target="_blank" data-smartkarma-citation="entities:8298:1">Gs Yuasa Corp (6674 JP)</a> for batteries. However, the highlight of the news was the companies MOU with CATL.
The information on the deal that was reported is as follows:
<ul>
<li>CATL will supply lithium-ion batteries for Toyota’s EVs that will be released in China as well as in other markets next year onwards</li>
<li>CATL and Toyota will collaborate on improving battery quality, adopting shared standards, and reusing batteries</li>
</ul>
In our opinion, this looks like a win-win situation for both Toyota and CATL provided the companies are able to meet their production targets. However, battery leader, <a href="https://www.smartkarma.com/entities/panasonic-corp" target="_blank" data-smartkarma-citation="entities:222:1">Panasonic Corp (6752 JP)</a> seems to be placed in a rather competitive situation. Although we felt that Panasonic would be able to have a strong hold on Toyota via its JV with the latter and diversifying its customer base away from Tesla, this move may weaken Panasonic’s position somewhat. Our detailed view on the news is given below.

On Friday, the Nikkei reported that Toyota Motor (7203 JP) had signed a memorandum of understanding (MOU) with CATL (A) (300750 CH) to supply batteries for their EVs that are to be released in China as well as in other markets. The deal was made on the back of the company’s intention to accelerate its EV plan by 5 years. The Nikkei also reported that, apart from CATL, Toyota has also signed deals with China’s BYD Co Ltd (002594 CH), and Japan’s Toshiba Corp (6502 JP) and Gs Yuasa Corp (6674 JP) for batteries. However, the highlight of the news was the companies MOU with CATL.
The information on the deal that was reported is as follows:

CATL will supply lithium-ion batteries for Toyota’s EVs that will be released in China as well as in other markets next year onwards
CATL and Toyota will collaborate on improving battery quality, adopting shared standards, and reusing batteries

In our opinion, this looks like a win-win situation for both Toyota and CATL provided the companies are able to meet their production targets. However, battery leader, Panasonic Corp (6752 JP) seems to be placed in a rather competitive situation. Although we felt that Panasonic would be able to have a strong hold on Toyota via its JV with the latter and diversifying its customer base away from Tesla, this move may weaken Panasonic’s position somewhat. Our detailed view on the news is given below.

Toyota Sides with CATL to Accelerate Its EV Goals; Reliance on Panasonic Reduces

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Luxurious auto car distribution in China sounds like a great business to have, supported by the rising number of wealthy individuals springing up in various parts of the Middle Kingdom. However, the sector seems to be very fragmented where no single companies is able to have significant market share as none of them has exclusive distribution rights over a particular foreign brand including <a href="https://www.smartkarma.com/entities/10795" target="_blank" data-smartkarma-citation="entities:10795:1">China Meidong Auto (1268 HK)</a> . The recent share price surge powered by growth expansion from the single city single store initiative (in third and fourth tier cities) may not last long as there is nothing stopping any competitor to expand to these markets when demand still outstrip supply therefore margin is better compared to the first tier cities. However, it also brings the question whether the fresh demand from the new wealth in the third and fourth tier cities have enough depth to sustain China Meidong Auto's sales growth.

Luxurious auto car distribution in China sounds like a great business to have, supported by the rising number of wealthy individuals springing up in various parts of the Middle Kingdom. However, the sector seems to be very fragmented where no single companies is able to have significant market share as none of them has exclusive distribution rights over a particular foreign brand including China Meidong Auto (1268 HK) . The recent share price surge powered by growth expansion from the single city single store initiative (in third and fourth tier cities) may not last long as there is nothing stopping any competitor to expand to these markets when demand still outstrip supply therefore margin is better compared to the first tier cities. However, it also brings the question whether the fresh demand from the new wealth in the third and fourth tier cities have enough depth to sustain China Meidong Auto's sales growth.

China Meidong Auto (1268): Low Inventory to Carry On?

Six weeks into the second quarter, and just two weeks after raising more than $2 billion selling stock and bonds, <a href="https://www.smartkarma.com/entities/20279" target="_blank" data-smartkarma-citation="entities:20279:1">Tesla Motors (TSLA US)</a> CEO Elon Musk alerted employees in an email after the market closed yesterday that he and the CFO need to do "hardcore" reviews of every expense "no matter how small" to keep the company from running out of cash.
This suggests potentially troubling demand trends and operating performance pressure have continued since the disastrous first quarter, when <a href="https://ir.tesla.com/static-files/b2218d34-fbee-4f1f-ac95-050eb29dd42f?mod=article_inline" target="_blank">Tesla generated a massive near-record loss</a> which drove available cash down to the lowest since January 2017 despite what should have been Tesla's third straight successful quarter since the launch of its flagship Model 3.
It's also obvious the company's long-awaited secondary stock offering priced only two weeks ago at just $243, which at the time was down 27% ytd and a two year low, came six months too late. Back in December investors were confident in Tesla's ambitious guidance for deliveries, revenue, and profits, hopes that since then have been crushed by two straight quarters which trailed market expectations.
Tesla stock remains in free fall two weeks later, closing on Friday at $211--down 37% ytd and the lowest since December 2016 when the launch of Model 3 was still six months away.
<div class="content-highlight">
Read on for more Bond Angle discussion about Tesla's prospects for the second quarter and full years 2019-2020, including model updates.
</div>

Six weeks into the second quarter, and just two weeks after raising more than $2 billion selling stock and bonds, Tesla Motors (TSLA US) CEO Elon Musk alerted employees in an email after the market closed yesterday that he and the CFO need to do "hardcore" reviews of every expense "no matter how small" to keep the company from running out of cash.
This suggests potentially troubling demand trends and operating performance pressure have continued since the disastrous first quarter, when Tesla generated a massive near-record loss which drove available cash down to the lowest since January 2017 despite what should have been Tesla's third straight successful quarter since the launch of its flagship Model 3.
It's also obvious the company's long-awaited secondary stock offering priced only two weeks ago at just $243, which at the time was down 27% ytd and a two year low, came six months too late. Back in December investors were confident in Tesla's ambitious guidance for deliveries, revenue, and profits, hopes that since then have been crushed by two straight quarters which trailed market expectations.
Tesla stock remains in free fall two weeks later, closing on Friday at $211--down 37% ytd and the lowest since December 2016 when the launch of Model 3 was still six months away.

Read on for more Bond Angle discussion about Tesla's prospects for the second quarter and full years 2019-2020, including model updates.


Tesla: When a Spartan Diet + $2 Billion Isn't Enough

Japan

Panasonic Corporation manufactures electric and electronic products. The Company produces home appliances, car navigation systems, digital devices, computer peripherals, telecommunications, industrial equipment, and electronic parts. Panasonic has associated companies around the world.

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Panasonic Corp (6752 JP)

Tesla Q219 10-Q Notes and Big Red Flags

Tesla Motors (TSLA US) filed its 10-Q for the second quarter on Monday which, as usual, raised new questions and concerns without really filling in...

Vicki Bryan

🇯🇵 Japan • Relative Price Scores - Overbought & Oversold Companies - June 2019

• RELATIVE PRICE SCORE • INTRODUCTION - The Relative Price Score (RPS) is a measure of stock price performance relative to TOPIX calculated by...

Campbell Gunn

Toyota Sides with CATL to Accelerate Its EV Goals; Reliance on Panasonic Reduces

On Friday, the Nikkei reported that Toyota Motor (7203 JP) had signed a memorandum of understanding (MOU) with CATL (A) (300750 CH) to supply...

Aqila Ali

China Meidong Auto (1268): Low Inventory to Carry On?

Luxurious auto car distribution in China sounds like a great business to have, supported by the rising number of wealthy individuals springing up...

Henry Soediarko

Tesla: When a Spartan Diet + $2 Billion Isn't Enough

Six weeks into the second quarter, and just two weeks after raising more than $2 billion selling stock and bonds, Tesla Motors (TSLA US) CEO Elon...

Vicki Bryan

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