Scott Foster

Independent Insight Provider, Japanese equities

LightStream Research

Long-Short Analysis on Japan, Asia and the World

Equity Bottom-Up

<ul>
<li>Acquisition of Steradian Semiconductors complements Renesas' partnership with Tata Group and expands its presence in India. </li>
<li>Follows purchase of Reality Analytics of the U.S. and Celeno Communications of Israel. Global footprint growing, technological sophistication rising to meet ADAS, AI and IIoT requirements.</li>
<li>P/E below 10x on current guidance, but vulnerable to semiconductor down-cycle. Accumulate for long-term potential.</li>
</ul>

Mark Chadwick

Japan Specialist

<ul>
<li>Renesas stock is down around 8% following quarterly earnings and a very conservative Q3 outlook</li>
<li>We think the market is over reacting and believe that Renesas is a key beneficiary of secular growth in auto and industrial electronics</li>
<li>The stock trades at a discount to global peers, despite a strong story for improving shareholder returns</li>
</ul>

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>The Nikkei Index team proposed several changes to the Nikkei 225 Average methodology last week. They include capping, a semi-annual (vs annual) review, and a change in "liquidity" measure.</li>
<li>It helps move membership away from the low price low weight names which populate the bottom of the index. Slowly. 6 names a year. That's not enough.</li>
<li>And it doesn't fix the historical anomalies rendering the index unsuitable as benchmark (and BOJ tool). I propose more changes below. You can submit this or yours in the consultation.</li>
</ul>

<ul>
<li>The Nikkei Index Team has suggested a methodology change to the Nikkei 225 Average.</li>
<li>It involves capping stocks, creating a method for re-weighting once capped then stocks fall, and they recommend changing to a semi-annual Periodic Review - twice a year rather than once.</li>
<li>More interestingly, they also change the "High Liquidity" definition to be related to traded value not volume, which starts to favour higher-market cap stocks with more shares out.</li>
</ul>

<ul>
<li>Renesas and Tata Group companies have announced a new partnership in electronic systems and wireless telecom for automotive and other applications.</li>
<li>Specifically, they are working on the development of electric vehicles and industrial system solutions combining their semiconductor, IT system and manufacturing expertise.</li>
<li>This should provide a significant boost to their business in India and global markets. As Mio Kato wrote in late April, <a href="https://www.smartkarma.com/insights/renesas-like-we-said-accelerating" target="_blank" data-smartkarma-citation="insights:69073" rel="noopener">Renesas – Like We Said… Accelerating</a> </li>
</ul>

Japan

Renesas Electronics Corporation researches, develops, designs and manufactures electronic components such as semiconductors and integrated devices.

Renesas Electronics - 6723 JP

Description