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>Japanese semiconductor equipment stocks have started to drop back, but device maker Rohm is already down 25% year-to-date and down 43% from its 52-week high. </li>
<li>Rohm's operating profit fell 53% last fiscal year and management is guiding for a 68% decline in in FY Mar-25. Investment in power devices remains strong despite weak sales.</li>
<li>1H guidance is for an 80% year-on-year decline in operating profit on a 6% decline in sales. Buy into this weakness. Recovery should start in 2H.</li>
</ul>


Japanese semiconductor equipment stocks have started to drop back, but device maker Rohm is already down 25% year-to-date and down 43% from its 52-week high. 
Rohm's operating profit fell 53% last fiscal year and management is guiding for a 68% decline in in FY Mar-25. Investment in power devices remains strong despite weak sales.
1H guidance is for an 80% year-on-year decline in operating profit on a 6% decline in sales. Buy into this weakness. Recovery should start in 2H.


Rohm (6963 JP): Negative Scenario Discounted

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Index Rebalance

<ul>
<li>The review period for the <a href="https://www.smartkarma.com/entities/nikkei-225" target="_blank" data-smartkarma-citation="entities:22909:1" rel="noopener">Nikkei 225 (NKY INDEX)</a> September rebalance ends in July. There could be three changes at the rebalance with sector balance in focus for the additions.</li>
<li>Depending on the changes, passive trackers will need to buy between 5-16x ADV (10.1%-24% of real float) on the inclusions and sell between 4-42x ADV on the deletions.</li>
<li>
<a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:751:1" rel="noopener">Fast Retailing (9983 JP)</a> will be capped to 10% of the index weight while <a href="https://www.smartkarma.com/entities/tokyo-electron-ltd" target="_blank" data-smartkarma-citation="entities:280:1" rel="noopener">Tokyo Electron (8035 JP)</a> is also close to the 10% cap.</li>
</ul>


The review period for the Nikkei 225 (NKY INDEX) September rebalance ends in July. There could be three changes at the rebalance with sector balance in focus for the additions.
Depending on the changes, passive trackers will need to buy between 5-16x ADV (10.1%-24% of real float) on the inclusions and sell between 4-42x ADV on the deletions.

Fast Retailing (9983 JP) will be capped to 10% of the index weight while Tokyo Electron (8035 JP) is also close to the 10% cap.


Nikkei 225 Index Rebalance Preview (Sep 2024): Ranking, Capping, Funding & Other Changes

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>The March 2024 rebal is done and dusted. When announced, there were 2 prospective DELETEs for Sep 2024. Now there is only one expected DELETE, <a href="https://www.smartkarma.com/entities/nippon-paper-industries-co-l" target="_blank" data-smartkarma-citation="entities:557:1" rel="noopener">Nippon Paper Industries (3863 JP)</a>. </li>
<li>The one likely inclusion is therefore <a href="https://www.smartkarma.com/entities/ryohin-keikaku-co-ltd" target="_blank" data-smartkarma-citation="entities:2765:1" rel="noopener">Ryohin Keikaku (7453 JP)</a>. But there is more fun afoot with <a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:751:1" rel="noopener">Fast Retailing (9983 JP)</a> and <a href="https://www.smartkarma.com/entities/tokyo-electron-ltd" target="_blank" data-smartkarma-citation="entities:280:1" rel="noopener">Tokyo Electron (8035 JP)</a>. </li>
<li>The two stocks - of totally different sectors - interact somewhat, both in determining Nikkei 225 direction, and their relative potential selldowns. </li>
</ul>


The March 2024 rebal is done and dusted. When announced, there were 2 prospective DELETEs for Sep 2024. Now there is only one expected DELETE, Nippon Paper Industries (3863 JP). 
The one likely inclusion is therefore Ryohin Keikaku (7453 JP). But there is more fun afoot with Fast Retailing (9983 JP) and Tokyo Electron (8035 JP). 
The two stocks - of totally different sectors - interact somewhat, both in determining Nikkei 225 direction, and their relative potential selldowns. 


Sep24 Nikkei 225 Rebal - Now 1 ADD, 1 DELETE; Fastie+TEL Still Where the Fun Is

<ul>
<li>Use of quantum technology expected to improve electrical die sorting (EDS) performance by several percentage points.</li>
<li>Collaboration with Quanmatic aims at full-scale introduction in April, the first month of FY Mar-25. </li>
<li>Buy for long-term growth led by power semiconductors with margin expansion from efficiency gains.</li>
</ul>


Use of quantum technology expected to improve electrical die sorting (EDS) performance by several percentage points.
Collaboration with Quanmatic aims at full-scale introduction in April, the first month of FY Mar-25. 
Buy for long-term growth led by power semiconductors with margin expansion from efficiency gains.


Rohm (6963 JP): Quantum Process Optimization

Japan Specialist

Mark Chadwick

Thematic (Sector/Industry)

<ul>
<li>Overseas: SPX +1.4%; The Fed’s “dot plot” of individual members’ expectations indicates four cuts in 2025</li>
<li>Today: NKY Futs -0.2% v cash. JPY143; KIshida shuffles Cabinet; Recruit 200bn yen share buyback; Suzuki to split stock</li>
<li>JapanX: Rohm's multi-billion-yen investment in SiC power chips takes advantage of government support for chip industry</li>
</ul>


Overseas: SPX +1.4%; The Fed’s “dot plot” of individual members’ expectations indicates four cuts in 2025
Today: NKY Futs -0.2% v cash. JPY143; KIshida shuffles Cabinet; Recruit 200bn yen share buyback; Suzuki to split stock
JapanX: Rohm's multi-billion-yen investment in SiC power chips takes advantage of government support for chip industry


Ohayo Japan | Record Highs on Dot Plot; Rohm's Big Bet on SiC

Japan

ROHM COMPANY LIMITED manufactures custom linear integrated circuits and semiconductor devices for use primarily in consumer electronics.  The Company has plants and sales offices worldwide.  Rohm's subsidiaries include Wako Electric and Apollo Electronics.

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ROHM Co Ltd (6963 JP)

Rohm (6963 JP): Negative Scenario Discounted

A 43% decline from its 52-week high has largely discounted the collapse of earnings. This year's guidance is "severe" and projected valuations for...

Scott Foster

Nikkei 225 Index Rebalance Preview (Sep 2024): Ranking, Capping, Funding & Other Changes

There could be 3 changes for the NKY in September with sector balance determining the inclusions. Fast Retailing will be capped while Tokyo...

Brian Freitas

Sep24 Nikkei 225 Rebal - Now 1 ADD, 1 DELETE; Fastie+TEL Still Where the Fun Is

The Sep 2024 Nikkei 225 review now threatens to be 1 small ADD and 1 small DELETE but two-way flow of US$9bn+. The fun is on Fast Retailing and...

Travis Lundy

Rohm (6963 JP): Quantum Process Optimization

Work with Quanmatic to improve electrical die sorting efficiency by several percent. Buy for growth driven by power semiconductors for EVs and...

Scott Foster

Ohayo Japan | Record Highs on Dot Plot; Rohm's Big Bet on SiC

The Fed's 'dot plot' suggests four rate cuts in 2025. In Japan, Rohm invests in SiC power chips and looks key beneficiary of structural EV growth

Mark Chadwick

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Rohm (6963 JP): Negative Scenario Discounted

A 43% decline from its 52-week high has largely discounted the collapse of earnings. This year's guidance is "severe" and projected valuations for...

Scott Foster

Nikkei 225 Index Rebalance Preview (Sep 2024): Ranking, Capping, Funding & Other Changes

There could be 3 changes for the NKY in September with sector balance determining the inclusions. Fast Retailing will be capped while Tokyo...

Brian Freitas

Sep24 Nikkei 225 Rebal - Now 1 ADD, 1 DELETE; Fastie+TEL Still Where the Fun Is

The Sep 2024 Nikkei 225 review now threatens to be 1 small ADD and 1 small DELETE but two-way flow of US$9bn+. The fun is on Fast Retailing and...

Travis Lundy

Rohm (6963 JP): Quantum Process Optimization

Work with Quanmatic to improve electrical die sorting efficiency by several percent. Buy for growth driven by power semiconductors for EVs and...

Scott Foster

Ohayo Japan | Record Highs on Dot Plot; Rohm's Big Bet on SiC

​The Fed's 'dot plot' suggests four rate cuts in 2025. In Japan, Rohm invests in SiC power chips and looks key beneficiary of structural EV growth

Mark Chadwick

The Fed's 'dot plot' suggests four rate cuts in 2025. In Japan, Rohm invests in SiC power chips and looks key beneficiary of structural EV growth