Equity Long-Short Analyst

Pyari Menon

Thematic (Sector/Industry)

The interest shown by the richest and some of the most influential investors and the success of public-private partnerships in space programs are a reflection of an industry poised for strong growth over the next several years.  The space-tech landscape covers various technologies, but in this note, we focus only on the cosmonautic vehicle and propulsion systems. 
The current top players in propulsion are Ariane Group (<a href="https://www.smartkarma.com/entities/airbus-group-se" target="_blank" data-smartkarma-citation="entities:21380:1" rel="noopener">Airbus Group SE (AIR FP)</a> &amp; <a href="https://www.smartkarma.com/entities/safran-sa" target="_blank" data-smartkarma-citation="entities:21540:1" rel="noopener">Safran SA (SAF FP)</a> joint venture),<a href="https://www.smartkarma.com/entities/aerojet-rocketdyne-holdings" target="_blank" data-smartkarma-citation="entities:19120:1" rel="noopener">Aerojet Rocketdyne (AJRD US)</a>, <a href="https://www.smartkarma.com/entities/boeing-co" target="_blank" data-smartkarma-citation="entities:11957:1" rel="noopener">Boeing Co (BA US)</a>, <a href="https://www.smartkarma.com/entities/raytheon-company" target="_blank" data-smartkarma-citation="entities:6453:1" rel="noopener">Raytheon Company (RTN US)</a>, &amp; <a href="https://www.smartkarma.com/entities/united-technologies-corp" target="_blank" data-smartkarma-citation="entities:12750:1" rel="noopener">United Technologies (UTX US)</a>. The current top players in space vehicles and equipment are <a href="https://www.smartkarma.com/entities/boeing-co" target="_blank" data-smartkarma-citation="entities:11957:1" rel="noopener">Boeing Co (BA US)</a>, <a href="https://www.smartkarma.com/entities/maxar-technologies-inc" target="_blank" data-smartkarma-citation="entities:28796:1" rel="noopener">Maxar Technologies Inc (MAXR US)</a>, <a href="https://www.smartkarma.com/entities/airbus-group-se" target="_blank" data-smartkarma-citation="entities:21380:1" rel="noopener">Airbus Group SE (AIR FP)</a>, <a href="https://www.smartkarma.com/entities/thales-sa" target="_blank" data-smartkarma-citation="entities:21483:1" rel="noopener">Thales SA (HO FP)</a>, <a href="https://www.smartkarma.com/entities/alphabet-inc-cl-c" target="_blank" data-smartkarma-citation="entities:11369:1" rel="noopener">Alphabet Inc Cl C (GOOG US)</a> &amp; <a href="https://www.smartkarma.com/entities/lockheed-martin-corp" target="_blank" data-smartkarma-citation="entities:20372:1" rel="noopener">Lockheed Martin (LMT US)</a>. 
The two new preeminent private players SpaceX and Blue Origin don't feature in the top five players listed above, we discuss the reasons later in the report. 
Unlike e-commerce or software-driven startups, space vehicles and propulsion are relatively capital intensive. So unless the start-ups are led by founders with deep pockets (like Blue Origin) or founders with the ability to raise innovation capital (like SpaceX) it is best to stick to the established names and hope they evolve their business model to adjust for the democratization and marketization of the space industry. That said two private names that screen well are Redwire (vehicles) and Mountain Aerospace Research (propulsion).<a href="https://www.smartkarma.com/entities/avio-spa" target="_blank" data-smartkarma-citation="entities:34833:1" rel="noopener">Avio SPA (AVIO IM)</a>is a small-cap listed company in the top ten for propulsion

The interest shown by the richest and some of the most influential investors and the success of public-private partnerships in space programs are a reflection of an industry poised for strong growth over the next several years.  The space-tech landscape covers various technologies, but in this note, we focus only on the cosmonautic vehicle and propulsion systems. 
The current top players in propulsion are Ariane Group (Airbus Group SE (AIR FP) &amp; Safran SA (SAF FP) joint venture),Aerojet Rocketdyne (AJRD US), Boeing Co (BA US), Raytheon Company (RTN US), &amp; United Technologies (UTX US). The current top players in space vehicles and equipment are Boeing Co (BA US), Maxar Technologies Inc (MAXR US), Airbus Group SE (AIR FP), Thales SA (HO FP), Alphabet Inc Cl C (GOOG US) &amp; Lockheed Martin (LMT US). 
The two new preeminent private players SpaceX and Blue Origin don't feature in the top five players listed above, we discuss the reasons later in the report. 
Unlike e-commerce or software-driven startups, space vehicles and propulsion are relatively capital intensive. So unless the start-ups are led by founders with deep pockets (like Blue Origin) or founders with the ability to raise innovation capital (like SpaceX) it is best to stick to the established names and hope they evolve their business model to adjust for the democratization and marketization of the space industry. That said two private names that screen well are Redwire (vehicles) and Mountain Aerospace Research (propulsion).Avio SPA (AVIO IM)is a small-cap listed company in the top ten for propulsion

Ideas from Data Mining Technical Publications: Space Vehicles and Propulsion Systems

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

Global equities are now breaking out to new highs amid positive technical developments -- something we noted was increasingly likely in last week’s Int’l Compass. These breakouts and other technical developments highlighted below argue that this is the beginning of a new leg higher. Now is the time to be playing offense. In today’s report we highlight our favorite setups within Industrials, spanning the Vermilion international Manufacturing, Services, and Transportation Sectors.

Global equities are now breaking out to new highs amid positive technical developments -- something we noted was increasingly likely in last week’s Int’l Compass. These breakouts and other technical developments highlighted below argue that this is the beginning of a new leg higher. Now is the time to be playing offense. In today’s report we highlight our favorite setups within Industrials, spanning the Vermilion international Manufacturing, Services, and Transportation Sectors.

Global Equity Strategy: Global Equities Beginning a New Leg Higher

We highlight attractive and actionable themes within developed international markets, including actionable set-ups across among: Non-bank Financials, Japanese Technology stocks, and within European Discretionary, Industrial, Health Care, and Staples sectors.

We highlight attractive and actionable themes within developed international markets, including actionable set-ups across among: Non-bank Financials, Japanese Technology stocks, and within European Discretionary, Industrial, Health Care, and Staples sectors.

Developed International Equity Strategy: Favor EAFE over EM

Equity Analyst, LightStream Research

Chacko Jacob

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

<a href="https://www.smartkarma.com/entities/4130" target="_blank" data-smartkarma-citation="entities:4130:1">Ntn Corp (6472 JP)</a> is a leading manufacturer of precision mechanical parts and components, especially hub bearings for which the company is a global market leader. The company’s overseas business accounted for 72% of its total sales in FY2016.  This year marks the beginning of the company’s second century of existence. To remain relevant for the next 100 years, the company has forayed into four new businesses namely, green energy, EV, robotics and service and solutions. By shifting its focus to new areas, NTN aims to double its revenues by 2025 to about JPY 1.3tn while increasing its operating margin to 10-15% from the current 5.1%.In April 2018, NTN<a href="https://asia.nikkei.com/Business/Companies/Japan-s-NTN-to-supply-in-wheel-motor-tech-to-Chinese-startup" target="_blank"> concluded</a> a licensing contract with Chinese EV startup Changchun Fawsn Auto Tech (FSAT) to provide air cooled in-wheel motors and vehicle motion control systems. This partnership marks the first time that EVs with in-wheel motors will be mass produced. While the deal is still on paper, it is likely to serve as a significant growth trigger in the next 2-3 years. However, in the short to medium-term we are sceptical on the company's growth prospects, largely due to its exposure to business cycles in regions that it operates in:<ul><li>FY2017 could mark the growth peak of its latest cycle and we expect revenue to remain flat in the coming two years.</li><li>Bottlenecks in its industrial machinery segment have prevented the company from keeping up with demand.</li><li>Japanese PMI has hit its highest point in four years and FY2018 could see a period of cooling.</li><li>The stronger yen, which has already pared export growth in March-April, could make the company’s products more expensive to end-users, mainly in Asia.</li><li>Lastly, the company has blamed the shrinking market in Japan for its falling aftermarket revenue. The company’s plan to increase market share in other regions could take time to materialise.</li></ul>

Ntn Corp (6472 JP) is a leading manufacturer of precision mechanical parts and components, especially hub bearings for which the company is a global market leader. The company’s overseas business accounted for 72% of its total sales in FY2016.  This year marks the beginning of the company’s second century of existence. To remain relevant for the next 100 years, the company has forayed into four new businesses namely, green energy, EV, robotics and service and solutions. By shifting its focus to new areas, NTN aims to double its revenues by 2025 to about JPY 1.3tn while increasing its operating margin to 10-15% from the current 5.1%.In April 2018, NTN concluded a licensing contract with Chinese EV startup Changchun Fawsn Auto Tech (FSAT) to provide air cooled in-wheel motors and vehicle motion control systems. This partnership marks the first time that EVs with in-wheel motors will be mass produced. While the deal is still on paper, it is likely to serve as a significant growth trigger in the next 2-3 years. However, in the short to medium-term we are sceptical on the company's growth prospects, largely due to its exposure to business cycles in regions that it operates in:FY2017 could mark the growth peak of its latest cycle and we expect revenue to remain flat in the coming two years.Bottlenecks in its industrial machinery segment have prevented the company from keeping up with demand.Japanese PMI has hit its highest point in four years and FY2018 could see a period of cooling.The stronger yen, which has already pared export growth in March-April, could make the company’s products more expensive to end-users, mainly in Asia.Lastly, the company has blamed the shrinking market in Japan for its falling aftermarket revenue. The company’s plan to increase market share in other regions could take time to materialise.

NTN's FY2018 Forecast Likely to Be Muted; Plays First-Mover Card with In-Wheel Motors for EVs

Actionable Insights, Assured Alpha, ANTYA Investments

ANTYA Investments

Actionable Insights, Assured Alpha

Investing That Empowers You

ANTYA Investments Inc., regulated by the Ontario Securities Commission, is registered to provide wealth management services in Canada. ANTYA manages institutional, and high net-worth client portfolios on a discretionary basis. Our investment philosophy embraces a Core-Satellite approach.  The core of the portfolio is chosen from a group of fifteen asset classes. A few stock specific asymmetrical investment opportunities comprise the satellite segment. ANTYA invests only in global, large capitalization, and investment grade companies.  

Dismal Stock Performance in 2017 and Since 2012<a href="https://www.smartkarma.com/entities/782" target="_blank" data-smartkarma-citation="entities:782:1">General Electric Co (GE US)</a> (“GE” or “company”) had a terrible 2017, with the stock providing a total return of -42.1%, compared to the S&amp;P 500 Index (“S&amp;P”) at 21.8%. Moreover, the company’s streak of dividend growth after the financial crises was interrupted with the dividend for 2018 slashed in half to an annualised rate of $0.48 per share, pushing it back down to 1999 levels. The management of GE is struggling with a conglomerate operating in multiple business segments, that possess neither technology nor market synergy. We expect continued under-performance in 2018 as well.We do not expect EBITDA to grow from current levels given multiple headwinds in approximately 50% of GE’s revenue base. We expect any gains in costs to be competed away in an over-supplied market for industrial infrastructure. Higher rates will compress EV/EBITDA multiples going forward.  Current valuation of GE does not reflect that eventuality yet. Compressed multiples could easily result in a single digit stock price for GE in the second half of 2018. Currently GE is priced for perfection, although it has proven to be a mere mortal since the financial crises. Simplistic bench-marking to industry peers appears to suggest a fully valued stock price, while ignoring myriad GE specific challenges such as accounting, governance, corporate control over reporting &amp; auditing, and declining product end-market. If, what's past is prologue then the company's accounting has set it up for more downside going forward. Stay tuned.

Dismal Stock Performance in 2017 and Since 2012General Electric Co (GE US) (“GE” or “company”) had a terrible 2017, with the stock providing a total return of -42.1%, compared to the S&amp;P 500 Index (“S&amp;P”) at 21.8%. Moreover, the company’s streak of dividend growth after the financial crises was interrupted with the dividend for 2018 slashed in half to an annualised rate of $0.48 per share, pushing it back down to 1999 levels. The management of GE is struggling with a conglomerate operating in multiple business segments, that possess neither technology nor market synergy. We expect continued under-performance in 2018 as well.We do not expect EBITDA to grow from current levels given multiple headwinds in approximately 50% of GE’s revenue base. We expect any gains in costs to be competed away in an over-supplied market for industrial infrastructure. Higher rates will compress EV/EBITDA multiples going forward.  Current valuation of GE does not reflect that eventuality yet. Compressed multiples could easily result in a single digit stock price for GE in the second half of 2018. Currently GE is priced for perfection, although it has proven to be a mere mortal since the financial crises. Simplistic bench-marking to industry peers appears to suggest a fully valued stock price, while ignoring myriad GE specific challenges such as accounting, governance, corporate control over reporting &amp; auditing, and declining product end-market. If, what's past is prologue then the company's accounting has set it up for more downside going forward. Stay tuned.

General Electric (GE US )- 25% Downside and Perhaps a Single Digit Stock Price in Its Future?

France

Safran SA is a international tier-1 supplier of systems and equipment in aerospace, defense, and security. The Company sells engines for airplanes, helicopters, launch vehicles and missiles, landing and braking systems, nacelles, onboard electrical systems, optronics, avionics, identity documents, biometric equipment, smartcards, explosives detection, & trace analysis systems.

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Safran SA (SAF FP)

Ideas from Data Mining Technical Publications: Space Vehicles and Propulsion Systems

The space economy is seeing much more private sector participation. This sets up the sector for strong growth. In this report, we screen for...

Pyari Menon

Global Equity Strategy: Global Equities Beginning a New Leg Higher

Global equities are now breaking out to new highs amid positive technical developments -- something we noted was increasingly likely in last week’s...

Vermilion Research

Developed International Equity Strategy: Favor EAFE over EM

We highlight attractive and actionable themes within developed international markets, including actionable set-ups across among: Non-bank...

Vermilion Research

NTN's FY2018 Forecast Likely to Be Muted; Plays First-Mover Card with In-Wheel Motors for EVs

Ntn Corp (6472 JP) is a leading manufacturer of precision mechanical parts and components, especially hub bearings for which the company is a...

Chacko Jacob

General Electric (GE US )- 25% Downside and Perhaps a Single Digit Stock Price in Its Future?

Dismal Stock Performance in 2017 and Since 2012General Electric Co (GE US) (“GE” or “company”) had a terrible 2017, with the stock providing a...

ANTYA Investments

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