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>Orders, sales and profits increased substantially YoY in the three months to June (1Q), but new SPE orders declined sequentially (QoQ) for the first time in two years.</li>
<li>Management has lowered 2Q sales and profit guidance in expectation of a weak 2Q. Full-year guidance remains unchanged. In our view, this reflects a wait-and-see attitude.</li>
<li>Major customer Intel has cut capex. TSMC and memory makers see weak quarters ahead. The potential downside risk has probably not been fully discounted.</li>
</ul>


Orders, sales and profits increased substantially YoY in the three months to June (1Q), but new SPE orders declined sequentially (QoQ) for the first time in two years.
Management has lowered 2Q sales and profit guidance in expectation of a weak 2Q. Full-year guidance remains unchanged. In our view, this reflects a wait-and-see attitude.
Major customer Intel has cut capex. TSMC and memory makers see weak quarters ahead. The potential downside risk has probably not been fully discounted.


Screen Holdings (7735 JP): Weakness Not Necessarily Discounted

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/advantest-corp" target="_blank" data-smartkarma-citation="entities:18107:1" rel="noopener">Advantest Corp (6857 JP)</a> yesterday announced Q1 results, with Revenues/OP/NP at record levels, a H1 div hike of 30%, guidance well ahead of consensus, and a buyback.  </li>
<li>They also announced a Mid-Term Plan revision which shows forward guidance better than consensus. </li>
<li>The buyback is smaller than the last one BUT float is not what you think it is. Understanding float dynamics here is key.</li>
</ul>



Advantest Corp (6857 JP) yesterday announced Q1 results, with Revenues/OP/NP at record levels, a H1 div hike of 30%, guidance well ahead of consensus, and a buyback.  
They also announced a Mid-Term Plan revision which shows forward guidance better than consensus. 
The buyback is smaller than the last one BUT float is not what you think it is. Understanding float dynamics here is key.


Advantest (6857) - Strong SoC Sales, Record Profits, Bullish Guidance, and a Buyback (+ Index Flow)

<ul>
<li>Screen Holdings beat FY Mar-22 profit guidance by a wide margin. This year, management is aiming for 12% sales growth and a 22% increase in operating profit.</li>
<li>New SPE orders have exceeded sales for seven straight quarters and the backlog is at a record high. But 1H of FY Mar-23 is expected to be weak.</li>
<li>A new factory is scheduled to come on line in 4Q, raising total SPE capacity by 20%. The risk is that this will coincide with a downturn in demand.</li>
</ul>


Screen Holdings beat FY Mar-22 profit guidance by a wide margin. This year, management is aiming for 12% sales growth and a 22% increase in operating profit.
New SPE orders have exceeded sales for seven straight quarters and the backlog is at a record high. But 1H of FY Mar-23 is expected to be weak.
A new factory is scheduled to come on line in 4Q, raising total SPE capacity by 20%. The risk is that this will coincide with a downturn in demand.


Screen Holdings (7735 JP): Good Results, Optimistic Guidance, Great Uncertainty

<ul>
<li>In early February 2022, Silchester International Investors (according to its website) sent letters to four low-ROE-earning Japanese regional banks proposing a new dividend policy.</li>
<li>The management and boards of each bank rejected the policy proposal though two of the four had upped their proposed dividend or changed policy prior, and two upped it afterwards.</li>
<li>While <a href="https://www.smartkarma.com/entities/bank-of-kyoto" target="_blank" data-smartkarma-citation="entities:5248:1" rel="noopener">Bank of Kyoto (8369 JP)</a> is the biggie, <a href="https://www.smartkarma.com/entities/shiga-bank-ltd" target="_blank" data-smartkarma-citation="entities:18665:1" rel="noopener">Shiga Bank (8366 JP)</a> is another one with significant equity holdings. </li>
</ul>


In early February 2022, Silchester International Investors (according to its website) sent letters to four low-ROE-earning Japanese regional banks proposing a new dividend policy.
The management and boards of each bank rejected the policy proposal though two of the four had upped their proposed dividend or changed policy prior, and two upped it afterwards.
While Bank of Kyoto (8369 JP) is the biggie, Shiga Bank (8366 JP) is another one with significant equity holdings. 


JAPAN ACTIVISM:  Silchester Goes After Shiga Bank

<ul>
<li>The share price has bounced back from the Ukraine war sell-off. Attention should now shift to orders, sales and profits. 26% potential upside to our price target</li>
<li>New SPE orders exceeded sales by 20% in the December quarter, taking the backlog to a new high and pointing to further sales and profit growth next fiscal year.</li>
<li>Management's FY Mar-22 guidance remains unchanged, with sales up 41% and operating profit up 2.2x. Upside potential of 26% to our price target.</li>
</ul>


The share price has bounced back from the Ukraine war sell-off. Attention should now shift to orders, sales and profits. 26% potential upside to our price target
New SPE orders exceeded sales by 20% in the December quarter, taking the backlog to a new high and pointing to further sales and profit growth next fiscal year.
Management's FY Mar-22 guidance remains unchanged, with sales up 41% and operating profit up 2.2x. Upside potential of 26% to our price target.


Screen Holdings (7735 JP): Book-To-Bill 1.2x in 3Q

Japan

SCREEN Holdings Co Ltd.  manufactures and sell semiconductors, FPD devices, commercial printing and printed circuit boards(PCB). The company also provides additional services for its products.

Price Gauge
52-week Range	0.00 - 0.00
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Dividend (Yield)	0.00

SCREEN Holdings (7735 JP)