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/smc-corp" target="_blank" data-smartkarma-citation="entities:20866:1" rel="noopener">SMC Corp (6273 JP)</a> announced better Q3 and an upward revision to still-below consensus for this year. Consensus is for up-and-to-the-right the next few years (but implied Q4 looks light).</li>
<li>The company raised its dividend so now it is 1% yield.</li>
<li>And the company announced a small but intriguing buyback. If you own the stock or trade in the space, it is worth understanding</li>
</ul>



SMC Corp (6273 JP) announced better Q3 and an upward revision to still-below consensus for this year. Consensus is for up-and-to-the-right the next few years (but implied Q4 looks light).
The company raised its dividend so now it is 1% yield.
And the company announced a small but intriguing buyback. If you own the stock or trade in the space, it is worth understanding


Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

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>SMC’s 3Q revenue of ¥184bn (+4.5% QOQ, +31.3% YoY) OP of ¥57bn continued its strong recent trend. </li>
<li>Reported revenue and OP were 8.0% and 8.3% higher than consensus estimates and drove SMC to revise up FY22 revenue and OP guidance respectively to ¥715bn (+2.1%) and ¥228bn (+4.6%). </li>
<li>The main concern remains a momentum peak, however, and a decline in YoY growth does not help.</li>
</ul>


SMC’s 3Q revenue of ¥184bn (+4.5% QOQ, +31.3% YoY) OP of ¥57bn continued its strong recent trend. 
Reported revenue and OP were 8.0% and 8.3% higher than consensus estimates and drove SMC to revise up FY22 revenue and OP guidance respectively to ¥715bn (+2.1%) and ¥228bn (+4.6%). 
The main concern remains a momentum peak, however, and a decline in YoY growth does not help.


SMC – Consensus Estimates Ignore Potential Down Cycle

<ul>
<li>After initially grinding up slowly but underperforming the Nikkei our suggested skew trade gave up ground during the new year sell off.</li>
<li>It did so slowly, however and was outperforming Nikkei when last we checked despite being down slightly. </li>
<li>Thankfully, a lot of the idiosyncratic volatility hurting the skew trade has reversed now and it is positive and outperforming Nikkei consistently.</li>
</ul>


After initially grinding up slowly but underperforming the Nikkei our suggested skew trade gave up ground during the new year sell off.
It did so slowly, however and was outperforming Nikkei when last we checked despite being down slightly. 
Thankfully, a lot of the idiosyncratic volatility hurting the skew trade has reversed now and it is positive and outperforming Nikkei consistently.


TOPIX-Nikkei Skew Trade Starting to Work Nicely

<ul>
<li>SMC reported its 2QFY22 results beating revenue and OP guidance by 5.5% and 18.0% respectively.</li>
<li>A weak yen and strong SG&amp;A control are helping boost margins to unusually high levels as well.</li>
<li>However, cyclical patterns suggest a revenue downturn is incoming at a time when valuations are extremely stretched.</li>
</ul>


SMC reported its 2QFY22 results beating revenue and OP guidance by 5.5% and 18.0% respectively.
A weak yen and strong SG&amp;A control are helping boost margins to unusually high levels as well.
However, cyclical patterns suggest a revenue downturn is incoming at a time when valuations are extremely stretched.


SMC – OP Beat Incoming but so Is the Downcycle

<p>Keyence has been our boring top pick within the factory automation sector for some time and has boringly and consistently outperformed peers. We still consider it the highest quality name within the sector but given valuations, we are reluctantly disembarking here.</p>

Keyence has been our boring top pick within the factory automation sector for some time and has boringly and consistently outperformed peers. We still consider it the highest quality name within the sector but given valuations, we are reluctantly disembarking here.

Keyence – Time to Step Off and Some Warning Signs for Markets

Japan

SMC CORPORATION manufactures directional control devices such as power, hand, and air valves.  The Company also produces air filters, cylinders, and actuators along with other pneumatic equipment.  SMC seeks to become a comprehensive maker of automated equipment through the market demand of information and communications products.

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SMC Corp (6273 JP)

SMC (6273) Buyback - Small Short Sharp

SMC announced Q3 below consensus but raised full-year to still-below consensus, but that creates an implied Q4 dip which is weird. There is also a...

Travis Lundy

SMC – Consensus Estimates Ignore Potential Down Cycle

SMC’s 3Q revenue of ¥184bn (+4.5% QOQ, +31.3% YoY) OP of ¥57bn continued its strong recent trend. The main concern remains a momentum peak,...

Mio Kato

TOPIX-Nikkei Skew Trade Starting to Work Nicely

After initially grinding up slowly but underperforming the Nikkei our suggested skew trade gave up ground during the new year sell off. It is now...

Mio Kato

SMC – OP Beat Incoming but so Is the Downcycle

SMC's 2Q was a nice beat but cyclical patterns suggest a revenue downturn is incoming at a time when valuations are extremely stretched.

Mio Kato

Keyence – Time to Step Off and Some Warning Signs for Markets

Keyence has been our top pick in the FA sector and has outperformed peers consistently but while we still consider it the highest quality name...

Mio Kato

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