Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

I have been lax in covering the <a href="https://www.smartkarma.com/entities/chiyoda-corp" target="_blank" data-smartkarma-citation="entities:6232:1" rel="noopener">Chiyoda Corp (6366 JP)</a> situation because <a href="https://www.smartkarma.com/profiles/mio-kato-cfa" target="_blank" data-smartkarma-citation="accounts:713" rel="noopener">Mio Kato, CFA</a> has been <a href="https://www.smartkarma.com/entities/chiyoda-corp/insights" target="_blank" rel="noopener">covering</a> the stock and its situation for months (and years) quite ably. For background on the company, I urge you to read his <a href="https://www.smartkarma.com/entities/chiyoda-corp/insights" target="_blank" rel="noopener">pieces</a>.There is one angle, however, which I should have covered. That is the one regarding the effects of its losses on its balance sheet, and the fact that it finished the year with negative equity. That means something. It probably means displacement of 20% Of The Shareholder Register.It was seen with <a href="https://www.smartkarma.com/entities/sharp-corp" target="_blank" data-smartkarma-citation="entities:391:1" rel="noopener">Sharp Corp (6753 JP)</a> in 2016, then <a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1" rel="noopener">Toshiba Corp (6502 JP)</a> in 2017. It was a quasi-inevitability in this case.Normally, the news would be out already because their Annual Securities Report (yukashoken hokokusho (有価証券報告書)) would be out the day of the Annual Shareholder Meeting, which took place on June 25th. However, on the 25th the company <a href="https://www.chiyodacorp.com/%E6%9C%89%E4%BE%A1%E8%A8%BC%E5%88%B8%E5%A0%B1%E5%91%8A%E6%9B%B8%E3%81%AE%E6%8F%90%E5%87%BA%E4%BA%88%E5%AE%9A%E6%97%A5%E3%81%AB%E9%96%A2%E3%81%97%E3%81%A6_20190625.pdf" target="_blank" rel="noopener">announced</a> (Japanese only) that they would delay the submission of their Annual Securities Report (yuho) until June 28th because of the announcement of a lawsuit filed by a former employee overseas (lawsuit was filed 11 June). The delayed filing should come out tomorrow.And that's when the official fireworks begin - when the TSE gets involved.

I have been lax in covering the Chiyoda Corp (6366 JP) situation because Mio Kato, CFA has been covering the stock and its situation for months (and years) quite ably. For background on the company, I urge you to read his pieces.There is one angle, however, which I should have covered. That is the one regarding the effects of its losses on its balance sheet, and the fact that it finished the year with negative equity. That means something. It probably means displacement of 20% Of The Shareholder Register.It was seen with Sharp Corp (6753 JP) in 2016, then Toshiba Corp (6502 JP) in 2017. It was a quasi-inevitability in this case.Normally, the news would be out already because their Annual Securities Report (yukashoken hokokusho (有価証券報告書)) would be out the day of the Annual Shareholder Meeting, which took place on June 25th. However, on the 25th the company announced (Japanese only) that they would delay the submission of their Annual Securities Report (yuho) until June 28th because of the announcement of a lawsuit filed by a former employee overseas (lawsuit was filed 11 June). The delayed filing should come out tomorrow.And that's when the official fireworks begin - when the TSE gets involved.

The Upcoming Chiyoda Corp (6366 JP) TOPIX and Nikkei Kickout

Equity Analyst, LightStream Research

Aqila Ali

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

Contemporary Amperex Technology (CATL) / Equity Bottom-Up

On Friday, the Nikkei reported that <a href="https://www.smartkarma.com/entities/toyota-motor-corp" target="_blank" data-smartkarma-citation="entities:73:1">Toyota Motor (7203 JP)</a> had signed a memorandum of understanding (MOU) with <a href="https://www.smartkarma.com/entities/contemporary-amperex-techn-a" target="_blank" data-smartkarma-citation="entities:24404:1">CATL (A) (300750 CH)</a> to supply batteries for their EVs that are to be released in China as well as in other markets. The deal was made on the back of the company’s intention to accelerate its EV plan by 5 years. The Nikkei also reported that, apart from CATL, Toyota has also signed deals with China’s <a href="https://www.smartkarma.com/entities/byd-co-ltd" target="_blank" data-smartkarma-citation="entities:26048:1">BYD Co Ltd (002594 CH)</a>, and Japan’s <a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1">Toshiba Corp (6502 JP)</a> and <a href="https://www.smartkarma.com/entities/gs-yuasa-corp" target="_blank" data-smartkarma-citation="entities:8298:1">Gs Yuasa Corp (6674 JP)</a> for batteries. However, the highlight of the news was the companies MOU with CATL.
The information on the deal that was reported is as follows:
<ul>
<li>CATL will supply lithium-ion batteries for Toyota’s EVs that will be released in China as well as in other markets next year onwards</li>
<li>CATL and Toyota will collaborate on improving battery quality, adopting shared standards, and reusing batteries</li>
</ul>
In our opinion, this looks like a win-win situation for both Toyota and CATL provided the companies are able to meet their production targets. However, battery leader, <a href="https://www.smartkarma.com/entities/panasonic-corp" target="_blank" data-smartkarma-citation="entities:222:1">Panasonic Corp (6752 JP)</a> seems to be placed in a rather competitive situation. Although we felt that Panasonic would be able to have a strong hold on Toyota via its JV with the latter and diversifying its customer base away from Tesla, this move may weaken Panasonic’s position somewhat. Our detailed view on the news is given below.

On Friday, the Nikkei reported that Toyota Motor (7203 JP) had signed a memorandum of understanding (MOU) with CATL (A) (300750 CH) to supply batteries for their EVs that are to be released in China as well as in other markets. The deal was made on the back of the company’s intention to accelerate its EV plan by 5 years. The Nikkei also reported that, apart from CATL, Toyota has also signed deals with China’s BYD Co Ltd (002594 CH), and Japan’s Toshiba Corp (6502 JP) and Gs Yuasa Corp (6674 JP) for batteries. However, the highlight of the news was the companies MOU with CATL.
The information on the deal that was reported is as follows:

CATL will supply lithium-ion batteries for Toyota’s EVs that will be released in China as well as in other markets next year onwards
CATL and Toyota will collaborate on improving battery quality, adopting shared standards, and reusing batteries

In our opinion, this looks like a win-win situation for both Toyota and CATL provided the companies are able to meet their production targets. However, battery leader, Panasonic Corp (6752 JP) seems to be placed in a rather competitive situation. Although we felt that Panasonic would be able to have a strong hold on Toyota via its JV with the latter and diversifying its customer base away from Tesla, this move may weaken Panasonic’s position somewhat. Our detailed view on the news is given below.

Toyota Sides with CATL to Accelerate Its EV Goals; Reliance on Panasonic Reduces

Asia Long-Short PM/Analyst

Curtis Lehnert

Tech wreck. DeFANGed. FANG flush. TATS turmoil. All of these headlines have at one point been seen from many a financial news outlet. While most everyone is familiar with the term "FANG" or "FAANG", everyone may not be familiar with the Asian variant "TATS". The TATS stocks are the internet and tech leaders from around Asia, namely Tencent, Alibaba, TSMC and Samsung. Samsung Electronics is literally a household name, making everything from refrigerators and washing machines to high-end smartphones and world-class semiconductors. It has also ballooned into one of Asia's largest and most valuable companies and constitutes a whopping 27% of its home market equity index, the Kospi 200. With this kind of dominance, it is a good idea for all investors looking at Asia to be familiar with Samsung. This insight is for those who do not cover Samsung, or perhaps have not taken a close look at Samsung in a while.  This insight is for those who want to understand:<ul>
<li>the structure of Samsung's business units</li>
<li>a brief historical summary of the Samsung story</li>
<li>a look at the company's most important products</li>
<li>a better understanding of the competitive dynamics of each segment in which the company competes</li>
</ul>If you need a one-stop read to understand the business of Korea's largest listed company, this is the insight for you.  All of the facts, none of the fluff.

Tech wreck. DeFANGed. FANG flush. TATS turmoil. All of these headlines have at one point been seen from many a financial news outlet. While most everyone is familiar with the term "FANG" or "FAANG", everyone may not be familiar with the Asian variant "TATS". The TATS stocks are the internet and tech leaders from around Asia, namely Tencent, Alibaba, TSMC and Samsung. Samsung Electronics is literally a household name, making everything from refrigerators and washing machines to high-end smartphones and world-class semiconductors. It has also ballooned into one of Asia's largest and most valuable companies and constitutes a whopping 27% of its home market equity index, the Kospi 200. With this kind of dominance, it is a good idea for all investors looking at Asia to be familiar with Samsung. This insight is for those who do not cover Samsung, or perhaps have not taken a close look at Samsung in a while.  This insight is for those who want to understand:
the structure of Samsung's business units
a brief historical summary of the Samsung story
a look at the company's most important products
a better understanding of the competitive dynamics of each segment in which the company competes
If you need a one-stop read to understand the business of Korea's largest listed company, this is the insight for you.  All of the facts, none of the fluff.

Samsung Electronics (005930 KS): A Generalist's Guide

Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

The <a href="https://asia.nikkei.com/Business/Business-deals/Exclusive-LNG-plant-engineer-Chiyoda-to-gain-1.4bn-lifeline" target="_blank">Nikkei reported</a> this morning that <a href="https://www.smartkarma.com/entities/6232" target="_blank" data-smartkarma-citation="entities:6232:1">Chiyoda Corp (6366 JP)</a> would receive a total of over ¥150bn in financial support from <a href="https://www.smartkarma.com/entities/20668" target="_blank" data-smartkarma-citation="entities:20668:1">Mitsubishi Corp (8058 JP)</a> and <a href="https://www.smartkarma.com/entities/8619" target="_blank" data-smartkarma-citation="entities:8619:1">Mitsubishi Ufj Financial Group Inc (Adr) (MTU US)</a>. This amount is larger than we expected and coincides with greater expected losses for the fiscal year. With that said, this move goes a long way towards addressing the uncertainty surrounding the company's balance sheet and should reassure both investors and clients.

The Nikkei reported this morning that Chiyoda Corp (6366 JP) would receive a total of over ¥150bn in financial support from Mitsubishi Corp (8058 JP) and Mitsubishi Ufj Financial Group Inc (Adr) (MTU US). This amount is larger than we expected and coincides with greater expected losses for the fiscal year. With that said, this move goes a long way towards addressing the uncertainty surrounding the company's balance sheet and should reassure both investors and clients.

Chiyoda: Financing Bigger Than Expected on Larger Losses

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

ja research

ja research is an independent research platform focused exclusively on Japanese equities. Leveraging data and graphic analysis provided by Japan Analytics, we provide insights on small and medium-sized companies that have been ignored by the sell-side as well as challenging conventional wisdom on larger companies. We also offer analyst and corporate access, the latter with translation if required. 

Thematic (Sector/Industry)

<div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/083/132/original/2019-03-25_18-58-11.png?1553507902" class="editor-image img-responsive" data-smartkarma-image-id="83132"></figure>Source: Japan Analytics
</div>There are currently 241 listed Japanese companies that can be categorised as Internet businesses. Our classification overlaps with the TOPIX-33 Information &amp; Communication sub-Sector but is broader in that it encompasses all companies listed on all sections and exchanges but is also narrower in that we have excluded Telecommunications (including <a href="https://www.smartkarma.com/entities/315" target="_blank" data-smartkarma-citation="entities:315:1">S</a><a href="https://www.smartkarma.com/entities/315" target="_blank" data-smartkarma-citation="entities:315:1">oftbank Group (9984 JP)</a>) and Information Technology companies. We have adopted a 'quantamental' approach which covers the long-term and current trends for Japan's Internet Sector as a whole, as well as eight sub-Sectors or Peer Groups and the Sectors' leading companies by market capitalisation.  Our focus is exclusively on the locally-listed universe and is based on disclosed financial and market data. We do not provide any forecasts, other than the companies' own forecasts and we do not attempt to make any business model or strategic judgments. Our focus is purely on financial and market performance. We do not cover unlisted and defunct companies such as Livedoor and, therefore, there is implicit survivor bias in the data. The broad themes that are developed in DETAIL below are grouped into six topics as follows: - • SUMMARY •  • FUNDAMENTAL OVERVIEW •  • SCORING - RESULTS &amp; REVISIONS / RELATIVE PRICE •  • RESULTS TRENDS •  • VALUATION • • RECOMMENDATIONS •<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/083/206/original/2019-03-25_17-46-58.png?1553565764" class="editor-image img-responsive" data-smartkarma-image-id="83206"></figure><div class="content-caption">Source: Japan Analytics</div>OVERVIEW - As will be covered in greater DETAIL below, Japan has failed to evolve a substantial Internet Sector and, in many business models, has been passed by global competitors including in the home market. Although Internet Sector revenues have grown steadily and now account for close to 1% of the total for all listed companies, operating margins have declined by half in the last seven years and are now only four percentage points higher than the market average. Accordingly, as measured by our Results &amp; Revision Score, the Sector is close to a twelve-year low. The market's response is an unchanged Sector weight in the market composite despite the addition of 111 new companies in the last six years, and a Relative Price Score that has moved in a narrow range over that period. The Sector averages disguise the weak business and market performance of a handful of Sector leaders as well as the overvaluation of the Sector's more successful business models, which is partly a result of a lack of alternatives. Despite the world's most significant Internet investor - <a href="https://www.smartkarma.com/entities/315" target="_blank" data-smartkarma-citation="entities:315:1">Softbank Group (9984 JP)</a>'s Vision Fund - being based in Japan, this fund and other global investors in Internet business have been right to give Japan a 'pass'.


Source: Japan Analytics
There are currently 241 listed Japanese companies that can be categorised as Internet businesses. Our classification overlaps with the TOPIX-33 Information &amp; Communication sub-Sector but is broader in that it encompasses all companies listed on all sections and exchanges but is also narrower in that we have excluded Telecommunications (including Softbank Group (9984 JP)) and Information Technology companies. We have adopted a 'quantamental' approach which covers the long-term and current trends for Japan's Internet Sector as a whole, as well as eight sub-Sectors or Peer Groups and the Sectors' leading companies by market capitalisation.  Our focus is exclusively on the locally-listed universe and is based on disclosed financial and market data. We do not provide any forecasts, other than the companies' own forecasts and we do not attempt to make any business model or strategic judgments. Our focus is purely on financial and market performance. We do not cover unlisted and defunct companies such as Livedoor and, therefore, there is implicit survivor bias in the data. The broad themes that are developed in DETAIL below are grouped into six topics as follows: - • SUMMARY •  • FUNDAMENTAL OVERVIEW •  • SCORING - RESULTS &amp; REVISIONS / RELATIVE PRICE •  • RESULTS TRENDS •  • VALUATION • • RECOMMENDATIONS •Source: Japan AnalyticsOVERVIEW - As will be covered in greater DETAIL below, Japan has failed to evolve a substantial Internet Sector and, in many business models, has been passed by global competitors including in the home market. Although Internet Sector revenues have grown steadily and now account for close to 1% of the total for all listed companies, operating margins have declined by half in the last seven years and are now only four percentage points higher than the market average. Accordingly, as measured by our Results &amp; Revision Score, the Sector is close to a twelve-year low. The market's response is an unchanged Sector weight in the market composite despite the addition of 111 new companies in the last six years, and a Relative Price Score that has moved in a narrow range over that period. The Sector averages disguise the weak business and market performance of a handful of Sector leaders as well as the overvaluation of the Sector's more successful business models, which is partly a result of a lack of alternatives. Despite the world's most significant Internet investor - Softbank Group (9984 JP)'s Vision Fund - being based in Japan, this fund and other global investors in Internet business have been right to give Japan a 'pass'. 

🇯🇵 Japan • Internet Sector Review - 'Japan Passing'

Japan

Toshiba Corporation manufactures and markets electrical and electronic products. The Company's products include digital products such as PCs and televisions, NAND flash memories, and system LSIs (large-scale integrated), as well as social infrastructures such as power generators, medical equipment, and home appliances.

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Toshiba Corp (6502 JP)

The Upcoming Chiyoda Corp (6366 JP) TOPIX and Nikkei Kickout

I have been lax in covering the Chiyoda Corp (6366 JP) situation because Mio Kato, CFA has been covering the stock and its situation for months...

Travis Lundy

Toyota Sides with CATL to Accelerate Its EV Goals; Reliance on Panasonic Reduces

On Friday, the Nikkei reported that Toyota Motor (7203 JP) had signed a memorandum of understanding (MOU) with CATL (A) (300750 CH) to supply...

Aqila Ali

Samsung Electronics (005930 KS): A Generalist's Guide

Tech wreck. DeFANGed. FANG flush. TATS turmoil. All of these headlines have at one point been seen from many a financial news outlet. While most...

Curtis Lehnert

Chiyoda: Financing Bigger Than Expected on Larger Losses

The Nikkei reported this morning that Chiyoda Corp (6366 JP) would receive a total of over ¥150bn in financial support from Mitsubishi Corp (8058...

Mio Kato

🇯🇵 Japan • Internet Sector Review - 'Japan Passing'

There are currently 241 listed Japanese companies that can be categorised as Internet businesses. Our classification overlaps with the TOPIX-33...

Campbell Gunn

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