Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<p>When <a href="https://www.smartkarma.com/entities/showa-denko-k-k" target="_blank" data-smartkarma-citation="entities:1496:1" rel="noopener">Showa Denko K.K. (4004 JP)</a> presented their H1 <a href="https://www.sdk.co.jp/assets/files/english/ir/library/pdf_presentation/results2021-2q.pdf" target="_blank" rel="noopener">results</a> on 10 August 2021, and later held their analyst call, it seemed quite bullish. The company was a year ahead of its internal integration efforts after having purchased Hitachi Chemical (renaming it Showa Denko Materials) in a HUGE debt-financed deal in 2020. The company noted that all businesses were operating well and that residual negative numbers coming from restructuring costs and other weaknesses were simply a matter of time to overcome.</p><p>The company showed an OP forecast which even it admitted was light, and for the year the forecast at ¥85bn remains significantly impacted by the amortisation of goodwill due to the purchase of the Hitachi Chemicals business (¥17.6bn this year). <em>This is to say that OP would be 20% higher if Showa Denko had used US-GAAP or IFRS to account for the purchase of Hitachi Chem.</em></p><p>Net Income forecasts out <em>years</em> from now are impacted by this cost to amortise the purchase goodwill. </p><p>The call was interesting in that it talked about efforts to reduce interest-bearing debt, and also talked about aggressive investment measures. That probably should have been a hint. </p><p>The shares fell hard from the 17th to the 20th as crude oil did too. </p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/227/837/original/Screenshot+2021-09-04+at+5.14.22+PM.png?1630746942" class="editor-image img-responsive" data-smartkarma-image-id="227837"></figure><p></p></section><p>And 13 days after the earnings release the company <a href="https://www.sdk.co.jp/assets/files/english/news/2021/20210823_sdknewsrelease_e.pdf" target="_blank" rel="noopener">announced</a> an equity sale where they would sell 35.1mm shares (including greenshoe) to investors. That is a big number, at roughly a quarter of the pre-existing share count. </p><p>It is even bigger when you consider shareholder structure. </p><p>Pricing is likely on 6 September. </p><p>Below the fold we look at shareholder structure, offer structure, and index demand.</p>

When Showa Denko K.K. (4004 JP) presented their H1 results on 10 August 2021, and later held their analyst call, it seemed quite bullish. The company was a year ahead of its internal integration efforts after having purchased Hitachi Chemical (renaming it Showa Denko Materials) in a HUGE debt-financed deal in 2020. The company noted that all businesses were operating well and that residual negative numbers coming from restructuring costs and other weaknesses were simply a matter of time to overcome.The company showed an OP forecast which even it admitted was light, and for the year the forecast at ¥85bn remains significantly impacted by the amortisation of goodwill due to the purchase of the Hitachi Chemicals business (¥17.6bn this year). This is to say that OP would be 20% higher if Showa Denko had used US-GAAP or IFRS to account for the purchase of Hitachi Chem.Net Income forecasts out years from now are impacted by this cost to amortise the purchase goodwill. The call was interesting in that it talked about efforts to reduce interest-bearing debt, and also talked about aggressive investment measures. That probably should have been a hint. The shares fell hard from the 17th to the 20th as crude oil did too. And 13 days after the earnings release the company announced an equity sale where they would sell 35.1mm shares (including greenshoe) to investors. That is a big number, at roughly a quarter of the pre-existing share count. It is even bigger when you consider shareholder structure. Pricing is likely on 6 September. Below the fold we look at shareholder structure, offer structure, and index demand.

Showa Denko (4004 JP) Offering - Supply, Passive Demand, and Opportunity

'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. 

Quantitative Analysis

<div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/087/536/original/2019-05-12_08-28-48.png?1557617338" class="editor-image img-responsive" data-smartkarma-image-id="87536"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/087/537/original/2019-05-12_08-29-53.png?1557617406" class="editor-image img-responsive" data-smartkarma-image-id="87537"></figure><p>Source: Japan Analytics</p>
</div><p><strong>SLIP-SLIDIN' AWAY</strong> - Japanese equities have lost 3.9% in the last holiday-shortened week and 4.6% or ¥30t since the bear-market rally peak on 17th April. The new Reiwa 令和 era has yet to see a positive close and the Bank of Japan has intervened to buy ETFs on three out of the last six trading days. A ¥2 appreciation in the Yen has cushioned the blow for non-resident/unhedged investors. For the first time since October 2018, the 50-day moving average of Total Market Value has been decisively breached. The remaining bulls will now be looking for a 'higher low' between ¥600t and ¥625t. </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/087/533/original/2019-05-12_08-13-49.png?1557616440" class="editor-image img-responsive" data-smartkarma-image-id="87533"></figure><div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/087/538/original/2019-05-12_08-38-11.png?1557617904" class="editor-image img-responsive" data-smartkarma-image-id="87538"></figure><p>Source: Japan Analytics</p>
</div><p><strong>BOUNCE AHEAD</strong> - The 5-day Relative Strength Index suggests a short-term recovery in the coming week, or until China announces its 'retaliation' measures to counter the recently-expanded US tariffs. 'Japan Inc.' is now voicing concerns about Japan's trade practices becoming the next focus for the US Trade Representative. Our Value Traded Ratio has also seen the strongest upward move- from 28 (the lowest level in nine months) to 53 (the highest since 21st December) in only eight trading days. Such sharp moves usually mark short-term low points.</p><p><strong>RESULTS &amp; REVISIONS</strong> - In the last four trading days, 1,153 Japanese companies have reported quarterly results, and there have been 855 initial forecasts for FY2020, 101 revision to annual forecasts, 598 initial interim estimates and ten revisions to interim forecasts. We are now at the halfway point of the Spring results announcements.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/087/539/original/2019-05-12_11-25-42.png?1557627962" class="editor-image img-responsive" data-smartkarma-image-id="87539"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>RESULTS &amp; REVISION SCORE</strong> - Our scoring methodology continues to have a reasonable correlation (0.79) with the Total Market Value. In the DETAIL section below we will analyse the breakdown the three components of the score, update our Sector Scores and look at the best and worst large-cap company results over the week. In the meantime, Simon &amp; Garfunkel can provide some light relief.</p><center><iframe src="https://www.youtube.com/embed/ZNt5FnMK2sM" width="854" height="480" frameborder="0" allow="accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture" allowfullscreen="allowfullscreen"></iframe></center><div class="content-caption">Simon &amp; Garfunkel: Slip-Slidin' Away - The Concert in Central Park, September 19, 1981</div>


Source: Japan Analytics
SLIP-SLIDIN' AWAY - Japanese equities have lost 3.9% in the last holiday-shortened week and 4.6% or ¥30t since the bear-market rally peak on 17th April. The new Reiwa 令和 era has yet to see a positive close and the Bank of Japan has intervened to buy ETFs on three out of the last six trading days. A ¥2 appreciation in the Yen has cushioned the blow for non-resident/unhedged investors. For the first time since October 2018, the 50-day moving average of Total Market Value has been decisively breached. The remaining bulls will now be looking for a 'higher low' between ¥600t and ¥625t. 
Source: Japan Analytics
BOUNCE AHEAD - The 5-day Relative Strength Index suggests a short-term recovery in the coming week, or until China announces its 'retaliation' measures to counter the recently-expanded US tariffs. 'Japan Inc.' is now voicing concerns about Japan's trade practices becoming the next focus for the US Trade Representative. Our Value Traded Ratio has also seen the strongest upward move- from 28 (the lowest level in nine months) to 53 (the highest since 21st December) in only eight trading days. Such sharp moves usually mark short-term low points.RESULTS &amp; REVISIONS - In the last four trading days, 1,153 Japanese companies have reported quarterly results, and there have been 855 initial forecasts for FY2020, 101 revision to annual forecasts, 598 initial interim estimates and ten revisions to interim forecasts. We are now at the halfway point of the Spring results announcements.Source: Japan AnalyticsRESULTS &amp; REVISION SCORE - Our scoring methodology continues to have a reasonable correlation (0.79) with the Total Market Value. In the DETAIL section below we will analyse the breakdown the three components of the score, update our Sector Scores and look at the best and worst large-cap company results over the week. In the meantime, Simon &amp; Garfunkel can provide some light relief.Simon &amp; Garfunkel: Slip-Slidin' Away - The Concert in Central Park, September 19, 1981

🇯🇵 Japan • Spring Results & Revisions & Market Update - Slip-Slidin' Away

Equity Analyst, LightStream Research

Supun Walpola

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

<p><span lang="EN-GB">Toyota’s current dividend and buyback yields are 3.1% and 2.1% respectively (at the current market price of JPY7,199 as of 22<sup>nd</sup> June 2018) bringing Toyota’s current cash yield (dividend yield plus buyback yield) to 5.2%. Toyota’s cash yield has been above the 5% mark consistently since FY03/15.</span></p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/055/962/original/Toyota.PNG?1529972342" class="editor-image img-responsive" data-smartkarma-image-id="55962"></figure><div class="content-remarks"><p><em>Source: Capital IQ and LSR Calculations</em></p></div><p><strong>We find Toyota’s high cash yield attractive as markets head towards bear territory.</strong> Toyota is in the higher end of the dividend yield spectrum among the Nikkei 225…</p>

Toyota’s current dividend and buyback yields are 3.1% and 2.1% respectively (at the current market price of JPY7,199 as of 22nd June 2018) bringing Toyota’s current cash yield (dividend yield plus buyback yield) to 5.2%. Toyota’s cash yield has been above the 5% mark consistently since FY03/15.Source: Capital IQ and LSR CalculationsWe find Toyota’s high cash yield attractive as markets head towards bear territory. Toyota is in the higher end of the dividend yield spectrum among the Nikkei 225…

Toyota for Bears: How Attractive Are Income Yields?

APAC IPOs & Placements

Zhen Zhou, Toh

Smartkarma

Smartkarma unites the fragmented investment industry, connecting institutional investors, independent research providers, and corporates within a single network.

Research Reinvented

Equity Capital Markets

Lotte Chemical Titan Holding Berhad / Equity Capital Markets

Lotte Chemical Titan Holding Berhad (TTNP MK)

<p><a href="https://www.smartkarma.com/entities/24159" target="_blank" data-smartkarma-citation="entities:24159:1">Lotte Chemical Titan Holding Berhad (TTNP MK)</a> is raising USD1,407–1,481m in its upcoming IPO. Proceeds will be used to fund the construction of the integrated petrochemical facility in Indonesia and expansion projects in Malaysia.</p><p>We recommend readers to take some time and read through all the analyses on Smartkarma written by <a href="https://www.smartkarma.com/profiles/9" target="_blank" data-smartkarma-citation="accounts:9">Ke Yan, CFA, FRM</a> and <a href="https://www.smartkarma.com/profiles/354" target="_blank" data-smartkarma-citation="accounts:354">Sanghyun Park</a>: </p><ul><li>Ke Yan analyzed in detail the company's business, growth drivers, industry and raw materials' trends as well as brief valuation…</li></ul>

Lotte Chemical Titan Holding Berhad (TTNP MK) is raising USD1,407–1,481m in its upcoming IPO. Proceeds will be used to fund the construction of the integrated petrochemical facility in Indonesia and expansion projects in Malaysia.We recommend readers to take some time and read through all the analyses on Smartkarma written by Ke Yan, CFA, FRM and Sanghyun Park: Ke Yan analyzed in detail the company's business, growth drivers, industry and raw materials' trends as well as brief valuation…

Lotte Chemical Titan IPO - Valuation up 5x in 6 Years Since Privatisation

Japan

TOSOH CORPORATION produces petrochemical and other chemical products.  The Company's primary products include ethylene, polyethylene, caustic soda, vinyl chloride, fine chemicals, and fertilizers.

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Tosoh Corp (4042 JP)

Showa Denko (4004 JP) Offering - Supply, Passive Demand, and Opportunity

Showa Denko's offering is not ginormous, but it is BIG. And it will engender a fair bit of passive flow. The question is whether investors will buy...

Travis Lundy

🇯🇵 Japan • Spring Results & Revisions & Market Update - Slip-Slidin' Away

SLIP-SLIDIN' AWAY - Japanese equities have lost 3.9% in the last holiday-shortened week and 4.6% or ¥30t since the bear-market rally peak on 17th...

Campbell Gunn

Toyota for Bears: How Attractive Are Income Yields?

Toyota’s current dividend and buyback yields are 3.1% and 2.1% respectively (at the current market price of JPY7,199 as of 22nd June 2018) bringing...

Supun Walpola

Lotte Chemical Titan IPO - Valuation up 5x in 6 Years Since Privatisation

Lotte Chemical Titan Holding Berhad (TTNP MK) is raising USD1,407–1,481m in its upcoming IPO. Proceeds will be used to fund the construction of the...

Zhen Zhou, Toh

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