Daily BriefsJapan

Japan: Toyota Motor, Sony Corp, BASE Inc, Link-U and more

In today’s briefing:

  • Toyota Industries (6201 JP): Trading Rich Vs Toyota Motors
  • Sony – PS5 Teardown
  • BASE Inc: Downside Risks Mount As EV/Sales Peak
  • Small Cap Growth: Link-U (4446) – Undercutting AWS

Toyota Industries (6201 JP): Trading Rich Vs Toyota Motors

By David Blennerhassett

Toyota Industries (6201 JP) is up 24% in the past three months compared to ~5% for 8.5%-held Toyota Motor (7203 JP) and ~6% for the TOPIX.

As a result, the implied stub is at levels only (briefly) surpassed in 2H17 and 1Q2018.

Source: CapIQ. Lines for 6201 & 7203 are base 100 from 10 years ago

The stub expansion is likely driven by demand for materials handling equipment, such as forklifts, which have been on a progressive growth trail recently. TICO is a global leader in forklifts and shares of KION Group AG (KGX GR), a key competitor, are up 36%/85% in the past three/six months.

Yet a closer inspection of earnings does not support TICO’s recent outperformance – unless the market is assigning a significantly high valuation for the stub ops. I think the recent movement in TICO is unwarranted, and recommend an unwind trade.

As always, more below the fold. 


Sony – PS5 Teardown

By Mio Kato

Sony posted a teardown of its upcoming PS5 console on the official Playstation Youtube account. The teardown revealed some interesting little details such as an extremely large heatsink, removable panels and liquid metal for the contact between the heatsink and the processor.


BASE Inc: Downside Risks Mount As EV/Sales Peak

By Oshadhi Kumarasiri

Founded in December 2012 in Roppongi Tokyo, BASE Inc (4477 JP) is an e-commerce platform, payment services provider and also a SME funding services provider. The company’s main business “BASE” is an e-commerce platform which allows businesses and individuals to create online shops.

In our last couple of reports, we suggested that there are downside risks as investor demand for COVID-resistant stocks have driven BASE’s valuation to unwarranted levels.

However, we were reluctant to consider a short position and wanted to wait until FY+2 EV/Sales peak before arranging a short position.

Over the last week BASE’s share price has rallied another 30%. Today the share price reached a new high of ¥16,510 per share before ending the day at ¥15,930 per share, up 12% from yesterday’s close price.

As a result, BASE’s consensus FY+2 EV/Sales have reached a new high of 25.1x and offers an opportunity to arrange a short position with favourable risks rewards.


Small Cap Growth: Link-U (4446) – Undercutting AWS

By Mark Chadwick

Link-U (4446 JP)  is a young, fast-growing technology company in an attractive sector. Indications are that the company has a strong moat around costs and switching, both of which can combine to get clients on the platform and keep them there. Management is focused on growth and is focused on certain niche areas withing their sphere of competence and skill. The shift to the TSE 1st section in July 2020 should increase visibility as the company moves to build out its infrastructure, expand its engineering talent, and grow its business lines under a management team that is properly aligned with the company’s performance. 


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