Independent Insight Provider, Japanese equities, LightStream Research

Scott Foster

Securities analyst covering electronics, precision equipment & robotics, engineering, construction, transport and other sectors for more than 25 years in Japan and 3 years in Korea. Permanent resident of Japan.

Independent Insight Provider, Japanese equities

BIG Nikon (7731) Buyback - OK But Should Do Better

Nikon (7731) | Focusing on the 4 Year View

Nikon (7731 JP): 50% Upside from Rock Bottom

🇯🇵 JAPAN • Four Quadrants - Contrarian Buys

🇯🇵 JAPAN • Looking for Value in Negative Enterprise Value

🇯🇵 JAPAN • Stock Picking with 'Peak' EV/OP Multiples - Introducing EV/POP

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

In <a href="https://www.smartkarma.com/insights/japan-four-quadrants-contrarian-buys" target="_blank" data-smartkarma-citation="insights:45688" rel="noopener">🇯🇵 JAPAN • Four Quadrants - Contrarian Buys</a> , Campbell Gunn notes that Nikon is now the most attractive Negative Enterprise Value (NEV) play in Japan with a theoretical upside well into triple digits. This Insight follows up with an analysis of the company's financial position and post-restructuring earnings potential.Sales began to rebound from the COVID collapse in 2Q with the recovery of camera demand in China and the resumption of lithography tool installations. Impairment charges, inventory disposals and write-downs, reduction of the workforce and other cost cutting should lead to smaller losses in 2H and profits in FY Mar-22. If recovery is not derailed by the pandemic, we estimate that net profit could reach two-thirds of its previous peak by FY Mar-23, resulting in ROE of 8%.<a href="https://www.smartkarma.com/insights/japan-four-quadrants-contrarian-buys" target="_blank" data-smartkarma-citation="insights:45688" rel="noopener"></a>The share price has dropped to 0.5x book value assuming a ¥50 billion net loss this fiscal year. The dividend has been cut in half, resulting in a yield of 2.9%. We expect management to restore the dividend as soon as possible.If the company generates the profit we are forecasting for FY Mar-22, projected valuations would be at the bottom of their historical ranges. Management has been proactive in restructuring, but a push from activists would not hurt.

In 🇯🇵 JAPAN • Four Quadrants - Contrarian Buys , Campbell Gunn notes that Nikon is now the most attractive Negative Enterprise Value (NEV) play in Japan with a theoretical upside well into triple digits. This Insight follows up with an analysis of the company's financial position and post-restructuring earnings potential.Sales began to rebound from the COVID collapse in 2Q with the recovery of camera demand in China and the resumption of lithography tool installations. Impairment charges, inventory disposals and write-downs, reduction of the workforce and other cost cutting should lead to smaller losses in 2H and profits in FY Mar-22. If recovery is not derailed by the pandemic, we estimate that net profit could reach two-thirds of its previous peak by FY Mar-23, resulting in ROE of 8%.The share price has dropped to 0.5x book value assuming a ¥50 billion net loss this fiscal year. The dividend has been cut in half, resulting in a yield of 2.9%. We expect management to restore the dividend as soon as possible.If the company generates the profit we are forecasting for FY Mar-22, projected valuations would be at the bottom of their historical ranges. Management has been proactive in restructuring, but a push from activists would not hurt. 

Nikon (7731): Japan's Best NEV Opportunity

Nikon Corp

Nikon (7731): Japan's Best NEV Opportunity