Japan/Asia Long-Short, LightStream Research

Mio Kato

Over 15 years analysing Japanese and Asian stocks from a long/short perspective

I focus on cyclically driven sectors such as Gaming, Factory Automation and Autos

An eclectic background as a long-short analyst, upper management at a financial data startup through its listing, and as the founder of a team analysing big/alternative data, all of which supports independent and differentiated views... we hope

An appreciation for Mathematics drives the development of a "Micro-Quantamental" process which can provide a data-driven, historically-informed and semi-automated foundation upon which to layer more qualitative and judgemental analysis, thus improving investment decision-making speed and accuracy

Japan/Asia Long-Short

Last Week in Event SPACE: FamilyMart, Monex, Investa, Seven, Adeka, HK & Shanghai Hotels

Daido Metal: Heavy Investment Burden Prompts Capital Raise but Can the Company Restore Margins?

Last Week in Event SPACE: Sharp, TPG, Aveo, Wheelock Props, Es Con, Foster, ASM Int'l

ADEKA Partial TOB for Nihon Nohyaku (4997 JP) : Part I

ADEKA Partial TOB for Nihon Nohyaku: The Arb Grids

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.

Event-Driven

<p>After market close on the 21st <a href="https://www.smartkarma.com/entities/3122" target="_blank" data-smartkarma-citation="entities:3122:1">Adeka Corp (4401 JP)</a> announced a partial tender offer (and participation in a third party allotment) to make <a href="https://www.smartkarma.com/entities/17345" target="_blank" data-smartkarma-citation="entities:17345:1">Nihon Nohyaku (4997 JP)</a> a consolidated subsidiary, seeking to attain a 51% share in the company. <a href="https://www.smartkarma.com/profiles/25" target="_blank" data-smartkarma-citation="accounts:25">Travis Lundy</a> has covered the partial tender in <a href="https://www.smartkarma.com/insights/adeka-partial-tob-for-nihon-nohyaku-4997-jp-part-i" target="_blank" data-smartkarma-citation="insights:23309">ADEKA Partial TOB for Nihon Nohyaku (4997 JP) : Part I</a> and <a href="https://www.smartkarma.com/insights/adeka-partial-tob-for-nihon-nohyaku-the-arb-grids" target="_blank" data-smartkarma-citation="insights:23310">ADEKA Partial TOB for Nihon Nohyaku: The Arb Grids</a>.</p><p>We examined the fundamentals of both companies and generally consider growth prospects to be reasonable.</p><ul>
<li>Both companies adopt strategies of developing a wide variety of niche products and have strength within their respective spheres of competence, holding high market shares.</li>
<li>Both companies have strong compound development capabilities with high hit rates and tend to aim for singles rather than swinging for the fences.</li>
<li>Adeka has particular strengths in additives for various plastics used in LCD and semiconductor manufacturing as well as for autos while Nihon Nohyaku boasts a strong lineup of insecticides.</li>
<li>The wide range of products and low dependency ratios mean that both companies tend to demonstrate steady rather than spectacular growth.</li>
<li>Adeka traded cheaply at 5x EV/OP pre-deal while Nihon Nohyaku was at a rather more demanding 13x EV/OP even before the tender.</li>
<li>We believe Adeka remains undervalued and that there is potential for the stock to re-rate following this acquisition as investors affirm the company's more aggressive stance and some intriguing potential for glass fibre reinforced plastic and graphene products.</li>
<li>We also believe that Adeka is moving to put its strong FCF and balance sheet to better use, and while this acquisition will look a little expensive until products from Nihon Nohyaku's longer term pipeline come through, we nevertheless believe that Adeka should trade to at least 9x EV/OP implying about 29% upside.</li>
</ul>

After market close on the 21st Adeka Corp (4401 JP) announced a partial tender offer (and participation in a third party allotment) to make Nihon Nohyaku (4997 JP) a consolidated subsidiary, seeking to attain a 51% share in the company. Travis Lundy has covered the partial tender in ADEKA Partial TOB for Nihon Nohyaku (4997 JP) : Part I and ADEKA Partial TOB for Nihon Nohyaku: The Arb Grids.We examined the fundamentals of both companies and generally consider growth prospects to be reasonable.
Both companies adopt strategies of developing a wide variety of niche products and have strength within their respective spheres of competence, holding high market shares.
Both companies have strong compound development capabilities with high hit rates and tend to aim for singles rather than swinging for the fences.
Adeka has particular strengths in additives for various plastics used in LCD and semiconductor manufacturing as well as for autos while Nihon Nohyaku boasts a strong lineup of insecticides.
The wide range of products and low dependency ratios mean that both companies tend to demonstrate steady rather than spectacular growth.
Adeka traded cheaply at 5x EV/OP pre-deal while Nihon Nohyaku was at a rather more demanding 13x EV/OP even before the tender.
We believe Adeka remains undervalued and that there is potential for the stock to re-rate following this acquisition as investors affirm the company's more aggressive stance and some intriguing potential for glass fibre reinforced plastic and graphene products.
We also believe that Adeka is moving to put its strong FCF and balance sheet to better use, and while this acquisition will look a little expensive until products from Nihon Nohyaku's longer term pipeline come through, we nevertheless believe that Adeka should trade to at least 9x EV/OP implying about 29% upside.


アデカによる日本農薬の部分的TOB：ニッチ市場で強力な両社の基礎的条件は良好