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

Renesas: Surges 10% on Positive Nikkei Interview with CEO Suggests Solid M&A Knowhow

Resignation of JIC Board Sends Renesas Down 4%, JDI Down 11%

Renesas: Visit Suggests Utilisation Rate Rebound Could Take Longer Than Sell-Side Expects

Renesas Electronics: Refreshing the Toyota Production System for Industry 4.0

Last Week in Event SPACE: Nippon Suisan, Investa Office, LCY, Nittoc, Takara, Nevsun, Guoco

Renesas Electronics: Pays Up for IDT but We Like the Strategic Fit

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

We visited <a href="https://www.smartkarma.com/entities/15933" target="_blank" data-smartkarma-citation="entities:15933:1">Renesas Electronics (6723 JP)</a> today and discussed the two key issues on investors minds:<ul>
<li>
Inventory build-up is on its way to being corrected and while channel inventory could take till 2Q2019 to truly clear, Renesas' own high levels of inventory should be mostly addressed by 3Q and be at comfortable levels by 4Q.</li>
<li>
There is no way to spin the IDT acquisition as being cheap, however, we do consider it to be necessary given the changing industry dynamics and the need for a strong sensor lineup going forward. We believe the combination of Renesas' leading position for MCUs and IDT's wide array of sensors will be a winning proposition.</li>
<li>The lack of overlap among customers is a further opportunity and while it will take time for the companies to develop products that can be cross-sold or sold as packages or solutions, the expansion of the SAMs for both companies is a notable positive.</li>
<li>The company is emphasising cost synergies (USD80m) as one of the quick wins of the transaction and we believe these are likely to come through quickly and at roughly the scale the company is projecting. Moreover, while the top line synergies will take years to materialise, we would point out that though the acquisition is on the expensive side, IDT's relatively small size makes this more digestible, while its fabless model means that once suitable products are developed, the potential for revenue expansion will be significantly larger than its scale would suggest given the lack of product overlap.</li>
</ul>

We visited Renesas Electronics (6723 JP) today and discussed the two key issues on investors minds:

Inventory build-up is on its way to being corrected and while channel inventory could take till 2Q2019 to truly clear, Renesas' own high levels of inventory should be mostly addressed by 3Q and be at comfortable levels by 4Q.

There is no way to spin the IDT acquisition as being cheap, however, we do consider it to be necessary given the changing industry dynamics and the need for a strong sensor lineup going forward. We believe the combination of Renesas' leading position for MCUs and IDT's wide array of sensors will be a winning proposition.
The lack of overlap among customers is a further opportunity and while it will take time for the companies to develop products that can be cross-sold or sold as packages or solutions, the expansion of the SAMs for both companies is a notable positive.
The company is emphasising cost synergies (USD80m) as one of the quick wins of the transaction and we believe these are likely to come through quickly and at roughly the scale the company is projecting. Moreover, while the top line synergies will take years to materialise, we would point out that though the acquisition is on the expensive side, IDT's relatively small size makes this more digestible, while its fabless model means that once suitable products are developed, the potential for revenue expansion will be significantly larger than its scale would suggest given the lack of product overlap.


르네사스 일렉트로닉스: IDT 인수에 대한 과도한 집중은 장기적인 전략적 잠재력을 드러낸다