Senior Technology Analyst, Japanese Equities, LightStream Research

Scott Foster

Senior Technology Analyst, Japanese Equities

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

IBIDEN CO, LTD. develops, produces, and markets ceramics, housing materials, and electronics.  The Company's products include printed circuit boards (PCB), graphite specialties, integrated circuit (IC) packages, ceramic fibers, melamine decorative high-pressure laminates, and pre-cut structural materials.

<ul>
<li>Sales, profits and the share price are bottoming out and good 1Q results make FY Mar-25 guidance look conservative.</li>
<li>Demand for advanced packaging should drive recovery, with the operating margin regaining its previous peak in three or four years.</li>
<li>Management's long-term guidance implies a decline in the projected P/E ratio from 26x to 10X by FY Mar-28, but even 15x would make the shares an attractive investment.</li>
</ul>


Sales, profits and the share price are bottoming out and good 1Q results make FY Mar-25 guidance look conservative.
Demand for advanced packaging should drive recovery, with the operating margin regaining its previous peak in three or four years.
Management's long-term guidance implies a decline in the projected P/E ratio from 26x to 10X by FY Mar-28, but even 15x would make the shares an attractive investment.


Ibiden (4062 JP): Once Again a Long-Term Buy

Kokusai Electric Corporation manufactures and distributes semiconductor manufacturing systems. The Company produces batch processing systems, single wafer processing systems, and other systems. Kokusai Electric also operates advanced thermal process technology development, training, and other businesses.

<ul>
<li>Kokusai has dropped 44% from its July peak, offering a long-term opportunity at reasonably attractive valuations. Management's guidance looks conservative.</li>
<li>KKR has reduced its stake from 43.4% to 23.2%, increasing the float while indicating that it still sees a long-term opportunity. Applied Materials has bought 14.7% of the company.</li>
<li>The completion of a new factory in Japan should double production capacity to meet demand from makers of AI processors, high-bandwidth memory, 3D NAND and power devices.</li>
</ul>


Kokusai has dropped 44% from its July peak, offering a long-term opportunity at reasonably attractive valuations. Management's guidance looks conservative.
KKR has reduced its stake from 43.4% to 23.2%, increasing the float while indicating that it still sees a long-term opportunity. Applied Materials has bought 14.7% of the company.
The completion of a new factory in Japan should double production capacity to meet demand from makers of AI processors, high-bandwidth memory, 3D NAND and power devices.


Kokusai Electric (6525 JP): Sell-Off Presents Buying Opportunity

ADVANTEST CORPORATION produces semiconductor testing devices and electronic measuring instruments.  The Company's products include large-scale integration (LSI) test systems, memory test systems, dynamic test handlers, network analyzers, electronic meters, optical testing devices, and signal sources.

<ul>
<li>Visibility is poor. Following excellent 1Q results, management raised FY Mar-25 sales guidance by 14%, operating profit guidance by 53% and net profit guidance by 57%. </li>
<li>Strong demand for AI processors and memory should support more than 35% growth in IC tester revenues and a doubling of operating profit in the two years to Mar-26.</li>
<li>The shares have dropped to the bottom of their recent trading range, but are still selling at more than 30x our EPS estimate for next fiscal year.</li>
</ul>


Visibility is poor. Following excellent 1Q results, management raised FY Mar-25 sales guidance by 14%, operating profit guidance by 53% and net profit guidance by 57%. 
Strong demand for AI processors and memory should support more than 35% growth in IC tester revenues and a doubling of operating profit in the two years to Mar-26.
The shares have dropped to the bottom of their recent trading range, but are still selling at more than 30x our EPS estimate for next fiscal year.


Advantest (6857 JP): High Valuation, Low Visibility

Mitsubishi Heavy Industries / Equity Bottom-Up

Mitsubishi Heavy Industries, Ltd. is a comprehensive heavy machinery maker. The Company manufactures machinery, ships, turbines and engines, prime movers, aircrafts, and machine parts for military and commercial use.  Mitsubishi Heavy Industries also researches and develops nuclear power plants.

<ul>
<li>The next leader of Japan's ruling LDP, who will almost certainly become prime minister in October, will probably not make major changes to the nation's defense policy.</li>
<li>Guidance remains unchanged after 1Q results that suggest the possibility of a better than expected order flow but also a material negative impact from a stronger yen.</li>
<li>MHI's valuation is not yet in speculative territory, but neither is it compelling. If the yen remains stable, we expect the share price to test its recent highs.</li>
</ul>


The next leader of Japan's ruling LDP, who will almost certainly become prime minister in October, will probably not make major changes to the nation's defense policy.
Guidance remains unchanged after 1Q results that suggest the possibility of a better than expected order flow but also a material negative impact from a stronger yen.
MHI's valuation is not yet in speculative territory, but neither is it compelling. If the yen remains stable, we expect the share price to test its recent highs.


MHI (7011 JP): Election Unlikely to Affect Defense Budget

SCREEN Holdings Co Ltd.  manufactures and sell semiconductors, FPD devices, commercial printing and printed circuit boards(PCB). The company also provides additional services for its products.

<ul>
<li>Screen has rebounded from its recent low, but strong 1H results, the recent weakening of the Yen and reasonable valuation point to further short-term upside. </li>
<li>However, management is guiding for slightly lower operating profit in 2H, and Intel's capex cuts also support a cautious outlook. </li>
<li>Screen expects slower growth in 2025 wafer fab equipment demand than SEMI, and neither appear to have factored in concern over insufficient return on investment in AI. </li>
</ul>


Screen has rebounded from its recent low, but strong 1H results, the recent weakening of the Yen and reasonable valuation point to further short-term upside. 
However, management is guiding for slightly lower operating profit in 2H, and Intel's capex cuts also support a cautious outlook. 
Screen expects slower growth in 2025 wafer fab equipment demand than SEMI, and neither appear to have factored in concern over insufficient return on investment in AI. 


Screen Holdings (7735 JP): Still a Buy for the Bounce

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.