Citywire Selector - For Professional Investors

Register to get unlimited access to Citywire’s fund manager database. Registration is free and only takes a minute.

Japanese autos steering in new direction, says small-cap specialist

Japanese autos steering in new direction, says small-cap specialist

The Japanese autos sector is under increasing price pressure but opportunities could emerge as companies move into more specialist parts of the supply chain.

That is the view of Citywire + rated Max Godwin, who manages the Eastspring Investments-Japan Smaller Companies fund.

Speaking to Citywire Selector, Godwin said the industry has been under fire for a number of years but is making strong strides to evolve into a new animal and avoid the headwinds caused by slower global growth.

His comments coincide with a report from automotive research firm Kelley Blue Brook, which suggested the Japanese autos market would need to consolidate aggressively over the next five years to remain competitive.

‘The kind of areas we are looking at are auto component makers,’ Godwin said. ‘The US has strengthened, car sales have recovered and Japanese companies are well-positioned to be big beneficiaries of that.'

Godwin said a lot of Japanese companies tend to have 30-40% of global market share in a particular market segment. This, however, is over-shadowed by high profile difficulties faced by companies such as Mitsubishi and airbag manufacturer Takata.

‘These component makers are operating on attractive price-to-book valuations and we also know, at the same time, that the difficulties in the industry over recent memory have forced them to change, to become leaner and more efficient.

‘The management were no longer just looking shorter-term and better plans for growth are now in place. They cut costs and improved the balance sheets, cash flow is okay and we think investors will become increasingly aware of the opportunities here.’

Godwin said he screens for out of favour areas of the market, which involves comparing historical data from five-to-10 years ago. He currently holds around 40-50 stocks in the fund, while uncovering and meeting roughly 10 potential new investment names each year.

The Eastspring Investments-Japan Smaller Companies fund returned 40.7% in Japanese yen terms over the three years to the end of May 2016. This compares to a 38.1% rise by the Russell/Nomura Mid Small Cap TR USD, its Citywire-assigned benchmark, over the same timeframe.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Events
  • Citywire Alternative Ucits Retreat 2017

    Citywire Alternative Ucits Retreat 2017

  • Citywire Milan 2017

    Citywire Milan 2017

  • Citywire Paris 2017

    Citywire Paris 2017

  • Citywire Deutschland 2017

    Citywire Deutschland 2017

  • Citywire DACH 2017

    Citywire DACH 2017

  • Citywire Italy 2016

    Citywire Italy 2016

  • Citywire Milan 2016

    Citywire Milan 2016

  • Citywire Alt Ucits 2016

    Citywire Alt Ucits 2016

  • Citywire Berlin 2016

    Citywire Berlin 2016

  • Citywire Switzerland 2017

    Citywire Switzerland 2017

  • Citywire Amsterdam 2016

    Citywire Amsterdam 2016

  • Citywire Montreux 2016

    Citywire Montreux 2016

  • Citywire Deutschland 2016

    Citywire Deutschland 2016

  • Citywire Latin America 2016

    Citywire Latin America 2016

  • Citywire Milan 2016

    Citywire Milan 2016

  • Citywire Munich 2016

    Citywire Munich 2016

  • Citywire Paris Alt Ucits 2016

    Citywire Paris Alt Ucits 2016

  • Citywire Zurich Alt Ucits 2016

    Citywire Zurich Alt Ucits 2016