Equity Analyst, LightStream Research

Oshadhi Kumarasiri

Equity Analyst

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

This is the last of a three-part series on <a href="https://www.smartkarma.com/entities/nitori-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:20386:1" rel="noopener">Nitori Holdings (9843 JP)</a>, Japan’s largest furniture and home accessories retailer. Previously, we have covered the company’s business model, financial performance, as well as the company’s medium-term profitability and revenue outlook using two different approaches: <a href="https://www.smartkarma.com/insights/nitori-holdings-coverage-initiation-part-1-driving-growth-through-diversification" target="_blank" rel="noopener">traditional investment research</a> and <a href="https://www.smartkarma.com/insights/nitori-holdings-coverage-initiation-part-2-alternative-data-analysis" target="_blank" rel="noopener">alternative data</a>. In this Insight, we focus on valuation and our investment recommendation.
Revenue &amp; OP Estimates
<table class="table table-striped">
<tbody>
<tr>
<td style="width: 31.0%;">
In ¥m
</td>
<td style="width: 22.86%;">
FY21
</td>
<td style="width: 22.48%;">
FY22
</td>
<td style="width: 23.64%;">
FY23
</td>
</tr>
<tr>
<td style="width: 31.0%;">
Revenue
</td>
<td style="width: 22.86%;"></td>
<td style="width: 22.48%;"></td>
<td style="width: 23.64%;"></td>
</tr>
<tr>
<td style="width: 31.0%;">
Consensus
</td>
<td style="width: 22.86%;">
658,888
</td>
<td style="width: 22.48%;">
701,791
</td>
<td style="width: 23.64%;">
742,894
</td>
</tr>
<tr>
<td style="width: 31.0%;">
LSR
</td>
<td style="width: 22.86%;">
681,719
</td>
<td style="width: 22.48%;">
744,364
</td>
<td style="width: 23.64%;">
771,573
</td>
</tr>
<tr>
<td style="width: 31.0%;">
 
</td>
<td style="width: 22.86%;"></td>
<td style="width: 22.48%;"></td>
<td style="width: 23.64%;"></td>
</tr>
<tr>
<td style="width: 31.0%;">
OP
</td>
<td style="width: 22.86%;"></td>
<td style="width: 22.48%;"></td>
<td style="width: 23.64%;"></td>
</tr>
<tr>
<td style="width: 31.0%;">
Consensus
</td>
<td style="width: 22.86%;">
114,786
</td>
<td style="width: 22.48%;">
123,026
</td>
<td style="width: 23.64%;">
131,201
</td>
</tr>
<tr>
<td style="width: 31.0%;">
LSR
</td>
<td style="width: 22.86%;">
119,284
</td>
<td style="width: 22.48%;">
130,780
</td>
<td style="width: 23.64%;">
136,085
</td>
</tr>
</tbody>
</table>
<div class="content-caption">Source: Cap IQ, LSR</div>

This is the last of a three-part series on Nitori Holdings (9843 JP), Japan’s largest furniture and home accessories retailer. Previously, we have covered the company’s business model, financial performance, as well as the company’s medium-term profitability and revenue outlook using two different approaches: traditional investment research and alternative data. In this Insight, we focus on valuation and our investment recommendation.
Revenue &amp; OP Estimates




In ¥m


FY21


FY22


FY23




Revenue







Consensus


658,888


701,791


742,894




LSR


681,719


744,364


771,573




 







OP







Consensus


114,786


123,026


131,201




LSR


119,284


130,780


136,085




Source: Cap IQ, LSR

Nitori Holdings Coverage Initiation Part 3: Valuation

Expert on Japan Retail and Consumer Markets, JapanConsuming

Michael Causton

Expert on Japan Retail and Consumer Markets

Real Insight on Japanese Consumer Markets

JapanConsuming

JapanConsuming is a specialist research firm producing intelligence on Japanese retail and consumer markets. Founded in 2000, JapanConsuming has become the leading provider of insights on Japanese retailers and consumer trends to retailers, brands, government agencies and investors. As well as a highly regarded monthly report on the market, JapanConsuming produces in-depth reports on retail sectors, seminars on key trends and telephone consulting to investors on trends and retailers.

JapanConsuming was founded by Michael Causton and Roy Larke. 

Thematic (Sector/Industry)

No one really knows what will happen after the initial shock of the coronavirus fades away. Many observers in Japan, expert and otherwise, are already predicting a completely new world in one way or another, but the reality is likely more prosaic.What is certain is that the Japanese consumer economy will recover and it is just a question of when.The most likely effect of the crisis is that it will catalyse a period of change already in process and which also happens to be one of the most dramatic and far-reaching seen so far in retail.But there is one trend that may well reverse as more businesses go under or contract, providing relief for many retailers: the labour shortage and rise in wages.The following offers an in-depth review of both the impact of the current crisis and implications as well as the long-term trends in Japanese retailing, providing insight into which sectors, formats and specific companies will win and lose in the next three years.For a short read, we provide the conclusions and winners and losers first.

No one really knows what will happen after the initial shock of the coronavirus fades away. Many observers in Japan, expert and otherwise, are already predicting a completely new world in one way or another, but the reality is likely more prosaic.What is certain is that the Japanese consumer economy will recover and it is just a question of when.The most likely effect of the crisis is that it will catalyse a period of change already in process and which also happens to be one of the most dramatic and far-reaching seen so far in retail.But there is one trend that may well reverse as more businesses go under or contract, providing relief for many retailers: the labour shortage and rise in wages.The following offers an in-depth review of both the impact of the current crisis and implications as well as the long-term trends in Japanese retailing, providing insight into which sectors, formats and specific companies will win and lose in the next three years.For a short read, we provide the conclusions and winners and losers first.

After Covid: The Future for Japanese Retail: Winners & Losers

Most apparel firms and retailers suffered plummeting sales in March and expect a further wrenching in April.The only retailers to post higher sales were <a href="https://www.smartkarma.com/entities/workman-co-ltd" target="_blank" data-smartkarma-citation="entities:8467:1" rel="noopener">Workman Co Ltd (7564 JP)</a> and <a href="https://www.smartkarma.com/entities/nishimatsuya-chain-co-ltd" target="_blank" data-smartkarma-citation="entities:13375:1" rel="noopener">Nishimatsuya Chain (7545 JP).</a> The only good news is that many saw online sales surge as consumers switched to mobile purchases. While this wasn’t enough to offset lost sales in stores, it will catalyse the shift to online.

Most apparel firms and retailers suffered plummeting sales in March and expect a further wrenching in April.The only retailers to post higher sales were Workman Co Ltd (7564 JP) and Nishimatsuya Chain (7545 JP). The only good news is that many saw online sales surge as consumers switched to mobile purchases. While this wasn’t enough to offset lost sales in stores, it will catalyse the shift to online.

90% of Japanese Listed Apparel Firms Down but E-Commerce Powers Ahead

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/127/413/original/File%202020-04-10%207%2001%2043.jpeg?1586469736" class="editor-image img-responsive" data-smartkarma-image-id="127413"></figure><div class="content-caption">Source • aatishb.com</div>CATCHING UP - As Japan's COVID-19 curve catches up with the global trendline and Tokyo reported a record number of 181 new confirmed cases, the local and national authorities are sparring over the details of the implementation of the requests to cease business operations. There are also variations of policy at the sub-prefectural level as, for example, concerning child-care facilities as Tokyo's wards adopt differing strategies. Such confusion is leading many individuals and some companies to take stricter measures than have so far been requested. Aichi and Kyoto Prefectures, which were omitted from the state of emergency declaration, have decided to implement measures independently. The constitutional arrangements governing relations between the state and prefectures are not working well at present and the frequent and very public communication breakdowns do not inspire confidence. The 'good' news is that COVID-19-attributed deaths in Japan are still below one hundred and only 99 people are deemed to be in critical condition. YOU ARE ON YOUR OWN (FOR ABOUT A WEEK) - Meanwhile, the national government is adamant that no compensation will be offered to businesses that are required to close. Support will be provided instead at an individual level where there is evidence of a loss of income. It does, however, appear that the shutdown will not now be implemented until the end of next week, which would result in only eight lost working days. The bold assumption is that the 80% social distancing measures that are being requested will have resulted in a peaking of the daily case count by months end.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/127/414/original/2020-04-10_06-57-43.png?1586470869" class="editor-image img-responsive" data-smartkarma-image-id="127414"></figure><div class="content-caption">Source • Social distancing to slow the US COVID-19 epidemic</div>SOCIAL DISTANCING v LOCKDOWNS - In an interesting preprint <a href="https://www.medrxiv.org/content/10.1101/2020.04.03.20052373v1" target="_blank" rel="noopener">paper</a> issued on 8th April - Social distancing to slow the US COVID-19 epidemic - a time-series analysis examined the impact of both social distancing measures and lockdowns in various US states. The evidence suggests that both policies are effective in reducing cases. These conclusions support Japan's current policy of avoiding the economic and social side-effects of universal stay-at-home policies.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/127/417/original/2020-04-10_07-33-27.png?1586471635" class="editor-image img-responsive" data-smartkarma-image-id="127417"></figure><div class="content-caption">Source • Japan Analytics</div>In the DETAIL below, as the pace of announcements picks up, we shall review the 32 results and 14 annual revisions or initial forecasts made yesterday. The positive/negative balance for results was 17:15, for revisions and forecasts the split was 7:7, with <a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:751:1" rel="noopener">Fast Retailing (9983 JP)</a> being the primary 'casualty'.

Source • aatishb.comCATCHING UP - As Japan's COVID-19 curve catches up with the global trendline and Tokyo reported a record number of 181 new confirmed cases, the local and national authorities are sparring over the details of the implementation of the requests to cease business operations. There are also variations of policy at the sub-prefectural level as, for example, concerning child-care facilities as Tokyo's wards adopt differing strategies. Such confusion is leading many individuals and some companies to take stricter measures than have so far been requested. Aichi and Kyoto Prefectures, which were omitted from the state of emergency declaration, have decided to implement measures independently. The constitutional arrangements governing relations between the state and prefectures are not working well at present and the frequent and very public communication breakdowns do not inspire confidence. The 'good' news is that COVID-19-attributed deaths in Japan are still below one hundred and only 99 people are deemed to be in critical condition. YOU ARE ON YOUR OWN (FOR ABOUT A WEEK) - Meanwhile, the national government is adamant that no compensation will be offered to businesses that are required to close. Support will be provided instead at an individual level where there is evidence of a loss of income. It does, however, appear that the shutdown will not now be implemented until the end of next week, which would result in only eight lost working days. The bold assumption is that the 80% social distancing measures that are being requested will have resulted in a peaking of the daily case count by months end.Source • Social distancing to slow the US COVID-19 epidemicSOCIAL DISTANCING v LOCKDOWNS - In an interesting preprint paper issued on 8th April - Social distancing to slow the US COVID-19 epidemic - a time-series analysis examined the impact of both social distancing measures and lockdowns in various US states. The evidence suggests that both policies are effective in reducing cases. These conclusions support Japan's current policy of avoiding the economic and social side-effects of universal stay-at-home policies.Source • Japan AnalyticsIn the DETAIL below, as the pace of announcements picks up, we shall review the 32 results and 14 annual revisions or initial forecasts made yesterday. The positive/negative balance for results was 17:15, for revisions and forecasts the split was 7:7, with Fast Retailing (9983 JP) being the primary 'casualty'.

🇯🇵 JAPAN • Revisions & Results 9th April - Communication Breakdown

Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

Event-Driven

With the BOJ announcing yesterday that it would double the upper limit of its ETF purchases to ¥12trn a year and its previous policy shift to favour TOPIX-based ETFs over Nikkei-based ETFs it made sense for TOPIX to outperform Nikkei today. However, we found the degree of outperformance to be slightly surprising as TOPIX rose 2.60% while the Nikkei barely squeaked out a +0.06% gain. Below, we examine some individual names within the two indices to try and identify pairs which could generate alpha based on this theme.

With the BOJ announcing yesterday that it would double the upper limit of its ETF purchases to ¥12trn a year and its previous policy shift to favour TOPIX-based ETFs over Nikkei-based ETFs it made sense for TOPIX to outperform Nikkei today. However, we found the degree of outperformance to be slightly surprising as TOPIX rose 2.60% while the Nikkei barely squeaked out a +0.06% gain. Below, we examine some individual names within the two indices to try and identify pairs which could generate alpha based on this theme.

Japan

RYOHIN KEIKAKU CO., LTD. is a retailer and wholesaler of Mujirushi Ryohin brand products, which were originally a generic private-brand product.  The Company's product line includes knitwear, food, and household items

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Ryohin Keikaku (7453 JP)

Nitori Holdings Coverage Initiation Part 3: Valuation

This is the last of a three-part series on Nitori Holdings (9843 JP), Japan’s largest furniture and home accessories retailer. Previously, we have...

Oshadhi Kumarasiri

After Covid: The Future for Japanese Retail: Winners & Losers

No one really knows what will happen after the initial shock of the coronavirus fades away. Many observers in Japan, expert and otherwise, are...

Michael Causton

90% of Japanese Listed Apparel Firms Down but E-Commerce Powers Ahead

Most apparel firms and retailers suffered plummeting sales in March and expect a further wrenching in April.The only retailers to post higher sales...

Michael Causton

🇯🇵 JAPAN • Revisions & Results 9th April - Communication Breakdown

CATCHING UP - As Japan's COVID-19 curve catches up with the global trendline and Tokyo reported a record number of 181 new confirmed cases, the...

Campbell Gunn

The Topix Vs. Nikkei Skew

With the BOJ announcing yesterday that it would double the upper limit of its ETF purchases to ¥12trn a year and its previous policy shift to...

Mio Kato

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)