In today’s briefing:
- Nikkei 225 Index Rebalance: Mercari, Lasertec, Nitori IN; Nippon Glass, Mitsui E&S, Matsui Sec OUT
- March 2024 Nikkei 225 Rebal – Look for Zozo, Ryohin Keikaku, and Maybe a Socionext Split
- Japanese Cosmetics Ready to Blossom with Asian Visitors
- Bargain Sale at Sogo Seibu as Seven & I Finally Capitulates
- Moncler (MONC IM): Not Just A Fashion Down Jacket Brand
- The Estée Lauder Companies Inc.: Does It Still Have A Strong Competitive Positioning In The Prestige Beauty Market? – Key Drivers
- Ross Stores Inc.: Continued Addition Of New Locations Boosting Growth! – Major Drivers
- Tapestry Inc.: The $8.5 Billion Capri Holdings Acquisition Can Be A Real Game Changer! – Major Drivers
- Walmart Inc.: The Flipkart Stake Augmentation Can Keep Driving E-Commerce Synergies! – Key Drivers
Nikkei 225 Index Rebalance: Mercari, Lasertec, Nitori IN; Nippon Glass, Mitsui E&S, Matsui Sec OUT
- Mercari (4385 JP), Lasertec (6920 JP) and Nitori (9843 JP) will replace Nippon Sheet Glass (5202 JP), Mitsui E&S (7003 JP) and Matsui Securities (8628 JP) in the Nikkei 225.
- As expected, Nitori Holdings (9843 JP) will be added at half the planned PAF since the trading value is low compared to the expected index weight.
- Passive trackers need to buy between 1-17 days of ADV on the adds while selling between 1.2-16.5 days of ADV on the deletes. There is a big funding trade too.
March 2024 Nikkei 225 Rebal – Look for Zozo, Ryohin Keikaku, and Maybe a Socionext Split
- Now that the September 2023 Nikkei 225 Rebal is announced, we look at the March 2024 rebal and its possibilities.
- Socionext (6526 JP) is the only automatic ADD, but it might not be. ZOZO Inc (3092 JP) and Ryohin Keikaku (7453 JP) would be sector balance ADDs.
- Fast Retailing (9983 JP) could get capped if it outperforms Nikkei 225 by ~10%+ to 31Jan2024. And Nitori Holdings (9843 JP) will see an add of ~14 days of ADV.
Japanese Cosmetics Ready to Blossom with Asian Visitors
- Despite expected increased demand from returning Asian tourists, Japanese cosmetics companies have been hesitant to revise their 2H 2023 inbound demand projections.
- We are long Kose Corp (4922 JP), Shiseido Company (4911 JP), and Pola Orbis Holdings (4927 JP), as consensus estimates look extra cautious and reasonable and appealing FY+2 valuation multiples.
- We view the risk of Chinese consumers boycotting Japanese cosmetics due to Fukushima wastewater release as relatively low.
Bargain Sale at Sogo Seibu as Seven & I Finally Capitulates
- Seven & I has finally sold Sogo Seibu to Fortress Investments.
- It will be pleased to have offloaded a loss-making format it never really understood but at a cost – it will write off more than ¥90 billion in loans.
- Fortress will immediately sell the land under Seibu Ikebukuro and some other assets to Yodobashi with suggestions of major redevelopment of both Ikebukuro and Shibuya.
Moncler (MONC IM): Not Just A Fashion Down Jacket Brand
- Moncler SpA (MONC IM) is an outstanding compounder with clear market leading position in luxury outerwear.
- Moat is increasing every year through relentless focus on brand building.
- We believe that Moncler deserves a higher PE multiple than its current 22x forward expected earnings.
The Estée Lauder Companies Inc.: Does It Still Have A Strong Competitive Positioning In The Prestige Beauty Market? – Key Drivers
- The Estée Lauder Companies Inc. delivered a mixed set of results in the quarter, with revenues above market expectations.
- Estée Lauder produced a 4% rise in organic revenue, returning to growth for the quarter as predicted.
- Despite challenges, Estée Lauder Companies grew in the EMEA and Asia Pacific markets, compensating for the decline in organic sales.
Ross Stores Inc.: Continued Addition Of New Locations Boosting Growth! – Major Drivers
- Ross Stores Inc. delivered a positive result and managed an all-around beat last quarter, with a 5% increase in comparable store sales primarily attributed to heightened customer traffic.
- Despite remaining cautious due to ongoing challenges in the economic landscape, Ross Stores raised its outlook for the second half of the year, indicating an upward trend in comparable store sales for the upcoming quarters.
- This resilient approach and the company’s strategic planning position Ross Stores for continued growth and success in the retail industry.
Tapestry Inc.: The $8.5 Billion Capri Holdings Acquisition Can Be A Real Game Changer! – Major Drivers
- Tapestry has been in the news for its $8.5 billion acquisition of Capri Holdings.
- Meanwhile, we delivered a disappointing set of results as the company was unable to meet the revenue and earnings expectations of Wall Street.
- Tapestry achieved remarkable and strategic progress, showcasing robust brand-building strategies, consumer-centric approaches, and effective execution, resulting in significant earnings per share.
Walmart Inc.: The Flipkart Stake Augmentation Can Keep Driving E-Commerce Synergies! – Key Drivers
- Walmart delivered a strong result and managed an all-around beat last quarter.
- The company continued gaining market share across various formats and markets, achieving positive growth in units sold and transaction counts.
- In this report, we have carried out a fundamental analysis of the historical financial statements of the company.
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