In today’s briefing:
- Cosmo Energy (5021) Vs Murakami – It’s On!
- Japan Excellent (8987). It WAS Most Excellent. That’s Now Done.
- Fast Retailing (9983) | Q1 Miss
- 2023 High Conviction Shift: Margins Begin to Recover as Unprofitable Projects Coming to an End
Cosmo Energy (5021) Vs Murakami – It’s On!
- In March 2022, longtime Cosmo Energy Holdings (5021 JP) holder Mubadala sold the last 15.7% of Cosmo Energy in a block sale after having sold 5% 8 months earlier.
- A month later it was revealed noted Japanese activist Murakami-san had bought 5.1%. A week later it was 8.3%. Then he bought more. Cosmo announced a buyback in May 2022.
- By November Murakami-san had 19.8%. But behind the scenes there had been discussions and those are now coming to light. Cosmo has announced possible defence measures.
Japan Excellent (8987). It WAS Most Excellent. That’s Now Done.
- 4.5 months ago I wrote about a possible “Sustained Flow Event” on Japan Excellent (8987 JP). Since then, the stock has outperformed every other Office REIT. It’s up since then.
- Outperformance within Office REITs has been a minimum of 3.5%, and a maximum of ~20.8% vs the biggest peer, with an average and median outperformance of 11.7% and 13.4% respectively.
- This idiosyncratic story has come to an end. It may be a temporary end, but I don’t see the next catalyst.
Fast Retailing (9983) | Q1 Miss
- We remain bearish on Fast Retailing given its valuation premium versus global peers
- Q1 sales were resilient despite global cost of living issues. Profits missed on rising costs and China’s Covid hangover
- Cost pressures on the wage bill could be a multi-year issue as Uniqlo seeks to align with global pay standards
2023 High Conviction Shift: Margins Begin to Recover as Unprofitable Projects Coming to an End
- Shift Inc (3697 JP) reported 1QFY08/2023 results today. Revenue increased 35.6% YoY to JPY19.3bn (vs consensus JPY19.8bn) while OP decreased 7.4% YoY to JPY1.8bn (vs consensus JPY2.2bn).
- Both GPM and OPM have dropped compared to 1QFY08/2022 but shows significant improvement over last two quarters suggesting unprofitable development projects are coming to an end.
- Though 1Q earnings fell a touch below consensus, we would not be too concerned as the company’s new services and being the market leader should drive long-term growth.
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