In today’s briefing:
- Fast Retailing: Guidance Upgraded, Yet The Upside Seems Limited Due to Stretched Valuations
- Governance of Companies in Which the Founder Owns Majority of the Shares Should Also Be Discussed
Fast Retailing: Guidance Upgraded, Yet The Upside Seems Limited Due to Stretched Valuations
- With discounting delayed, Fast Retailing (9983 JP)’s 3QFY22 was a surprise to the upside as its OP grew 36.5% YoY to ¥81.8bn (consensus:¥65.8bn) to exceed the pre-COVID level by 9.7%.
- Nevertheless, the upside seems limited in the short-term, with shares already trading at a stretched valuation of 22.2x consensus FY+2 OP, compared to the historical median of 15.5x.
- At around ¥290.0bn FY+1 OP, a fair price should be somewhere around ¥58,000-60,000, which implies a downside of around 25%.
Governance of Companies in Which the Founder Owns Majority of the Shares Should Also Be Discussed
- I hope that the investigation by SESC will lead to the establishment of compliance system for these IR vendors, although IR vendors have been left unchecked by insider trading regulations.
- Apart from this issue, there is much room for discussion on the issue of governance for a company listed in which the founder owns more than 50% of the shares.
- This is the same problem that occurs with parent-subsidiary listings. For increasing the listed companies, TSE has permitted the listing of companies in which the founder owns majority of shares.
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