In today’s briefing:
- Fast Retailing (9983) – Great (Bte) Earnings Now Out of The Way; Anticipating End-July Capping Data
- [JAPAN ACTIVISM] Keisei Elec (9009) AGM Result Not Salutary, Tough To Win On This Stance
- Fast Retailing (9983) | Q3 Masterclass
- Yoshinoya Holdings (9861 JP): Q1 FY02/25 flash update
- Nitto Kogyo Corporation (6651 JP) – 4Q Follow-Up
- Adopting DOE Is Step Forward, but Explanation Needed to Step into Strategic Allocation of Cash Flow
- Softcreate Holdings (3371 JP): Coverage initiation
Fast Retailing (9983) – Great (Bte) Earnings Now Out of The Way; Anticipating End-July Capping Data
- Yesterday after the close, Fast Retailing (9983 JP) reported salutary Q3 earnings, and raised its full-year (to August) guidance and its final dividend forecast (by ¥50/share)
- Q3 revenue and profit gained sharply (Rev +13.5%, OP +31.2%) everywhere but Greater China. OPMs were up, especially in Japan. Early summer has been good, despite FX impact.
- New guidance is above consensus, the ADR popped, and with slightly stronger yen on US CPI, that should help. But we approach end-July. Expect lots of pop-sellers.
[JAPAN ACTIVISM] Keisei Elec (9009) AGM Result Not Salutary, Tough To Win On This Stance
- A week ago, the Keisei Electric Railway Co (9009 JP) AGM took place. The activist which had proposed a shareholder resolution saw ISS and Glass Lewis support.
- But that was to no avail as the shareholder proposal got 29.89% of the votes, and 26.15% of total voting rights. This likely informs the near-term future of such proposals.
- I expect the ask needs to change, and the agenda item needs to be difficult to be against.
Fast Retailing (9983) | Q3 Masterclass
- Fast Retailing delivered an impressive Q3 report. Sales +10% YoY were +3% above our expectations.
- Big jump in profitability. OP +31% YoY to Y145b driven by +57% jump in Uniqlo Japan earnings. Record consolidated OPM ~19%
- Uniqlo’s performance is leaving global peers in its wake. Profitability now rivalling Inditex. However, valuations remain at a premium
Yoshinoya Holdings (9861 JP): Q1 FY02/25 flash update
- Sales increased by 7.4% YoY to JPY47.5bn, driven by store expansion and effective product and sales strategies.
- Operating profit decreased by 38.6% YoY to JPY880mn, impacted by rising labor and raw material costs.
- Net income attributable to owners of the parent fell by 33.5% YoY to JPY681mn, despite higher sales and price revisions.
Nitto Kogyo Corporation (6651 JP) – 4Q Follow-Up
- NITTO KOGYO Corporation (hereafter, the Company) announced its earnings results for FY2024/3 on May 15, 2024.
- In addition to posting record net sales, the Company recorded profit growth for all three of its segments.
- While the price of raw materials and parts rose, the Company’s gross profit margin improved 1.4 ppt YoY to 26.8%.
Adopting DOE Is Step Forward, but Explanation Needed to Step into Strategic Allocation of Cash Flow
- Since non-cash expenses are added to net profit for many manufacturing companies, cash on hand will not decrease at all if the dividend policy is based on net profit.
- Using DOE as the basis for dividend policy would help improve ROE because it places certain constraints on the expansion of shareholders’ equity.
- However, the challenge for raising ROE is the strategic allocation of excess cash on hand and cash flow to shareholder returns and growth investments to improve profitability.
Softcreate Holdings (3371 JP): Coverage initiation
- In FY03/24, revenue grew 15.1% YoY to JPY27.9bn, operating profit increased 19.6% YoY to JPY5.2bn, recurring profit increased 19.3% YoY to JPY5.4bn, and net income attributable to owners of the parent increased 19.0% YoY to JPY3.3bn.
- In the EC Solutions business, revenue increased 16.7% YoY to JPY15.6bn, and recurring profit rose 17.8% YoY to JPY4.0bn, mainly due to growth in revenue from e-commerce site development and e-commerce cloud services.
- In the IT Solutions business, revenue grew 12.7% YoY to JPY12.5bn and recurring profit rose 8.2% YoY to JPY2.8bn owing to higher revenue from IT cloud services and security and infrastructure construction.
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