Daily Brief Japan: Fast Retailing, Shift Inc, Tokyo Stock Exchange Tokyo Price Index Topix and more

In today’s briefing:

Fast Retailing: Inflated Earnings Expectations & Stretched Multiples, A Cause for Concern
High Conviction Shift: Margins at Record High with Strict Management and Operational Improvement
A Shortcut to a Solution Is to Specify in Corporate Governance Code the ％ of Women to Be Promoted

Fast Retailing: Inflated Earnings Expectations & Stretched Multiples, A Cause for Concern

Consensus FY+2 EBIT seems inflated by around 16%, driven by optimistic assumptions of recovery in China and growth in North America and Europe.
However, apparel demand in China was lower than expected, while wage hikes and a potential US recession could negatively impact profitability in the short-medium term.
As risks are skewed to the downside, we remain short Fast Retailing (9983 JP) leading up to 2QFY23 results.

Shift Inc (3697 JP) reported 2QFY08/23 results on Monday. Revenue increased 34.7% YoY to ¥21.0bn (vs consensus ¥21.3bn vs guidance ¥21.1bn) while OP grew 74.8% YoY to ¥3.3bn (vs consensus ¥2.4bn).
Both GPM and OPM improved significantly reaching record highs as unprofitable projects came to an end with cost optimisation initiatives removing previous concerns over declined margins in 1QFY08/23.
Shift’s share price closed at ¥25,870 closing 15.8% higher than the previous close at the end of yesterday’s trading following its strong set of earnings.

Although women should be appointed to the board of executive directors to bring women’s perspectives into management, many companies actually only appoint a few women to “non-statutory executive officer” positions.
A survey shows that the percentage of women in management positions is about 10%, and even now there’re no signs of an increase in the number of female management executives.
Companies seem to be reluctant to act on their own to address the obstacles that prevent women from becoming board members as a social issue.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network