Brief Japan: Japanese Convenience Stores: Shorter Hours and more

In this briefing:

1. Japanese Convenience Stores: Shorter Hours
2. Hankyu Invests ¥1.75 Billion in Hankyu Men’s Tokyo
3. Uniqlo Japan’s Most Valuable Retail Brand
4. After Zozo: Onward Sets Sights on Digital Renaissance
5. Japan Stock Weekly

1. Japanese Convenience Stores: Shorter Hours

Today almost all the 50,000 stores run by the big three convenience store chains operate 24-hours a day, but franchise owners everywhere are struggling to find enough staff.

Last month, the owners’ union of the biggest chain, Seven Eleven, issued a demand that each store be allowed to set its own hours.

This move has implications for a retail industry struggling with labour shortages and higher part-time wages.

2. Hankyu Invests ¥1.75 Billion in Hankyu Men’s Tokyo

Hankyu Hanshin has outperformed the department store sector in the last few years and continues to invest to lock in its dominance of the Osaka market.

It is now about to unveil a major new update to its Tokyo store, creating a more luxurious Men’s Emporium.

The investment is an example of how the better department stores are repositioning individual buildings to better meet target market needs and find relevance in an e-commerce age.

3. Uniqlo Japan’s Most Valuable Retail Brand

Interbrand’s annual valuation of top brands saw growing numbers of Japanese firms in retail and FMCG (Fast Moving Consumer Goods) enter its global brand ranking.

At home, online companies like Zozo and Mercari are also climbing the rankings.

4. After Zozo: Onward Sets Sights on Digital Renaissance

Onward Holdings (8016 JP) made a bold stand against price discounts in January when it announced plans to stop selling on ZOZO (3092 JP) but the timing was not ideal as Onward lowered its FY2018 sales guidance shortly thereafter..

With Zozo no longer a partner, Onward is investing in the growth of its own e-commerce business and has installed a new 50-person digital strategy group to make this happen.

If the plan works, Onward could finally break away from its dependence on the contracting department store apparel market but the journey to reach this goal will be a long one.

5. Japan Stock Weekly

Takamatsu Construction (1762)

It is possible that 3/19 results may fall a bit short of estimates but next year will see a decent bounce in earnings given the good orders currently being seen. The shares are very cheap on 2x 3/20 EV/ebitda so we do not see much down side risk here, but any such weakness should be views as a great buying opportunity. This is a well-run and conservative business in an otherwise often poorly run sector. Eventually there must also be the possibility of a higher payout ratio. In our view, however, this is later rather than soon but must come. A decent long term buy in the construction space.

Fujitec (6406)

The shares are cheap. The company is cash rich and owns 10% in treasury stock; it owned more last year but has cancelled 4%. It has some Y6bn in long term investment. EV in our view is Y57bn vs the current market cap of Y110bn. With ebitda next year coming in at Y15bn, EV/ebitda is under 4x. The shares yield 3.4% and trade at book. They have slightly underperformed the market over the last 12 months. For now, we view this as a defensive buy. There remain many issues longer term as to its place in the global elevator world. A potential positive, however, is that in May the company will announce a new mid-term plan and in it, they will outline their view as regards to shareholder returns for the next three years. They are aware that they are very over capitalised, so greater returns are a real possibility.

Prored (7034) 

Good, first quarter results and in our view, an upward to come.