In this briefing:
1. Zozo: Zo Far Zo Bad
Just a day after the publication of a deep dive Smartkarma Originals report (Zozo: A Shooting Star Shooting Itself in the Foot) on ZOZO Inc (3092 JP) by Michael Causton and ourselves, the company announced moderate 3Q results, a 34% downgrade to its current year OP forecast and a cut to its year-end dividend from ¥22 to ¥10, bringing its full year payout down from ¥36 to ¥24.
At the results meeting questions focused on the fallout of Zozo’s new Zozo Arigatou initiative which prompted some brands to discontinue sales on the Zozotown Mall, the reason for such a large downgrade just after the announcement of a very bullish medium-term plan, and even management compensation given such a disappointment.
We feel that the results underscore the issues raised in our previous report and that the stock could remain under pressure in-spite of how far it has already fallen.
2. TRADE IDEA – Toyota Industries (6201 JP): Close the Stub Trade
In my original insight on December 11, 2018 TRADE IDEA – Toyota Industries (6201 JP) Stub: Riding the Automation Wave , I proposed setting up a stub trade to isolate the market leading materials handling and automotive components business of Toyota Industries (6201 JP) that was trading at an unwarranted 35% discount to NAV . During the 56 calendar days that followed, Toyota Industries (6201 JP) has gained an underwhelming 4% and the trade has made 1.96% on the gross notional. This hasn’t exactly been a trade to tell the grand-kids about, more or less a flat result but in this insight I will outline why I think the trade is over.
In this insight I will discuss:
- Performance of ALL my recommended stub trades
- a post-mortem trade analysis on the Toyota Industries stub
- alternative data support for my actions
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