Equity Analyst, LightStream Research

Oshadhi Kumarasiri

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Event-Driven

<ul>
<li>The Holdco trade involving <a href="https://www.smartkarma.com/entities/kirin-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:16977:1" rel="noopener">Kirin Holdings (2503 JP)</a>, which we suggested last year has generated over 33% during the last 12 months against Topix’s 3.8% and Nikkei’s 2.6%.</li>
<li>We expect additional gains from this Holdco trade mostly alongside improvements in the core-business EBITDA expectations.</li>
<li>In addition, Kirin is looking outright positive with multiple catalysts assisting Kirin to turn around price performance.</li>
</ul>


The Holdco trade involving Kirin Holdings (2503 JP), which we suggested last year has generated over 33% during the last 12 months against Topix’s 3.8% and Nikkei’s 2.6%.
We expect additional gains from this Holdco trade mostly alongside improvements in the core-business EBITDA expectations.
In addition, Kirin is looking outright positive with multiple catalysts assisting Kirin to turn around price performance.


Kirin: Holdco Trade Has More Room to Run, Also Outright Attractive

Equity Bottom-Up

<ul>
<li>We last wrote on this relatively small Japanese cosmetics company in September 2021 suggesting that it could be worth keeping an eye on given its cheaper valuation compared to peers.</li>
<li>
<a href="https://www.smartkarma.com/entities/premier-anti-aging-co-ltd" target="_blank" data-smartkarma-citation="entities:34292:1" rel="noopener">Premier Anti-Aging (4934 JP)</a> shares are down 80% from the peak, mostly because it was sold-off alongside the low quality names in Mothers.</li>
<li>It seems early to turn outright bullish on Premier Anti-Aging yet. However, if you are short other unprofitable names in Mothers, we think Premier Anti-Aging is a sensible long hedge.</li>
</ul>


We last wrote on this relatively small Japanese cosmetics company in September 2021 suggesting that it could be worth keeping an eye on given its cheaper valuation compared to peers.

Premier Anti-Aging (4934 JP) shares are down 80% from the peak, mostly because it was sold-off alongside the low quality names in Mothers.
It seems early to turn outright bullish on Premier Anti-Aging yet. However, if you are short other unprofitable names in Mothers, we think Premier Anti-Aging is a sensible long hedge.


Premier Anti-Aging Company:  Getting to an Interesting Level

<ul>
<li>With Omicron under control, Japan is expected to relax home quarantine requirements for foreign travellers some time or the other.</li>
<li>Meanwhile, Google Mobility data hints that domestic customers are starting to head back to places like shopping centres, suggesting an improvement in demand conditions.</li>
<li>Based on valuation and the price performance trend, long time underperformer <a href="https://www.smartkarma.com/entities/pola-orbis-holdings-inc" target="_blank" data-smartkarma-citation="entities:2287:1" rel="noopener">Pola Orbis Holdings (4927 JP)</a> seems like the best option to capitalise on the reopening of Japan to foreign tourists.</li>
</ul>


With Omicron under control, Japan is expected to relax home quarantine requirements for foreign travellers some time or the other.
Meanwhile, Google Mobility data hints that domestic customers are starting to head back to places like shopping centres, suggesting an improvement in demand conditions.
Based on valuation and the price performance trend, long time underperformer Pola Orbis Holdings (4927 JP) seems like the best option to capitalise on the reopening of Japan to foreign tourists.


Pola Orbis: Our Preferred Choice Leading up The Reopening of Japan to Foreign Tourists

<ul>
<li>With life getting back to the usual ways following changes due to COVID-19, the Japanese cosmetics sector was expected to experience an uplift in earnings, mainly through inbound demand.</li>
<li>However, the extension of China’s common prosperity crackdowns to the live-streaming e-commerce business, could more than offset a possible recovery in inbound demand.</li>
<li>Thus, we fear that there is additional downside risk to Japanese cosmetics multiples in the short term.</li>
</ul>


With life getting back to the usual ways following changes due to COVID-19, the Japanese cosmetics sector was expected to experience an uplift in earnings, mainly through inbound demand.
However, the extension of China’s common prosperity crackdowns to the live-streaming e-commerce business, could more than offset a possible recovery in inbound demand.
Thus, we fear that there is additional downside risk to Japanese cosmetics multiples in the short term.


Crackdown on Live-Streaming E-Commerce Could Derail The Recovery of Japanese Cosmetics

<ul>
<li>
<a href="https://www.smartkarma.com/entities/kirin-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:16977:1" rel="noopener">Kirin Holdings (2503 JP)</a>’s NAV discount has narrowed from around 30% in July 2021 to 17% by November 2021.</li>
<li>Institutional investors have started to increase their ownership of Kirin after trimming their stakes during the first half of the year.</li>
<li>We think that NAV discount will continue to narrow over the next few months as institutional investors come back to own Kirin following the issues with the Myanmar business.</li>
</ul>



Kirin Holdings (2503 JP)’s NAV discount has narrowed from around 30% in July 2021 to 17% by November 2021.
Institutional investors have started to increase their ownership of Kirin after trimming their stakes during the first half of the year.
We think that NAV discount will continue to narrow over the next few months as institutional investors come back to own Kirin following the issues with the Myanmar business.


Kirin: Holdco Discount Is Starting to Unwind Alongside The Return of Institutional Investors

Japan

FANCL CORPORATION produces and sells additive-free skin care cosmetics for both women and men.  The Company's products include cleansing creams, hair care goods such as shampoos and conditioners, and facial make up products.  Fancl also makes and distributes dietary supplements including royal jelly and various tablets with extracted essence from mushrooms, garlic, ginseng, and soy beans.

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Fancl Corp (4921 JP)

Kirin: Holdco Trade Has More Room to Run, Also Outright Attractive

Almost 12 months down the line, our Holdco trade involving Kirin has given us a return of around 33.3% against Topix’s 3.8% and Nikkei’s 2.6%...

Oshadhi Kumarasiri

Premier Anti-Aging Company: Getting to an Interesting Level

Premier Anti-Aging’s current multiple is around 27% below the sector’s cyclical low multiple suggesting that there could be significant upside...

Oshadhi Kumarasiri

Pola Orbis: Our Preferred Choice Leading up The Reopening of Japan to Foreign Tourists

Based on valuation and the price performance trend, long time underperformer Pola Orbis seems like the best option to capitalise on the reopening...

Oshadhi Kumarasiri

Crackdown on Live-Streaming E-Commerce Could Derail The Recovery of Japanese Cosmetics

Valuation multiples of Japanese cosmetics makers more than doubled during the last 6-7 years alongside the growth driven by the China expansion and...

Oshadhi Kumarasiri

Kirin: Holdco Discount Is Starting to Unwind Alongside The Return of Institutional Investors

Even though Kirin's listed holdings have gained more than 200% since 2019, Kirin's share price has failed to reflect that significant increase in...

Oshadhi Kumarasiri

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