Analyst

Steve

Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/l-oreal-sa" target="_blank" data-smartkarma-citation="entities:21521:1" rel="noopener">L'Oreal SA (OR FP)</a> is the largest beauty company in the world, with a 15% global market share.  The second place in contrast has only around 5% market share. </li>
<li>The company has been excellently managed, and out-performed the overall global beauty industry growth by an average of 5% over the last 3 years.  However, growth could be slowing down.</li>
<li>L'Oreal is now trading at 34x forward PE, which is a near 100% premium over the average of European consumer staples, and near a multi-decade high. </li>
</ul>



L'Oreal SA (OR FP) is the largest beauty company in the world, with a 15% global market share.  The second place in contrast has only around 5% market share. 
The company has been excellently managed, and out-performed the overall global beauty industry growth by an average of 5% over the last 3 years.  However, growth could be slowing down.
L'Oreal is now trading at 34x forward PE, which is a near 100% premium over the average of European consumer staples, and near a multi-decade high. 


<ul>
<li>
<a href="https://www.smartkarma.com/entities/shiseido-co-ltd" target="_blank" data-smartkarma-citation="entities:5718:1" rel="noopener">Shiseido Company (4911 JP)</a> relies heavily on Japan and China, each making up over one quarter of sales. </li>
<li>The long thesis is simple - I expect improvement in both regions in the near future, and the valuation is very attractive.</li>
<li>Blackstone just announced a potential bid for <a href="https://www.smartkarma.com/entities/l-occitane-international-sa" target="_blank" data-smartkarma-citation="entities:6772:1" rel="noopener">L'Occitane (973 HK)</a>, which I have written extensively about.  We could potentially see a pickup in interest in the sector.</li>
</ul>



Shiseido Company (4911 JP) relies heavily on Japan and China, each making up over one quarter of sales. 
The long thesis is simple - I expect improvement in both regions in the near future, and the valuation is very attractive.
Blackstone just announced a potential bid for L'Occitane (973 HK), which I have written extensively about.  We could potentially see a pickup in interest in the sector.


Shiseido (4911 JP):  This Fallen Angel Is Fixable

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.

Mandarin Oriental International / Equity Bottom-Up

Mandarin Oriental International (MAND SP)

<ul>
<li>This update builds upon our initial report on the APAC Luxury Industry, in which we expressed our belief that potential opportunities lie within the small niches of the luxury sector.</li>
<li>While the share price performance hasn't met our expectations, the broader trend we highlighted, Luxury Travel and Tourism, has shown robust growth.</li>
<li>Even though travel flows have returned to pre-pandemic levels, Shiseido has not yet regained its pre-pandemic performance, however the two hotels are already operating at levels close to 2019 levels.</li>
</ul>


This update builds upon our initial report on the APAC Luxury Industry, in which we expressed our belief that potential opportunities lie within the small niches of the luxury sector.
While the share price performance hasn't met our expectations, the broader trend we highlighted, Luxury Travel and Tourism, has shown robust growth.
Even though travel flows have returned to pre-pandemic levels, Shiseido has not yet regained its pre-pandemic performance, however the two hotels are already operating at levels close to 2019 levels.


L'Occitane International / Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/l-occitane-international-sa" target="_blank" data-smartkarma-citation="entities:6772:1" rel="noopener">L'Occitane (973 HK)</a> announced after market close yesterday that the controlling shareholder has terminated the potential general offer. </li>
<li>Shares trade at a significant discount to global cosmetics peers and its own historical trading range, while brands' growth momentum remain intact. </li>
<li>Take advantage of any potential significant sell-down caused by the drop of the privatization attempt. </li>
</ul>



L'Occitane (973 HK) announced after market close yesterday that the controlling shareholder has terminated the potential general offer. 
Shares trade at a significant discount to global cosmetics peers and its own historical trading range, while brands' growth momentum remain intact. 
Take advantage of any potential significant sell-down caused by the drop of the privatization attempt. 


L'Occitane (973 HK):  Underlying Fundamentals Intact

<ul>
<li>Despite expected increased demand from returning Asian tourists, Japanese cosmetics companies have been hesitant to revise their 2H 2023 inbound demand projections.</li>
<li>We are long <a href="https://www.smartkarma.com/entities/kose-corp" target="_blank" data-smartkarma-citation="entities:18009:1" rel="noopener">Kose Corp (4922 JP)</a>, <a href="https://www.smartkarma.com/entities/shiseido-co-ltd" target="_blank" data-smartkarma-citation="entities:5718:1" rel="noopener">Shiseido Company (4911 JP)</a>, and <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>, as consensus estimates look extra cautious and reasonable and appealing FY+2 valuation multiples.</li>
<li>We view the risk of Chinese consumers boycotting Japanese cosmetics due to Fukushima wastewater release as relatively low.</li>
</ul>


Despite expected increased demand from returning Asian tourists, Japanese cosmetics companies have been hesitant to revise their 2H 2023 inbound demand projections.
We are long Kose Corp (4922 JP), Shiseido Company (4911 JP), and Pola Orbis Holdings (4927 JP), as consensus estimates look extra cautious and reasonable and appealing FY+2 valuation multiples.
We view the risk of Chinese consumers boycotting Japanese cosmetics due to Fukushima wastewater release as relatively low.


Japanese Cosmetics Ready to Blossom with Asian Visitors

Japan

Shiseido Company, Limited manufactures cosmetic and toiletry products. The Company offers an array of makeup and skin-care products, toiletries, beauty salon, pharmaceuticals, foodstuffs, and fine chemicals.

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Shiseido Company (4911 JP)

Pair Trade: L'Oreal / Shiseido

L'Oreal's share price declined by 7.6% on Feb. 9, due to a miss on 4Q23 sales (up 6.9% yoy vs. consensus of +9.5% yoy). This is in line with my...

Steve

Shiseido (4911 JP): This Fallen Angel Is Fixable

Shiseido heavily relies on Japan and China for sales, and with expected improvements in these regions, the company's attractive valuation makes it...

Steve

APAC Luxury Industry Series: Update

Despite the underperformance of share prices, the luxury travel and tourism sector has experienced strong growth, while Shiseido is still...

Oshadhi Kumarasiri

L'Occitane (973 HK): Underlying Fundamentals Intact

L'Occitane (973 HK)'s controlling shareholder terminates potential privatization offer, but the company's growth prospects remain strong. Take...

Steve

Japanese Cosmetics Ready to Blossom with Asian Visitors

Japanese cosmetics companies were hesitant to revise their inbound demand projections despite expected increased demand from returning Asian...

Oshadhi Kumarasiri

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Pair Trade: L'Oreal / Shiseido

L'Oreal's share price declined by 7.6% on Feb. 9, due to a miss on 4Q23 sales (up 6.9% yoy vs. consensus of +9.5% yoy). This is in line with my...

Steve

Shiseido (4911 JP): This Fallen Angel Is Fixable

​Shiseido heavily relies on Japan and China for sales, and with expected improvements in these regions, the company's attractive valuation makes it...

Steve

APAC Luxury Industry Series: Update

​Despite the underperformance of share prices, the luxury travel and tourism sector has experienced strong growth, while Shiseido is still...

Oshadhi Kumarasiri

L'Occitane (973 HK): Underlying Fundamentals Intact

​L'Occitane (973 HK)'s controlling shareholder terminates potential privatization offer, but the company's growth prospects remain strong. Take...

Steve

Japanese Cosmetics Ready to Blossom with Asian Visitors

​Japanese cosmetics companies were hesitant to revise their inbound demand projections despite expected increased demand from returning Asian...

Oshadhi Kumarasiri

Shiseido heavily relies on Japan and China for sales, and with expected improvements in these regions, the company's attractive valuation makes it...

Despite the underperformance of share prices, the luxury travel and tourism sector has experienced strong growth, while Shiseido is still...

L'Occitane (973 HK)'s controlling shareholder terminates potential privatization offer, but the company's growth prospects remain strong. Take...

Japanese cosmetics companies were hesitant to revise their inbound demand projections despite expected increased demand from returning Asian...