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.

Equity Bottom-Up

<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>
<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>’s share price is up more than 6% today following the yesterday’s strong Q4 results with 2021 EBITDA surpassing the November 2021 guidance by ¥17.6bn (11.3%).</li>
<li>The China business is still not completely out of the woods, although the like for like growth rate accelerated from 2.0% YoY in 3Q21 to 7.0% by 4Q21.</li>
<li>Nonetheless, strong performance across skin and beauty care in all regions suggests that the company is on track to become the world’s number 1 skin and beauty care brand.</li>
</ul>



Shiseido Company (4911 JP)’s share price is up more than 6% today following the yesterday’s strong Q4 results with 2021 EBITDA surpassing the November 2021 guidance by ¥17.6bn (11.3%).
The China business is still not completely out of the woods, although the like for like growth rate accelerated from 2.0% YoY in 3Q21 to 7.0% by 4Q21.
Nonetheless, strong performance across skin and beauty care in all regions suggests that the company is on track to become the world’s number 1 skin and beauty care brand.


Shiseido: China Is Still a Question Mark But The Rest of The Business Deserves Plaudits

<ul>
<li>Considering the geopolitical relationship over the last 100 years, it doesn’t take much for Chinese people to start developing an anti-Japan sentiment.</li>
<li>The relationship between the two countries was already reaching nervy levels, before Tokyo’s decision to snub the 2022 Winter Olympics.</li>
<li>We think the Japanese government’s decision to not send a government delegation to the Winter Olympics could be all that is needed to spark an anti-Japan sentiment among Chinese consumers.</li>
</ul>


Considering the geopolitical relationship over the last 100 years, it doesn’t take much for Chinese people to start developing an anti-Japan sentiment.
The relationship between the two countries was already reaching nervy levels, before Tokyo’s decision to snub the 2022 Winter Olympics.
We think the Japanese government’s decision to not send a government delegation to the Winter Olympics could be all that is needed to spark an anti-Japan sentiment among Chinese consumers.


Japan’s Boycott of Winter Olympics Could Be the Tipping Point

<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/shiseido-co-ltd" target="_blank" data-smartkarma-citation="entities:5718:1" rel="noopener">Shiseido Company (4911 JP)</a>’s share price fell as much as 5% in early trading today after delivering weaker than expected 3Q21 results on 10th November 2021.</li>
<li>Despite the weak performance in the third quarter, Shiseido increased its 2021 OP guidance by ¥5.0bn to ¥32.0bn.</li>
<li>There's upside potential to earnings and current multiples are also towards the low side. However, risks rewards are not that great with a possible slowdown in the Chinese cosmetics market.</li>
</ul>



Shiseido Company (4911 JP)’s share price fell as much as 5% in early trading today after delivering weaker than expected 3Q21 results on 10th November 2021.
Despite the weak performance in the third quarter, Shiseido increased its 2021 OP guidance by ¥5.0bn to ¥32.0bn.
There's upside potential to earnings and current multiples are also towards the low side. However, risks rewards are not that great with a possible slowdown in the Chinese cosmetics market.


Shiseido: There’s Upside to Consensus Estimates But China Slowdown Is a Too Big of a Risk

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)

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

Shiseido: China Is Still a Question Mark But The Rest of The Business Deserves Plaudits

The strong performance across skin and beauty care categories in all regions suggests that Shiseido could be on track to become the world’s number...

Oshadhi Kumarasiri

Japan’s Boycott of Winter Olympics Could Be the Tipping Point

The relationship between the two countries was already reaching nervy levels, before Tokyo’s decision to snub the 2022 Winter Olympics. With the...

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

Shiseido: There’s Upside to Consensus Estimates But China Slowdown Is a Too Big of a Risk

Even though the valuation multiples are currently towards the low side, we think risks rewards are not that enticing as the China slowdown risk...

Oshadhi Kumarasiri

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