In this briefing:
- Donki’s Big Push into the US Market Led by Current CEO
- Ctrip.com (CTRP): Well Controlled Marketing Expenses Actually Benefit from Weak Advertising Market
- Melco: Big Management Moves, Global Reach and Macau Ramp Produce Solid Entry Point
Pan Pacific International (7532 JP) (PPI)’s CEO Koji Ohara will step down from running domestic operations this month to take up the reins at the company’s North American HQ in California.
The move signals a major push into the USA, with Ohara suggesting that PPI could well buy its way into the market. Many foreign retailers have tried and failed to break into the US market over the past few decades but Donki already has a small foothold and may well have the backing and unique positioning to make a success of this toughest of markets. As in Japan recently, it is likely to seek acquisitions there to build a base quickly.
Ohara leaves the Japan unit having hit the ¥1 trillion target for 2020 more than 12 months early. The domestic business is now the fourth biggest retailer in the country following the Uny acquisition. Despite cautious forecasts, the prospect for high returns from converting Uny stores remains very strong and, given the number of GMS chains in trouble, the possibility of PPI buying other local chains or individual stores remains likely.
With organic growth at home, in Asia and now potentially the US, as well as the prospect of more M&A at home and maybe even in the US, CEO Ohara’s recent suggestion that PPI will emerge as a leading global retailer in the next few years may turn out to be right.
2. Ctrip.com (CTRP): Well Controlled Marketing Expenses Actually Benefit from Weak Advertising Market
- Ctrip (CTRP)’s operating margin continued to improve in 2Q19, mainly due to the YoY decrease in sales and marketing expenses.
- CTRP announced it improved marketing efficiency, but we believe the real reason is CTRP benefits from the weak advertising market.
- We believe there is an upside of 7%.
- Lawrence Ho strengthens c-suite management ranks to liberate focus on global projects.
- 2Q19 produced a record EBITDA OF US$442m up 24%, y/y despite macro headwinds.
- Hong Kong protests, China woes, Australia licensing delay hide bullish fundamentals.