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Faculty of Business and Accountancy

CIC2004 Investment
Individual Assignment:
Analyst Report
Prepared by:
Ahmad Haikal bin Ahmad Mochtar CIC160001

Date of Submission
27th September 2017
9843.T Nitori Holdings - BUY
Name: Ahmad Haikal Ahmad Mochtar Market Price: 17,980 JPY
Email: ahmadhaikal96@yahoo.com Target Price: 19,000 JPY
+603 2222 3333
Company Info Investment Highlights:
Board Tokyo
Ticker 9843.T - Nitori Holdings acquired 34% stake in a pre-real
Sector Consumer estate company Katitas Co. Ltd, providing
Shares 111.958
diversification in its earning flow. While trade of
Outstanding
(mil) furniture is still the main source of income for
Market cap 2,013.007 Nitori Holdings, the acquisition of Katitas shows
(bil, JPY) that Nitori Holdings is beginning to diversify its
Majority income sources to mitigate the risk of poor sales in
shareholder economic downturns.
(%)
Nitori Shoji 18.10 - Nitori Holdings’ sales increased by 11% to 282
Nitori Akio 3.37
billion yen from March to August 2017.
Nitori Momoyo 2.69
Nitori 3.50
International - Spending in new furniture spurred by the growth in
Scholarship influx of tourists into Japan. According to report by
Foundation McKinsey, Japan has been experiencing 33%
increase in terms of tourists coming into the country
Source: Bloomberg, Reuters
since 2011. This leads to hotels and accommodation
providers such as AirBnB users purchase new
furniture to accommodate the increasing influx of
Returns Statistics tourists.
Current Price 17,980
(JPY) - Japanese are beginning to spend money,
Expected Price 19,850
encouraging domestic consumption, according to
(JPY)
Reuters. As Japanese consumes more, domestic
Expected Return 10.40
from Share Price economic growth is expected to kick-start in the
(%) country that has long facing trouble in growing its
Expected Return 0.22 economy since the Lost Decade after the real estate
from Dividend bubble.
(%)
Total Expected 10.62
Return Risks:
(%) There may be risks associated with investing in Nitori
Source: Bloomberg, Estimate Holdings. Some of the most common risks are foreign
exchange risk, political and legal risk, business-specific risk
and market risk. However, there may be other risk involved
that is not disclosed in the document. No party is liable for
any losses suffered due to any risk from investing in this
company.

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Key Statistics
Company Earnings
FYE Feb (JPY Billion) 2013 2014 2015 2016 2017 2018(E
)
Revenue 348.8 387.6 417.3 458.1 513.0 570.0
Cost of Goods Sold 156.2 185.9 198.9 214.6 234.7 260.0
Gross Profit 192.6 201.7 218.4 243.5 278.3 310.0
Profit Before Tax 62.7 63.2 67.6 74.6 87.8 91.0
Tax Expense 26.9 24.8 26.1 27.6 27.8 28.3
Profit After Tax 35.8 38.4 41.5 47.0 60.0 62.7
EPS (yen) 319.7 342.98 370.67 419.80 535.9 560.0
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EPS growth (%) - 7.26 8.07 13.25 27.66 4.50
Gross profit margin (%) 55.22 52.04 52.34 53.15 54.25 54.38
Net profit margin (%) 17.98 16.30 16.20 16.28 11.70 11.00
PER 15.6 20.4 28.3 29.8 33.6 33.9
Source: Bloomberg, Reuters, Estimate

Balance Sheet
FYE Feb (JPY Billion) 2013 2014 2015 2016 2017 2018(E
)
Total Cash and 17.6 22.0 26.4 42.3 70.6 63.0
Equivalent
Total Debtors 10.2 11.9 13.1 15.3 18.5 22.4
Inventories 30.7 37.0 44.5 45.4 49.0 52.7
Other Current Assets 14.06 18.10 40.0 26.99 32.08 21.9
Total Current Assets 72.56 89.00 124.00 129.99 170.18 160.00
Fixed Assets 160.5 177.32 210.94 224.84 248.1 292.01
Investments and Other 44.5 45.7 59.4 48.5 55.8 79.1
Non-Current Assets
Intangible Assets 6.73 9.68 10.46 11.21 13.73 13.89
Total Non-Current 211.73 232.70 280.80 284.55 317.63 385.00
Assets
Total Creditors 28.8 29.3 39.1 33.2 36.1 40.1
Other Current Liabilities 26.5 28.6 36.9 34.4 39.6 43.4
Total Current 55.3 57.9 76.0 67.6 75.7 83.5
Liabilities
Long-term Debt 10.2 0.6 0.8 3.1 2.3 10.0
Other Non-Current 9.0 15.3 17.5 12.9 15.0 15.4
Liabilities
Total Non-Current 19.2 15.9 18.3 16.0 17.3 25.4
Liabilities
Total Equity 209.7 247.9 310.5 330.94 394.81 436.10

3
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Source: Bloomberg, Reuters, Estimate

Charts and Analysis


Sector Analysis
Thomson Reuters Japan Cyclical Goods Index

Since 2016, Japan is witnessing a resurgence in cyclical goods industry after declining in 2015.
This is spearheaded by increase in domestic spending. Nitori Holdings is bound to benefit from
the growth of this industry as consumer spends on purchasing new, affordable furniture.

Thomson Reuters Japan Inbound Tourism Index

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As stated in the highlights, Japan is steadily receiving more tourists per year. This will
supplement the growth in furniture suppliers as accommodation providers purchase new
furniture to accommodate their customers and potential tourists. As such, Nitori Holdings stands
to benefit from the growth in tourism industry in Japan.
Technical Analysis

There are two buy signals seen from the graph.


The moving average continues to move beneath the price, which indicates that the share price
may still have the potential to rally up.
The MACD has just shown another bullish crossing. There is a potential for the share price to
rally upwards.

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However, it is recommended to have a stop-loss at 16,872 yen which is the resistance for the
share price.
Analyst Consensus
Buy 3 Nomura, Goldman, Daiwa
Hold 2 Morgan Stanley, Fidelity
Sell 1 Mizuho Securities
Source: Thomson Reuters

Disclaimer
This report is prepared for general circulation. It does not have regard to the specific investment
objectives, financial situation and the particular needs of any recipient hereof. Advice should be
sought from a financial adviser regarding the suitability of the investment product, taking into
account the specific investment objectives, financial situation or particular needs of any person in
receipt of the recommendation, before the person makes a commitment to purchase the
investment product.

The contents in this document is taken from reliable sources, however, its accuracy is not
guaranteed. Readers are fully responsible for any decision made based on the information taken
from this material as there is no guarantee on its completeness, reliability or accuracy of the
information contained within this material.

This report is not an offer to buy or sell any security. The report is developed with numerous
assumptions that may change over time, and the information is subject to change without notice.
Different assumptions could lead to different results.

Recommendation Guide

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Buy The stock price may appreciate more than
10% in 12 months.
Hold The stock price may appreciate up to 10% in
12 months.
Sell The stock price may decline by 10% in 12
months.

References

1. Bloomberg Terminal
2. Thomson Reuters Eikon
3. Nitori Holdings (n.d). Retrieved from: http://www.nitorihd.co.jp/ir/performance/
4. JTB Tourism Research and Consulting Co. (n.d). Retrieved from:
https://www.tourism.jp/en/tourism-database/stats/
5. McKinsey & Co (October 2016). Can Inbound Tourism Fuel Japan’s Economic Growth?
Retrieved from: https://www.mckinsey.com/industries/travel-transport-and-logistics/our-
insights/can-inbound-tourism-fuel-japans-economic-growth

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