Thursday, October 15, 2015

Analysis of Fast Retailing


Fast Retailing, a Japanese retail and fashion group

Company: Fast Retailing

ISIN JP3802300008 | WKN 891638

Business: A Japanese retail group. They stand on a couple of brand pillars: UNIQLO (their largest brand with 1485 stores of which 852 are in Japan and 374 in China. high quality at reasonable prices), GU (319 stores offer low price fashion), Theory (501 stores offering fashion for the contemporary woman, launched in New York), COMPTOIR DES COTONNIERS (376 stores, French origin offering fashion for women), PRINCESSE tam·tam (150 stores also French origin offering "lingerie made by women for women"), PLST (a brand that belongs to and is being sold in the Theory stores) & finally J BRAND (4 stores, Californian origin offering fashion denim). My interest was aroused due to an UNIQLO store that appeared in Berlin.

Active: Highly brand based but with their biggest one Uniqlo they are present in Japan, China, Hong Kong, Taiwan, South Korea, Singapore, Malaysia, Thailand, Philippines, Indonesia, Australia, USA, UK, France, Germany, Russia and in Belgium. 

P/E: 40.8 (this one really makes me fall off my chair!)


contrarian values of P/E, P/B, ROE as well as dividend for Fast Retailing

The P/E of Fast Retailing is insane high with 40.8 and the P/B is a nightmare with 7.4 which gives a very, very clear no go from Graham. Their earnings to sales I find low with only 7% and this they must work on improving. The ROE is however very good with 18%. The book to debt ratio is also excellent with 1.7.
In the last five years they have grown their yearly revenue by 15.4% which is insane and this then gives us a motivated P/E of 36 to 40 which means that Fast Retailing is only a little overvalued by the market today.
They pay a symbolic dividend in the size of 0.9% which still correspond to 36% of their earnings so they better keep pushing that revenue and those earnings!

Conclusion: Graham says no to Fast Retailing and I say why not. The P/E and P/B are horribly high, the ROE is excellent and it is not debt leveraged so that is fine. The dividends are also useless but the growth, the growth has value to me and is the most important reason for why I say why not.

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1 comment:

Fredrik von Oberhausen said...

Next time you come to Berlin then make sure to visit UNIQLO, TK Maxx and Primark!