istyle (3660) - Looking Pretty
2017 was a bumpy ride for istyle. The stock had reached a one-year high at ¥1,070 on May 12, 2017 before plummeting to ¥620 on Sept 8, 2017. It closed the year at ¥880, for a modest 5.9% YoY increase. The share price movements reflected the market’s uncertainty about the company’s implementation of new initiatives as it strives to achieve ¥7bil in OP on ¥50bil in sales in FY20.
More than a year has passed since the August 3, 2016 announcement of a new mid-term plan, “Road to 2020”. We think the company is progressing well. It looks on track to achieve a CAGR of over 30% in revenue and a CAGR of over 50% in OP over the FY17~FY20 period, with OPM exceeding 10% in FY20.
An unrivalled position in the domestic market and strong brand recognition of @cosme should provide great support for the company’s expansion into other beauty-related businesses. @cosme is also attracting consumers in other Asian markets, where there is growing interest in Japanese culture and products. We do not find valuations demanding, given istyle’s growth and profitability improvement prospects.
istyle Inc. is engaged in the operation of cosmetics portal Website under the name @cosme. The Company operates in four segments. The On Platform segment includes marketing business in Japan and overseas, service for premium members. The Beauty Service segment includes the operation of cosmetics e-commerce (EC) sites in Japan and the operation of the cosmetics specialty store. The Global segment includes services developed outside Japan. The Others segment includes the temporary staffing business, which dispatches beauty salon staff, and the investment development business, which invests in companies with a wide range of growth stages, including companies that have not been established.
Founded in 2009, Pelham Smithers Associates (PSA) provides market intelligence on Asian technology, focusing in particular on Japan. The industries covered by our team of specialists are: consumer electronics, telecomms, pharmaceuticals, internet, electronic parts and materials, automotive technology, retail and capital goods.
PSA produces both company and sector reports. The focus of PSA’s research is to identify winners and losers as new technologies impact the top and bottom lines of corporations. Critical to our research is the clear explanation of how these new technologies work and how they impact companies and industries.
The founding partners have worked closely together for twenty years and the team has more than doubled in size since 2012.
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