Lifting Fast Retailing’s FVE to JPY 53,000 on Stronger Overseas Outlook; Shares Remain Overvalued

Narrow-moat Fast Retailing reported fourth-quarter results beating its own guidance issued back in July. We lift our fair value estimate to JPY 53,000 from JPY 48,000, mainly to reflect a modest lift in sales forecast resulting from stronger overseas expansion. While we are convinced that Uniqlo's cost advantage and intangible assets will sustain group growth, fueled by the potential in Asia, we view Fast Retailing's shares as overvalued, trading at a 40% premium to our fair value estimate, in part because of its low free float and its sizable weight in the Nikkei Index. We would prefer to own the name when it offers a wider margin of safety.