PPHI Revising up Guidance on Better-than-Expected Last-Minute Demand and Campaign Effects

Narrow-moat Pan Pacific International Holdings (PPIH, previous Donki) got off to a good start in fiscal 2020 ending in June with a 46% growth in operating profits (13% excluding impacts of Uny acquisition). Thanks to better-than-expected performance of its discount store businesses (Donki), management has revised up the full-year profit guidance by 3%. The revised profit target is now a touch above our forecasts. In the past, management tended to guide conservatively and revise up profits quarter by quarter. However, it failed to do so after sales to foreign tourists slowed down and the acquisition of Uny increased difficulty to control profits, in our opinion. We have made no change in our forecasts and our fair value estimate of JPY 1,625.