Uny’s Healthy Growth and Reduced Cost Burden Likely to Lift PPIH’s Profits; Raising FVE to JPY 1,750

We are raising our fair value estimate of narrow-moat Pan Pacific International, or PPIH, to JPY 1,750 from JPY 1,625 to reflect an improved profit outlook for Uny, the acquired general merchandize store chain. Uny’s same-store sales have outperformed those of its peers and Don Quijote stores post-tax hikes, trending at 0.5% decline during the October quarter compared with a more than 3% decline of peers and 4% decline of Don Quijote (discount format). Moreover, a sizable drop in personnel costs might help lift profits. We thus raised our earnings projection by 2%-4% for the explicit forecast period and stage-two EBI growth to 3.3% from 3%.