The main target of inbound Japan - Kyoritsu Maintenance, what is its investment value?
In 2023, Japan's tourism industry is regaining its vitality. After a few years of stagnation due to the new coronavirus, the tourism demand has risen again, with the added impact of a weak yen attracting many international tourists, especially from Europe and the US. They are eager to enjoy foreign cultures and are heading to Japan's nature, cities, cultural heritage, and shopping districts.
I have high expectations for the growth of Japan's inbound market, but not every industry can benefit equally. After analyzing the current situation, I have decided to focus particularly on hotels and restaurants among the key areas related to the tourism industry. Instead of being swayed by short-term market fluctuations, I will focus on investment targets that can provide sustainable profits.
I have high expectations for the growth of Japan's inbound market, but not every industry can benefit equally. After analyzing the current situation, I have decided to focus particularly on hotels and restaurants among the key areas related to the tourism industry. Instead of being swayed by short-term market fluctuations, I will focus on investment targets that can provide sustainable profits.
Industry analysis and investment selection
Retail, airlines, transportation: cautious outlook for growth
The increase in inbound demand has revitalized the flow of people, leading to a sharp rise in demand for hotels, restaurants, and shopping facilities. However, not all sectors can expect sustainable growth.
The retail industry is thriving, but the competition is fierce, and consumer demand driven by tourists may be short-term. In particular, purchases of luxury goods and electronic equipment remain temporary consumption trends, unsuitable for long-term investments.
The aviation industry is also cautious. While the passenger load factor is indeed recovering, domestic business travel purposes remain lackluster, and the signs of recovery are limited due to the proliferation of online meetings. Furthermore, not all foreign visitors to Japan necessarily use Japanese airlines, as they also utilize low-cost airlines and airlines from other countries. Additionally, the instability of fuel prices and exchange rates are significant risk factors.
In the transportation industry, the focus is on the Tokaido Shinkansen operated by JR Tokai, which connects Tokyo and Osaka. This route connects the two most prosperous cities in Japan and is a crucial transportation method for many tourists, but there are no particularly noticeable investment opportunities in other transportation-related fields.
Core investment opportunities in the hotel industry
Amidst the recovery of the inbound market, the hotel industry is an area of particular focus. Despite a decrease in supply due to the pandemic, tourism demand has sharply increased. Currently, in tourist destinations like Tokyo and Osaka, hotel rates have skyrocketed, and occupancy rates are nearly full.
The company being especially focused on $Kyoritsu Maintenance (9616.JP)$ is particularly worth noting. With a diversified business expansion and a stable financial foundation, this company is highly competitive and stands out in the lodging industry. The 'Dormy Inn' brand of business hotels is popular among business travelers and short-term tourists, offering services like hot spring inns to cater to a wide range of tourist needs.
The increase in inbound demand has revitalized the flow of people, leading to a sharp rise in demand for hotels, restaurants, and shopping facilities. However, not all sectors can expect sustainable growth.
The retail industry is thriving, but the competition is fierce, and consumer demand driven by tourists may be short-term. In particular, purchases of luxury goods and electronic equipment remain temporary consumption trends, unsuitable for long-term investments.
The aviation industry is also cautious. While the passenger load factor is indeed recovering, domestic business travel purposes remain lackluster, and the signs of recovery are limited due to the proliferation of online meetings. Furthermore, not all foreign visitors to Japan necessarily use Japanese airlines, as they also utilize low-cost airlines and airlines from other countries. Additionally, the instability of fuel prices and exchange rates are significant risk factors.
In the transportation industry, the focus is on the Tokaido Shinkansen operated by JR Tokai, which connects Tokyo and Osaka. This route connects the two most prosperous cities in Japan and is a crucial transportation method for many tourists, but there are no particularly noticeable investment opportunities in other transportation-related fields.
Core investment opportunities in the hotel industry
Amidst the recovery of the inbound market, the hotel industry is an area of particular focus. Despite a decrease in supply due to the pandemic, tourism demand has sharply increased. Currently, in tourist destinations like Tokyo and Osaka, hotel rates have skyrocketed, and occupancy rates are nearly full.
The company being especially focused on $Kyoritsu Maintenance (9616.JP)$ is particularly worth noting. With a diversified business expansion and a stable financial foundation, this company is highly competitive and stands out in the lodging industry. The 'Dormy Inn' brand of business hotels is popular among business travelers and short-term tourists, offering services like hot spring inns to cater to a wide range of tourist needs.
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Kyoritsu Maintenance's business model includes not only hotel operations but also the management of student dormitories, ensuring a diverse revenue stream. This leads to risk diversification and expected stable income. From financial statements, it can be confirmed that the company has maintained thorough cost management and stable cash flow even during the pandemic. The current recovery in the tourism industry further enhances growth potential.
Currently, Kyoritsu Maintenance's price-earnings ratio (PE ratio) is below the industry average, indicating that its growth potential is not fully recognized in the market. Considering the stable management, diversified revenue structure, and long-term growth prospects supported by inbound demand, we have decided to hold Kyoritsu Maintenance as a core position for the long term. We believe it is the most attractive investment in the hotel industry.
Currently, Kyoritsu Maintenance's price-earnings ratio (PE ratio) is below the industry average, indicating that its growth potential is not fully recognized in the market. Considering the stable management, diversified revenue structure, and long-term growth prospects supported by inbound demand, we have decided to hold Kyoritsu Maintenance as a core position for the long term. We believe it is the most attractive investment in the hotel industry.
Observation and Potential of the Food and Beverage Industry
The increase in inbound demand is also expected to have a positive impact on the food and beverage industry. However, we are cautious about the food and beverage industry. While the increase in consumption by tourists is a positive factor, amid the progression of domestic inflation in Japan, there is a possibility that the rising food prices may squeeze the profit margins of the food and beverage industry.
The increase in the cost of imported food ingredients is considered to be the main cause of price increases, and it is believed that many restaurants have limited ability to pass on these costs. If the environment of high prices continues in the long term, there are concerns about a decline in domestic demand, which could also increase the burden on Japanese consumers. Therefore, there are many unclear factors in the growth outlook of the food and beverage industry.
At present, we are observing the food and beverage industry. In the future, if inflation eases and the risk of cost increases is reduced, we intend to reassess the investment value of the food and beverage industry. While there is potential for growth in the food and beverage industry, at this stage, we plan to wait for further clear signals before taking any action.
Outlook on the Japanese economy and investment strategy.
The depreciation of the yen is having a positive impact on the inbound market, but at the same time, it is also increasing inflation risks. Signs of moving away from deflation, which has persisted for a long time, can be seen, with the rising prices of imported goods pushing up living costs. This trend of inflation also affects the policies of the Bank of Japan, and if inflation reaches uncontrollable levels, the BOJ will have to consider raising interest rates.
If interest rates are raised, the cost of capital will increase, creating a challenging environment especially for capital-intensive industries such as hotels and service sector. However, if the tourism industry continues to recover, we believe there is still room for growth in the hotel industry.
Overall, I have selected Komatsu Maintenance (9616) as a core position. Even if the macroeconomic environment fluctuates, the hotel industry, which is directly influenced by inbound demand, can expect stable growth. Komatsu Maintenance is expected to provide stable returns by flexibly responding to market changes through its diversified business operations.
Summary of the investment: A calm and stable strategy.
With the revival of the inbound market, I am observing calmly and acting cautiously. Kori Maintenance is my core position, and its multifaceted business and solid financial position make it a very attractive option in the current market. Limited opportunities are expected in the retail and airline industries, so they are currently not part of my strategy.
I will continue to pay attention to changes in Japan's macroeconomy, while maintaining flexibility in my investment strategy by closely monitoring the yen exchange rate, inflation rate, and BOJ policy changes. Japan's tourism industry is in the process of revival, and this is a long-term battle. With a clear investment logic and prudent decisions, I will seek growth opportunities and avoid unnecessary risks.
Summary of the investment: A calm and stable strategy.
With the revival of the inbound market, I am observing calmly and acting cautiously. Kori Maintenance is my core position, and its multifaceted business and solid financial position make it a very attractive option in the current market. Limited opportunities are expected in the retail and airline industries, so they are currently not part of my strategy.
I will continue to pay attention to changes in Japan's macroeconomy, while maintaining flexibility in my investment strategy by closely monitoring the yen exchange rate, inflation rate, and BOJ policy changes. Japan's tourism industry is in the process of revival, and this is a long-term battle. With a clear investment logic and prudent decisions, I will seek growth opportunities and avoid unnecessary risks.
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三田Santa OP : There are many other excellent companies in the hotel industry, but not many are listed on the stock market. Therefore, the reason for choosing this stock is that the stock price is relatively affordable and I wanted to choose the best option among the limited choices.