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A-rated PM: why we’re keeping an eye on IPOs

A-rated PM: why we’re keeping an eye on IPOs

Many investors positioned in companies either on the cusp or having just executed an IPO, have been burnt in recent months.

A case in point is Snap, which recently announced an overhaul of its social media platform, just nine months after its original IPO. It transpires that analysts overestimated new user numbers and the company’s shares have continued to fall.

But this uncertainty hasn’t fazed Sumi Trust’s Satoshi Marui, who has 2.01% of his Japan Small Cap fund allocated to DIY company, Lixil Viva, which only entered the stock market back in April this year.

‘Lixil Viva Corporation operates DIY stores in Japan, selling a number of different products aimed at homeowners, from household and garden items, interior decor and furniture, through to electronics and office products.

'It also supplies businesses with items such as tools, hardware, plumbing products, working wear, lumber and flooring products, millwork, building materials, and kitchen and bath products.

‘We thoroughly researched the company and added it to our portfolio in June 2017 following its successful IPO two months earlier. Since then, we have maintained our allocation in the portfolio.’

Marui is capturing the growth in Japan’s young professionals with this contrarian bet, but said one of the main reasons for investing in the company was due to its client-focused sales strategy.

‘Its stores are mostly located around the Tokyo Metropolitan Area, one of the company’s strengths is providing renovation-related materials and they employ qualified architects to handle professional clients.

'Although home centres and furniture stores in general face difficulties domestically due to excessive competition, we believe this company’s sales will continue to grow.’

Olympic game plan

Marui said this position is also a play on Tokyo’s 2020 Olympic Games. ‘We expect to see an increased demand for new and refurbished retail and food service stores, driven by the 2020 Tokyo Olympic Games.

‘Lixil Viva’s shops, aimed at businesses and professionals will be a beneficiary of this trend. Also, in addition to building materials, its stores stock professional cooking utensils such as knives, pots, frying pans and bowls which enable the stores to expand their client base from constructors to professional chefs.’

This article originally appeared in the December edition of the Citywire Selector magazine.

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