Financial Analysis of KOSE Corp and Shiseido Co Ltd

This presentation provides a financial analysis of KOSE Corp and Shiseido Co Ltd, two leading Japanese companies in the personal care products sector. It includes an industry overview, company overview, approach and methodology, disclosure, corporate governance, forecasts and potential investment strategies, business analysis, profitability ratios, efficiency ratios, solvency ratio, liquidity ratio, trend analysis, Altman Z score, review of developments, summary, and recommendations.

Financial Analysis

Porter five force analysis of personal care products sector:
Bargaining power of buyers:
High
Bargaining power of suppliers:
Low
Threat of substitutes: High Threat from new entrants: Low
Competition intensity: High
Industry overview

KOSE Corp
 KOSE Corporation is one of the leading Japanese
company which operates at global level.
 It offers personal care products to the customers such
as cosmetic, skin and hair care.
 Further, to assess the financial position and
performance of KOSE in against to the competitor
Shiseido has been considered.
Company overview

Shiseido Co Ltd
 Shiseido is known as the producer of quality skin and
hair care, cosmetic and fragrance related products.
 Such Japanese company has secured first position in
Japan and fifth in the world.
 Both the companies which are undertaken for the study
listed on and traded through Tokyo stock exchange.
CONTD..

 With the motive to evaluate financial results of KOSE over the
rival firm such as Shiseido Co Ltd data has been gathered
through the annual reports of such companies.
 Hence, by accessing income statement and balance sheet of
KOSE as well as Shiseido, pertaining to 5 years from 2012 to
2016, data has been gathered.
 Along with this, to present the better view of issue latest
economic developments and company’s latest announcements as
well as forecasts have also been evaluated. Hence, main source
of information considered for the present study are as follows:
Annual reports of KOSE and Shiseido
Journals and articles related personal care sector
Approach and methodology

 On 4th March 2014, KOSE announced that it has signed
agreement in relation to acquiring 14856 shares.
 This aspect shows that KOSE stake in Tarte accounts for
93.5% respectively whose value is JPY135 significantly.
Review of auditor’s report
 Auditor’s report of KOSE Corp shows that financial
statements of the concerned organization are free from
errors.
 Besides this, auditors entailed in their report that company
has made fair distribution of benefits among the
shareholders and other stakeholders.
Disclosure and announcement by the
companies

 Corporate governance report of KOSE Corp shows that
enhancement of the group’s value is one of the main
objectives of the company.
 Hence, business unit communicates all the business
aspects to the concerned stakeholders by ensuring high
level of transparency and fairness.
 This in turn provides assistance to the firm in establishing
effectual and trustful relationship with the stakeholder’s.
 In addition to this, for managing risk specific committee
has developed by the firm.
Corporate governance report of KOSE
Corp

 Along with, external auditor has appointed by the firm to present the fair view of financial
performance.
CONTD..

On the basis of current performance, market trend as well
as SWOT analysis, it is estimated that in the near future
KOSE corp. will take entry in the developing countries
and thereby attain high margin.
Forecasts and potential investment strategies

SWOT analysis of KOSE Corporation
Strengths
 Effectual control on cost (labor)
 Highly skilled and efficient workforce
 Sound quality management
Weaknesses
 Less emphasis on R&D
 Lower level of focus on promotional campaign
or aspects
Opportunities
 Enhance customer base and profit margin by
taking entry in emerging economies
 Company has opportunity to grab high market
share through innovation and offering new
products as well as services to the customers.
Threats
 Changing rules and regulations
 Presence of strong competitors
Business analysis

SWOT analysis of Shiseido Co Ltd
Strengths
 Effective management
 Sound customer base
 Quality management
 Market leader
Weaknesses
 Lack of training & development
session
 Lack of R&D program
Opportunities
 Expansion of business operations in
global market through mergers and
acquisition
Threats
 Government rules and regulations
CONTD..

Net profit ratio Return on invested
capital %
Profitability ratios
31/3/2015 31/12/2015 31/12/2016 30/8/2017
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
NP ratio
KOSE Corp Shiseido Co Ltd
31/3/2015 31/12/2015 31/12/2016 30/8/2017
-6.00%
-4.00%
-2.00%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
ROCE
KOSE Corp Shiseido Co Ltd

Fixed Assets turnover ratio Inventory turnover ratio
Efficiency ratios
31/3/2015 31/12/2015 31/12/2016 30/8/2017
2.95
2.53 2.72
1.891.84 1.85 1.79
1.23
Inventory turnover
ratio
KOSE Corp Shiseido Co Ltd31/3/2015 31/12/2015 31/12/2016 30/8/2017
0
1
2
3
4
5
6
Fixed assets turnover
ratio
in times

Debt-equity ratio
Solvency ratio
31/3/2015 31/12/2015 31/12/2016 30/8/2017
0
0.05
0.1
0.15
0.2
0.25
0.09
0.18
0.16
0.2
Debt-equity ratio
Shiseido Co Ltd

Current ratio
Liquidity ratio
31/3/2015 31/12/2015 31/12/2016 30/8/2017
0
0.5
1
1.5
2
2.5
3
3.5
4
Current Ratio

Earnings per share Dividend per share
CONTD..
Interim Unaudited
Mar-15 Dec-15 Dec-16 Sep-17
0
20
40
60
80
100
120
KOSE Corp
Shiseido Co Ltd
Interim Unaudited
Mar-15 Dec-15 Dec-16 Sep-17
0
50
100
150
200
250
300
350
400
450
500
Shiseido Co Ltd
KOSE Corp

PE Ratio of firms
Interim Unaudited
Mar-15 Dec-15 Dec-16 Sep-17
-80
-60
-40
-20
0
20
40
60
80
100
Shiseido Co Ltd
KOSE Corp

EV/ EBITDA ratio
Mar-15
May-15
Jul-15
Sep-15
Nov-15
Jan-16
Mar-16
May-16
Jul-16
Sep-16
Nov-16
Jan-17
Mar-17
May-17
Jul-17
Sep-17
-
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
KOSE Corp
Shiseido Co

Trend analysis or share price movement
Dec-12 Dec-13 Dec-14 Mar-15
December
2015
December
2016
1-Sep-17
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
1795
3340
4865
6530
11160
9710
12890
1139
1691
1693
2173
2529
2958
4231
Share price trend or movement
Shiseido Company, Limited share
prices
KOSE Corp share price

Altman Z score
Symb
ol of
form
ula
Ratio KOSE Corp Shiseido
A Working capital / total
assets
119348 / 252192
= .47 237151/934,736=.25
B Retained earnings / total
assets
168823 / 252192
= .67 231969/934,736=.25
C EBIT / total assets 23,468 / 252192 =
.09 70654/934,736=.08
D Market capitalization /
book value of debt
734730/ NIL =
NIL 1688169/ 71,723 = 23.54
E Sales to total assets 144615 / 252192
= 0.57 731,201/934,736=.78
Sum
of
Score
(A to
E)
1.81
24.89

By doing assessment of recent
trends and development it has been
identified that KOSE Corp is making
focus on its long-term vision such as
2020.
Hence, the roadmap of such
management plan lays high level of
emphasis on three phases such as V
shaped turnaround, building,
strengthening and expanding global
brands
REVIEW OF LATEST
DEVELOPMENTS

 From the above report, it has been concluded that high level
of competitors are available in the Japanese cosmetic sector.
 On the basis of such aspect, business unit can attain success
by offering innovative products or services to the
customers. Besides this, it can be inferred from the financial
analysis that profitability, liquidity and solvency aspect of
KOSE is sound as compared to its competitor.
 Further, it has been articulated that KOSE is offering higher
returns to the investors in against to Shiseido. Along with
this, it can be stated that long term vision will make
remarkable contribution in the growth and success of KORP
Corp.
SUMMARY

 It is recommended to the management team of KOSE
to undertake inventory control tools and techniques
such as EOQ, JIT etc. By doing this, firm can exert
control on holding or storage cost and thereby would
become able to generate high margin.
 Along with this, KOSE should include both equity and
debt in financial structure for developing the optimal
one. Hence, by undertaking such aspect Shiseido can
strengthen its solvency position to the significant level.
Recommendations

KOSE Corporation SWOT Analysis Overview. 2017. [Online]. Available through:
<https://www.swotanalysis24.com/swot-k/62322-swot-analysis-kose-corporation.html >.
[Accessed on 18th October 2017].
Shiseido Company, Limited SWOT Analysis. 2017. [Online]. Available through:
<https://www.swotanalysis24.com/swot-s/97971-swot-analysis-shiseido-
companylimited.html>. [Accessed on 18th October 2017].
Medium-term Management Plan. 2017. [Online]. Available through:
<=http://www.kose.co.jp/company/en/info/mid/>. [Accessed on 18th October 2017].
Corporate governance. 2017. [Online]. Available through: <
http://www.kose.co.jp/company/en/info/governance/>. [Accessed on 18th October 2017].
Financial statements of KOSE Corp. 2017. [Online]. Available through: <
http://financials.morningstar.com/balance-sheet/bs.html?t=4922&region=jpn&culture=en-
US>. [Accessed on 18th October 2017].
Financial statements of Shiseido Co Ltd. 2017. [Online]. Available through: <
http://financials.morningstar.com/balance-sheet/bs.html?t=4911&region=jpn&culture=en-
US>. [Accessed on 18th October 2017].
REFERENCES