Dip (TYO:2379) - Fundamental Investment Case

Whilst 1H 2/20 sales were broadly in line with plan, efficient use of advertising resulted in above plan 1H OP.

We expect the advertising budget to increase in the 2H, directed towards areas such as a new TV CM & advertising on the main Shibuya crossing, but expect the company to comfortably achieve its minimum OP target.

Dip is also targeting corporate customers of former competitor ‘an’, after owner PERSOL announced its termination in August. We therefore expect the company’s efforts to contribute to customer growth from the 4Q 2/20.

Customer growth in the new AI/RPA division is progressing ahead of plan, with 100 installations expected by the end of November.

On 16x 2/22 earnings, a FCF yield of almost 7% & following a 4 year period in which the stock has traded in line with Topix, we conclude the stock remains undervalued & maintain our Positive rating