Second-Quarter Results in Line but Near-Term Headwinds Abound; Shares Fully Valued

East Japan Railway, or JRE, posted second-quarter results that were in line with our expectations. Given some of the potential headwinds, such as the risk of weaker demand following the latest hike in the consumption tax and disruption from Typhoon Hagibis in October, we have revised our fiscal 2020 growth and margin assumptions slightly lower, but this has a limited effect on our fair value estimate. We maintain our FVE for narrow-moat JRE at JPY 9,500 per share. Since the company released first-quarter results in late July, its share price has been flat. We consider shares fully valued at current levels and think investors are better served waiting for an improved entry point.