Author Topic: 1782.JP - Joban Kaihatsu Co Ltd  (Read 11593 times)

west

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1782.JP - Joban Kaihatsu Co Ltd
« on: September 16, 2014, 07:55:49 PM »
More Japan stocks coming up!  I'm going to try to post one a day for the next few days.

Joban Kaihatsu is a medium-scale general construction firm based in Iwata in the Fukushima Prefecture area.  Despite being in Fukushima, Iwata is fairly far south of where the tsunami hit the hardest in 2011, and is about 40 miles away from the Fukushima Daiichi nuclear power plant.  So, none of the earthquake/tsunami/nuclear reactor stuff is really a factor here.

So, with that out of the way, here are the numbers:

Cash makes up over 50% of the firm's current market cap.

EV/TTM EBIT - 1.15x
EV/TTM EBITDA - 1.06
ROIC - Using Greenblatt's approach has been about 25.6% over the last four years on average (with a good amount of variability).  Using Damodaran's approach shows an ROIC of 27% last year, increasing from 11% four years ago.

P/B - 0.67x
BVPS Growth has averaged 19% a year (!) on average over the last four years (again, a good amount of variability however).

Cash collection cycle has gone down from 56 days four years ago to 12 days (!) last year.

Comps for the industry (Construction) give me an upside of:

EV/EBIT for Industry in Japan: 13.29x
Upside to fair value with cash valued as an operating asset: 212.8%
Upside to fair value with cash valued as cash: 1056.2%

EV/EBITDA for Industry in Japan: 7.78x
Upside to fair value with cash valued as an operating asset: 98.6%
Upside to fair value with cash valued as cash: 634.2%

P/B for Industry in Japan: 1.22x
Upside to fair value: 85.4%

EV/S for Industry in Japan: 0.83x
Upside to fair value with cash valued as an operating asset: 230.5%
Upside to fair value with cash valued as cash: 1122.0%

Enjoy!


Picasso

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Re: 1782.JP - Joban Kaihatsu Co Ltd
« Reply #1 on: September 16, 2014, 08:00:47 PM »
How do you get through their filings without knowing Japanese? 

I recall investing in a small NY based construction firm and most of the cash was set aside for construction projects so it was not really for shareholders.  But I suppose that is reflected in your comps and EV multiples.

Is there a way to view an annual report on this company in English?

west

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Re: 1782.JP - Joban Kaihatsu Co Ltd
« Reply #2 on: September 16, 2014, 08:09:48 PM »
I hate to do this, but I'm starting to repeat myself in my Japan posts.  I refer to my other ideas here:

http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/5965-jp-fujimak-corp/
http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/7399-jp-nansin-co/
http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/7297-jp-car-mate-manufacturing-co/
http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/7014-jp-namura-shipbuilding-co/
http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/7292-jp-murakami-corp/
http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/7235-jp-tokyo-radiator-manufacturing/

Basically I don't do any analysis beyond the basic financials and I only do 1% to 2% position bets.  I'm flying blind to a certain degree, but it's worked out disgustingly well so far.

I'm beginning to think I might need to open a thread for discussing strategies with these Japan stocks so the discussion doesn't get scattered all around in the different idea threads (like it currently is...)

oddballstocks

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Re: 1782.JP - Joban Kaihatsu Co Ltd
« Reply #3 on: September 16, 2014, 08:15:36 PM »
How do you get through their filings without knowing Japanese? 

I recall investing in a small NY based construction firm and most of the cash was set aside for construction projects so it was not really for shareholders.  But I suppose that is reflected in your comps and EV multiples.

Is there a way to view an annual report on this company in English?

Let me ask a different question, how much information is enough?  This is at .9x EV/EBITDA and 67% of book value.  They're earning incredible amounts on their capital, so what else do you need to know?  Is it a comfort thing, in that you don't trust the numbers unless you read some text around them (that might not confirm anything beyond what you see), or is it something else?

I ask because the numbers are available in English from a variety of different sources, many free.  Their statements are in Japanese and can be accessed via the Tokyo Exchange site.

Personally I have cost myself with Japan in the past because I over thought these stocks.  I'd look at something like this at less than 1x EV/EBITDA and read their statement looking for some problem then pass.  Stocks like this are cheap, rock bottom cheap.  Maybe this'll never trade for 11x EV/EBITDA, but at 3x you have a triple.  This has a P/E of 3, is it worth 6, maybe, that's a double.  At some point these companies are so cheap you can't pass on them.  So yes, I don't know Japanese, but I just buy these things in bulk and move on.  I have done fantastic with Japanese companies since adopting the "blind eye" approach. 

Maybe this is like human powered quant investing and it isn't sexy enough or complex enough for the board.  Fair enough, although there are no style points in investing.  At the end of the day it's only returns that matter, and getting there with the least amount of risk.  I'd say buying cheap Japanese companies certainly qualifies. 

If you do want a sense of emotional well being on these Japanese stocks you can buy the Japan Company Handbook for $150.  They have a short paragraph in English about each company along with financials and an analyst opinion.  I have a copy from 2012 that I still use.  Here is how they describe Joban Kaihatsu: "Medium-scale general construction firm belonging to Joban Kosan group.  On top of construction and engineering works in Fukushima Pref, also engaged in environmental equipment business.  Breaking away from reliance on local government for demand."

One other point, in the Autumn of 2012 BVPS was 268, so it's grown quite a lot.  The book has ROE at 19.2%.  59% of the companies sales come from construction, 21% from civil engineering, 13% from environmental things, 1% from real estate and 6% from other.
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oddballstocks

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Re: 1782.JP - Joban Kaihatsu Co Ltd
« Reply #4 on: September 16, 2014, 08:20:11 PM »
I hate to do this, but I'm starting to repeat myself in my Japan posts.  I refer to my other ideas here:

http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/5965-jp-fujimak-corp/
http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/7399-jp-nansin-co/
http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/7297-jp-car-mate-manufacturing-co/
http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/7014-jp-namura-shipbuilding-co/
http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/7292-jp-murakami-corp/
http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/7235-jp-tokyo-radiator-manufacturing/

Basically I don't do any analysis beyond the basic financials and I only do 1% to 2% position bets.  I'm flying blind to a certain degree, but it's worked out disgustingly well so far.

I'm beginning to think I might need to open a thread for discussing strategies with these Japan stocks so the discussion doesn't get scattered all around in the different idea threads (like it currently is...)

No need to repeat yourself.  The ideas you've given have been GOLD.  Although I can't get a fill on Joban Kaihatsu even crossing the bid.

I think there are many a quarter dozen of us on this board who are investing in these and everyone else is either mystified or too scared to put any money to work in Japan.  I've talked extensively about my strategy and you have as well.  I'm not sure we'll ever convert the unconverted, but I don't mind if there's no competition!
The ultimate edge for bank investors: http://www.completebankdata.com

west

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Re: 1782.JP - Joban Kaihatsu Co Ltd
« Reply #5 on: September 16, 2014, 08:31:18 PM »
No need to repeat yourself.  The ideas you've given have been GOLD.  Although I can't get a fill on Joban Kaihatsu even crossing the bid.

I think there are many a quarter dozen of us on this board who are investing in these and everyone else is either mystified or too scared to put any money to work in Japan.  I've talked extensively about my strategy and you have as well.  I'm not sure we'll ever convert the unconverted, but I don't mind if there's no competition!

Ha! :)

Well... to give some of the non-believers on this board credit, I put at least a thousand hours of work into researching all of this (no BS) before I was confident enough to buy even one Japanese stock.  I also missed out on 2013's awesome returns...

Picasso

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Re: 1782.JP - Joban Kaihatsu Co Ltd
« Reply #6 on: September 16, 2014, 08:38:15 PM »
How do you get through their filings without knowing Japanese? 

I recall investing in a small NY based construction firm and most of the cash was set aside for construction projects so it was not really for shareholders.  But I suppose that is reflected in your comps and EV multiples.

Is there a way to view an annual report on this company in English?

Let me ask a different question, how much information is enough?  This is at .9x EV/EBITDA and 67% of book value.  They're earning incredible amounts on their capital, so what else do you need to know?  Is it a comfort thing, in that you don't trust the numbers unless you read some text around them (that might not confirm anything beyond what you see), or is it something else?

I ask because the numbers are available in English from a variety of different sources, many free.  Their statements are in Japanese and can be accessed via the Tokyo Exchange site.

Personally I have cost myself with Japan in the past because I over thought these stocks.  I'd look at something like this at less than 1x EV/EBITDA and read their statement looking for some problem then pass.  Stocks like this are cheap, rock bottom cheap.  Maybe this'll never trade for 11x EV/EBITDA, but at 3x you have a triple.  This has a P/E of 3, is it worth 6, maybe, that's a double.  At some point these companies are so cheap you can't pass on them.  So yes, I don't know Japanese, but I just buy these things in bulk and move on.  I have done fantastic with Japanese companies since adopting the "blind eye" approach. 

Maybe this is like human powered quant investing and it isn't sexy enough or complex enough for the board.  Fair enough, although there are no style points in investing.  At the end of the day it's only returns that matter, and getting there with the least amount of risk.  I'd say buying cheap Japanese companies certainly qualifies. 

If you do want a sense of emotional well being on these Japanese stocks you can buy the Japan Company Handbook for $150.  They have a short paragraph in English about each company along with financials and an analyst opinion.  I have a copy from 2012 that I still use.  Here is how they describe Joban Kaihatsu: "Medium-scale general construction firm belonging to Joban Kosan group.  On top of construction and engineering works in Fukushima Pref, also engaged in environmental equipment business.  Breaking away from reliance on local government for demand."

One other point, in the Autumn of 2012 BVPS was 268, so it's grown quite a lot.  The book has ROE at 19.2%.  59% of the companies sales come from construction, 21% from civil engineering, 13% from environmental things, 1% from real estate and 6% from other.

Sorry, I just have a habit of diving into the stuff I invest in and I do not normally take this kind of quant approach.  Plus I own a small amount of high conviction holdings so spreading out into dozens of cheap stocks is a bit different. 

That said, I see the value in the strategy here and am thinking about placing 15-20 1% bets on these Japanese micro-caps.  I like this one in particular so we'll see how much liquidity is on the buyside.

Thanks for the tip on the Japan Company Handbook.  I'll order mine tonight.   :)

oddballstocks

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Re: 1782.JP - Joban Kaihatsu Co Ltd
« Reply #7 on: September 16, 2014, 08:44:35 PM »
How do you get through their filings without knowing Japanese? 

I recall investing in a small NY based construction firm and most of the cash was set aside for construction projects so it was not really for shareholders.  But I suppose that is reflected in your comps and EV multiples.

Is there a way to view an annual report on this company in English?

Let me ask a different question, how much information is enough?  This is at .9x EV/EBITDA and 67% of book value.  They're earning incredible amounts on their capital, so what else do you need to know?  Is it a comfort thing, in that you don't trust the numbers unless you read some text around them (that might not confirm anything beyond what you see), or is it something else?

I ask because the numbers are available in English from a variety of different sources, many free.  Their statements are in Japanese and can be accessed via the Tokyo Exchange site.

Personally I have cost myself with Japan in the past because I over thought these stocks.  I'd look at something like this at less than 1x EV/EBITDA and read their statement looking for some problem then pass.  Stocks like this are cheap, rock bottom cheap.  Maybe this'll never trade for 11x EV/EBITDA, but at 3x you have a triple.  This has a P/E of 3, is it worth 6, maybe, that's a double.  At some point these companies are so cheap you can't pass on them.  So yes, I don't know Japanese, but I just buy these things in bulk and move on.  I have done fantastic with Japanese companies since adopting the "blind eye" approach. 

Maybe this is like human powered quant investing and it isn't sexy enough or complex enough for the board.  Fair enough, although there are no style points in investing.  At the end of the day it's only returns that matter, and getting there with the least amount of risk.  I'd say buying cheap Japanese companies certainly qualifies. 

If you do want a sense of emotional well being on these Japanese stocks you can buy the Japan Company Handbook for $150.  They have a short paragraph in English about each company along with financials and an analyst opinion.  I have a copy from 2012 that I still use.  Here is how they describe Joban Kaihatsu: "Medium-scale general construction firm belonging to Joban Kosan group.  On top of construction and engineering works in Fukushima Pref, also engaged in environmental equipment business.  Breaking away from reliance on local government for demand."

One other point, in the Autumn of 2012 BVPS was 268, so it's grown quite a lot.  The book has ROE at 19.2%.  59% of the companies sales come from construction, 21% from civil engineering, 13% from environmental things, 1% from real estate and 6% from other.

Sorry, I just have a habit of diving into the stuff I invest in and I do not normally take this kind of quant approach.  Plus I own a small amount of high conviction holdings so spreading out into dozens of cheap stocks is a bit different. 

That said, I see the value in the strategy here and am thinking about placing 15-20 1% bets on these Japanese micro-caps.  I like this one in particular so we'll see how much liquidity is on the buyside.

Thanks for the tip on the Japan Company Handbook.  I'll order mine tonight.   :)

On the handbook, call the book store in NYC that sells it.  I talked to someone on the phone who took my order, they shipped it next day air, which is included in the price.  I'm not sure if shipping online is extra, but if you can get it next day via NYC it might be worth it.

My approach is similar to yours, I like to know what I'm investing in.  But I've also realized there are areas of the worldwide market that are too cheap to ignore, so I'll place a number of bets on these Japanese companies, forget about them and look again in a year.
The ultimate edge for bank investors: http://www.completebankdata.com

matjone

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Re: 1782.JP - Joban Kaihatsu Co Ltd
« Reply #8 on: September 16, 2014, 08:55:50 PM »
 I have been waiting for you to start posting again, west.  Thanks.

I am a little more drawn to the outrageously cheap ones with less regard to quality, as long as they are earning a little or at least holding steady.   I can feel your pain on missing out - I missed Ohmoto Gumi because I didn't want to buy a full lot and go over some pre-set rule I came up with on position size for these.  Take a look at how ridiculously cheap it was - something like 1/4 NCAV, no debt, neg ev, and actually a little growth to boot.  If you have any of those that you saw and weren't interested in, send them my way.
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simplefocus

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Re: 1782.JP - Joban Kaihatsu Co Ltd
« Reply #9 on: September 16, 2014, 09:55:57 PM »
hi west,

which brokerage account do you use?  how much does it cost you per trade?  I have Ameritrade and Sharebuilder, but they both don't have an option for me to buy international stocks directly.  I can buy their ADRs or pink sheets.  thanks.