7399.JP - Nansin Co

[west]

Another Japan idea.  This is another damn-close-to-Fujimak in cheapness and quality pick.

From Financial Times:
NANSIN CO., LTD. is a Japan-based company mainly engaged in the manufacture and sale of casters and dollies. The Company operates in three business segments. The Malaysia segment is engaged in the manufacture and sale of casters in Malaysia. The China segment is engaged in the manufacture and sale of casters and dollies in China. The Britain segment is engaged in the leasing of real estate in Britain. As of March 31, 2013, the Company had three consolidated subsidiaries.

EV/EBIT - 2.5x
EV/EBITDA - 1.9x.

P/TBV - 0.41
BVPS growth rate - ~11%+ each of the last four years.  21.2% growth three years ago.

P/E - 3.16x, with earnings being pretty flat over the last few years.  So, yeah, it's earned it's current market cap in earnings in just the last three years...

No weird Minority Interest holdings unlike some of my other picks.

EV/FCF of less than 3.0x.  FCF has been positive and high relative to current EV every single one of the last five years.

ROIC has varied between 10.4% and 22.1% during the last four years.

Double checking all the numbers one more time... there's is really NOTHING bad with this company (quantitatively... I can't tell qualitatively as we've discussed).  It's pretty much great all around.

Enjoy!

[oddballstocks]

This is a really good find, so good I've got an order out on it now as well.  Unfortunately it looks like there aren't many shares available.

I just went through all the financials and this is a great example of a good company that's neglected (JASDAQ) and faces a market structural issue (1,000 minimum lot size).  Looks like insiders own 23% of it, institutions another 13%.

Hoping my order gets filled on this one.

[rykelsap]

Interesting find West, I appreciate the deep value Japan ideas. FCF was significantly negative in FY2008 and FY2009 but this appears to be a one-time outlay to open a new factory (at least from what I can approximate from the rough google translation). The company spent ¥4.6 bn in capital expenditures over the two year period, substantially more than the current market cap.

[writser]

Bumping this as it is still extremely cheap. Trading at 1/3 book, 1/3 sales, tangible book value increased by 9% p.a. the past five years while paying out a 2.5% dividend. Revenue has been growing every year for the past five years, company has been profitable every year, has paid off debt and has cash on the balance sheet roughly equal to the current market cap. If this was a badly managed US smallcap it would trade at least 100% higher.

Flipside: boring stock, no catalyst, not a great capital allocator at the helm like Michael Pearson.

[snow pea]

Thanks for the heads up!

[DW1234]

This looks really cheap indeed. Steady earnings, pretty steady cashflows. Really strong BS.

Does anyone have insights on this:

They have investment properties worth Y67M, yet a rent income of Y40M.
They also have Y332M of investment securites, and earn Y16.8M in dividend, which equals ~5% ROI. Which is unusually high for Japanese companies.

I'm wondering how they get these returns. Maybe they rent out part of their land for extra rent income?

[DW1234]

Decided to buy a bit, to add to my Japanese basket.

P/E: 7
P/B: 0.38
EV/EBIT: 1.51
Operating margin: 7.5% (4y avg of 10.13%)
Div payout: 13% (ROI 1.86%)

As so many Japanese companies they have a bunch of cash, 75% of their marketcap in cash. Unfortunately they don't pay this back to shareholders (again.. Japan). I'm mostly enthusiastic about this because they combine a ridiculous strong BS with really steady earnings and cashflow. Earnings have been higher historically, so it doesn't look like you're buying into a cyclical high, it just looks like a very stable business.

I still don't understand why their rental income is ~50% of the worth of their properties. Not a big issue, but I'm still curious if anyone knows.

[Stuart D]

Are there any case studies for corporate raiders like Carl Icahn trying to take over Japanese companies & return cash to shareholders?

[s8019]

I think there are no corporate raiders in Japan, it's probably cultural thing. However the shareholder structure in this particular case is not so hopeless imo.

[DW1234]

There have been people who tried activism in Japan. Michael Burry being the latest well known investors to try. T. Boone Pickens also lost a pretty famous battle in the early 90's. It's really hard to make them change their capital allocation. Japanese managers  have an entirely different view of what entails a good/optimal capital allocation. They mostly just want to keep the company and their employees alive for as long as possible.