Thinking Points

  • Fisco published three reports this week.
  • One fishing and sports equipment seller, one trading house, and a communication equipment seller.
  • One of these companies delivers healthy business performance and comes with an interesting price tag.

Fisco published three reports last week. The companies covered are: Globeride (TSE: 7990), Sanyei Corporation (TSE: 8119), and Startia Holdings (TSE: 3393). Among the three, I found Startia Holdings to be most interesting, mostly because it’s generally better business performance, recent focus on recurring revenues, and lower price multiple.

 

Globeride (TSE: 7990)

If you’re a fishing enthusiast, you’ve probably heard of Globeride’s main brand: Daiwa. The company started manufacturing fishing reels in 1955, expanded into other fishing equipment manufacturing, then continued onto manufacturing/sales of golf, tennis, and sport cycling related gear and equipment.

Source: Company site

As far as financials and business performance goes, there isn’t much that speaks out to me. It’s certainly not your typical cash-loaded Japanese company. A bit expensive, Globeride currently trades at 17 times EV/ EBIT.

Read Fisco’s full report on Globeride here.

 

Sanyei Corporation (TSE: 8119)

Sanyei Corporation is a trading company mainly importing and selling European lifestyle products. Additionally, the company directly operates retail locations for some of these brands. Of Sanyei’s 83 total retail locations, 63 are that of an established German footwear brand called Birkenstock.

Source: Company Facebook page

Business performance over the last 10 years has improved. Stronger gross margins, fluctuating operating margins, and improving balance sheet over time. Dividend focused investors may be interested in the current 3.9% yield. Trades for about 6.5 EV/EBIT.

Read Fisco’s full report on Sanyei Corporation here.

 

Startia Holdings (TSE: 3393)

If you are hardcore about small caps and niche markets, you might like Startia’s strategy. The company offers digital marketing software and IT-related services, specifically targeting SMEs that are too small to have internal IT staff or get the attention of other larger IT service providers.

Just like many IT service companies, Startia Holdings delivers solid Greenblatt ROIC, often above 100%. What’s more, the company started a business model transition about 10 years ago with a focus on recurring revenues. In fiscal 2008, recurring revenues accounted for less than 10% of total revenues. In fiscal 2018, recurring revenues accounted for 42.2% of total revenues. The company is consistently free cash flow positive. The stock currently trades at 5.5 times EV/EBIT.

Read Fisco’s full report on Startia Holdings here.

 

Fisco Wrap Up

If I had to choose one company to take a closer look into, it would be Startia Holdings. The business model transition and consistent business performance combined with the 5.5 times EV/EBIT price tag looks interesting.

Author: Kenkyo Investing

Kenkyo Investing applies a value investing approach to Japanese equities, providing insights that are often unavailable to non-Japanese speakers.