Thinking Points

  • Fisco published six reports this week.
  • Among companies covered are: one leader in medical gowns, one key player in pharmacies, and the top seller of tiles in Japan.
  • One interesting price tag and one interesting business quality for this week.

Fisco published six reports this week. The three companies we are summarizing today are: Ainavo Holdings (TSE: 7539), Qol (TSE: 3034), and Nagaileben (TSE: 7447). Ainavo Holdings is particularly interesting, consistently generating free cash flow positive and currently trading for 2.7 times EV/EBIT.


Ainavo Holdings (TSE: 7539)

Ainavo Holdings, through its subsidiaries, is mainly engaged in the installation of exterior and home equipment, as well as selling building materials. According to Nikkei, Ainavo handles the largest volume of tiles in Japan. With over 2,000 subcontractors, half of which work exclusively for Ainavo, there isn’t a single tile worker in Japan that hasn’t heard of the company.

Source: Company site

Business performance was a little shaky up until fiscal 2012, but the company has improved over the last five years. Ainavo currently trades at 2.7 times EV/EBIT with a dividend yield of 3.19%.

Read Fisco’s full report on Ainavo Holdings here.


Qol (TSE: 3034)

Qol is one of the top 5 leading pharmacy operators with a strong network in the Kanto (Tokyo & surrounding area) and Tohoku (northeastern Japan) regions. We mentioned the company here last year in an article about the convergence of convenience stores, pharmacies, and drug stores. Through M&A and organic growth, the company is expecting increased revenues. However, Japan’s biennial pharmacy fee revisions (which generally adjusts fees lower), is expected to drag down earnings.

Source: Company site

Qol has partnered up with #3 convenience store player Lawson (TSE: 2651) and West Japan Railway (TSE: 9021). This is more of a defensive response to the recent relaxation of OTC drug regulations. Today, the company trades at 9.3 times EV/EBIT.

Read Fisco’s full report on Qol here.


Nagaileben (TSE: 7447)

Nagaileben specializes in manufacturing medical wear. According to its earnings presentation, the company has a 60% domestic share in medical gowns. The company is characterized by continuous incremental business performance improvement and a bomb proof, cash loaded balance sheet. Net cash amounts to over a year of revenues. Not sure how much more they plan on piling up.

Source: Earnings presentation

Here’s another consistent free cash flow generator. The company currently trades at 14 times EV/EBIT, which appears a bit on the high end. I highly recommend keeping this company on a watchlist given its consistently healthy business performance.

Read Fisco’s full report on Nagaileben here.


Fisco Wrap Up

From an investment perspective, Ainavo’s low EV/EBIT multiple combined with its network of subcontractors is most interesting. However, in terms of business quality, Nagaileben is one to keep on a watchlist.

Hope you enjoyed!


Author: Kenkyo Investing

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