Thinking Points

  • Fisco didn’t publish any reports last week, but I secretly took a week off, so we’re catching up.
  • Two companies stood out with solid business performance, one software company and one manufacturer.
  • Both companies seem a tad bit expensive at this time, but are watchlist worthy.

Hopefully you don’t pay too much attention to these posts (yes, I skipped one week). Mostly because I went to Tokyo with a Kenkyo subscriber fund manager! More on that trip another time. As it happens, Fisco didn’t publish anything last week and I skipped my Fisco roundup the week before.

We missed five company reports in total, and here are snippets on two companies that I found interesting:

 

Miroku Jyoho Service (TSE: 9928)

Miroku Jyoho Service develops and sells enterprise resource planning systems (ERP systems) mainly for financial and accounting purposes. Its customers are primarily tax accounting and CPA firms as well as the generally small and mid-sized businesses these firms serve. According to Fisco’s report, Miroku holds about a 25% domestic share in this space along with its competitors TKC Corporation (TSE: 9746) and Japan Digital Laboratory, which hold comparable market share.

Source: Miroku website

 

This is another company that requires careful attention with financials. My data source showed miscategorized expenses up to fiscal 2015. Current EV/EBIT is at 15+, which seems expensive, but the company also delivers a rock solid 10-year revenue CAGR of 3.7%.

Read Fisco’s report on Miroku here.

 

Hagihara Industries (TSE: 7856)

Hagihara Industries manufactures synthetic resin processed products and machinery products. Its core technologies include cutting, stretching, and winding, which were developed through years of flat yarn manufacturing. Hagihara is the only company in Japan with manufacturing capability from raw materials to sheets. Another noteworthy fact is its in house engineering team building machines for resin processing.

Source: Hagihara website

 

The company is more focused on maintaining/improving profitability rather than revenue growth. And they have the track record to prove it. Hagihara consistently produces healthy free cash flow and currently trades at 13x EV/EBIT, which seems expensive for a company with no real growth prospects. That said, Hagihara is most certainly a company to keep on a watchlist for when investor sentiment shifts negatively.

Read Fisco’s report on Hagihara here.

 

Fisco Wrap Up

Both companies offer solid and sustainable business performance, but seem a bit expensive at this time. I’d keep them both on a watchlist for now.

Author: Kenkyo Investing

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