Investment Idea #25 - Japan's Low PBR Consumer Play!

One of the 40%.

Japan is a unique market. 40% of its listed companies trade below 1x Price-to-Book (PBR) and this has been the case for the last 10 years. As such, today’s stock is one amongst the 1,000 odd names^ trading below book. It is a brand name, with strong free cashflow, but trading below book!

^ Japan has almost 4,000 listed companies

Japan, land of high quality but cheap stocks and beautiful temples!

As usual, financial numbers are as follows:

Simple Financials (Mar 26 estimate, JPY)

• Sales: 115bn

• Net income: 8bn

• FCF: 7bn

• Dividend: 120 yen per share, Yield: 2.4%

• Debt: -35bn (Net cash), Mkt Cap 90bn

Financial Ratios

• ROE: 8%, OPM: 9%

• EV/EBITDA: 4.6x (Mar 26)

• PER: 11.5x (Mar 26)

• FCF yield: 8.3%

The company is already cheap looking at the first cut here. But as we shall discuss, we will see how ridiculously cheap it actually is. The question is whether value could be unlock, which we shall also debate and comments are welcomed!