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shinmaywa corporation: a compelling value opportunity in japanese industrials
by：Top-In
2020-08-03
Focus: diversified and conservative companies, operating in multiple industries and industries in Japan, have further operations in Asia and North America.
Steady and sustained growth in book value, financial health, strong cash balance and low debt levels.
Many indicators, including DCF, P/B, and EV/CFO, are undervalued.
Based on the growth catalyst of maintaining Japanese market share and accelerating sales in Asia.
In particular, the potential of the aircraft division and the potential U disk
As a further driver of growth.
OverviewShinmaywa (TYO:7224)
It is a diversified industrial company based outside Japan and listed on the Tokyo Stock Exchange.
The market value of the company is 97 billion yen (circa USD 900m)
The company was established in 1949.
The company has offices and facilities in the following countries: Japan: manufacturing, R & D, sales and maintenance, and North America: sales and maintenance and regional procurement office sales and maintenance office Taiwan: manufacturing & Sales & maintenance office India: Market Research & Sales Office manufacturing, sales & Maintenance Department Company is
As outlined, diversified holding companies operating in many departments and geographical regions.
More importantly, the company plays a role in public investment in Japan and in the domestic market because most of the business comes from government and public service companies.
In addition, the company has manufacturing and export offices outside Japan and factories in North America, China, Taiwan, Thailand, India and Singapore.
In particular, the company offers a diverse portfolio of products across multiple industries in these regions.
The company operates in the following business areas: water treatment equipment.
Manufacture various fluid equipment including water pump.
The products are mainly used in water treatment facilities and remote monitoring systems in Japan, the United States and Taiwan and other exporting countries.
The market for services includes industrial/agricultural facilities such as wastewater treatment plants, residential and commercial establishments, breweries, farms, family gardens and industrial parks, disaster prevention equipment at airports and other large airports
Infrastructure of scale.
The products include submersible pumps, blowers and aerators for the following areas: pumping stations for wastewater treatment facilities for rainwater discharge facilities, civil works and construction works.
Manufacturing of electrical wire processing system equipment that terminates cables, including cutting, stripping and curling.
Develop equipment for home appliances and the automotive industry market.
The company has two factories in Japan and China, and further sales offices in Japan, Thailand, the United States, Singapore, China and Germany.
The company also works with dealers/agents in Turkey, Vietnam, Hong Kong, India and South Korea.
The sales target for 2015 is 100 units at 8: 00. 2 million yen (
About $74,500 per unit)
Environmental Systems.
Design, develop, install and maintain equipment related to waste recovery facilities.
This includes a waste transfer station equipment that stores garbage before it is transported to a landfill or recycling facility.
This is mainly for urban garbage and the facilities are designed, developed and maintained by Shinmaywa.
Shinmaywa produces garbage storage and disposal equipment for commercial, commercial and residential apartment facilities.
In addition, the company has built a concrete waste recycling system for recycling concrete from buildings, roads and bridges.
The company\'s clients are municipalities, industrial-scale enterprises and residential/commercial institutions, mainly in Japan and China, with a small number in Southeast Asia.
Source: film and surface modification of Shinmaywa website.
Manufacturing of surface modification equipment used to improve the efficiency of tools and other industrial process equipment.
The manufactured technology provides surface hardness and wear resistance, corrosion resistance, polishing and decorative coloring for the treated object.
This includes tools, molds and various machine parts.
Products manufactured by Shinmaywa include DLC coating system, DC magnetic tube system, ion etching system and plasma polishing system.
Film coating system.
Develop vacuum film coating technology for various products, including lens of glasses and camera, protective film of snack and pet bottle package, edge surface of drill bit, car headlights including LCD, projector, dvd and semiconductor, screen of mobile phone and other equipment.
The business is located in Japan and has a manufacturing plant, three sales offices and two dealers/agents.
The business has two sales offices in Thailand and China. -
Industrial mechanical system: Environmental System, film coating system, direct drive motor, film and surface modification. -
Parking System: handling the manufacture, sale, installation, maintenance, improvement and repair of mechanical parking system. -
Aircraft: Made in USA-
Manufacturing of parts for stol sar amphibious aircraft and commercial aviation aircraft. The US-
2 is the only amphibious plane in the world that can be opened
Landing and taking off at sea, used by Japan\'s Maritime Self-Defense ForceDefense Force.
The commercial aircraft components division manufactures components for civilian aircraft manufacturers, including Boeing, Airbus and Brazilian airlines. -
Special-purpose trucks: various industrial-purpose vehicles including dump trucks, shelter trucks, concrete mixers, oil tanks, sewage trucks and tailgate lifts.
Source of recent performance: 4-traders.
Product Value Evaluation: The company is a value game with a price/earnings ratio of 9. 57.
Historically, P/E in five-
Average 10 years. 32.
The same is true for the current price/book value. 77.
The average for the past four years is 1. 02.
However, low P/B is the norm for a company with high fixed capital, considering that the historical average for four years is about 25% higher and the p/B ratio is low.
Book value per share (equity)
Book value per share increased by 4. Between 2008 4%-
2017, the book value increased by 9. 6% over five-
Between 2012 and 2017.
From the chart, there has been a steady and steady increase in book value.
Looking at the price of the company\'s free cash flow and the EV/CFO, we can see that there are great valuation opportunities here.
The chief financial officer is 14 yen.
EV of 34 billion yen 72.
15 billion about 20% of the CFO\'s production, or the CFO of EV/month. 03.
Free cash flow for price 6. 5.
Profitability and operational performance
The monthly base is 5.
39 to 5-
Average Year 5. 6. TTM ROIC is 8. 32 with a five-
An average of 9 years. 07. TTM ROE is 8. 40 with a five-
An average of 9 years. 59.
Financial strength: strong balance sheet, $222 in cash, shortage of funds
Regular assets held.
The current financial ratio of the company is 2, financial stability.
Interest insurance of 78 and 226. 82.
Total Debt/equity (MRQ)is . 13.
As a result, the company looks conservative, financially stable and in a strong cash position.
Sales growth at FiguresShinmaywa is stable at 5-13%year period.
Capital expenditure was strong, reaching 25% per cent and earnings per share increased by 75% per cent.
All data is superior to industry and sector, far ahead of the Tokyo exchange.
The dividend is 7 yen per share and the yield is 1.
46% and repurchase rate of return 3.
37% makes the total yield 4. 83%.
The company\'s payment rate is 13. 9%.
There seems to be an opportunity to increase dividend spending, especially given the sustainable payment of dividends due to stable free cash flow generation and historical growth in dividend spending.
Calculating Intrinsic value calculating the intrinsic value of Shinmaywa and calculating the intrinsic value of any business is somewhat subjective.
I used the DCF method to achieve the intrinsic value of the company.
Using the DCF method and assuming the following growth rates and discount rates, the following six scenarios were plotted to determine the approximate fair value of the business.
The growth rate based on the growth of historical book value is 4.
Compared to economic stagnation and negative growth, the growth rate was 4%.
2% have been simulated.
The discount rate is based on current market and company indicators, and in order to obtain an estimate below fair value, a conservative and less conservative number has been simulated.
The average value between all six of the above cases is estimated as intrinsic value, and the share price is currently traded at a discount of 16%.
Judging from the current stock price, the market seems to be skeptical about whether xinmeihua is likely to maintain positive growth in the future.
Competitive companies operate in multiple sectors and it is difficult to measure competition directly.
Kyokuto Kaihatsu Kogyo, another heavy industry group operating in the field of dedicated vehicles, parking systems and environmental systems, as well as Shinmaywa.
Kyokuto does not operate the aircraft sector and focuses mainly on the Japanese market.
Here are some comparisons of operational and performance indicators between the two companies.
Source: MorningstarWhilst, based on the above indicators, Kyokuto highlights better profitability and operational performance, and Shinmaywa is the first choice based on the overall evaluation of the company.
In the past few years, the company\'s sales have decreased.
In particular, in April 2017, sales in the aircraft sector fell by 17%.
As other departments maintain stability or develop their business, this puts pressure on the group\'s overall lag results.
Opportunities for the aircraft sector to reverse negative sales trends are still high, about $1. 65 billion-
Dollar-to-dollar deals
Amphibious aircraft of Indian defense forces.
The agreement has been discussed for several years and there have been some delays and setbacks in discussions between the governments of India and Japan.
It seems that the Indian government still wants this agreement to continue, especially when they want to improve the naval capacity to operate around Andaman and the island of nikobal, as well as strengthening the capability and manpower support of naval vessels with spare vessels.
If the deal is successful, I believe it will be a positive catalyst for the stock price.
In addition, looking at the various businesses of the company, there are several opportunities to increase growth.
In particular, the specialized truck department is a bet (public)
Investment at the municipal level in Japan, as this seems to be a major customer.
Increased government and municipal spending on public infrastructure could also benefit water treatment and environmental systems.
On the basis of strong economic growth and the upcoming Summer Olympics in Tokyo in 2020, this is guaranteed.
There are many risks at risk that may affect the value of Shinmaywa.
As shown in the latest quarterly results, Shinmaywa management predicts that operating profit guided throughout the year is about 16% and net profit is about 20% (April 2017-March 2018).
Sales are expected to remain flat compared to last year.
I believe this has been taken into account in the stock price, and any surprise of the rise may be positive.
Another risk is the election that Japanese Prime Minister Shinzo Abe called for later this month.
If he and his party lose a majority in parliament, it could affect some of the economic and social reforms Abe wants to make in the coming years.
As this may have an impact on public investment, the business of Shinmaywa, in particular for its special-purpose vehicles, may be affected.
There are some risks in the market regarding the new Mawa aircraft and industrial machinery business.
In its aircraft business, it cannot be U-
2 amphibious aircraft may have a negative impact on their ability to recover the full investment and manufacturing costs of the project.
In addition, with regard to the parts provided by commercial aviation manufacturers such as Boeing and Airbus, this is a long time slow
The decline in this business will affect sales orders.
I believe that in terms of the sales figures that Shinmaywa has released for its aircraft division, we have seen the above impact.
This may also apply to its industrial machinery business, and part of Shinmaywa\'s activities in wire processing and film coating are provided to the automotive industry.
The long-term slowdown here may also affect the development of sales orders.
All in all, I think Shinmaywa at this time is still a compelling buying opportunity.
Look at the valuation indicators, and the business looks undervalued according to the classic value indicators (
P/B, EV/CFO, P/E)
As well as the conservative figures when conducting DCF analysis.
Shinmaywa has a history of sustained strong growth in book value.
I think the business is very diverse, leading in many industries, allowing it to manage any slow business for a long time
Completed in one of its business areas.
Finally, from the growth prospects of Shinmaywa\'s mainly active markets in Japan and Southeast Asian countries, the business growth prospects are promising.
I think Shinmay wa is currently undervalued based on the above, and this is a compelling purchase opportunity.
Steady and sustained growth in book value, financial health, strong cash balance and low debt levels.
Many indicators, including DCF, P/B, and EV/CFO, are undervalued.
Based on the growth catalyst of maintaining Japanese market share and accelerating sales in Asia.
In particular, the potential of the aircraft division and the potential U disk
As a further driver of growth.
OverviewShinmaywa (TYO:7224)
It is a diversified industrial company based outside Japan and listed on the Tokyo Stock Exchange.
The market value of the company is 97 billion yen (circa USD 900m)
The company was established in 1949.
The company has offices and facilities in the following countries: Japan: manufacturing, R & D, sales and maintenance, and North America: sales and maintenance and regional procurement office sales and maintenance office Taiwan: manufacturing & Sales & maintenance office India: Market Research & Sales Office manufacturing, sales & Maintenance Department Company is
As outlined, diversified holding companies operating in many departments and geographical regions.
More importantly, the company plays a role in public investment in Japan and in the domestic market because most of the business comes from government and public service companies.
In addition, the company has manufacturing and export offices outside Japan and factories in North America, China, Taiwan, Thailand, India and Singapore.
In particular, the company offers a diverse portfolio of products across multiple industries in these regions.
The company operates in the following business areas: water treatment equipment.
Manufacture various fluid equipment including water pump.
The products are mainly used in water treatment facilities and remote monitoring systems in Japan, the United States and Taiwan and other exporting countries.
The market for services includes industrial/agricultural facilities such as wastewater treatment plants, residential and commercial establishments, breweries, farms, family gardens and industrial parks, disaster prevention equipment at airports and other large airports
Infrastructure of scale.
The products include submersible pumps, blowers and aerators for the following areas: pumping stations for wastewater treatment facilities for rainwater discharge facilities, civil works and construction works.
Manufacturing of electrical wire processing system equipment that terminates cables, including cutting, stripping and curling.
Develop equipment for home appliances and the automotive industry market.
The company has two factories in Japan and China, and further sales offices in Japan, Thailand, the United States, Singapore, China and Germany.
The company also works with dealers/agents in Turkey, Vietnam, Hong Kong, India and South Korea.
The sales target for 2015 is 100 units at 8: 00. 2 million yen (
About $74,500 per unit)
Environmental Systems.
Design, develop, install and maintain equipment related to waste recovery facilities.
This includes a waste transfer station equipment that stores garbage before it is transported to a landfill or recycling facility.
This is mainly for urban garbage and the facilities are designed, developed and maintained by Shinmaywa.
Shinmaywa produces garbage storage and disposal equipment for commercial, commercial and residential apartment facilities.
In addition, the company has built a concrete waste recycling system for recycling concrete from buildings, roads and bridges.
The company\'s clients are municipalities, industrial-scale enterprises and residential/commercial institutions, mainly in Japan and China, with a small number in Southeast Asia.
Source: film and surface modification of Shinmaywa website.
Manufacturing of surface modification equipment used to improve the efficiency of tools and other industrial process equipment.
The manufactured technology provides surface hardness and wear resistance, corrosion resistance, polishing and decorative coloring for the treated object.
This includes tools, molds and various machine parts.
Products manufactured by Shinmaywa include DLC coating system, DC magnetic tube system, ion etching system and plasma polishing system.
Film coating system.
Develop vacuum film coating technology for various products, including lens of glasses and camera, protective film of snack and pet bottle package, edge surface of drill bit, car headlights including LCD, projector, dvd and semiconductor, screen of mobile phone and other equipment.
The business is located in Japan and has a manufacturing plant, three sales offices and two dealers/agents.
The business has two sales offices in Thailand and China. -
Industrial mechanical system: Environmental System, film coating system, direct drive motor, film and surface modification. -
Parking System: handling the manufacture, sale, installation, maintenance, improvement and repair of mechanical parking system. -
Aircraft: Made in USA-
Manufacturing of parts for stol sar amphibious aircraft and commercial aviation aircraft. The US-
2 is the only amphibious plane in the world that can be opened
Landing and taking off at sea, used by Japan\'s Maritime Self-Defense ForceDefense Force.
The commercial aircraft components division manufactures components for civilian aircraft manufacturers, including Boeing, Airbus and Brazilian airlines. -
Special-purpose trucks: various industrial-purpose vehicles including dump trucks, shelter trucks, concrete mixers, oil tanks, sewage trucks and tailgate lifts.
Source of recent performance: 4-traders.
Product Value Evaluation: The company is a value game with a price/earnings ratio of 9. 57.
Historically, P/E in five-
Average 10 years. 32.
The same is true for the current price/book value. 77.
The average for the past four years is 1. 02.
However, low P/B is the norm for a company with high fixed capital, considering that the historical average for four years is about 25% higher and the p/B ratio is low.
Book value per share (equity)
Book value per share increased by 4. Between 2008 4%-
2017, the book value increased by 9. 6% over five-
Between 2012 and 2017.
From the chart, there has been a steady and steady increase in book value.
Looking at the price of the company\'s free cash flow and the EV/CFO, we can see that there are great valuation opportunities here.
The chief financial officer is 14 yen.
EV of 34 billion yen 72.
15 billion about 20% of the CFO\'s production, or the CFO of EV/month. 03.
Free cash flow for price 6. 5.
Profitability and operational performance
The monthly base is 5.
39 to 5-
Average Year 5. 6. TTM ROIC is 8. 32 with a five-
An average of 9 years. 07. TTM ROE is 8. 40 with a five-
An average of 9 years. 59.
Financial strength: strong balance sheet, $222 in cash, shortage of funds
Regular assets held.
The current financial ratio of the company is 2, financial stability.
Interest insurance of 78 and 226. 82.
Total Debt/equity (MRQ)is . 13.
As a result, the company looks conservative, financially stable and in a strong cash position.
Sales growth at FiguresShinmaywa is stable at 5-13%year period.
Capital expenditure was strong, reaching 25% per cent and earnings per share increased by 75% per cent.
All data is superior to industry and sector, far ahead of the Tokyo exchange.
The dividend is 7 yen per share and the yield is 1.
46% and repurchase rate of return 3.
37% makes the total yield 4. 83%.
The company\'s payment rate is 13. 9%.
There seems to be an opportunity to increase dividend spending, especially given the sustainable payment of dividends due to stable free cash flow generation and historical growth in dividend spending.
Calculating Intrinsic value calculating the intrinsic value of Shinmaywa and calculating the intrinsic value of any business is somewhat subjective.
I used the DCF method to achieve the intrinsic value of the company.
Using the DCF method and assuming the following growth rates and discount rates, the following six scenarios were plotted to determine the approximate fair value of the business.
The growth rate based on the growth of historical book value is 4.
Compared to economic stagnation and negative growth, the growth rate was 4%.
2% have been simulated.
The discount rate is based on current market and company indicators, and in order to obtain an estimate below fair value, a conservative and less conservative number has been simulated.
The average value between all six of the above cases is estimated as intrinsic value, and the share price is currently traded at a discount of 16%.
Judging from the current stock price, the market seems to be skeptical about whether xinmeihua is likely to maintain positive growth in the future.
Competitive companies operate in multiple sectors and it is difficult to measure competition directly.
Kyokuto Kaihatsu Kogyo, another heavy industry group operating in the field of dedicated vehicles, parking systems and environmental systems, as well as Shinmaywa.
Kyokuto does not operate the aircraft sector and focuses mainly on the Japanese market.
Here are some comparisons of operational and performance indicators between the two companies.
Source: MorningstarWhilst, based on the above indicators, Kyokuto highlights better profitability and operational performance, and Shinmaywa is the first choice based on the overall evaluation of the company.
In the past few years, the company\'s sales have decreased.
In particular, in April 2017, sales in the aircraft sector fell by 17%.
As other departments maintain stability or develop their business, this puts pressure on the group\'s overall lag results.
Opportunities for the aircraft sector to reverse negative sales trends are still high, about $1. 65 billion-
Dollar-to-dollar deals
Amphibious aircraft of Indian defense forces.
The agreement has been discussed for several years and there have been some delays and setbacks in discussions between the governments of India and Japan.
It seems that the Indian government still wants this agreement to continue, especially when they want to improve the naval capacity to operate around Andaman and the island of nikobal, as well as strengthening the capability and manpower support of naval vessels with spare vessels.
If the deal is successful, I believe it will be a positive catalyst for the stock price.
In addition, looking at the various businesses of the company, there are several opportunities to increase growth.
In particular, the specialized truck department is a bet (public)
Investment at the municipal level in Japan, as this seems to be a major customer.
Increased government and municipal spending on public infrastructure could also benefit water treatment and environmental systems.
On the basis of strong economic growth and the upcoming Summer Olympics in Tokyo in 2020, this is guaranteed.
There are many risks at risk that may affect the value of Shinmaywa.
As shown in the latest quarterly results, Shinmaywa management predicts that operating profit guided throughout the year is about 16% and net profit is about 20% (April 2017-March 2018).
Sales are expected to remain flat compared to last year.
I believe this has been taken into account in the stock price, and any surprise of the rise may be positive.
Another risk is the election that Japanese Prime Minister Shinzo Abe called for later this month.
If he and his party lose a majority in parliament, it could affect some of the economic and social reforms Abe wants to make in the coming years.
As this may have an impact on public investment, the business of Shinmaywa, in particular for its special-purpose vehicles, may be affected.
There are some risks in the market regarding the new Mawa aircraft and industrial machinery business.
In its aircraft business, it cannot be U-
2 amphibious aircraft may have a negative impact on their ability to recover the full investment and manufacturing costs of the project.
In addition, with regard to the parts provided by commercial aviation manufacturers such as Boeing and Airbus, this is a long time slow
The decline in this business will affect sales orders.
I believe that in terms of the sales figures that Shinmaywa has released for its aircraft division, we have seen the above impact.
This may also apply to its industrial machinery business, and part of Shinmaywa\'s activities in wire processing and film coating are provided to the automotive industry.
The long-term slowdown here may also affect the development of sales orders.
All in all, I think Shinmaywa at this time is still a compelling buying opportunity.
Look at the valuation indicators, and the business looks undervalued according to the classic value indicators (
P/B, EV/CFO, P/E)
As well as the conservative figures when conducting DCF analysis.
Shinmaywa has a history of sustained strong growth in book value.
I think the business is very diverse, leading in many industries, allowing it to manage any slow business for a long time
Completed in one of its business areas.
Finally, from the growth prospects of Shinmaywa\'s mainly active markets in Japan and Southeast Asian countries, the business growth prospects are promising.
I think Shinmay wa is currently undervalued based on the above, and this is a compelling purchase opportunity.
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