Tuesday, September 25, 2007

Beautiful (and small) But Unloved


While the the shares of metal bashers and manufacturers of all manner and variety in all geographical locales aroun the world, vault higher at seemingly increasing rates on the back of the US Fed throwing in the proverbial towel, and ditto for manufacturers of fertilizers, Asahi Industries (TSE Code#5456) remains neglected and unloved despite its in-vogue pursuits, trading at but 25 cents on the dollar it did at the start of 2006. But while chasers of "What's hot!" should (says I, by extension) find this attractive, value investors too should be (but are not...yet) frothing. For it trades for nary 0.75 historical book, (0.6x forecast book), LESS than 6x trailing and 5x forecast earnings (albeit they are the company's own estimates) , a 3% hitorical dividend yield, and a veritably unbelievable EV/EBITDA of 2.2X suggesting to the cynical that all the preceeding is vapor, and that the world, and Asahi Industries businesses will likely end - if not tomorrow - then shortly thereafter.

From a distance, she is as attractive as they come. Of course, the flaws may be many, and the future less bright than current foreseen by management. But if that will soon be the case for their core businesses of re-bar and fertilizer, then there is one monstrous market non-sequitir inflating throughout BOTH the developed and the developing world. Since I tend to maintain a healthy respect for markets, but understand that some companies - particularly new and smaller ones - do fall through the cracks, I would not be betting upon the imminent reversal of the gloval liquidity complex, but might suggest those interested in something between a 2-bagger and a 4-bagger, potentially do their own research on this little erstwhile stone that's dropped so prodigiously during the past 21 months.

9 comments:

Daniel said...

Very interesting. Unfortunately I haven't studied Japanese a full year yet and can't find any info in English at the company's web site...any suggestions?

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Rakuten said...

interesting indeed, especially if you consider the performance of Nihon Nohyaku(4997) over the same period. There is cleary a lot of unwinding still going on in the small/mid cap space, mostly due to redemptions, and no demand from domestic retail investors either (too busy playing FX). This will create plenty of opportunities. Asahi is by now means an exception though... just look at Gulliver or Marusei, there are plenty of increadibly cheap stocks in that space.

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Anonymous said...

I just checked the TSE site, found 16 entries (in English) with Asahi in title, and they all had 5 numbers in their code. Missing something? Thanks

Anonymous said...

That stock trades on JASDAQ. Though a value play it is very small cap and thinly traded besides it is not the only opportunity on JASDAQ other companies like Mitsuchi (#3439) trade at P/E of 6 and amazing 0.6 price to book with net profit growth of 23% and sales growth of 9% it looks dirt cheap just like many other stocks on Jasdaq. Of all the stocks traded about 75% have a PBR of less 1.5

"Cassandra" said...

anon - of course there is much value out there, BUT as a number of observers have pointed out in this forum, many should be.

Asahi Inds(5456) fascinates me and is anomalous because it is thematically attractive - irrespective of size and liquidity.

Mitsuchi to appears cheap having followed the typical Japanese path of no post-IPO support. Japan still conforms what used to be historical behaviour in the US of systematically selling IPOs in anticipation of their virtually inevitable underperformance.

Anonymous said...

I am interested to know more about investing in the Japanese stock market.
Could you advise on any good, English, investing websites and also stockbrokers for Japanese stocks.

Also, what stock screening software do you use, Bloomberg?

Mank thanks

"Cassandra" said...

Please email me at

rusol1@yahoo.com

...and we can continue this directly. Describing your screening requirements, and what Technology you use in non-Japanese markets would be useful to assist you.

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