Hyoki Kaiun Kaisha (TYO 9362) - A Nanocap Logistics Company Efficiently Operating at 9% RoE, 6.8 P/E, and 4.5% Dividend at 0.6x BV / 0.39x ADJ TBV

A Short Sum of the Parts Analysis of A $18m Nanocap Logistics Company with 10 yr Net Income and Book Value CAGR of 8% and 9%.

Source: Google Maps, Hyogo Port Logistics Center

I am thematically very bullish on cheap Japanese logistics companies. There have been 2 very expensive buyouts in the sector recently (TYO 9055 & TYO 9099) and I suspect we’ll see many more.

Hyoki Kaiun Kaisha (TYO 9362) is a nanocap (~$18m USD) Japanese logistics company with 3 primary assets near Kobe. The stock has also gone practically nowhere in the last 20 years despite book value per share increasing from ¥950 to ¥3,900. Given its tiny size, few are looking at this name. It hasn’t been mentioned at all on X/Twitter and I couldn’t find any writeups.

This is a short writeup featuring a sum of the parts analysis which demonstrates 259% upside to conservative estimates of property values. This is actually not nearly as cheap (balance sheet wise) as many other logistics companies, but they have more efficient operations, so not being as cheap makes sense. They pay out a healthy dividend (4.5%) and have good operating metrics. It’s also cheap on earnings (5.6 P/E LTM and 6.8 forecasted P/E)

Key Metrics:

• Stock Price: ¥2,400

• Market Cap: ¥2.85b

• P/B: 0.62x

• P/E (Forecast): 6.8

• P/E (LTM): 5.6

• Current Assets: ¥3,978m

• Investment Securities: ¥2,154m

• Current Assets + Investment Securities: ¥6,132m

• Total Liabilities: ¥8,329m

Conservative Valuations of 3 Primary Assets:

• Hyogo Port Logistics Center: ¥4,599m

• Kobe Logistics Center: ¥3,250m

• Himeji Warehouse: ¥1,736m

Sum of Parts Valuation:

• Total Value of Logistics Assets + Current Assets + Investment Securities: ¥15,717m

• Deduct Total Liabilities: ¥8,329m

• Sum of Parts Value: ¥7,388m (¥6,207/share)

• Market Price: ¥2,400

• Upside to Conservative Fair Value: 259%

• Adj P/TBV: 0.39x

One reason why Hyoki Kaiun Kaisha may not be as cheap as Okayamaken Freight Transportation (9063) or Tohbu (9036) is its efficient operations. Return on equity for Hyoki Kaiun Kaisha is approximately 9%, compared to ~2.5% for Okayamaken and 1.4% for Tohbu. Hyoki Kaiun Kaisha also has a higher dividend payout ratio (~30%) which gives us a dividend yield of 4.5%.

Despite not being as cheap on balance sheet metrics, Hyoki Kaiun Kaisha boasts some strong operating metrics:

• Revenue 5yr CAGR: 6.55%

• Net Income 10yr CAGR: 8%

• Book Value 10yr CAGR: 9%

• Return on Equity: ~9%

Source: IR Financial Info

I own this stock as part of my cheap Japanese basket. It’s not my favorite logistics name, that honor goes to Nissin Corp (TYO 9066) followed by Keihin (9312), but given decent operating metrics and cheapness, I’m optimistic Hyoki Kaiun Kaisha will do well. Okayamaken Freight and Tohbu have a lot more balance sheet value, but they’re poorly run. I own all of these names.

Sum of the Parts Analysis / Valuation of Assets:

Below I conservatively estimate the value of each Hyoki Kaiun Kaisha property by using valuations of nearby logistics properties. I don’t normally do sum-of-the-parts writeups because if you need to do one, whatever you’re looking at usually isn’t cheap enough, but with only 3 assets, this was easy to do and I enjoy digging into these companies.

Below is worth reading if you want to check the assumptions used in my sum of the parts calculation above.

Property 1: Hyogo Port Logistics Center

• Location: Google Maps

• Year Built: 2020

• Land Area (m2): 10,395

• Floor Area (m2): 9,234

• Book Value (land+building+equipment): ¥3,007m

• Conservative market Value: ¥4,599

I’m using the Kobe Toyahama Logistics Center built in 1989 as a comparable property. It is located nearby, but it sits on land half the size of our property at 5,158 m2. 74% of the purchase price paid for this property was attributed to its land value. The property as a whole was appraised at ¥1,980m, which makes the land worth ¥1,465. Given our property sits on land a bit more than 2x the size, our property’s land value would be ¥2,930. Book value for our building/structure is ¥1,669. Given that its a relatively recent build, book value (which gets depreciated) is likely accurate. Just add this to the land value estimate and we’re at  ¥4,599.

This is CONSERVATIVE as buildings don’t appreciate, the land does. So the increase in valuation on the appraisal is due to land values increasing, but we’re only capturing 74% of that in this estimate.

Property 2: Kobe Logistics Center

• Location: Google Maps

• Year Built: 2010

• Land Area (m2): 10,058

• Floor Area (m2): 22,475

• Book Value (land+building+equipment): ¥2,315m

• Conservative market Value: ¥3,250

I’m using IIF Nishinomiya Logistics Center Center as a comparable property. It is appraised at ¥3,250m despite being built in 1997. Our property is significantly newer (2010) and based on my gut is better located (located on Port Island, an artificial island which connects to Kobe Airport). The comparable property sits on a slightly smaller parcel of land 9,997m2 and has less total floor area 16,692. Still, we are using the same value to be conservative.

Property 3: Himeji Warehouse (Multiple properties)

• Location: Google Maps

• Year Built: Various (5 buildings)

• Land Area (m2): 9,186

• Book Value (land+building+equipment): ¥1,393m (¥669m of this is a ship. I have no idea what this ship is worth, going with book value)

• Conservative market Value: ¥1,736m

I’m using IIF Hyogo Tatsuno Logistics Center as a comparable property. It’s appraised at ¥4,640m. It’s not a good comp as it’s pretty far away from our property further inland whereas our property is on Himeji Port. 66% of the original purchase price for this comparable property was attributed to land value. The property sits on 34,564 m2 of land and 66% of the appraisal value would value that land at ¥3,062m. Our properties are significantly better located, but let’s stick with this number. Adjusting for size (our properties sit on 9,186 m2), our land is worth ¥813m. Add back the book value of the buildings and ship and we’re at ¥1,736m.

Disclosure: I own shares in Hyoki Kaiun Kaisha (TYO 9362). None of this is investment advice. Everything in this post is my own opinion and I could be wrong. Do your own due dilligence.

Appendix:

Source: Latest securities report.

Further reading/research: https://en.japan-reit.com/report/shutoku/ great free resource to easily look up every property owned by every Japanese REIT along with acquisition cost + appraised value.