A rock solid logistics company that only ever lost money twice (2001 and 2009) over the last 40 years trading at dirt cheap valuations and returning cash
Great post as usual, Altay. Thanks as always for sharing your thoughts on these names. A few quick notes after looking at this:
1. I had a slightly different share count. The May 9 announcement notes that the company had 19,058,798 shares outstanding at March 31 excluding treasury shares. This checks out with the post-buyback announcement which noted that the 4.5MM shares bought back were 23.61% of the total share count (4.5 / 19.058798 = 0.2361). That suggests the share count post buyback should be 14,558,798. Let me know if I've missed something here.
2. The balance sheet at March 31 showed book value of 102.2B yen but of that 5.6B is attributable to non-controlling interests. After subtracting that, we are left with 96.6B. If we then subtract the 14B for the buyback, the adjusted book value is 82.6B. Using the share count above, that would suggest book value of 5,673 yen per share, which is slightly lower than your number, and a P/B of 0.79.
3. Nissin looks cheap on a P/E basis but less cheap on a EV/EBIT basis. It looks like they had roughly 28.9B in cash and 23.3B in debt at March 31, which implies net cash of about 5.6B. If you add the cost of the buyback (14B yen) it would imply net debt of 8.64B yen. That would suggest an enterprise value of 73.8B which is 8.1x the forecast operating profit of 9.1B. Operating income might not be the best way to look at this company, but I'd be concerned about using P/E here as net income is forecast to be higher than operating income for FY25.
Would be interested to hear if you have any thoughts on the above — and sorry for the long comment!
1. You are correct, I lazily used the average shares outstanding in the fiscal year.
2. You are correct here too. forgot to subtract non-controlling interests.
3. Operating profit is forecast to increase to ¥11b in FY 2027. They are forecasting ¥9.1b for FY 2025. Forecast is from their updated mid term plan. 11B operating income is a substantial improvement from ¥9.1b forecast for FY 2025. Using net income is a bit generous for sure, but they're also forecasting ¥9.8b net income in 2027, only a bit below the ¥10.3b figure i used for P/E in the headline.
Thank you for the corrections! Put this out hastily and it was a bit sloppy. I could have gone into length about some of the underlying assets, but did not do so. There's a lot more value in their assets than what's obvious on the balance sheet. But this is typically the case for logistics companies that have been around a long time. Nissin has been public since 1950 and carries a lot of assets at well below market value. The Shanghai assets's land value on the balance sheet is ¥875 million. Market price is orders of magnitude larger.
I think the market will wake up to this name sooner or later and it will trade above book.
Interesting post! Why do you say they likely have undervalued real estate on the balance sheet? As far as I can tell the real estate is mostly pretty core to the business so they are unlikely to offload a meaningful amount of it – am I wrong?
It is both undervalued and core. Land is recorded at cost on the balance sheet and generally appreciates. Much of these assets were purchased decades ago. You are correct that it won't be sold as its used by the business, but it provides some additional margin of safet / added value if an acquirer looks at them.
Continuous Compounding put together a useful excel file for Nissin Corp, you can read his writeup/grab the excel file here: https://continuouscompounding.substack.com/p/fellow-substacker-spotlight-altaycap
Great post as usual, Altay. Thanks as always for sharing your thoughts on these names. A few quick notes after looking at this:
1. I had a slightly different share count. The May 9 announcement notes that the company had 19,058,798 shares outstanding at March 31 excluding treasury shares. This checks out with the post-buyback announcement which noted that the 4.5MM shares bought back were 23.61% of the total share count (4.5 / 19.058798 = 0.2361). That suggests the share count post buyback should be 14,558,798. Let me know if I've missed something here.
2. The balance sheet at March 31 showed book value of 102.2B yen but of that 5.6B is attributable to non-controlling interests. After subtracting that, we are left with 96.6B. If we then subtract the 14B for the buyback, the adjusted book value is 82.6B. Using the share count above, that would suggest book value of 5,673 yen per share, which is slightly lower than your number, and a P/B of 0.79.
3. Nissin looks cheap on a P/E basis but less cheap on a EV/EBIT basis. It looks like they had roughly 28.9B in cash and 23.3B in debt at March 31, which implies net cash of about 5.6B. If you add the cost of the buyback (14B yen) it would imply net debt of 8.64B yen. That would suggest an enterprise value of 73.8B which is 8.1x the forecast operating profit of 9.1B. Operating income might not be the best way to look at this company, but I'd be concerned about using P/E here as net income is forecast to be higher than operating income for FY25.
Would be interested to hear if you have any thoughts on the above — and sorry for the long comment!
1. You are correct, I lazily used the average shares outstanding in the fiscal year.
2. You are correct here too. forgot to subtract non-controlling interests.
3. Operating profit is forecast to increase to ¥11b in FY 2027. They are forecasting ¥9.1b for FY 2025. Forecast is from their updated mid term plan. 11B operating income is a substantial improvement from ¥9.1b forecast for FY 2025. Using net income is a bit generous for sure, but they're also forecasting ¥9.8b net income in 2027, only a bit below the ¥10.3b figure i used for P/E in the headline.
Thank you for the corrections! Put this out hastily and it was a bit sloppy. I could have gone into length about some of the underlying assets, but did not do so. There's a lot more value in their assets than what's obvious on the balance sheet. But this is typically the case for logistics companies that have been around a long time. Nissin has been public since 1950 and carries a lot of assets at well below market value. The Shanghai assets's land value on the balance sheet is ¥875 million. Market price is orders of magnitude larger.
I think the market will wake up to this name sooner or later and it will trade above book.
Interesting post! Why do you say they likely have undervalued real estate on the balance sheet? As far as I can tell the real estate is mostly pretty core to the business so they are unlikely to offload a meaningful amount of it – am I wrong?
It is both undervalued and core. Land is recorded at cost on the balance sheet and generally appreciates. Much of these assets were purchased decades ago. You are correct that it won't be sold as its used by the business, but it provides some additional margin of safet / added value if an acquirer looks at them.