Analysis of Shinnihon Corp (1879:TYO)

SHINNIHON CORPORATION is a Japanese construction company that has been active since 1964. It is engaged in design, planning, construction/repair and civil engineering management, as well as the sale of buildings and subdivisions. It has 510 employees.

Shinnihon is a steal as it trades at just 4.7x recurring earnings, 1.19x tangible book value, 0.69x sales, and 5.25x free cash flow. I wish you luck finding a quality European or US company this cheap right now.

Du point de vue des dividendes c'est en apparence un peu moins bien, puisque le rendement ne se monte qu'à 1.82%. Mais si l'on y regarde de plus près, on constate que le distribution ratio n'est que de 8.56%!  Autrement dit, l'entreprise japonaise possède une marge énorme pour investir dans son propre développement et continuer à faire progresser son dividende dans le futur, même en cas de baisse substantielle du bénéfice! Shinnihon ne s'est d'ailleurs pas gênée jusqu'ici de faire croître les distributions qu'elle offre aux actionnaires, puisqu'elle l'a fait avec un taux de croissance annuel moyen de 18% sur ces cinq dernières années! Ceci nous montre encore une fois qu'une approche qui ne se focaliserait que sur le rendement en dividende nous ferait passer totalement à côté de pépites de ce genre...

Just like the dividend, profits, cash reserves and asset values are growing over the long term, which proves the strength of Shinnihon's business model. The Japanese company clearly succeeds in creating value over time for its owners and this is reflected in the share price which has more than quadrupled over the last five years.

Les réserves de liquidités sont très confortables, avec un ratio de liquidité générale de 2.09 (en progression) et un ratio de liquidité réduite de 1.87. Shinnihon n'a donc aucun souci pour honorer ses obligations financières courantes. Même si elle est en légère baisse, la gross margin est correcte, à 19%, pour une marge nette de 9.3%. Le rendement des actifs est quant à lui notable, et en hausse, à 19%, pour une rentabilité des capitaux propres de 18%.

As for debt, it remains at prudent levels, with a long-term debt-to-asset ratio of 6.4% (constantly declining for several years). To give a concrete picture, the Japanese company would theoretically be able to pay off its entire debt in less than a year using its free cash flow. If I dare to make a bad pun, there is no need to get worked up about it... The icing on the cake is that despite this low use of debt, the company does not need to finance its development by other means, such as a capital increase. The number of shares outstanding has indeed been stable for several years, which avoids a dilution of shareholders' equity.

Shinnihon is certainly active in a sector that is quite sensitive to the economic situation, this is reflected in the beta of the stock (1.35). Nevertheless, we can see that it is not only a very solid company, but that it is also trading at a significant discount. Although the stock has risen sharply in recent years, the price is still below its historical highs reached almost thirty years ago! I believe that the price should at least double to reflect its intrinsic value and that the dividend should do at least as well.

I have owned this stock since August 2017 and plan to hold on to it. The buy signal is still strong.