Analysis of Kaneko Seeds Co Ltd (1376:TYO)

KANEKO Seeds CO., LTD. is a Japanese company that has been active since 1947 in the sale of seedlings, gardening products, agrochemicals, agricultural facilities, as well as the design and construction of hydroponic plants, greenhouses and gardens. The company has 653 employees.

Valorization

Kaneko se négocie à un prix intéressant, de 12.8 fois les bénéfices récurrents, 1.08 fois la valeur comptable corporelle, 0.33 fois les ventes et 12 fois le free cash flow. Le dividende est certes assez modeste, avec un rendement de 1.64%, mais il s'explique par un distribution ratio prudent de 20.95% par rapport aux bénéfices et de 19.63% par rapport au free cash flow. L'entreprise nippone a donc encore du mou sous la pédale pour continuer à faire progresser son dividende dans le futur. Elle l'a d'ailleurs fait gentiment mais sûrement par le passé, sur un rythme annuel moyen de 4.4% sur ces cinq dernières années.

Balance sheet & result

Just like the dividend, profits, cash reserves and asset values are growing over the long term, which proves the strength of the small seed seller's business model. Kaneko is clearly managing to create value for its owners over the long term and this is reflected in the share price which has doubled over the last five years.

Liquidity reserves are sufficient to meet current financial obligations, with a current ratio of 1.48 (improving) and a liquidity ratio of 1.19.

There gross margin n'est pas énorme, avec 15.9%, mais elle est en progression. La marge de free cash flow se monte quant à elle à 2.75%. Le rendement des actifs est lui aussi assez modeste, mais en augmentation, à 3.43%. La rentabilité en cash flow des actifs est légèrement supérieure, à 4.10%.

As for debt, it is simply non-existent. As for the number of shares outstanding, it is stable, which avoids any dilution of shareholders' equity.

Conclusion

With Kaneko we are certainly not facing a profitability monster. It is rather a small, quiet company, which generates cash and profits on a very regular basis. It is helped in this by a low need for capital expenditure and non-existent debt. Its sector of activity also protects it from major economic and financial risks, which is confirmed by a beta of 0.87. Kaneko is the kind of stock that you can buy and forget about in a corner.

The stock is still below its all-time highs from the early 90s. I believe the stock is still quite heavily undervalued and should gain several dozen % to reflect its intrinsic value. The dividend should do at least as well.

I just took a position on Kaneko,