Sumiken Mitsui Road Co Ltd (1776:TYO) Analysis

Sumiken Mitsui Road est une entreprise nippone que nous avons déjà étudié en fall 2017As a reminder, this company has been active in the construction sector in Japan since 1948.

Valorization

Despite a rise in the share price of 10% since our last analysis, Sumiken Mitsui Road still remains extremely cheap by any measure. Indeed, it is trading at

• 6.78 times current recurring earnings
• 6.64 times average recurring earnings
• 0.66 times tangible assets
• 0.19 times sales
• 6.62 times current free cash flow
• 9.02 times average free cash flow

The company is so cheap that its enterprise value is negative. This means that the stock is currently trading for less than its cash reserves. In other words, you can buy yen at a discount...

THE dividend yield est correct, avec 2.24%, A priori ce n'est pas extraordinaire, mais il s'explique par un distribution ratio archi-conservateur de 15% par rapport aux bénéfices et par rapport au free cash flow. Sumiken Mitsui Road possède donc une marge substantielle pour faire progresser le revenu de ses actionnaires dans le futur. Elle ne s'est d'ailleurs pas privée de le faire dans le passé, sur un rythme annuel moyen impressionnant de 21.67% (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 solidity of the Japanese manufacturer's business model. Sumiken clearly succeeds in creating value for its owners, and this is reflected in the share price which has almost quadrupled over the last ten years.

Les réserves de liquidités sont bonnes, avec un current ratio en hausse, à 1.43, et un quick ratio de 1.37. La gross margin est cependant faible, à 10.76% (en très légère baisse). En toute logique, la marge nette et de free cash flow sont également menues (2.79%, resp. 2.85%). La rentabilité est à peine meilleure, avec un ROA de 3.66% (en baisse), un ROE de 9.67% et un CFROA de 5.47%.

From a debt perspective, however, it is much better, since the debt is simply non-existent.

The number of shares outstanding is stable, which avoids any dilution of shareholders' assets.

Conclusion

Sumiken Mitsui Road is really very cheap. No analysts on the horizon, very few institutions, this small company of 486 people vegetates in the no man's land of the stock market. It is so neglected that you can actually buy cash at a nice discount.

Certainly, it is not a monster of profitability. The margin is low, the overheads are quite high, as are the capital expenditures. With Sumiken we are certainly not in the school of Warren Buffett.

Nevertheless, the small Japanese construction company is solid, which is corroborated by the absence of debt, an F-Score (Piotroski) of 7 and a Z-Score (Altman) of 2.4. These two indicators tell us that Sumiken not only has a low "chance" of going bankrupt, but also, thanks to the F-Score, that its stock is likely to outperform the market.

I believe that the price should at least double to reflect the intrinsic value of the Japanese company. The dividend should do at least as well. The buy signal is therefore still as strong as ever.