TIGERS POLYMER CORPORATION is a Japanese manufacturer of rubber hoses and products. The company was founded in 1938, the year of the tiger, from which it took part of its name. The small company manufactures and sells household hoses, used for vacuum cleaners, washing machines and air conditioners, as well as industrial hoses, used in general industry, civil engineering and housing. It also manufactures and sells rubber sheets, which are used in packaging and shock-absorbing materials. Finally, it also manufactures and sells automotive parts and molded rubber and resin articles. Tigers Polymers has 2,000 employees.
Valorization
The Japanese company is trading at a very attractive price,
- 7.7 times current recurring earnings
- 8.7 times average recurring earnings
- 0.53 times tangible assets
- 0.36 times sales
- 13.43 times current free cash flow
- 21.04 times average free cash flow, this being due to strong capital expenditure in 2014 and 2017.
EBIT and EBITDA represent 34.45% of the enterprise value, which confirms that Tigers Polymer is currently a very good opportunity.
From a dividend point of view, it is apparently not a party, since the yield only amounts to 1.96%. This is nevertheless explained by a prudent distribution ratio of:
- 15.13% compared to current profits
- 17.01% compared to average profits
- 26.27% compared to current free cash flow
- 41.15% compared to average free cash flow
The tiger therefore still has room to continue to increase its dividend in the future, as it has done in the past at an average annual rate of 8,45% (last five years). Note, however, that distributions remained static between 2015 and 2016, as well as between 2017 and 2018.
Balance sheet & result
Just like the dividend, profits, asset values and cash reserves are growing over the long term, which proves the solidity of the Japanese manufacturer's business model. Tigers Polymers is clearly succeeding in creating value for its owners and this is reflected in the share price which has more than doubled in the last five years.
Cash reserves are very comfortable, with a current ratio of 2.78 (up) and a quick ratio of 2.35. The Japanese company therefore has no worries about meeting its current financial obligations.
The gross margin is slightly down, at 20.6%, for a net margin of 4.64% and a free cash flow margin of 2.67%. This is not huge, but sufficient since the tiger manages to generate profits and cash on a regular basis.
Profitability is down, with an ROA of 4,59%, an ROE of 6,99% and a return on cash flow from assets of 9,16%.
Long-term debt to assets is low at just 1.29% (down). Debt is just 0.09 times equity. The Japanese company would be able to pay off its entire debt in less than four years using its average free cash flow.
Finally, note that the number of shares in circulation is stable, which avoids any dilution of shareholders' assets.
Conclusion
Tigers Polymers is a small, simple company that makes and sells unglamorous products. It has a long history, is very low in debt, has good cash reserves, and is trading at a very cheap price. Its industry is quite defensive, which is confirmed by a beta of 0.93. The stock's volatility has only been 10% over the past year.
Even if profitability is not its first quality, the Japanese tiger is sitting well on its legs. The Z-Score (Altman) of 3.0 and the Z-Score (Piotroski) of 6 confirm that we are in the presence of a solid company that is not ready to go bankrupt.
I believe the stock should triple to reflect its intrinsic value. I bought a slice in April, currently suffering a loss of 11%. The stock's underperformance since this spring is currently the only reason I could doubt Tigers Polymers. If this trend were to continue I might have to part ways, depending on my opinion. stop loss procedure. So, to be continued.
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Both turnover and profit have not increased for 3 years and profitability is indeed not extraordinary. I am not sure that this company really creates value for its shareholders, which is also reflected in the share price which has only gained 25% in 18 years…
Be careful, this is the characteristic of all Japanese stocks. They have been totally neglected for decades (and my contrarian side loves it, because it offers us an incredible quantity of cheap stocks). Tigers Polymers follows more or less the same progression as the Nikkei over the period you cite (it has however done better than the index over the last 5 years, but less well this last year it is true).
Regarding profits, let's not forget their fickle nature! Over 5 years, however, they have increased. And cash flow has been positive each of the last five years, which means that cash reserves have also increased each year, as have assets. So there is indeed value being created. On the other hand, if the market persists in not wanting to recognize it, it's true that it will pose a problem. As the saying goes, the market is always right.
Activation of the stop loss trading order