5965.JP - Fujimak Corp

[writser]

I did some more digging.  You can look at the annuals at the TSE website and from those you can at least copy/paste to translate through Google. Some extra stuff I found so far:

 

The 1.1 billion JPY in investments can be split out in the following way:

 

- 922k listed stocks

- 156k unlisted stocks

- 35k partnerships.

 

It would be interesting to learn a little bit more about their pension obligations. As far as I can understand they voted to join a public pension system in 2013. This system either looks horribly underfunded or I misunderstand something:

 

We join the "Tokyo furniture Pension Fund", is the company policy of dissolved at the delegates' meeting held in September 2013. By this policy resolution, the occurrence of costs associated with the fund dissolution is expected, but to determine the amount reasonably for uncertainty is often at this time will be difficult.

 

[ .. ]

 

(March 31, 2012) matters related to the funded status of (1) the entire system

The amount of pension assets

74,712 one million yen

The amount of the obligation of the pension calculation

127,871 one million yen

Deductions

-53,159 one million yen

 

I'm wondering what costs they would have to incur to get rid of their current pension fund. So far I still haven't found anything with regards to the 'other' balance sheet items. Take all of this 'research' with a grain of salt - could very well be possible that Google Translate and I completely misunderstand the annual report :) .

[west]

I've been spending some more time on this. Looks cheap indeed. Has anybody been able to read the annual report? I can translate the stuff on their homepage but I can find only the short 'Financial Results' releases there. Footnotes etc. are lacking. I can download the complete annual from Morningstar but I cannot translate that one using Chrome (it is DRM protected .. ).

 

I'm asking because the balance sheet still holds some mysteries for me. Most notaby:

 

1. There are roughly 0.6 billion JPY ST assets, 1.6 billion LT JPY assets and 1.6 billion JPY ST liabilities qualified as 'other'. No clue what these are.

2. I am wondering what the 1.1 billion JPY investment securities are. As Hielko, another forum reader, pointed out, it is relatively common in Japan to own an equity stake in your business partners. Is this what these are? And are these listed securities?

 

Any help would be appreciated. Might as well shoot IR an email in English. Let's see what happens :) .

 

writser,

 

If you open up the financials in a PDF reader (I use Preview on MacOS X) you can copy the line item descriptions and paste them into Google translate:

 

https://translate.google.com/

 

Google translate doesn't do a good job with large chunks of Japanese text, but it's pretty good for translating small chunks of text, like line item descriptions.

 

TBH though, I'm mostly investing in these companies blind.  If I can't completely read all the information available, my thinking is I shouldn't delude myself into thinking I can understand enough about the company to have an intelligent opinion if I can only understand some of the data available.  I've looked at enough US companies where once you dig into the nuances a completely story shows up than what pops up on first glance.  And understanding just part of the story would have mislead me.

 

So, if I know I can't understand "enough", I don't bother trying to understand anything.  Otherwise I'm just tricking myself into having a false confidence.

 

Instead I keep my position sizes very low in Japan (2% position sizes max) and do a basket of them.

 

(Rambling further- Basic balance sheet analysis, like seeing cash, A/R, A/P, etc. stuff is probably worth the effort of translating the line items.  I wouldn't worry about it too much past knowing whether the company might hit a liquidity crunch or not.)

 

[randomep]

I did some more digging.  You can look at the annuals at the TSE website and from those you can at least copy/paste to translate through Google. Some extra stuff I found so far:

 

The 1.1 billion JPY in investments can be split out in the following way:

 

- 922k listed stocks

- 156k unlisted stocks

- 35k partnerships.

 

It would be interesting to learn a little bit more about their pension obligations. As far as I can understand they voted to join a public pension system in 2013. This system either looks horribly underfunded or I misunderstand something:

 

We join the "Tokyo furniture Pension Fund", is the company policy of dissolved at the delegates' meeting held in September 2013. By this policy resolution, the occurrence of costs associated with the fund dissolution is expected, but to determine the amount reasonably for uncertainty is often at this time will be difficult.

 

[ .. ]

 

(March 31, 2012) matters related to the funded status of (1) the entire system

The amount of pension assets

74,712 one million yen

The amount of the obligation of the pension calculation

127,871 one million yen

Deductions

-53,159 one million yen

 

I'm wondering what costs they would have to incur to get rid of their current pension fund. So far I still haven't found anything with regards to the 'other' balance sheet items. Take all of this 'research' with a grain of salt - could very well be possible that Google Translate and I completely misunderstand the annual report :) .

 

Writser, what year annual report you talking about? I can completely translate the latest annual report.

[writser]

I was trying to translate this one:

 

https://disclosure.edinet-fsa.go.jp/E01EW/download?1405981373004&uji.bean=ee.bean.parent.EECommonSearchBean&uji.verb=W0EZA106CXP001003Action&SESSIONKEY=1405981372545&s=S1002EEB

 

Managed to do so finally by downloading it in XBRL format from TSE. Note that this report is 90 pages, are you sure we are talking about the same document? I couldn't find that one on the Fujimak website.

[randomep]

I was trying to translate this one:

 

https://disclosure.edinet-fsa.go.jp/E01EW/download?1405981373004&uji.bean=ee.bean.parent.EECommonSearchBean&uji.verb=W0EZA106CXP001003Action&SESSIONKEY=1405981372545&s=S1002EEB

 

Managed to do so finally by downloading it in XBRL format from TSE. Note that this report is 90 pages, are you sure we are talking about the same document? I couldn't find that one on the Fujimak website.

 

I see what you are saying. I get all my docs from fujimak website (IR) isn't this good enough? It isn't as many pages as your link but it is has all the content required.

 

http://www.fujimak.co.jp/core_sys/images/news/00000273/base/003.pdf?1405986302

[writser]

Well, the complete annual contains at least *more* information. Major shareholders, insider ownership, segment splitouts and a splitout of their stock holdings, among others. Granted, maybe it is not all that important. For those interested I uploaded a rough translation here: http://www.writser.nl/fujimak/translated.htm .

 

I'm starting to like this. Market cap of the company is ~5.3 billion yen, for that you get at the very least:

 

* 3.4 billion yen in cash (net of all debt)

* 0.9 billion yen in listed stocks.

* 0.4 billion yen in investment properties.

* an operating business generating 0,9 billion of fcf on average over the past 5 years.

 

Obviously capital allocation is horrible but this is still dirt cheap. Still wondering about the pension situation. If somebody a little more knowledgeable about that could have a look at the footnotes in the uploaded annual report that would be really appreciated.

[Hielko]

Doesn't seem that the pension liability is significant.

[randomep]

Well, the complete annual contains at least *more* information. Major shareholders, insider ownership, segment splitouts and a splitout of their stock holdings, among others. Granted, maybe it is not all that important. For those interested I uploaded a rough translation here: http://www.writser.nl/fujimak/translated.htm .

 

I'm starting to like this. Market cap of the company is ~5.3 billion yen, for that you get at the very least:

 

* 3.4 billion yen in cash (net of all debt)

* 0.9 billion yen in listed stocks.

* 0.4 billion yen in investment properties.

* an operating business generating 0,9 billion of fcf on average over the past 5 years.

 

Obviously capital allocation is horrible but this is still dirt cheap. Still wondering about the pension situation. If somebody a little more knowledgeable about that could have a look at the footnotes in the uploaded annual report that would be really appreciated.

 

The biggest thing for me is the potential for growth in asia.

 

But, we should invert the issue. Why is the stock so depressed?

 

[west]

Well, the complete annual contains at least *more* information. Major shareholders, insider ownership, segment splitouts and a splitout of their stock holdings, among others. Granted, maybe it is not all that important. For those interested I uploaded a rough translation here: http://www.writser.nl/fujimak/translated.htm .

 

I'm starting to like this. Market cap of the company is ~5.3 billion yen, for that you get at the very least:

 

* 3.4 billion yen in cash (net of all debt)

* 0.9 billion yen in listed stocks.

* 0.4 billion yen in investment properties.

* an operating business generating 0,9 billion of fcf on average over the past 5 years.

 

Obviously capital allocation is horrible but this is still dirt cheap. Still wondering about the pension situation. If somebody a little more knowledgeable about that could have a look at the footnotes in the uploaded annual report that would be really appreciated.

 

The biggest thing for me is the potential for growth in asia.

 

But, we should invert the issue. Why is the stock so depressed?

 

Honestly?  It's Japan.  I've thought about why things are so cheap for a long time.  I think it's just psychology (and the lack of an active M&A market).  Kind of like in the 50s when Buffett was starting to invest.  Stuff was cheap because the market hadn't gone anywhere in 2+ decades.  When that kind of stuff happens, people think it's going to stay cheap forever.

 

The one fear I have with these Japanese stocks though is how long are they going to take to work out?  I know they will eventually, but, say, four or five years (like what Buffett did with the Washington Post) is a long time to wait if you're a normal human.

 

I guess that's another reason why I'm doing a basket based approach with Japanese stocks...

[frommi]

I noticed that Capex is very high in the last two years, is this because of the expansion?

[writser]

I would guess so. They opened a sales subsidiary in Thailand and factories in Vietnam and Cambodja during the past two years. Also, capex has been slightly on the low side for a couple of years.

[frommi]

Thanks for your ideas, Japan really looks like value investors paradise at the moment.

[Hielko]

Well, the complete annual contains at least *more* information. Major shareholders, insider ownership, segment splitouts and a splitout of their stock holdings, among others. Granted, maybe it is not all that important. For those interested I uploaded a rough translation here: http://www.writser.nl/fujimak/translated.htm .

 

I'm starting to like this. Market cap of the company is ~5.3 billion yen, for that you get at the very least:

 

* 3.4 billion yen in cash (net of all debt)

* 0.9 billion yen in listed stocks.

* 0.4 billion yen in investment properties.

* an operating business generating 0,9 billion of fcf on average over the past 5 years.

 

Obviously capital allocation is horrible but this is still dirt cheap. Still wondering about the pension situation. If somebody a little more knowledgeable about that could have a look at the footnotes in the uploaded annual report that would be really appreciated.

 

The biggest thing for me is the potential for growth in asia.

 

But, we should invert the issue. Why is the stock so depressed?

 

Honestly?  It's Japan.  I've thought about why things are so cheap for a long time.  I think it's just psychology (and the lack of an active M&A market).  Kind of like in the 50s when Buffett was starting to invest.  Stuff was cheap because the market hadn't gone anywhere in 2+ decades.  When that kind of stuff happens, people think it's going to stay cheap forever.

 

The one fear I have with these Japanese stocks though is how long are they going to take to work out?  I know they will eventually, but, say, four or five years (like what Buffett did with the Washington Post) is a long time to wait if you're a normal human.

 

I guess that's another reason why I'm doing a basket based approach with Japanese stocks...

I think you are missing a big part of the reason of why stocks are cheap in Japan. They are also cheap because corporate governance sucks (from a shareholders point of view anyway): it's not a coincidence that tons of companies are extremely cash rich. You need psychology to change, but what's probably more important are fundamental changes (culture, laws etc). Abe seems to be trying to push for some change, but as long as shareholders aren't really the full owners of the company I think you are making a mistake to value non-operating assets such as cash and bonds at market value.

[west]

... I think you are making a mistake to value non-operating assets such as cash and bonds at market value.

 

Hieko, for me at least this is why I also like to pick companies with low P/Es and low P/Bs, with significantly growing BVPS, in addition to the capital structure agnostic approaches like EV/EBIT and ROIC.  For example, Fujimak has a P/E of < 5.0x, while earnings have been growing, and a P/TBV of 0.45x, while BVPS has been growing at ~12%+ per year.  I like to think these add a bit of a catalyst versus, say, JP:6249, which has over 80% of its value in cash and has crazy historic ROICs.  However, its P/E is greater than 20x.

 

[oddballstocks]

... I think you are making a mistake to value non-operating assets such as cash and bonds at market value.

 

Hieko, for me at least this is why I also like to pick companies with low P/Es and low P/Bs, with significantly growing BVPS, in addition to the capital structure agnostic approaches like EV/EBIT and ROIC.  For example, Fujimak has a P/E of < 5.0x, while earnings have been growing, and a P/TBV of 0.45x, while BVPS has been growing at ~12%+ per year.  I like to think these add a bit of a catalyst versus, say, JP:6249, which has over 80% of its value in cash and has crazy historic ROICs.  However, its P/E is greater than 20x.

 

Listen to west, he knows what he's talking about.  I own Fujimak and have been happy with it.  I think the approach of low P/E, low P/B and growing BVPS is probably better than the net-net approach I was initially taking in Japan.

[randomep]

Thanks for your ideas, Japan really looks like value investors paradise at the moment.

 

Ya I really see Buffett's point that the small cap opportunities are more numerous today and in his time.

 

Japan has plenty for example. I am sitting on a 30% gain in about 1 yr. That exceeds the Nikkei but they are heavily correlated. Buying Japan means betting on Nikkei, and I think we have a good chance for the index to go from 15k today to 20k. But to buy Japan you have to believe Kyle Bass is all BS.

[TwoCitiesCapital]

Thanks for your ideas, Japan really looks like value investors paradise at the moment.

 

Ya I really see Buffett's point that the small cap opportunities are more numerous today and in his time.

 

Japan has plenty for example. I am sitting on a 30% gain in about 1 yr. That exceeds the Nikkei but they are heavily correlated. Buying Japan means betting on Nikkei, and I think we have a good chance for the index to go from 15k today to 20k. But to buy Japan you have to believe Kyle Bass is all BS.

 

I don't think that's true - it just means you'd stay away from Japanese companies whose value is largely dependant on cash/JGBs or whose business is dependant on imports. The others would be temporarily impaired but a currency collapse but would probably be able to raise pieces along with inflation and you'd have a margin of safety too.

[randomep]

Thanks for your ideas, Japan really looks like value investors paradise at the moment.

 

Ya I really see Buffett's point that the small cap opportunities are more numerous today and in his time.

 

Japan has plenty for example. I am sitting on a 30% gain in about 1 yr. That exceeds the Nikkei but they are heavily correlated. Buying Japan means betting on Nikkei, and I think we have a good chance for the index to go from 15k today to 20k. But to buy Japan you have to believe Kyle Bass is all BS.

 

I don't think that's true - it just means you'd stay away from Japanese companies whose value is largely dependant on cash/JGBs or whose business is dependant on imports. The others would be temporarily impaired but a currency collapse but would probably be able to raise pieces along with inflation and you'd have a margin of safety too.

 

In a hypothetical yen/JGB crash the whole economy is affected. Every section is dependent on trade. For example you implied export companies will do ok but they also have to import their raw products. In an inflationary environment a company may not be able to pay their bills because their revenue from yesterday's sales cannot pay for COG because the cost has risen higher than yesterday's sale. i.e., all economies collapse from high inflation.

 

But to me that is a moot point. Emperical evidence all points to an overwhelming tendency for the yen to deflate w/o government intervention.

 

Nikkei 20,000 here we come!

 

[randomep]

 

Q1 earnings are out. Sales down 6% yoy. Earnings -38 yen vs. 3.5 yen a year ago. OUCH.

 

I am not losing faith though, I got a 3 year horizon to wait for the thesis to play out.

[west]

 

Q1 earnings are out. Sales down 6% yoy. Earnings -38 yen vs. 3.5 yen a year ago. OUCH.

 

I am not losing faith though, I got a 3 year horizon to wait for the thesis to play out.

 

I'm guessing you're talking EPS?  Didn't they make ~100 Yen EPS just last quarter, which would more than offset this loss?

 

For what it's worth, I don't think Japanese companies, especially overlooked ones, manage their earnings quite like US companies do...

 

Imho, I would put this company on the back burner and forget about it.  Realistically none of us can really have a complete understanding of the company due to the language barrier, so we're just deluding ourselves if we think otherwise.  And we definitely should not get caught up in quarter to quarter earnings fluctuations.

 

Stay diversified my friend.

[randomep]

 

Q1 earnings are out. Sales down 6% yoy. Earnings -38 yen vs. 3.5 yen a year ago. OUCH.

 

I am not losing faith though, I got a 3 year horizon to wait for the thesis to play out.

 

I'm guessing you're talking EPS?  Didn't they make ~100 Yen EPS just last quarter, which would more than offset this loss?

 

For what it's worth, I don't think Japanese companies, especially overlooked ones, manage their earnings quite like US companies do...

 

Imho, I would put this company on the back burner and forget about it.  Realistically none of us can really have a complete understanding of the company due to the language barrier, so we're just deluding ourselves if we think otherwise.  And we definitely should not get caught up in quarter to quarter earnings fluctuations.

 

Stay diversified my friend.

 

West, what do you mean "put it in the back burner"? if you hold the stock? Are you saying you would sell?

 

 

[writser]

I think he means hold it & don't spend too much time on it.

[oddballstocks]

Yes, all my Japanese holdings on the back burner.  I'm going to get kicked out of being a value investor for what I say next but here it goes..

 

With these stocks I basically ignore them.  I log in and look at their price a few times a week.  If the stock suddenly starts to appreciate I'll look and see if there's a filing or news release.  If the price drops like crazy I'll look at their results as well.  Otherwise I do nothing, literally nothing.  I have a few that have been mostly flat or slightly down for two years, I haven't looked at their financials since I purchased.  If I did I know what I'd see, a company that hasn't really changed since I purchased it.

 

As west said just sit back and enjoy the ride.  These things do appreciate given enough time.  Sometimes it's quick, I've had a number go up 50-100% in a matter of days or a week.

[randomep]

I think he means hold it & don't spend too much time on it.

 

whew I feel much better, although looking for confirmation from fellow investors can be a dangerous thing!

 

[cobafdek]

If the price drops like crazy I'll look at their results as well.  Otherwise I do nothing, literally nothing.

 

Imho, I would put this company on the back burner and forget about it.  Realistically none of us can really have a complete understanding of the company due to the language barrier, so we're just deluding ourselves if we think otherwise.  And we definitely should not get caught up in quarter to quarter earnings fluctuations.

 

Do you guys buy a full position at the outset, albeit understandably a small percentage (say 0.5 - 2% of portfolio), and intend never to buy more?  Or do you leave room to average down, e.g., buy a very small position initially and then buy more to reach a small position if the price drops appreciably?

 

Admittedly, net-net investing will have to be different from the style of value investing that seeks a few large concentrated positions, and foreign net-net investing may be even more so.  So if you had access only to limited info (such as ft.com statistics and maybe some press releases, but no reliable translations of full annual reports), is the tactic of averaging-down out of the question for you guys?

 

I realize this question is a hypothetical, so feel free to make as many qualifications as you please.  Anyone else also feel free to chime in with your 2 cents.