9628.JP San Holdings

[frommi]

This is the biggest funeral service company by sales in japan and is active since 1932. It trades at less than half of tangible book and i think around the value of cash and land in the books and this with a PE of 8.5 and EV/EBITDA of 2.8 (PE 8.5). The nearest competitor is Tear Corp (2485.JP) which trades at EV/EBITDA of 12 (PE~24). Tear Corp has higher margins and is owner operated and activly promoting their stock with stock splits etc. FCF generation for San Holdings over the last 5 years looks very healthy and they have invested in additional funeral halls over the last years.

 

The number of deaths in japan is growing by around 1-2% a year until 2050. The market for funeral services is very fragmented and San Holdings has around a 1% market share.

The management has a 10 year plan starting in 2009 and has already done some things like reorganization of the sub companies, margins have improved since then.

 

They have increased their normally very conservative guidance for the current year because of increased deaths and higher prices. (http://in.reuters.com/finance/stocks/9628.T/key-developments)

 

An article from 2009 about the funerals in japan: http://www.japantimes.co.jp/news/2009/10/22/national/funerals-a-growth-undertaking/

 

The investment thesis is very simple. This is already cheap, operates in a growing and stable market and there is potential for margin improvements.

 

I found the annual report of 2012/2013 in english, when someone has more data/reports i am really interested in it.

 

http://www.san-hd.co.jp/ir/pdf/2012annual_review_e.pdf

http://www.san-hd.co.jp/ir/pdf/2013annual_review_e.pdf

 

What i don`t like is that the management only has a very small amount of stock and i don`t know if they operate really shareholder friendly, but i didn`t find things that highlight the opposite either.