09 July 2014

Japan Foods - Ajisen Discount

Bought Japan Foods a few days back after having watched this stock for some time. Guess I'm still very much in a Japan mood after visiting the land of the rising sun on a holiday recently. Is this a bias effect?

The company appears to be in a growth phase with reasonably good margins. Scale likely matters in such a business. It appears to be expanding with some initial footprints in various Asia-Pacific countries. Its latest annual report hinted at likely expansion of its overseas outlets.

Financials appear reasonable, though not necessarily with much margin of safety at the moment. Numbers are suggestive of its growth. DPS and EPS has continued to rise year on year after an initial dip, with dividend standing at 2.8%, and more coming. Total dividend payout for 2014 is expected to be 2.6 cents in total, representing a total of 53% of net profit. The Board intends to recommend dividends of at least 40% of the Group's consolidated net profits, an increase from its current 35% level. With that, it has maintained a steady year-on-year increase in its dividends paid out.

Interestingly, the founder, Takahashi Kenichi, who is still driving the company was a mechanical engineer.  And he continues to hold the majority stake of almost 66% in the company. His pay for FY2014 was $716,000, of which 64% was bonuses.

Ratios & Other data
ROA (%)21.4810.1513.8620.5720.14
ROE (%)40.1616.0819.6028.1826.85
DPS (SGD)0.00330.00450.00660.01270.0073
EPS (SGD)0.02880.01500.02150.03700.0421

Peer Comparison Ø

Industry PeerROA(%)ROE(%)P/EP/BVEPSDPSDiv Yield(%)
Japan Foods Holding Ltd18.4324.1814.713.660.04210.00732.80
ABR Holdings Limited5.196.8018.071.600.04080.02503.29
Neo Group Ltd16.6635.4521.166.610.04440.02672.84
Sakae Holdings Ltd4.578.5914.301.490.03840.02003.64
Soup Restaurant Group Limited13.3318.14145.574.65-0.0075-

[Source: POEMS, dated 9 Jul 2014]

From the peer comparison, Japan Foods stands up well in terms of its ROA and ROE.  Its P/E is at a more reasonable level compared to the rest.  In terms of P/BV, it appears to be in the same league as Neo Group and Soup Restaurant, commanding a premium.

What came as an unexpected added surprise was this:

Ownership of the shares came with an Ajisen Family Card that offers various discounts at their restaurants (largely at 10%), though only valid for a year. Cool, nonetheless! And I thought Soup Restaurant was the only one that did this (Soup Restaurant - Slurping with a Discount).

I'm not too impressed with Ajisen Ramen itself though. Have tasted better. Food tends to be too oily. Fruit Paradise is interesting. Its outlet at VivoCity used to be packed. It seems a lot quieter these days though. Have not had the opportunity to try its other bands.

Disclaimer: This is not a call to buy or sell. Make your own assessment before investing.

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