NIHON DENGI : A cheap Japanese stock


NIHON DENGI (JP: 1723 )


Nihon Dengi is a kind of stock that the late Walter Schloss probably would cherish. Only that this one trades outside United States.


Nihon Dengi, established in 1959 engages in designing of building automation and factory automation. It’s a pioneer of the building automation engineering in Japan and provides a system for optimal integration of applications across various buildings like office buildings, hospitals and hotels. It also sells control equipments like thermostats, flow meters and industrial valves.


For example, it implements energy saving measures in factories. Its Industrial Instrumentation segment is engaged in the design, construction, maintenance and inspection of automated control systems for food and chemical production facilities. 
Nihon Dengi trades at ¥590 and with 8.20 million shares outstanding, market cap comes out to be ¥ 4.84 billion.


That’s a very attractive discount considering the following –

  • Total current assets of ¥ 16.3 billion including cash around ¥6 billion and total liabilities of ¥ 8.5 billion giving net-net working capital value at ¥7.8 billion. PRICE / NCAV  comes out be  0.62 
  • Tangible book value of ¥ 11 billion giving Price / book of 0.44
  • Positive EBIT and positive net income in the last 10 years.
  • Positive free cash flow in the last 10 years .
  • Negative enterprise value of ¥ 500 million.
  • 4 year Average CROIC of  around 7%
  • Dividend yield of 5 %
Below is the 9 year record of sales and EBIT (all figures in million ¥)


YEAR SALES         EBIT             EBIT margin


2011        21800          1400       6.42%
2010        21510          1650       7.67%
2009        23160          1900       8.20%
2008        21710          1300       5.99%
2007        21380          1160       5.43%
2006        19400          488         2.52%
2005        20780          899         4.33%
2004        20520         1150        5.60%
2003        22410         1150        5.13%


And here are the cash flows of the last 5 years:

Year    Sales  CFFO  CAP-EX    FCF   Fcf margin fcf/share
2011  2180 0 695     -200.00      495 2.27% 60.37
2010  21510 1128     -140.00     988   4.59% 120.49
2009  23160 1806     -157.00    1649 7.12%         201.10
2008  21710 1317     -236.00    1081 4.98%         131.83
2007  21380 1477     -188.00    1289 6.03% 157.20

Although EBIT margins have remained stable, operating cash flow  declined substantially in 2011. I would prefer not see this but still we do have a nice margin of safety from assets perspective. Employee Stock Ownership Association owns 12.69% of the stock.

Overall, a good stock to own in a basket of Japanese net-nets stocks.