Tiemco Limited – Q3 2016

TYO:7501 – 484 JPY

1kr50öreTIEMCO LTD. is a Japan-based company principally engaged in the planning, development, import, export and sale of fishing and outdoor products. The Company operates in three business segments. The Fishing Product segment provides lure fishing products, fly-fishing products and other fishing products. The Outdoor Product segment provides outdoor apparels under the brand Foxfire and other outdoor activity-related items. The Others segment is involved in the property and casualty insurance agency business and the real estate leasing business. – Google Times.

1. Adequate margin of safety (criterion a) or b) must be met): 

a)

  • P/NCAV < 1x
    • 0,36x 

&

  • EV/Operating earnings(5y&10y) < 3x
    • 5y =  -82x 
    • 10y = -26x 
      • Negative EV and positive operating earnings 5y and 10y.

b)

  • P/NCAV < 0,75x
    • 0,36x 

2. The risk of permanent loss is low:

2.1 The risk of bankruptcy is low (criterion a) or b) must be met):

a)

  • Debt/Equity < 25 %
    • 1,1 % 

b)

  • Z-score ≥ 3
    • 2,13 X

2.2 The company’s business model is not totally unprofitable (criterion a) or b) must be met):

a)

  • Positive retained earnings:
    • 398 M¥ 

b)

  • Positive aggregate operating income for the last ten years:
    •   308 M¥ 

3. The company does not have a shareholder unfriendly capital allocation:

  • Shareholder yield TTM ≥ -2 %
    • Dividend yield TTM = 2,5 %
    • Net buyback yield TTM = 12,2 %
    • Net debt paydown yield TTM = 1,3 %
      • =  16 % 

Other notes:

  • P/Net cash = 1x
  • P/TB = 0,3x
  • NCAV-burn rate Qx – Qx-4 (YoY) and Qx – Qx-1 (QoQ)
    • Qx – Qx-4 = +9,9 %
    • Qx – Qx-1 = +2,7 %
  • The Founder and Chairman, Sadahiko Sakai owns 16 % of the company.
  • Insiders together own 26 % of the company.
  • Other analysis of Tiemco:
  • Tiemco is a nano-cap stock: 14 M$ in market capitalization. The trading is very illiquid.

MoS

Disclosure: The author is long TYO:7501 when this analysis is published.

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