Thursday, December 5, 2013

Why I Own Fujimak

I found Fujimak (5965:TSE) while looking for small Japanese net-nets. Although Fujimak is not a net-net, it got my attention for its great earnings. The stock trades at only 5 times trailing earnings. I have only seen this in very special situations. But from what I have seen Fujimak can earn this type of earnings regularly, and without much leverage. The only negative that stands out to me is that this is a Japanese microcap. Its current market cap is only $55 mil USD.

Fujimak makes kitchen equipment for commercial use. The company has been around since 1950. The company only provides investors online information in Japanese. The online data only go back six years. Their equity and earnings per share are shown below.

Equity and Earnings per share (yen)

I don't have any information prior to the six years. I can only assume that the company was just humming along when earnings took off around 4 years ago. The stock price currently is 860 yen. The expected income for fiscal 2014 is 130 yen.

But digging deeper, the data is peculiar. The income increase did not come from greater sales, it came from greater margins. And what an improvement this makes.

The following table shows the gross margin is relatively constant, but the profit margin benefited greatly from improved SG&A expenses. So the improved performance comes from selling possibly less and more profitably products. Other than that, I don't have much more to add because I can't read the reports in Japanese, and even if I could I don't think they would reveal much. But whatever the reason, the numbers, if true, is compelling enough reason to buy Fujimak.

Fujimak should also benefit from the current Japanese resurgance. The USD is worth 102 yen now. Between 100 and 110 is a wonderful sweet spot for Japanese exports. And I can tell that Fujimak is pushing its expansion into Asia. They recently opened an office in Vietnam.


  1. I wonder if they had an increase in business from the tsunami and their normal revenues and earnings will be lower. I wish I could find an english annual report.

  2. Nothing indicates to me that the tsunami was a good thing for business. In the context of the whole I don't think the tusnami affected that big a proportion of people in Japan. The revenue is pretty consistent, but the problem is the earnings are all over the place. Main cause seems to be SG&A and I don't think you would be able to get anything from their reports even if you understood Japanese. I had Japanese people translate parts of the report and there is no deep info. So this company is a big unknown.