Riken Keiki Q2 Update

	7734
Price	¥ 1036.000
Market Cap	¥ 24.04 B ($ 208 M USD)
P/E TTM	9.2 x
Div yield	1.7 %
P/BV	0.77
ROE	8.4 %
ROIC	12.2 %
Gross Margin	47.4 %

Riken Keiki recorded yet another outstanding quarter. That is a string of improving results over that last few years. The first half sales increased 7% but income increased 32%. And what strikes me about the recent company performance is the steadily improving margins. So far this half the gross margin is 47.4%. And from 2009 to 2014 the margins were 40.3%, 42.9%, 40.0% 42.6% and 46.7%, respectively. Operationally, the company must be doing something right, or it could be favourable effects of the exchange rate, or both. Foreign sales are just 22% of total sales.

For any foreign investor in Japanese stocks, any recent good news is overshadowed by the terrible Q2 GDP numbers. The country slipped into recession as it followed the previous quarter's 7.3% GDP drop with a 1.6% GDP drop. This caused a even further slide in the exchange rate. Today a dollar costs ¥106. However, I am stinking to Japanese investments for now because I don't think there can be sustainable pressure on the Yen. The Japanese current account is still positive this year, meaning that more money flows into Japan than out. In fact, I think I am going to buy some more Riken Keiki shares!