Wednesday, May 15, 2013

Riken Keiki Reports 2012 Earnings Up 22%

Riken Keiki (7734:TSE) recently announced 2012 earnings which rose 22% yoy, while revenue dropped slightly yoy, as the following chart shows.

Anyone dealing with Japanese stocks must bear in mine that the Japanese yen dropped dramatically in the last year. A US dollar was worth 80 yen initially and now it is worth 102 yen.

The drop in revenue could be partly attributed to the 2011 Japanese tsunami, which increased demand for Riken Keiki's products in 2011. The different directions between the revenue and earnings was due to a $1 bil decrease in cost of goods sold in 2012, and, to a less extent, greater one-time charges in 2011. The company management appears to be good at reducing costs to improve profits.

The company, unfortunately, forecasts lower profit in 2013. Which is surprising considering the recent drop in the yen. The company also proposes a 17 yen dividend, which is a 2.5% yield.

Riken Keiki is a small cap company that makes gas detectors. Other than their financial reports, which are in Japanese, there is almost no news on the company. I own this stock because I believe the company holds a valuable niche in industry. What it does must be hard to duplicate well. As well, it trades near net-net. And, being a Japanese company market cap at about $150 mil USD, the company is below the radar of the big money managers. So, I have a lot of margin for my lack of information.

On a final note, starting with this blog entry, I will reveal my estimated intrinsic value of my stocks if it exists.

My intrinsic value for Riken Keiki is 930 yen. It is 777 yen today.

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