Thanks for this. Fascinating idea. I discovered the company with a TIKR search on Japanese companies with net cash balance sheets, strong revenue growth and high returns on capital. Then came across your writeup. Do you have any thoughts on their possible overseas expansion plans? They seem to have an eye on M&A opportunities in the US, given their recent announcement of an alliance with Service First in California.
They have been looking at M&A for a decade now, and they have only acquired TESCO, which was smoothly done and turned around. The alliance with Service First is interesting news, I think they will spend at least 6 months to a year exchanging costumers and practices before making any decision, management is pretty conservative with capital and goals like is the norm in Japan.
I have looked at various maintenance brokers here in the US and my main concern is competition, I assume if they expand here, they will make sure to enter a niche where they can become market leaders similar to what they have there with the restaurant industry.
Thanks very much for the response. This makes sense - management does appear to be pretty conservative so you'd expect them to take their time on any overseas M&A activity. The stock looks far too cheap on the Japan market alone. Plenty of room to expand further into other niches such as retail, childcare, hotels etc as company has identified. Thanks again for a great writeup.
Very interesting write up. Thanks. Any idea how cyclical activities are? Emergency repairs are non-discretionary expenses and not so price sensitive compared to regular maintenance, so i was surprised to see strong decline in revs and profits during gfc. Thanks and keep up good work. Similar b2b maintnenance platforms are valued at 5x - 10x higher than shin maint (sms assist, lessen, servicechannel, … ) so this looks like a steal
I would say the weather for the HVAC unit which individually is the main revenue driver might be the main cyclical factor here. The implementation of P-Maint is trying to address that by scheduling services ahead.
Regarding the GFC, they changed their reporting right on 2009-2010 from FY ending on April to FY ending on February, so that year where revenues are going down 400M its 10 months. Profits definitively took a hit, at 20% GM with that scale is normal, I think that is one of their advantage, it is hard for other to scale and do 20%GM at this point, you can look at how different the impact of COVID was, even though it might have been a worse crisis for restaurants at least on 2020-2021. The exposure from restaurant chains has gone from 95% back then to 70% currently, that also helps.
Thanks for this. Fascinating idea. I discovered the company with a TIKR search on Japanese companies with net cash balance sheets, strong revenue growth and high returns on capital. Then came across your writeup. Do you have any thoughts on their possible overseas expansion plans? They seem to have an eye on M&A opportunities in the US, given their recent announcement of an alliance with Service First in California.
Thank you for the kind words.
They have been looking at M&A for a decade now, and they have only acquired TESCO, which was smoothly done and turned around. The alliance with Service First is interesting news, I think they will spend at least 6 months to a year exchanging costumers and practices before making any decision, management is pretty conservative with capital and goals like is the norm in Japan.
I have looked at various maintenance brokers here in the US and my main concern is competition, I assume if they expand here, they will make sure to enter a niche where they can become market leaders similar to what they have there with the restaurant industry.
Thanks very much for the response. This makes sense - management does appear to be pretty conservative so you'd expect them to take their time on any overseas M&A activity. The stock looks far too cheap on the Japan market alone. Plenty of room to expand further into other niches such as retail, childcare, hotels etc as company has identified. Thanks again for a great writeup.
Very interesting write up. Thanks. Any idea how cyclical activities are? Emergency repairs are non-discretionary expenses and not so price sensitive compared to regular maintenance, so i was surprised to see strong decline in revs and profits during gfc. Thanks and keep up good work. Similar b2b maintnenance platforms are valued at 5x - 10x higher than shin maint (sms assist, lessen, servicechannel, … ) so this looks like a steal
I would say the weather for the HVAC unit which individually is the main revenue driver might be the main cyclical factor here. The implementation of P-Maint is trying to address that by scheduling services ahead.
Regarding the GFC, they changed their reporting right on 2009-2010 from FY ending on April to FY ending on February, so that year where revenues are going down 400M its 10 months. Profits definitively took a hit, at 20% GM with that scale is normal, I think that is one of their advantage, it is hard for other to scale and do 20%GM at this point, you can look at how different the impact of COVID was, even though it might have been a worse crisis for restaurants at least on 2020-2021. The exposure from restaurant chains has gone from 95% back then to 70% currently, that also helps.
This was a great read thank you for bringing this unique Japanese company to my attention. I’ll certainly be adding them to my Japan watchlist
Nice company write-ups!