The shares have had a decent run, not much removed from the Topix, but with so many stocks now trading well above their historical valuation levels, this one still looks exceedingly attractive.
The stock trades on 7.7x current company guidance, will generate 9-10% ROE and trades at a P/B of 0.7x. Considering Maruzen has steadily increased sales over the short, medium and long term, all the while maintaining 10% operating margins, it is my contention that a strong management team is at the helm. Fidelity is a 9% shareholder, but otherwise there appear to be very few foreigners involved in the stock.
The vast majority of Maruzen's business comes from kitchen equipment for large scale cooking needs. The company is now targeting Y50b annual sales over the medium term, after surpassing its previous Y40b target last year. Given the expected pickup in the domestic economy, one could reasonably argue the 1.2% decline in sales projected for fiscal February 2014 is overly conservative.
I think the stock could trade at 1600 or potentially higher in the next 12 months. A key impediment is a lack of liquidity, which is why any news of a stock split or change in trading units (currently 1000 shares) would probably be a major catalyst to the upside.
