Bought at 706. Current 755. Target 1100
With the market already on a tear it seems reasonable to look into laggard value plays that would benefit from a domestic economic recovery.
Watabe Wedding presents such an interesting value opportunity.
The company is primarily engaged in arranging high-end overseas weddings for Japanese couples. Although they are also active in domestic weddings and working to expand in Asian markets such as China.
With the yen weakening so rapidly, certainly the risk is clear that the attractiveness of taking a large group of family and friends to Hawaii will wane. However, there is a reasonable argument to be made that the gearing from a boost in general confidence among the Japanese will be larger than the negative impact from the yen. Certainly the marriage market has seen a substantial shrink in the last few years along with the depressed Japanese economy.
Then there are the valuations. While a great many Japanese stocks have recovered to 1x P/B, Watabe still lingers at 0.53x. It also trades at 10-11x projected earnings for this year, although having achieved 84% of guidance in the 3Q, there is a substantial possibility of an overshoot, it would seem. Then there is the dividend, at 30 yen, the stock yields 4%. The payout has been stuck at this level for a number of years as earnings have flattened out, however once revenues start to pick up again, expect the company to start lifting payments once again.
And on cash flow, the stock trades exceedingly cheap at 2.6x EV/EBIT.
The technicals have also turned positive with the upward momentum starting to build after a significant lag vs. the overall market.
Sales Trend
OP Trend
Dividends
Valuations
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