Japanese software company fat pitch value
12 times earnings for SAAS..
Hello and welcome to the new subscribers!
Today this is a Japan potential opportunity.
After last week analysis of Jardine Matheson completing, I will I think focus more on quick pitch of my ideas in portfolio.
One reason for getting interested in Japan is that the currency is undervalued because of a carry trade.
The higher rates of the US dollar make some people believe that it offers more value.
However interest rates are not the main reason for a currency relative valuation to another, otherwise the Turkish Lira and the Brazilian Real would be the most expensive currencies. It depends on many factors.
This highly technological and industrialized nation should have a GDP per capita on par with the US and Germany. I recently saw a video about a French expat saying a decent salary to live in Tokyo is 1300 EUR. This is totally insane. Even in Southern Europe you need salaries around 2000 EUR in the large cities.
So my opinion is that if you buy a domestic Japanese company at a 10 times P/E ratio, it is in reality a 5 or 7 P/E ratio. But it’s just my opinion.
The company;
This idea is a Japanese Software company micro cap.
The earnings have slowed down after a good software demand led covid boom, and may grow slower than in the past. This is where we us value investors appear in the picture.
The company is a hidden SAAS nano cap that is profitable and founder led.
This trades at 10 times operating income, has 28% of the market cap in cash
EV/ EBITDA of 6.7
The PE ratio is 12.5 based on the forecast for the fiscal year ending March 2025.
It compounded earnings at 16.6% since data is available in 2018.
I will be clear: This is an early view of this tracking position. I will keep following and get more knowledge of the company over time, and provide better updates. So I am not promising anything in the short term here.
I think it’s a decent long term bet and that a group of decent bets should do ok, where you do not pay for growth. This is the value approach.
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