Nissei Build Kogyo (MV $390m): Japan’s #1 Solution Specialist in Parking Systems and Prefabricated Building
ROE 20.6% and trading at EV/EBIT 10.8x, EV/EBITDA 9.2x
Nissei Build Kogyo (TSE: 1916) is Japan’s leading comprehensive manufacturer in automated parking systems and prefabricated building to effectively utilise urban space for both landowners and operators. From a three-car parking lot, Nissei is able to transform the area into a 36-car parking space and efficiently manage costs and maintenance requirements. NBK has rarity value as the only company in Japan to do systemized construction by using H-type lightweight steel frame for structures of 10-40m, in frontage and 1,000m2 or less in gross floor space in Japan and it is one of the few listed manufacturers in Japan with its own production plants which NBK has established over the years to become a network of factories to supply its products nationwide in Japan. NBK is the unknown hidden champion essential to the lower-capex expansion and successful growth story of the well-known convenience store FamilyMart and so on. Guided by its organizing and operating principle “Space is Value”, NBK’s wide-moat competitive strength lies in having its own integrated manufacturing and design capability, technological capabilities, solution-providing ability, and nationwide network of factories, which are highly evaluated by its loyal clients who provide recurring income to NBK as they expand. By utilizing knowhow in systemized construction, NBK has been able to expand its multi-level parking structure business and NBK has established a formidable position in this specialized niche segment of the market with a #1 position. Established in 1961 by founder Hiroshi Morioka to produce prefabricated garage to keep cars protected from elements of weather, NBK grew successfully by taking up greater roles such as parking, and operational management, achieving the highest share in the Japan market in terms of installation record by 1999 and has since extended its dominant market leadership. NBK was listed in the Second Section of the Osaka Securities Exchange in 1978 and subsequently listed in the First Section of the Tokyo Stock Exchange in 1996. Led by second generation leader Atsuhiro Morioka who took over as President in 1998, NBK has undertaken organizational reform and has been aggressive in (1) executing M&A strategy, (2) executing alliance strategy, (3) growing higher-margin “stock-based” (as opposed to flow-based) recurring income business, and (4) expanding overseas, (5) enhancing its marketing and sales force.
1) What Makes It a Wide-Moat Business? Fundamental Dynamics Behind 20.6% ROE
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