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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About The Author: Koon Boon Kee
Koon Boon is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets.
Starting his career at a boutique hedge fund in Singapore and later, at Korea’s largest mutual fund company, Koon Boon started to make headway into the investment arena. In his early successes, Koon Boon was part of the core investment decision committee which achieved 700% in returns (net of fees), in its flagship Asian fund.
A prolific writer and thought leader, Koon Boon has contributed hundreds of articles to Bamboo Innovator and BeyondProxy, an acclaimed series of subscription-based, research-intensive publications for serious investors; and is Managing Editor of the Moat Report Asia, a research service focused exclusively on highlighting undervalued wide-moat businesses in Asia. He had also presented in top banking and finance conferences in Sydney, Cape Town, HK and Beijing, as well as in the Emerging Value Summit and Wide Moat Investing Summit. His work has been featured in local and international media such as, TEDxWallStreet, Investopia, BeyondProxy, Greatinvestors.tv, Jakarta Post, Straits Times Singapore, TODAY Singapore, Business Times Singapore, as well as a publication in the BoğaziçiJournal.
With the wide occurrences of financial fraud committed by listed firms in China during 2015, Koon Boon went to further his studies, from which he saw a gap in the curriculum for accounting fraud. He went on to pioneer the first-of-its-kind course on Accounting Fraud in Asia, which is now an official course in the SMU curriculum.
Today Koon Boon is the Chief Investment Officer at 8I Holdings Limited, where he is responsible for the sustainable growth and outperformance of listed Asian equities investments in the Hidden Champions Fund.
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