Kawagishi Bridge Works Co Ltd (5921:TYO) (KGBGF:OTC)

Recent Share Price: ¥2,500

Accounting: Japanese Accounting Standards

Fiscal Year: Sept 30th

Market Cap: ¥7.5 billion ($68 million)

Kawagishi Bridge Works Co., Ltd. is a Japanese industrial focused on the design, manufacturing, and site construction of steel frames for steel structures. In addition to the site construction work in eastern Japan, the Company is also involved in the manufacture and sale of precast concrete (PC) products.

The company operates 5 plants for Steel Frame and 1 plant for Precast Concrete.

Segment Revenue20172018
Steel Frame¥18,72395.6%¥24,24294.2%
Precast Concrete¥8644.4%¥1,5045.8%
Backlog20172018
Steel Frame¥17,06491.2%¥15,39497.9%
Precast Concrete¥1,6408.8%¥3372.1%

Recent History

2017

Announced Reverse 1-to-5 stock split effective March 28.

Insider Ownership

Executive Shareholders
NameEquities%
Ryuichi Kawagishi (Chairman)82,4002.75%
Hideo Kanamoto (President)3,5000.11%

At fiscal year-end, investments in passive stocks (17) totaled ¥906 billion.

In addition to stock holdings, the company reports that it owns rental property with a fair market value (calculated by the Company based on the property tax valuation) of ¥1.2 billion.

At ¥2.1 billion, this represents approximately 30% of the current market cap. Although company makes no claim for liquidaion, the passive holdings provide sizable financial safety.

Financials

Disclosure: We own shares in Kawagishi Bridge Works Co Ltd (5921:TYO)

4 thoughts on “Kawagishi Bridge Works Co Ltd (5921:TYO) (KGBGF:OTC)

  1. Good company (in a relative poor sector) at a cheap price. Interesting!
    As always there are not so many news about this kind of companies (at least in English). Do you find a reason about the price movement from 2500 yen in early 2017 up to 5000 and now back at 2500? The Earnings don’t reflect these changes.

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    • Thanks for following up on my next post. I don’t have specific reasons as to the fluctuations in stock price; I could speculate but that just may fool me into thinking it’s the reality!​

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  2. Hi Brent,
    I noticed that Kawagishi has an increasing STA accrual score and PMAN and Beneish M-Score. Does the increasing scores in regard to accounting manipulation worry you in owning this stock?
    Thanks,
    Alan

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    • Hi Alan,

      Thanks for your comment! It’s a very interesting idea, but I have not read anything on using these metrics on a directional basis so I would not know how to apply the concept. I only use these on an absolute basis and am looking to toss out the really bad apples. I do not want to introduce too many false positives, so I attribute most of the variance to noise unless it is really egregious.

      For STA, I use a simplified Sloan equation:
      Sloan Ratio = (Net Income – CFO – CFI) / Total Assets
      CFO = Cash From Operations
      CFI = Cash From Investments
      between -10% and 10% = safe zone
      less than between -25% and -10% on the negative side, and between 10% and 25% on the positive side = warning
      less than -25% or greater than 25%, and this ratio is consistent over several quarters or even years = red flag

      In the case of KBW, STA was in the warning zone in 2014 and 2010 with scores of 16.9% and -17.5%, respectively. In the case of the M-score, it has been in a reasonable range over the past 10 years. Its worse score was in 2011. I do not consider a PMAN of 5.2% to be a strong enough signal to rule out the stock.

      For example, PMAN for Enron looked like this:

      1994 – 0.2% PMAN
      1995 – 2.7%
      1996 – 2.0%
      1997 – 1.4%
      1998 – 1.0%
      1999 – 1.7%
      2000 – 29.9%

      Click to access Enron%20101.pdf

      So I’m screening for really obvious flags. In Beneish’s paper (1999), companies that were proven to be involved in earnings manipulation had a typical score of PMAN 39%.

      The goal is to push my distribution of returns slightly to the right. Until I learn more, I’m only pitching out the really bad stuff.

      [Shout out for information used in Quantitative Value, by Gray & Carlisle]

      Like

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