Minebea Mitsumi is a precision components producer, from bearings, fasteners and electrical motors to locks and smart systems. A very interesting company that did really good in the past. If it continues like that, expect very good returns from this Japanese stock.
Japanese Stock Analysis – Minebea Mitsumi
FL investor sec. As you have seen in the last video I'm researching Asian stocks I'm looking for interesting investments to cover on my stock market research platform. And I'm going as always through a list I found the list of value invested, value oriented, Singapore Asian focused fund and I'm going through the list of stocks to see okay, where are they are seeing value, can I find some value for myself to follow?
The largest position is Minebea Mitsumi, it's a Japanese precision parts component company that makes from micro ball bearings, motors that work on your hard drive, and all those little little things that go into computers into cars, or the motors in the cars, the locks and things like that. So a very, very interesting company. Closely related to the economy, demand for cars, demand for cloud computers, etc. But with high potential upside and what they did in the past is really remarkable.
They grew sales five times and they plan to grow, grow sales 3 times, 2.5 times over the next 10 years on a conservative financial basis where they will pay out dividends, do buybacks, return money to shareholders, which is a key component when it comes to Japanese companies as the corporate government's culture is different from American companies, American companies focused on shareholders, Japanese focus on the business, we are building the business so it's a balance there. And also we did a video about Michael Burry how he says there is an index fund bubble and how companies in Japan are undervalued. So it's a good thing to look at these Japanese stocks.
Minebea Mitsumi corporate analysis
I'm going to give you an overview on what the company does, and then also a risk reward investment thesis. So here goes the overview. It's a Japanese manufacturer of precision equipment and components bearings, motors, censors, and even semiconductors, the company is a fast growing company to 17 acquisition and or can grow, they managed to triple sales and increase operating income five fold over the last 10 years. And they plan to continue to do that. And do that through acquisitions organic growth investing at return on equity higher than 15%. So this is what they did over the past 10 years from 16 countries to 22 countries, quadruple triple the number of plans. And they have plans in Japan, China, Korea, Southeast Asia, Thailand, Europe, North America and South America.
They make all those precision things that are needed and even buffered, both precision cast apart a few years ago. So this might be a competitor. And this might be a similar company with similar attitudes for the next three years 50% of the cumulative free cash flow will be allocated to share buybacks and dividends.
And this is very important because it shows good intentions to shareholders which is a rarity or which is a new things when it comes to Japanese companies they produce a lot of things we don't need to go into the details will go into an overview.
This is what they did significant growth due to organic growth and mergers and acquisitions, mergers and acquisitions added 500 billion yen of revenues, organic growth 270 billion, and they plan to continue to do that they are buying all those companies that are not profitable, that are in a hard place because they can't smaller companies, but that can really turn the corner when it comes to applying new technologies to that all the technologies that we are always using. For example, one acquisition was U-Shin that makes locks, car locks, home locks, but they didn't have the technology to make it with motors with everything that is needed in the current environment. So they bought it and they hope to turn around the company. And that's what their message is.
We integrate other manufacturers of precision components into the lean, mean machine that the company is for now it's working well there are ups and downs, but we have to see how it fits how it will work out long term, there will be ups and downs, which is also the biggest risk or the biggest opportunity when it comes to investing.
The Minebea Mitsumi, they acquired the Mitsumi a few years ago. It was an interesting thing because the stock price surged before the acquisition was made public so there was a leak in information. So again, one day leak, but then very interesting how these things happen all around the world. They have business segments, the machine components ball bearings rod at fasteners with huge margins.