I spent a few hours looking at this and their translated reports. The food co is a consolidated subsidiary of the holding co, among a few other smaller ones. Seems like the holding company is a better deal given their percentage ownership and market prices of both, and most of the founding family own at the holding level. I'm most frustrated that I can't find a clear and compelling explanation for the spin off in 2016 but some Korean news at the time cited chaebol (large family owned companies) reform. Despite the stated purpose of transparency it makes analysis more complex and appears politically motivated. Sure looks good in comparison to kikkoman.
Maeil Dairies is a very similar situation - seemingly strong company that split to the holding co structure a few years back. Quite undervalued in my estimation.
As for other Korean stocks on my watchlist - I like KT&G, Korean Ratings, Komelon, and CS Holdings. Any other Korean equities you have your eye on?
Thanks! I like the website format. Unfortunately I was only able to translate certain segments but it does seem that the holding co owns royalties on the Sempio Brand (7-8% or FY2021 revenue). It does seem like the holding co is the better option just given the valuation differential and the royalty scheme. That being said, they had an equity issuance of roughly 25% of Shares in late 2021 (I think I'm right about that) which strikes me as pretty irresponsible given the severe undervaluation of the stock. I'm not sure what the proceeds were used for but that's precious equity they gave away. Do you have any other insight relevant to the holding co vs the operating business?
There's a good write up on Komelon on VIC that was memorable but I didn't buy at that time. I think CS was one of Michael Burry's holdings at one point but I could be wrong on that. I don't have a good grip on the future of tobacco so I gave up on those. Korean Ratings is very interesting. The fundamentals make it worth a deeper look but I don't understand that market well enough currently. I have mostly been sorting through Japanese equities with a lot of learning and little buying. Yuasa trading co is interesting there. Nothing else I've seen in Korea that I've been watching. Sempio is qualitatively one of the stronger situations I've seen in a while.
I wasn't positive on the Sempio Co share issuance because I hadn't compared the share count from 2021 to 2020, though I saw an article that mentioned stock issuance of about 25 billion won in Nov 2021 which is roughly equivalent to a quarter of the companies market cap. Ill have to investigate further, maybe I got something mixed up.
I really should be a member of VIC, not sure why I haven't taken the time to get on there. Its funny you mention the write up on Komelon as I had no idea that anyone else had coverage on the stock. Burry owned the Operating business of CS Holdings a while back - that too I discovered after the fact that I had put it on the watchlist. Its funny how us value-oriented investors tend to gravitate to the same businesses. I guess it speaks to our dedication.
I just briefly checked the financials on Yuasa and it does seem quite interesting at the current price, though Ill have to do further research. As far as Japan goes - my largest positions are Suzumo Machinery and Murakami, ideas which I admittedly stole from Kenkyo and Burry respectively. I also own Tone and Daito Koun, which I came to through my own research.
I'm considering opening a monex account for the sole purpose of buying LARGAN Precision which I regard as an absolute steal at the current 2000ish TD price.
I also didn't find anything about Sempio Co's share issuance. I wonder if it might have been a stock split, since I know Bloomberg adjusts for them.
That said, royalties to the parent puts Sempio Foods in a worse position. I'm sure the family structured the spin-off in such a way as to be able to maintain control while avoiding inheritance taxes. I don't love these holdco/opco structures.
But Sempio's underlying business seems solid and management seems bright as well. It does seem like it should be valued higher than the current share price.
Japan is a funny place. Looking over those Murakami has an EV of 4B and a BV of 70B - wild. The rest look like strong businesses with solid fundamentals. Anything worth looking at to understand the qualitative side of those like LARGAN? They're all fundamentally interesting. Yuasa is just statistically cheap. What I like about the best write ups on VIC is that it will lay out what one part is misunderstood and allows the whole puzzle to fit together. Kenkyo is good too. I enjoyed the write up on Suzumo.
Vietnam's growth numbers have been interesting and I've been meaning to look around over there too but havent found much.
Very random question on an unrelated post - but do you know of Kadoya Sesame Mills, Michael? It’s a highly profitable Japanese manufacturer of sesame oil, with a growing international presence. The company has put up some remarkable ROE numbers for a company employing no debt. I’ve been buying shares recently as the present valuation is very attractive imo. Anyway, just seemed like the type of business that would be right up your alley. Thanks.
Hi Bryce, I've started looking into Kadoya and the stock looks very compelling. I wonder if you've seen any written report on the stock as the English investor material seems sparse? Are they likely to benefit from presently high sunflower and palm oil prices?
About 8,000 shares are traded each day. With a share price of KRW 42,400 or US$35/share, that's equivalent to roughly US$300,000 per day. So the liquidity is surprisingly good, in light of the low USD market cap.
I spent a few hours looking at this and their translated reports. The food co is a consolidated subsidiary of the holding co, among a few other smaller ones. Seems like the holding company is a better deal given their percentage ownership and market prices of both, and most of the founding family own at the holding level. I'm most frustrated that I can't find a clear and compelling explanation for the spin off in 2016 but some Korean news at the time cited chaebol (large family owned companies) reform. Despite the stated purpose of transparency it makes analysis more complex and appears politically motivated. Sure looks good in comparison to kikkoman.
Where did you manage to find the company annual reports? I can't seem to locate them anywhere.
You can find them on DART, however all in Korean https://dart.fss.or.kr/
https://app.tikr.com/stock/filings?cid=27897130&tid=369350996&ref=9ktghx
Maeil Dairies is a very similar situation - seemingly strong company that split to the holding co structure a few years back. Quite undervalued in my estimation.
As for other Korean stocks on my watchlist - I like KT&G, Korean Ratings, Komelon, and CS Holdings. Any other Korean equities you have your eye on?
https://app.tikr.com/investor?id=5050303654&ref=9ktghx
https://app.tikr.com/investor?id=4297614016&ref=9ktghx
These guys are pretty smart. You could use this as a starting point.
Thanks! I like the website format. Unfortunately I was only able to translate certain segments but it does seem that the holding co owns royalties on the Sempio Brand (7-8% or FY2021 revenue). It does seem like the holding co is the better option just given the valuation differential and the royalty scheme. That being said, they had an equity issuance of roughly 25% of Shares in late 2021 (I think I'm right about that) which strikes me as pretty irresponsible given the severe undervaluation of the stock. I'm not sure what the proceeds were used for but that's precious equity they gave away. Do you have any other insight relevant to the holding co vs the operating business?
I wasn't able to find anything regarding the 2021 dilution. All the sources I have access to have stable share counts recently.
No, I wish I was able to get a better grip on the holdco/op dynamics. I guess that's just part of the game with international holdings. Im surprised it wasnt mentioned in the comments here https://valueinvestorsclub.com/idea/Sempio_Foods_Company/0491738381
There's a good write up on Komelon on VIC that was memorable but I didn't buy at that time. I think CS was one of Michael Burry's holdings at one point but I could be wrong on that. I don't have a good grip on the future of tobacco so I gave up on those. Korean Ratings is very interesting. The fundamentals make it worth a deeper look but I don't understand that market well enough currently. I have mostly been sorting through Japanese equities with a lot of learning and little buying. Yuasa trading co is interesting there. Nothing else I've seen in Korea that I've been watching. Sempio is qualitatively one of the stronger situations I've seen in a while.
I wasn't positive on the Sempio Co share issuance because I hadn't compared the share count from 2021 to 2020, though I saw an article that mentioned stock issuance of about 25 billion won in Nov 2021 which is roughly equivalent to a quarter of the companies market cap. Ill have to investigate further, maybe I got something mixed up.
I really should be a member of VIC, not sure why I haven't taken the time to get on there. Its funny you mention the write up on Komelon as I had no idea that anyone else had coverage on the stock. Burry owned the Operating business of CS Holdings a while back - that too I discovered after the fact that I had put it on the watchlist. Its funny how us value-oriented investors tend to gravitate to the same businesses. I guess it speaks to our dedication.
I just briefly checked the financials on Yuasa and it does seem quite interesting at the current price, though Ill have to do further research. As far as Japan goes - my largest positions are Suzumo Machinery and Murakami, ideas which I admittedly stole from Kenkyo and Burry respectively. I also own Tone and Daito Koun, which I came to through my own research.
I'm considering opening a monex account for the sole purpose of buying LARGAN Precision which I regard as an absolute steal at the current 2000ish TD price.
I also didn't find anything about Sempio Co's share issuance. I wonder if it might have been a stock split, since I know Bloomberg adjusts for them.
That said, royalties to the parent puts Sempio Foods in a worse position. I'm sure the family structured the spin-off in such a way as to be able to maintain control while avoiding inheritance taxes. I don't love these holdco/opco structures.
But Sempio's underlying business seems solid and management seems bright as well. It does seem like it should be valued higher than the current share price.
Japan is a funny place. Looking over those Murakami has an EV of 4B and a BV of 70B - wild. The rest look like strong businesses with solid fundamentals. Anything worth looking at to understand the qualitative side of those like LARGAN? They're all fundamentally interesting. Yuasa is just statistically cheap. What I like about the best write ups on VIC is that it will lay out what one part is misunderstood and allows the whole puzzle to fit together. Kenkyo is good too. I enjoyed the write up on Suzumo.
Vietnam's growth numbers have been interesting and I've been meaning to look around over there too but havent found much.
Very random question on an unrelated post - but do you know of Kadoya Sesame Mills, Michael? It’s a highly profitable Japanese manufacturer of sesame oil, with a growing international presence. The company has put up some remarkable ROE numbers for a company employing no debt. I’ve been buying shares recently as the present valuation is very attractive imo. Anyway, just seemed like the type of business that would be right up your alley. Thanks.
Hi Connor - I don't know the stock but it looks compelling. I'll definitely look into it. Thanks!
Hi Bryce, I've started looking into Kadoya and the stock looks very compelling. I wonder if you've seen any written report on the stock as the English investor material seems sparse? Are they likely to benefit from presently high sunflower and palm oil prices?
Thanks for the write-up Michael - what's the liquidity like?
About 8,000 shares are traded each day. With a share price of KRW 42,400 or US$35/share, that's equivalent to roughly US$300,000 per day. So the liquidity is surprisingly good, in light of the low USD market cap.