Cheap Polish compounder at 8x PE
This will be a quick one since there isn’t a whole lot to say. Toya S.A. (ticker TOA.WS) is a Polish company with various tool brands, and their flagship brand is Yato at around 70% of revenue and growing. They source about 10,000 different tools from about a 100 different suppliers in China and are building out a global distribution network. Stock is trading at a 8x FW PE and business has been steadily growing with reasonably stable profit margins and a ROIC of 20-30% (depending on how well they were able to offload their inventory that year). And is debt free. And it seems from browsing around on Google and Youtube, their brands are of reasonable quality and customers are generally happy. But it isn’t a very well known brand.
The way I see it, they are basically a tool quality assessor and distributor since they don’t manufacture their own tools, which makes this a rather asset light business and explains the high returns they generate.
From looking at their financials it seems this business isn’t all that cyclical either:
Current 2021 PE multiple (if we annualize the zl 0.26 EPS they did in Q1, and subtract the zl 0.29 dividend you will get in the coming weeks), is about 8x. Between 2014 and 2018 this stock traded at around a 15x PE going to a 30x PE in 2018 and then sinking to a 8-9x PE in 2019. They paid a zl 0.8 dividend in 2020. So there is a willingness to pay large dividends.
Probably the reason it is cheap is that there are 5 large holders that own 76.19% of the shares outstanding. And minority holders own the rest. So not much liquidity, this is basically a micro cap. It didn’t help that large holder Tomasz Koprowski significantly lowered his stake from about 15% to current 9% of shares outstanding. And it is a small company in Poland with not many analysts paying attention to it. But with growth and a ROIC this high on a debt free balance sheet for a Polish company, current PE of only 8x seems excessively low. Closest comparable is probably Makita in Japan. Makita trades at about 23x 2021 earnings, and is forecast to grow steadily in coming years. Ofcourse Makita is far bigger with far better brand awareness so it should probably trade at a premium. But at the same time, Toya has grown significantly faster in the past 5-10 years and seems to be taking market share.
Long Toya S.A. at average price of zl 8.24 per share. And I may sell it at any time so DYOW.