Seek 100-bagger (100x stock)! March 15, 2021 issue

【This Week's Video Here】
https://youtu.be/984SUtfADag

※ The video is 34 minutes long.

1. Value Stocks
JFE Systems 4832
Listed on TSE Second Section

Stock code 　Stock 　Listing year
4832　 JFE Systems　 2001

Minimum market cap (billion yen) Current market cap (billion yen) Target market cap (billion yen)
45 　268 　461

Business type
Mainly focuses on system construction and maintenance for the manufacturing sector. Accounts for about 40% of its business with JFE Steel. Develops and offers electronic forms and cost management systems for the manufacturing industry.
※ Listing year notes the listing dates for the Tokyo Stock Exchange First/Second Sections, Mothers, and JASDAQ.
※ 100x market cap is calculated from the minimum market cap.

2. Key Points
1. Originating from the system division of Kawasaki Steel (now JFE Steel) as a spin-off, the company mainly develops systems for manufacturers and provides systems not only for steel but also for various sectors such as science, food, and automotive. 【Clear recovery in the manufacturing sector from the second half of the year】 suggests solid earnings may continue in the next period.

2. The appeal of the stock lies in its cash flow backed by solid earnings. 【FCF (free cash flow) over the last 5 years is 15.5 billion yen】, generating about 3.1 billion yen in cash returns per year. The system business is not slated for high growth but is expected to grow steadily. The five-year average annual growth rate (CAGR) is 4.4%, and 【although this year revenue and profit may decline, long-term growth is sustained】.

3. The company’s top shareholder is JFE Steel (unlisted), holding 65.1% of shares, and JFE Steel’s parent company is JFE Holdings [5411], creating a parent-subsidiary listing relationship. Since last year, the market has focused on resolving this parent-subsidiary listing issue, and companies with a high share of related-party holdings are likely to face some form of capital policy pressure.