Yesterday I did some cursory research into Shimano Inc., the world’s largest bicycle component manufacturer. Before I go on, I must admit that I am a serious road cyclist and I use Shimano components.
Here are some preliminary facts to get you acquainted.
- Shimano has about a 70-80% share of the worldwide bicycle component market
- Bicycle components make up about 78% of sales while fishing tackle makes up the rest of sales
- Operating margin has increased nicely for the past seven years: from 9% in 2001 to 14.8% in 2007
- Operating margin has averaged about 14% for the past eight years
- Strong history of sponsoring some of the best athletes and cycling teams in the world (I believe Lance won all seven of his Tours riding on Shimano components)
Here’s a picture of some of Shimano’s end products:
So what about the price of Shimano stock?
I’ve done a basic discounted cash flow analysis (make sure to note that all figures are in Yen) and found that Shimano stock is most likely about 30% beneath its intrinsic value.
If I had some more cash, I might invest a bit in Shimano. I see it as a stable, well-run business with good margins. Bicycles have been around for a long time and people will continue to use them. And especially as fuel prices rise, I think at least a few people will try to use bicycles for short commutes.
I agree. How would the average Joe invest in a company publicly traded in Japan? I see it’s ticker is 7309:JP Shimano Inc. I use on online trading account and assume you would need a broker to invest.
Any help would be appreciated.
Well it depends a lot on whether your broker will let you do transaction with the over the counter exchanges. The ticker symbol you want to look for is SHMDF. Also, be sure to look up your broker’s policy regarding trading foreign stocks. Some brokers charge a very large fee for buying or selling such stocks.
Thanks Doug, I’ll look into it.