A Profitable Japanese Microcap Trading at a 53% Discount to NCAV.
The cash comes from a one-off asset sale. CEL hasn’t been building cash on the balance sheet for years. While management has no intention of paying out the cash at present, they plan to use it for acquisitions. It won’t stay on the balance sheet for ever.
CEL’s operating business is not a great business, but it’s not terrible either. CEL earned an average of 15% pretax on capital employed over the last three years (FY20-FY22). The operating business earns above its cost of capital, is consistently profitable and ~40% of earnings are paid out as dividends.
Management has a lot of skin in the game. CEL’s founder and president, Masatsugu Shinno, owns 60% of the company, which aligns his interests with shareholders.
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