2353 Nippon Parking Development

The company rents idle land from owners, turns it into paid parking, and also runs ski resorts and theme parks. Record foreign tourists lifted skier numbers 23% this season.

▲ Japan has plenty of underused urban land, and foreign tourism keeps growing. The company forecasts record revenue and record profit this year.  ▼ Ski profits depend on snow; a warm winter hurts. Theme parks need heavy spending on facilities, and Thailand is the only overseas business.

The company guarantees rent to landowners without buying the land, so it earns 25% margins on parking with little capital. Its Hakuba ski resorts would be hard to replicate.

▲ Return on the capital actually used in operations is roughly 51%. The network of landowner contacts and the Hakuba resorts took years to build.  ▼ Anyone can run a parking lot, so competition is everywhere. The company is buying more heavy assets, debt rose to ¥22.9bn, and return on equity fell.

Founder Tatsumi's group owns about a third of the company. Dividends have risen 16 years in a row, this year's payout is over 90% of profit, and buybacks keep coming.

▲ After 16 straight dividend increases and back-to-back buybacks, cutting returns would shock investors. Management also targets return on equity above 30%.  ▼ There is no written payout rule. The listed ski subsidiary shares its profit with outside holders, and debt-funded building projects compete with dividends for cash.

The business sells for 8.5 years of operating profit. Its capital earns 18.8%. Net cash is 5.3% of the market cap; 49.3% of profit goes out as dividends. Today's dividend yield is 3.7%. If the company paid out all of its profit, the yield at today's price would be 7.5% — past the 6% level where Japanese small caps tend to find buyers. Raising the payout 10 points a year would reach 6% in about 3.2 years. At the current payout, the cash pile alone equals today's market cap in about 25.1 years. How this valuation floor works →