Ajinomoto – a new hope from its relocation

[i4value]

Ajinomoto bottom line over the past 12 years was boosted by 2 land gains that resulted in about the same contribution to the past 12 years' earnings as the operating profits. The land gains are one-off items and moving forward we have to rely just on the operations.

Ajinomoto is a mature company with revenue growing at 6.1 % CAGR over the past 12 years. So you may think that there is not much hope for better results.

But the company relocated to a new plant in 2022 and its operating results since then provide a good picture of its future. It is also financially sound. On such a basis I found that there is more than a 30% margin of safety making it an investment opportunity.

For more insights refer to Is Ajinomoto an investment opportunity?

[weijian]

What are the potential catalysts?

There is excess cash and I hope that more will be returned to shareholders.

There is a good revenue growth track record. Continued revenue growth given its high operating leverage will boost its profits.

The Group has overcome its teething problems at the new plant and we should see an improvement in the contribution margin.

hi i4value,

Your research piece stated that there is "excess cash" but from Ajinomoto Msia's announcement back then, it has already earmarked the remaining cash for other usages. I will reproduce it below in italics:

The company plans to allocate the proceeds as follows: RM128.78 million towards working capital, RM83.39 million for the repayment of bank borrowings, RM30 million to settle an advance from its ultimate holding company, Ajinomoto Co Inc., and RM35.16 million for estimated real property gains tax (RPGT).

Additionally, approximately RM1.78 million will be earmarked for expenses related to the proposed disposal, leaving RM129 million to be allocated for the special dividend to entitled shareholders.

https://themalaysianreserve.com/2023/07/...-dividend/

So in essence, the "excess cash" has been earmarked for working capital and return of borrowings/advances from parent. From AR24, the last 2 FY's working capital is ~70-80mil. So an additional 129mil for working capital is increasing it by ~1.5x. I would assume that the Parent is seeing great business opportunities and the factory will ramp up in no time.

[i4value]

Thanks for pointing out the "excess cash". I missed it.