Hoya (OTC:HOCPF, OTCPK:HOCPY) is a Japanese manufacturer of optical lenses products and information technology. The company has put up impressive growth numbers and should continue to do well with an aging demographic.
There are 416 million shares and the market cap is ¥1.861 trillion ($15.69 billion). It takes 118 yen to buy one dollar. The stock trades at a price to earnings ratio of 20 and a dividend yield of 1.67%.
Sales were ¥308 billion ($2.6 billion) in 2005 and grew to ¥490 billion ($4.15 billion) in the latest year. Very impressive top line growth. Earnings per share grew from ¥144 to ¥218 over that time frame. Dividends grew from ¥37.5 to ¥75 over the same time frame. Return on equity is a very high 16.5%. The fiscal year ends in March.
The balance sheet is rock solid. As of the latest quarter, cash was ¥347 billion ($2.94 billion) and accounts receivable ¥98 billion ($830 million). Debt was ¥37 billion ($314 million) and accounts payable ¥40 billion ($339 million).
The Life Care division produces lenses for contacts and glasses, artificial bonds, and scopes. Sales were ¥306 billion ($2.6 billion) and were up 15% from the prior year. The company bought Seiko Optical last year. As one would expect eye care products are expected to increase as the people of the world continue to age. Hoya's analysis states that the global market will grow 2% to 3% and that they are number two in sales. The company wants to focus on this division as it thinks this will be where growth is.
The Information Technology division manufacturers imaging related products, glass disks, liquid crystal displays, screens, camera lenses, and other products. Revenues were ¥180 billion ($1.52 billion) and were up 13.1% from the prior year. This division faces the same issues that all technology companies face: one minute their products are hot and the next they are not. Over the years, many divisions have been bought, sold, and merged.
As of the latest quarter, 30.5% of sales were derived from Japan, 14.6% Americas, 19.4% Europe, 34.2% Asia, and 1.3% for the rest of the world. Revenues were up 9.4% for the first six months of fiscal 2016. Profit was up 12.1%. I'm not sure if the dividend will be increased as the fist payout remained the same. Free cash flow for the first six months was ¥58.8 billion ($498 million).
Hoya seems to run an American style business. It focuses on profitability and growth. Many companies in Japan just focus on being in business, not growing. Management will conduct M&A to grow or R&D. This analysis suggests that the global ophthalmology market will grow by 7% a year from 2015 to 2021. It names Hoya as one of the largest players, along with Johnson & Johnson, Alcon, and Bausch & Lomb.
I'd never heard of Hoya until reading First Eagle's commentaries. I went to Syracuse and we usually beat Georgetown in basketball but I think it's a different kind of Hoya. I can't find a good competitor that is publicly traded to compare to Hoya. No doubt the optical business will grow as the world ages and no doubt that Hoya is a leader. The risk is in the Information Technology division. Tech products come and go and smart phones make up a large portion of their business. It's a company to follow and I think I'll do just that.
Disclosure: I am/we are long SGIIX.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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