2019-04-25-9696.T-Jefferson Research-Jefferson Research Financial Sonar Report. A Detai... - 84988260

FINANCIAL SONAR™: REALITY RADAR ON COMPANY PERFORMANCE
JASDAQ 9696 WITH US CORPORATION

REGION ASIA PACIFIC OVERALL RATING FOR 3RD QUARTER 2019
BUY
INDUSTRY DIVERSIFIED CONSUMER SERVICES
OUR EVALUATION OF 9696 FINANCIAL SONAR™ FOR 9696

3RD QUARTER 2019
With us Corporation is showing strong Earnings Quality, Cash Flow Quality, Operating
Efficiency and Balance Sheet Quality, and Valuation suggests a lower amount of price
risk. When combined, 9696 deserves a BUY rating. EARN
T I ON ING
The Operating Efficiency rating was the only dimension that showed improvement UA SQ
during the last quarter by strengthening on improved returns, which led to a higher AL RI S
K
T
V
AS
UA
ST R
overall rating. All other dimensions were unchanged from the previous quarter.
LIT
LE
O
Y
NG
HISTORICAL RATINGS
W Q U ALITY
B ALANC
ONG
Q4 2018 Q1 2019 Q2 2019 Q3 2019
STRO
STR
OVERALL RATING HOLD SELL HOLD BUY
NG
FLO
E SH
EARNINGS QUALITY STRONG STRONGEST STRONG STRONG
SH
EE
CASH FLOW QUALITY STRONG STRONG STRONG STRONG STR O NG
CA
T
OPERATING EFFICIENCY WEAK STRONG WEAK STRONG
OPE CY
BALANCE SHEET STRONG STRONG STRONG STRONG R A TI N G E F FIC I EN
VALUATION MEDIUM RISK LOW RISK LEAST RISK LEAST RISK
PRICE TRENDS AND VALUATION
Price (JPY, AS OF 04/25/19) 401.00 MARKET CAP. 4.0 BILLION PRICE/SALES 0.2
PRICE/EARNINGS 15.6 PRICE/EARNINGS GROWTH 0.1 PRICE/CASH FLOW 13.3
PRICE/ADJUSTED EARNINGS 18.7 PRICE/ADJUSTED EARNINGS GROWTH 0.1 PRICE/ADJUSTED CASH FLOW 4.7
Data not available for this chart.
© 2019 Jefferson Research & Management Report prepared on April 26, 2019
www.jeffersonresearch.com Page 1 of 11

BUY
EARNINGS QUALITY: STRONG

Earnings quality has long been analyzed and used by investors as a measure of the fundamental quality of the company and its
future prospects. Companies may be including certain items that increase reported earnings and often the amount of cash flow
supporting the earnings may be weak. Jefferson adjusts for these kinds of items and other anomalies to produce an adjusted
earnings number that more accurately reflects ongoing business fundamentals at With us Corporation. Reported earnings are
compared to the Jefferson adjusted earnings as a means to gauge earnings quality. Also measured is the amount of cash flow that
underpins earnings.
The earnings quality for 9696 remains STRONG.
The annual reported net income was 177.0M with an adjusted number that was 150.4% of reported. The reported operating cash
flow was equal to 1,538M.
NET INCOME VS. ADJUSTED NET INCOME IN MILLIONS EARNINGS VS. OPERATING CASH FLOW IN MILLIONS
Adjusted Net Income Reported Operating Cash Flow
Adjusted Net Income as a Percentage of Net Income Operating Cash Flow as a Percentage of Earnings
170.6% 150.4% 71.0% 96.5% 100.0% 1051.8% 868.9% NA NA NA
400 2,000
372.0
372.0
301.0
301.0
1,481.0
177.0
112.0
910.0
290.6
266.2
200 0
-1,466.0
213.6
191.1
-341.0
-358.0
372.0
301.0
301.0
177.0
112.0
0 -2,000
Fiscal Year Fiscal Year Trailing Fiscal Year Fiscal Year Trailing
2017 2018 12 Months Q2 2019 Q3 2019 2017 2018 12 Months Q2 2019 Q3 2019
ACCRUALS % OF SALES
Actual Accruals Forcasted Accruals
12.5%
10.0%
7.5%
5.0%
2.5%
8.4%
8.4%
5.0%
9.9%
8.6%
8.6%
8.2%
6.5%
7.9%
7.8%
7.9%
5.2%
7.3%
5.7%
8.1%
7.1%
0.0%
Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019

BUY
CASH FLOW QUALITY: STRONG

Cash flow is considered by many investors to be the ultimate measure of company performance and more reliable than reported
earnings. The Jefferson measurement eliminates items that are not part of recurring cash flow or the result of actual operations for
With us Corporation. These adjustments to cash flow provide a truer measure of cash flow and the resultant cash flow quality rating.
The cash flow quality rating for 9696 remains STRONG.
The reported annual operating cash flow number was 1,538M with an adjusted number that was 96.3% of reported. The reported
annual free cash flow number was 1,200M with an adjusted number that was 95.3% of reported.
OPERATING CASH FLOW IN MILLIONS FREE CASH FLOW IN MILLIONS

Adjusted Operating Cash Flow Adjusted Free Cash Flow
Adjusted Operating Cash Flow as a Percentage of Operating Cash Flow Adjusted Free Cash Flow as a Percentage of Free Cash Flow
77.2% 96.3% NA NA NA 67.7% 95.3% NA NA NA
1,538.0
1,200.0
1,178.0
2,000 2,000
831.0
1,481.0
1,143.0
910.0
0 NA NA NA 0 NA NA NA
563.0
-2,000 -2,000
Fiscal Year Fiscal Year Trailing Fiscal Year Fiscal Year Trailing
2017 2018 12 Months Q2 2019 Q3 2019 2017 2018 12 Months Q2 2019 Q3 2019
FLOW RATIO CASH FLOW ROI

Adjusted Cash Flow ROI
0.40 30.0%
0.30 20.0%
0.20 10.0%
0.10 0.0%
0.00 -10.0%
Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19
DEBT COVERAGE
Adjusted Debt Coverage
200
100
-100
-200
Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19

BUY
OPERATING EFFICIENCY: STRONG

The ability of With us Corporation to earn a profit is in part the result of how rapidly it converts its collection of assets into revenues
and the resulting earnings and cash flow margins available. Operating Efficiency is measured by a combination of factors including:
return on invested capital (ROIC), gross margin, EBIT margin, asset turnover, equity turnover, and lastly Staff, General, and
Administrative costs as a percentage of sales (SGA).
The operating efficiency rating for 9696 improved from WEAK to STRONG
ROIC increased from 3.8% to 5.0%. The higher ROIC indicates that 9696 has increased the amount of profit per dollar of capital
invested in the business.
In addition, the EBIT margin improved from 11.0% to 14.0%. The higher EBIT margin indicates that 9696 has reduced their
pre-financing costs.
GROSS MARGIN EBIT MARGIN

Change from previous quarter: UP▲ Adjusted EBIT Margin Change from previous quarter: UP▲
40.0% 20.0%
10.0%
30.0%
0.0%
20.0%
-10.0%
10.0% -20.0%
NET MARGIN SG&A AS A PERCENTAGE OF SALES

Adjusted Net Margin Change from previous quarter: UP▲ Change from previous quarter: DOWN▼
10.0% 30.0%
27.5%
0.0%
25.0%
-10.0%
22.5%
-20.0% 20.0%

BUY
OPERATING EFFICIENCY: STRONG

ROIC RETURN ON INCREMENTAL INVESTED CAPITAL
Adjusted ROIC Change from previous quarter: UP▲ Change from previous quarter: DOWN▼
6.0% 300.0%
200.0%
4.0%
100.0%
2.0%
0.0%
0.0% -100.0%
ASSET TURNOVER EQUITY TURNOVER

Change from previous quarter: UP▲ Change from previous quarter: UP▲
1.50 3.60
1.40
3.40
1.30
3.20
1.20
1.10 3.00
CASH CONVERSION CYCLE IN DAYS

Change from previous quarter: UP▲
12.50
10.00
7.50
5.00
2.50
Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19

BUY
BALANCE SHEET QUALITY: STRONG

The balance sheet shows the ability of With us Corporation to pay its bills and fund future growth. It also provides clues to aggressive
accounting since reported earnings that do not generate cash flow generally end up somewhere on the balance sheet. The following
are analyzed in determining balance sheet quality: quick ratio, current ratio, cash position, accounts receivable days sales
outstanding (AR DSOs), and number of days inventory is held prior to sale to customers (Inv Days).
The balance sheet rating for 9696 remains STRONG as the quick ratio, current ratio, Inv Days, and cash position strengthened over
the last quarter while the AR DSOs, debt/assets and debt/equity weakened.
Even though the quick ratio improved from 0.8X to 0.9X, the decline in AR DSOs offset this by deteriorating from 7 to 19 days. The
higher AR DSOs indicates that 9696 has lengthened the time it takes on average to receive payment from its customers, thereby
decreasing liquidity.
RECEIVABLES DAYS OUT INVENTORY DAYS OUT

Change from previous quarter: UP▲ Change from previous quarter: DOWN▼
25 2.75
20
2.50
15
2.25
10
5 2.00
CURRENT RATIO QUICK RATIO

Change from previous quarter: UP▲ Change from previous quarter: UP▲
1.10 0.90
1.05
1.00 0.85
0.95
0.90 0.80

BUY
BALANCE SHEET QUALITY: STRONG

DEBT/EQUITY DEBT/ASSETS
Debt/Tangible Equity Change from previous quarter: UP▲ Debt/Tangible Assets Change from previous quarter: UP▲
40 14
35 12
30 10
25 8
CASH IN MILLIONS
Change from previous quarter: UP▲
5,000
4,500
4,000
3,500
3,000
Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19

BUY
VALUATION: LEAST RISK

A favorable valuation (a LEAST RISK or LOW RISK rating) implies lower potential downward price risk that is evidenced by a
company price multiple that is lower than the corresponding sector average. The valuation rating is based on both absolute and
relative levels at With us Corporation compared to its peers within its sector based on price to earnings (PE), price to earnings growth
(PEG), price to sales (PS), and price to cash flow (PCF).
The valuation rating for 9696 remains a LEAST RISK as the price to cash flow and PEG ratios became more attractive over the last
quarter while the price to sales and price to earnings ratios became less attractive.
Even though 9696's PCF ratio relative to the sector average PCF improved from 1.46X to 1.15X during the last quarter, the decline in
the PS ratio relative to the sector average PS offset this by deteriorating from 0.29X to 0.33X.
PRICE/EARNINGS
RANGE As Reported Adjusted Diversified Consumer Services Sector
LAST 2 YEARS LOW HIGH AVERAGE
40
Reported Price/Earnings 15.60 46.80 27.80 30
Adjusted Price/Earnings 11.30 37.40 20.68 20
Sector Price/Earnings 15.60 18.30 17.49 10
30.5
37.4
28.5
23.2
16.8
15.6
15.6
18.7
19.1
0.8
0.7
0.7
0
Q4 2018 Q1 2019 Q2 2019 Q3 2019
PRICE/CASH FLOW
50
Reported Price/Cash Flow 13.30 46.80 27.53
Adjusted Price/Cash Flow -776.80 55.10 -85.45
16.9
25
13.6
13.3
12.3
11.6
11.6
7.9
Sector Price/Cash Flow 11.60 13.60 12.65
5.6
23.2
4.7
55.1
19.1
0
Q4 2018 Q1 2019 Q2 2019 Q3 2019
PRICE/EARNINGS GROWTH
0.80
Reported Price/Earnings Growth 0.10 0.40 0.20 0.60
Adjusted Price/Earnings Growth 0.10 0.50 0.30 0.40
0.2
0.2
0.20
0.1
0.1
0.1
Sector Price/Earnings Growth 0.50 0.80 0.64

0.4
0.4
0.8
0.6
0.5
0.7
0.7
0.00
Q4 2018 Q1 2019 Q2 2019 Q3 2019
PRICE/SALES
RANGE As Reported Diversified Consumer Services Sector
0.80
Reported Price/Sales 0.20 0.30 0.26 0.60
Sector Price/Sales 0.60 0.70 0.65 0.40
0.2
0.2
0.2
0.20
0.6
0.3
0.7
0.7
0.7
0.00
Q4 2018 Q1 2019 Q2 2019 Q3 2019

BUY
PEER VALUATION COMPARISON

PRICE/ PRICE/
PRICE ON PRICE/ PRICE/ CASH EARNINGS VALUATION
TICKER COMPANY MARKET CAP. 04/25/19 EARNINGS SALES FLOW GROWTH RATING
4319 Tac Co.Ltd. 4.2 B 225.00 10.6 0.2 9.1 NA LEAST RISK
32 The Cross-Harbour (Holdings) Limited 4.1 B 11.00 8.8 13.2 9.2 NA MEDIUM RISK
6181 Partner Agent Inc. 4.1 B 403.00 23.4 0.8 28.2 NA MOST RISK
9696 With us Corporation 4.0 B 401.00 15.6 0.2 13.3 0.1 LEAST RISK
IEL IDP Education Limited 4.0 B 15.70 49.0 5.1 37.0 1.7 MOST RISK
GHC Graham Holdings Company 3.9 B 729.70 8.2 1.3 11.1 NA LOW RISK
2424 Brass Corporation 3.6 B 645.00 29.3 0.3 4.1 NA MEDIUM RISK
DIVERSIFIED CONSUMER SERVICES SECTOR 29.0 B — 15.6 0.6 11.6 0.6 —
PEER OPERATING COMPARISON

GROSS EBIT NET CASH OPERATING
MARGIN MARGIN MARGIN CONVERSION EFFICIENCY
TICKER COMPANY MARKET CAP. (%) (%) (%) ROIC (%) CYCLE (DAYS) RATING
4319 Tac Co.Ltd. 4.2 B 34.1 -7.0 -3.5 2.7 89.0 MEDIUM RISK
32 The Cross-Harbour (Holdings) Limited 4.1 B 81.1 56.6 104.3 6.5 -2.0 LOW RISK
6181 Partner Agent Inc. 4.1 B 53.7 1.0 0.4 4.5 NA MEDIUM RISK
9696 With us Corporation 4.0 B 36.0 14.0 8.3 5.0 8.0 LOW RISK
IEL IDP Education Limited 4.0 B 25.8 19.2 13.4 32.0 NA MEDIUM RISK
GHC Graham Holdings Company 3.9 B 37.2 18.8 8.2 7.9 3.0 LOW RISK
2424 Brass Corporation 3.6 B 62.6 5.5 3.7 2.2 -19.0 MEDIUM RISK

BUY
DEFINITIONS
Adjusted Net Income: Adjusted Net Income is a company’s from continuing operations.
reported net income less adjustments for one-time and
Adjusted Debt Coverage: Adjusted Debt Coverage is a measure
non-operating items yielding a more realistic picture of a
of a company’s ability to cover its debt obligations with cash
company’s ongoing earnings.
flow it generated from continuing operations, calculated using a
Accruals – Forecasted and Actual: The comparison of forecasted company’s adjusted cash flow.
and actual accruals identifies a discretionary build not
Adjusted Return on Invested Capital: Adjusted ROIC assesses a
attributable to a company’s sales growth, and could be a sign of
company’s efficiency at allocating the capital to profitable
poor earnings quality. For our purposes, the forecasted accrual
investments using a company’s adjusted net income (see above)
component is an aggregate measurement of total accruals
yielding a measure of how well a company is using its capital to
(short-term balance sheet accounts) that distinguishes between
generate returns.
“normalized” and “extraordinary” accruals. The normalized
accruals are based on historical relationships between sales and Adjusted EBIT Margin: Adjusted EBIT Margin is a measure of a
accruals and are dynamically adjusted over time to account for company’s earnings before interest and income taxes less
changes in the ratio between these two variables. Normally, adjustments for one-time and non-operating items divided by a
short term accruals will grow as sales grow – i.e., the company’s sales.
“normalized” measure. Discretionary accruals are the portion of
accruals that are in excess of the base factor and therefore Adjusted Net Margin: Adjusted Net Margin is a measure of a
exceed the normal and are “extraordinary”. company’s net income less adjustments for one-time and
non-operating items divided by a company’s sales.
Adjusted Operating Cash Flow: Adjusted Operating Cash Flow is
reported operating cash flow less adjustments for one-time and Return on Incremental Invested Capital: ROIIC measures the
non-operating items yielding a more realistic picture of a relationship between incremental investment and incremental
company’s ongoing cash flow from operations. net operating profit after tax. This provides a measure of the
returns a company is earning on recent investments rather than
Adjusted Free Cash Flow: Adjusted Free Cash Flow is reported all investments as measured by ROIC.
operating cash flow less adjustments for one-time,
non-operating items and capital expenditures. This provides a Cash Conversion Cycle: The Cash Conversion Cycle measures
more realistic picture of a company’s ongoing cash generation the number of days working capital is tied up from the date of
from operations after capital investments. purchase of raw materials until the collection of cash from the
sale of the product.
Flow Ratio: The Flow Ratio is a measurement of management’s
effectiveness in managing its working capital to maximize the Debt to Tangible Equity: Debt to Tangible Equity is a ratio of a
company’s cash flows. The measure is a ratio of a company’s company’s debt to equity less adjustments for goodwill and
non-cash current assets to its non-interest bearing short-term other intangible assets yielding tangible equity.
liabilities.– These non-cash assets include items such as Debt to Tangible Assets: Debt to Tangible Assets is a ratio of a
accounts receivable (which are essentially interest-free loans to company’s debt to total assets less adjustments for goodwill and
customers) and inventory (which is subject to obsolescence or other intangible assets.
spoilage). The non-interest bearing liabilities are essentially
interest-free loans to the company. A lower ratio implies tighter Price/Adjusted Earnings: Adjusted Price/Earnings is a relative
cash management for a company as it has less cash tied up in valuation measure comparing a company’s share price to its
non-cash current assets and is able to utilize interest free loans adjusted net income.
from suppliers. Price/Adjusted Cash Flow: Adjusted Price/Cash Flow is a
Cash Flow Return on Investment: Cash Flow ROI is a measure relative valuation measure comparing a company’s share price
of a company’s ability to generate operating cash flow from its to its adjusted cash flow.
invested capital. Many analysts consider this measure preferable Price/Adjusted Earnings Growth: Adjusted Price/Earnings
to an earnings return measure such as ROE since cash flow is Growth is a relative valuation measure comparing a company’s
considered a more reliable measure. share price to its growth in adjusted earnings.
Adjusted Cash Flow Return on Investment: Adjusted Cash Flow
ROI is a measure of the ability to generate operating cash flow
from its investment in capital calculated using a company’s
adjusted cash flow.
Debt Coverage: Debt Coverage is a measure of a company’s
ability to cover its debt obligations with cash flow it generated

BUY
ABOUT THE FINANCIAL SONAR™ REPORT & METHODOLOGY
The Jefferson Financial Sonar™ ratings system classifies companies into three categories: Buy, Hold and Sell. The Financial Sonar
rating is the result of a point scoring system derived from the five main criteria. The more negative the rating, the more likely the
overall rating will be a Sell. More positive criteria will support an Overall Rating of Buy.
Jefferson Research & Management has developed the Financial Sonar™ Rating System which is based upon five analytical criteria:
Earnings Quality, Cash Flow, Operating Efficiency, Balance Sheet, and Valuation. The first four criteria are rated in one of four
categories (best to worst): Strongest, Strong, Weak, Weakest. Valuation is also rated in one of four categories (best to worst): Least
Risk, Low Risk, Medium Risk, Most Risk.
ABOUT JEFFERSON RESEARCH & MANAGEMENT
Jefferson Research & Management is an independent investment research and advisory firm founded in 1989 and based in Portland,
Oregon. The firm has been providing fundamental research to institutional and individual clients for more than 20 years. Financial
Sonar™ ratings are based on a proprietary rating system developed by Jefferson Research & Management that measures the changes
in company fundamentals using information from financial statements.
DISCLAIMER
This report is for information purposes only for clients of Jefferson Research & Management and in no way should be interpreted as a
complete investment recommendation. This report has been prepared exclusively by Jefferson Research & Management.
Information contained in this report is obtained from sources believed to be reliable, but no guarantee is made to its accuracy and no
representation is made that it is complete, or that errors, if discovered, will be corrected.
1) Jefferson Research & Management and its staff are not involved in investment banking activities for firms covered.
2) No employee of Jefferson Research & Management is on the board of any covered company and no outsiders are members of
Jefferson Research & Management’s board.
3) Jefferson Research & Management employees trading stock in rated companies are subject to trading restrictions prior to release
(once identified) and for a one day period subsequent to rating changes but do not individually or collectively own more than 1
percent of the outstanding stock of a covered company.
No part of this report can be reprinted or transmitted electronically without the prior written authorization of Jefferson Research &
Management.
Reproduction of any information, data or material, including ratings (“Content”) in any form is prohibited except with the prior
written permission of the relevant party. Such party, its affiliates and suppliers (“Content Providers”) do not guarantee the accuracy,
adequacy, completeness, timeliness or availability of any Content and are not responsible for any errors or omissions (negligent or
otherwise), regardless of the cause, or for the results obtained from the use of such Content. In no event shall Content Providers be
liable for any damages, costs, expenses, legal fees, or losses (including lost income or lost profit and opportunity costs) in connection
with any use of the Content. A reference to a particular investment or security, a rating or any observation concerning an investment
that is part of the Content is not a recommendation to buy, sell or hold such investment or security, does not address the suitability
of an investment or security and should not be relied on as investment advice. Credit ratings are statements of opinions and are not
statements of fact.
Credit: Copyright © 2018, S&P Global Market Intelligence (and its affiliates, as applicable).

2019-04-25-9696.T-Jefferson Research-Jefferson Research Financial Sonar Report. A Detai... - 84988260

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

2019-04-25-9696.T-Jefferson Research-Jefferson Research Financial Sonar Report. A Detai... - 84988260

Uploaded by

Copyright:

Available Formats

FINANCIAL SONAR™: REALITY RADAR ON COMPANY PERFORMANCE

JASDAQ 9696 WITH US CORPORATION

OUR EVALUATION OF 9696 FINANCIAL SONAR™ FOR 9696

PRICE TRENDS AND VALUATION

Data not available for this chart.

JASDAQ 9696 WITH US CORPORATION

EARNINGS QUALITY: STRONG

JASDAQ 9696 WITH US CORPORATION

CASH FLOW QUALITY: STRONG

OPERATING CASH FLOW IN MILLIONS FREE CASH FLOW IN MILLIONS

FLOW RATIO CASH FLOW ROI

JASDAQ 9696 WITH US CORPORATION

OPERATING EFFICIENCY: STRONG

GROSS MARGIN EBIT MARGIN

NET MARGIN SG&A AS A PERCENTAGE OF SALES

JASDAQ 9696 WITH US CORPORATION

OPERATING EFFICIENCY: STRONG

ASSET TURNOVER EQUITY TURNOVER

CASH CONVERSION CYCLE IN DAYS

JASDAQ 9696 WITH US CORPORATION

BALANCE SHEET QUALITY: STRONG

RECEIVABLES DAYS OUT INVENTORY DAYS OUT

CURRENT RATIO QUICK RATIO

JASDAQ 9696 WITH US CORPORATION

BALANCE SHEET QUALITY: STRONG

JASDAQ 9696 WITH US CORPORATION

VALUATION: LEAST RISK

Sector Price/Cash Flow 11.60 13.60 12.65

Sector Price/Earnings Growth 0.50 0.80 0.64

JASDAQ 9696 WITH US CORPORATION

PEER VALUATION COMPARISON

PEER OPERATING COMPARISON

JASDAQ 9696 WITH US CORPORATION

JASDAQ 9696 WITH US CORPORATION

ABOUT THE FINANCIAL SONAR™ REPORT & METHODOLOGY

ABOUT JEFFERSON RESEARCH & MANAGEMENT

You might also like