Kirin Holdings Looks Undervalued, But The Business Is In Transition

Japan’s Kirin Holdings (OTCPK:KNBWY) is a challenging company to evaluate. On one hand, you have a management team that has done some very good things with its brewery operations over the past few years, including leveraging new product development to regain #1 share in Japan. Management has also been diligent about exiting (or at least trying to exit) business with weak margin and growth outlooks.

On the other hand, the company’s investment into Fancl, a Japanese manufacturer of cosmetics and supplements is a curious step, as was the acquisition of Kyowa Hakko Bio, and there have been persistent rumors about whether Kirin would acquire more of Kyowa Kirin (OTC:KYKOY).

I understand why Kirin management wants to look beyond the beer business for avenues of growth; Japan is a low-growth market (at best) and there aren’t many attractive “gettable” beer businesses elsewhere. On the other hand, not many companies manage to succeed in businesses well outside their core focus. Kirin shares don’t look particularly expensive, but investors attracted by the value should understand that it may take a while longer for the Street to buy into the story and bid the shares up to a higher level.

 

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Kirin Holdings Looks Undervalued, But The Business Is In Transition