While researching the liquid-crystal display industry, I kept coming across the name Asahi Glass, now known as AGC Inc. (ASGLY, Financial)(TSE:5201, Financial). This Japanese company is the largest glass manufacturer in the world, but is barely followed in the U.S.
The stock trades for 3,801 yen ($33.94), there are 227.44 million shares and the market cap is 865 trillion yen ($77 billion). Earnings per share were 397.46 yen and the price-earnings ratio is 9.56. The dividend is 3%. Pretty decent valuation.
Sales were 1.522 trillion yen last year and were up 4.1% from the prior year. Operating profit margins were 8% and profit margins were 5.9%, which is very profitable. The company has 123 billion yen in cash, 260 billion yen in receivables and 179 billion yen in financial assets. The liability side shows 300 billion yen in payables and 541 billion yen in debt. Not a bad balance sheet.
Sales estimates for fiscal 2019 are 1.6 trillion yen, which would be a 5.1% increase. Operating profit is forecasted to be 125 billion yen, a 3.7% increase from the previous fiscal year.
Glass is the largest division of the company. This is architectural and automotive glass. It accounts for 50% of revenues and saw a 3% increase from the prior year. Electronics, including LCDs for cell phones and solar power panels, accounts for 16.5% of sales and witnessed a 3.7% decrease. Chemicals accounts for 31.8% of sales and saw an over 10% increase in sales. This division sells chlor-alkali products and urethane products. Ceramics make up a little over 5% in sales.
You know the antennas that are built into the glass on your car? AGC is working on an antenna like this that will attract 5G. The tough thing about 5G is that towers have to be built every few thousand yards. The radius for 3G and 4G is miles, but 5G is far less. With 5G, autonomous driving is possible. We are a few years away because of the tremendous amount of fiber optics and transmitters that it will take.
AGC is the number two manufacturer of LEDs. Dragontrail is the brand name of its glass used in cellphones. It is similar to Corning’s (GLW, Financial) Gorilla Glass, which is used in many iPhones. Samsung (XKRX:005930, Financial), Sony (SNE, Financial) and Blackberry (BB, Financial) use Drangontail.
AGC is number two in liquid crystal displays and thin-film transistors. A product that I found interesting is Fontex, a plastic optical fiber that works even when bent. Current fiber optics do not work when bent.
The stock trades over the counter over in the U.S. Only a paltry 27,000 shares trade on average. You’d be better off seeing if your broker has a presence in Japan.
Fluon is a synthetic fluoropolymer used in lubricants and coatings. It is used as a coating covering the Allianz Arena in Germany. The order to AGC was for 150,000 square meters.
The reason I wanted to look at AGC is I kept reading it is a major competitor to Corning in glass for phones. While that is true, it’s only part of what the company does. It manufactures much more automotive and architectural glass. My concern here is that building may slow down and the bull market in auto sales has gone on for too long. I like Corning (though I don’t own shares) because of its presence in fiber optics and cell phone glass.
What is amazing is the difficulty of finding information on AGC. I found no research looking at Morgan Stanley and Charles Schwab. Usually I can find something. This is an enormous company that ought to get more recognition.
Disclosure: We do not own shares.Â
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