Toya: the Polish tool distributor
A growth company selling at a value price.
Toya is a company based in Poland which sources tools mainly from Asia and distributes them. They are listed on the Warsaw stock exchange under the ticker TOA. They sell products predominantly under the Yato and Vorel brands (70% and 17% of 2020 sales, respectively), although they own others. You can read more about them and their history on their website.
The global tools market is a mature and rather boring industry which only grows at about the same pace as inflation. Toya is anything but boring: they’ve managed to capture market share from the competition with surprising consistency: they’ve grown both top and bottom line in almost every year in the past decate. Their 10y CAGR on both sales and profits is roughly 12%, but their growth is accelerating lately! In H1 2021, both sales and profits are up more than 30% compared to the same period in 2020, which was already a spectacular year.
Even more impressively, Toya has achieved all of this while paying substantial dividends along the way: in the past decade they’ve only retained roughly 40% of earnings, the rest have been paid out as dividends. Depending on the cash needs of the company, it often pays a yearly dividend. This year it was 0.29 PLN, last year it was 0.80 PLN, but in some years is doesn’t pay anything. For context, shares are currently trading at 8.71 PLN (at the Friday close).
The company reports a very good and stable gross margin, of around 33% in the past decade. It has not been sacrificed to achieve the aforementioned growth, on the contrary in 2020 it stood at 35%. The balance sheet is pristine:
at the end of 2020 there were only 49 days of receivables, down both as number of days and in absolute Zloty value from the end of 2019, despite significant revenue growth!
they have 129M PLN in available credit from banks of which only 8.2M were drawn as of the end of H1 2021, 65M cash and equivalents, 97M in receivables and 220M in inventory against 166M in current liabilities
almost no long term debt as of the end of H1 2021: 30M PLN, which is roughly their EBIT in the single quarter of Q2 2021
You can find the financial reports in English on the company’s website, although I believe they only publish the annual reports in English. Note that the reporting currency is the Polish Zloty (however that’s a very stable currency against the USD).
Mr. Jan Szmidt, one of the company’s co-founders currently sitting on the board, owns ~37.5% of the 75M shares in the company. The number of outstanding shares has been constant for the past decade. The company has a page on its website dedicated to the ownership structure (unfortunately unavailable in English).
An interesting opportunity laying in front of the company is to grow their margins via more online sales. They own their own website for selling their tools online: toya24.pl and there’s also a Romanian and a Chinese version of this website, their 2 largest external markets where they also own subsidiaries. Currently this channel accounts for only 7% of sales, however margins here are incredible: 47% vs an average of 34% on their other channels (wholesale + retail + exports). They seem to have noticed and to be actively be investing in this channel:
The group sees great potential and plans further dynamic development of this distribution channel in the […] coming periods.
Given what was presented above, what would you say a fair P/E multiple is for this company? Give yourself a second to consider it.
You’re probably thinking of a number that’s higher than the 8x P/E the shares are currently trading at (if for earnings we consider the annualized number for H1 2021, which may be conservative, as historically the company does better in H2 than in H1).
Disclosure: I am long WSE:TOA. This is not investment advice, please read my legal disclaimers.
Thank you for the writeup. Good information.