Took a quantitative bet on Sanko Co. Sanko manufactures mechatronics and plastic components for automotbile and IT products.
Low margin business, strong balance sheet. Dividends. Only ~1200 shareholders according to IR info. Entered at NCAV ratio of 0.6 or 460¥.
So UKC hit a valuation of above net current assets a lot sooner than I expected. Not because the share price took of on a rocket, but because the company made large write-downs of receivables and prepayments.
The share has traded up since I took my position, but I feel a bit anxious about the write-downs so I sold. You know “Misfortunes never come singly” – there could be more problems with the books. The need to put together an independent audit committee indicates managerial problems.
Exited at ¥1922, so return of about +17 % in 5 weeks.
UKC Holdings is engaged in the sales and distribution of semiconductor and electrical components. It´s a typical Japanese net-net low margin business. Entered at ¥1630 or a NCAV ratio of about 0.51. The company pays dividends and have some IR info in English.
|| ¥ 134 895 000
|| ¥ 85 111 000
|Net current assets
|| ¥ 49 784 000
|| ¥ 25 500 000
Odawara is principally engaged in the manufacturing, development and sale of bus fare and ticket systems. The company has it’s roots in the 1950s and seems to have been involved with bus fare equipment since the 1970s. The company was listed in 2009. The company has less than 1500 share holders and a market cap of circa 14 million USD.
All reports are in Japanese. From what I can gather business is a bit slow. The Tokyo Summer Olympics in 2020 may give an upswing, as public transport will be overhauled and the company is well established in the Japanese metropolitan areas.
The company has current assets of 4.6 B¥, total liabilities of 1.2 B¥. Current assets includes 1.7 B¥ in cash. Market cap is 1.6 B¥. The company is in other words trading at 50 % discount to the current assets. Price 507¥.
I am aware that I may be overenthusiastic about the Japanese net-nets, but I’ve still picked another one. This time Sasakura Engineering. The company is engaged in the development of desalination plants, heat exchangers etc.
It’s a quantitative pick. There are many things to like from a net-net perspective, strong balance sheet, reducing share count, cyclic business. From my limited knowledge it would seem that the company could benefit from some macro trends – growing population and urbanization.
The company provides some limited IR info in English. Trading at NCAV of 0.5.
The share has a rather large lot size of 1 000 shares, so it’s limited liquidity. Unlocking value in this company could be as simple as reducing the lot size to 100 shares (common for many Japanese stocks).
Opened a small position in Kawasumi Laboratories. KL manufactures and sells medical devices relating to hemodialysis, blood banking, infusion therapy etc. The devices are mainly of a more simple and disposable nature.
It’s not wide moat medtech business, but more of a commodity market. However, the company has a very low valuation, is trading below NCAV and have a strong balance sheet. The company has been profitable during the last years, although poor margins as with most Japanese net-nets. Dividends looks ok and the company performed a 5% share repurchase last year.
Entered at ~0.63 of NCAV or 660¥.
||14 400 M¥ (126 MUSD)
||15 501 M¥
||5 637 M¥
Entered another Japanese net-net position based on the quantitative figures. This time it was the Nireco Corp. The company sells various equipment for automation and control. Strong balance sheet and stable share count. Decent margins.
Entered at 600¥.