Japan opportunity

[hasilp89]

 

@Spekulatius any chance you've heard of this company. not sure if you've come across them in your day to day work.

 

[Spekulatius]

@hasilp89 I finally got around checking out Enplas 6961. Looks quite impressive and I agree it looks very cheap. Their business is producing high tolerances molded parts semiconductors, life science, electric motors (this one is the most commoditized and has low margins )and now communication (little plugs for optical connections). With the latter, they seem to have an extremely profitable niche that has ~60% EBIT margins. It may be the most profitable business I have ever seen, and it’s due to datacenters connectors as the number imply. I wonder how sustainable the margins are as I think eventually competition is going to make a dent here. I think it’s inevitable that margins will decline substantially because 60% EBIT margins for this stuff seems unsustainable.

[Spekulatius]

Adding a bit more to Teiheiyo Cement 5233. 3rd Avenue Value find position. If they meet their goals for 2027 (10% ROE vs 6.4%), the stock should trade at book value then. Could be a double if the earnings continue to grow and they buy back more stock.

 

I think it’s doable since the Japanese cement business is currently slightly below breakeven and they want to get it to a moderate 10% EBIT through rationalization.

[hasilp89]

On 6/20/2025 at 5:43 PM, Spekulatius said:

@hasilp89 I finally got around checking out Enplas 6961. Looks quite impressive and I agree it looks very cheap. Their business is producing high tolerances molded parts semiconductors, life science, electric motors (this one is the most commoditized and has low margins )and now communication (little plugs for optical connections). With the latter, they seem to have an extremely profitable niche that has ~60% EBIT margins. It may be the most profitable business I have ever seen, and it’s due to datacenters connectors as the number imply. I wonder how sustainable the margins are as I think eventually competition is going to make a dent here. I think it’s inevitable that margins will decline substantially because 60% EBIT margins for this stuff seems unsustainable.

Thanks Spek, missed this on Friday. Worthy of an addition to your Japan basket? Hope you are surviving the CLT heat!

[Spekulatius]

11 hours ago, hasilp89 said:

Thanks Spek, missed this on Friday. Worthy of an addition to your Japan basket? Hope you are surviving the CLT heat!

Yes, 6961 might be an addition to my Japan basked. Inhaber not decided yet. My main concern is sustainability of margins in their communication segment and the lazy balance sheet and seemingly shareholder unfriendliness. I put this on my watchlist for now.

 

Surprisingly enough, the heat here in CLT is not worse than where I am moving from. My weather app says that the temperature in the town in MA was higher than at my house here, go figure. Humidity tends to be higher up there too, so I think the incremental suffering is nil.

Edited June 25, 2025 by Spekulatius

[Spekulatius]

Postmortem on some sales:

 

$4368 - this chemical producer / supplier the semiconductor industry did OK. I sold because results and forcast seemed below my expectations. Found this one via a WSJ article

$9386- sold because the results of this logistic co seems pretty underwhelming at a profit. Stocks received a  management buyout offer shortly after I sold, up more than 50% Ouch. Found this one with a screen initially.

 

$4290. High end call center for automobile emergencies etc. Growth stock with a fairly large founder stake.  Results seem to stall out so I sold for a decent profit. Stock has been weak since and down from my purchase price . Found this one via FinTwit initially.

Edited July 4, 2025 by Spekulatius

[Dalal.Holdings]

On 5/22/2025 at 3:09 PM, Dalal.Holdings said:

 

The catalyst is already here: for the current fiscal year which ends in about 9 days, they have been raising their forecasts since Denso, now forecasting op profit of 2.1B yen/1.6B net profit (so about 200 JPY per share or P/E of 6). Most recent report shows Op Profit for the 9 months in FY 25 up 23% Y/Y which I attribute to denso. They have taken on debt to fund Denso so it is a levered play. They are forecasting 3B yen in operating profit by FY 2027 (which starts in about 1 year) due to Denso and from what I've seen, they've undershot with guidance.

 

They have JP auto industry exposure which I'm not crazy about, but the company has downside protection as it's a cheap net-net (below 75% of NCAV) that hasn't lost money in > 10 years (last brief loss in 2012) with significant cash on the B/S (over 3.6B Yen) albeit levered to fund Denso working capital. So, asymmetric with Denso creating room for large potential upside. It may not be an incredible business, but show me one trading this cheap that is. 

 

They just raised the dividend 20% which is another good sign (now yields over 5%). 

 

 

Mitachi reported for Fiscal Year ending May 2025:

 

- 213 JPY/share in profit (so currently P/E or 6) (up 39% YoY)

- Revenues up 152% YoY to JPY 98.2B

- Operating Profit of JPY 2.15B (up 35% YoY)

- Dividend of JPY 60/year (4.7% yield)

 

FY 2027 (Starting in June 2026) Targets:

- Revenue of JPY 100B

- Operating Profit of JPY 3B

 

Current FY 2026 targets are below FY 2025 (expected EPS of JPY 188/Op Profit of JPY 2B). FY 2027 would represent 50% rise in Op Profit from 2026.

 

Their goal is to maintain or increase ROE at or above 10% (FY 2025 was 11.3%) and boost the multiple on the stock according to earnings slides. They are going for a 30% dividend payout ratio.

[jfan]

With the Yen/USD at 145 today, which is the top end of the trading band since the 1990s, and the bottom around 100. Some of these Japanese companies like Nintendo, have a significant amount of sales outside of Japan (earning USD) and costs (denominated in Yen). A reversion back down to 100, would put alot of pressure on margins from reduced revenues when re-patriated back to Japan. 

 

With all this talk on de-dollarization vs US exceptionalism (Trump winning), how do people manage their Japanese positions whose business model is dependent on exporting?

 

[bizaro86]

7 hours ago, jfan said:

With the Yen/USD at 145 today, which is the top end of the trading band since the 1990s, and the bottom around 100. Some of these Japanese companies like Nintendo, have a significant amount of sales outside of Japan (earning USD) and costs (denominated in Yen). A reversion back down to 100, would put alot of pressure on margins from reduced revenues when re-patriated back to Japan. 

 

With all this talk on de-dollarization vs US exceptionalism (Trump winning), how do people manage their Japanese positions whose business model is dependent on exporting?

 

 

Since I'm converting USD to JPY to buy the positions and many have significant assets that would be natively/truly valued in JPY it seems to me that provides a pretty good offset. 

[Junior R]

what is everyone top undervalued Japan Play

 

Thanks

[brobro777]

I dunno guys I stink at currencies so I stick to listening to my friend talk about how much him and his kids like the Switch 2 and the new Donkey Kong game

[LC]

15 hours ago, jfan said:

With all this talk on de-dollarization vs US exceptionalism (Trump winning), how do people manage their Japanese positions whose business model is dependent on exporting?

 

Aside from Nintendo my other Japan positions are mostly domestic, with 5+ years (any mostly 10+) of consistent profitability, with dividends above the borrow rate. 

 

I think of it as self-funding, undervalued cigar butt portfolio. I let it sit there and have the option to periodically sell off stuff on price spikes. It's about 10% of the overall portfolio.

[nwoodman]

4 hours ago, Junior R said:

what is everyone top undervalued Japan Play

 

Thanks

5844 Kyoto Financial Group.  It’s run on a bit since I wrote it up.  Last buy from my end was a couple of months ago.  There’s always the argument that it deserves a holding company discount.  Hardly lit up the board but cheap is cheap, especially if you like the Kyoto based investments Nintendo, Murata, Nidac etc.  there is always the possibility of some NIM expansion.

 

https://thecobf.com/forum/topic/21225-5844t-kyoto-financial-group/#comment-604254

 

[Junior R]

4 hours ago, nwoodman said:

5844 Kyoto Financial Group.  It’s run on a bit since I wrote it up.  Last buy from my end was a couple of months ago.  There’s always the argument that it deserves a holding company discount.  Hardly lit up the board but cheap is cheap, especially if you like the Kyoto based investments Nintendo, Murata, Nidac etc.  there is always the possibility of some NIM expansion.

 

https://thecobf.com/forum/topic/21225-5844t-kyoto-financial-group/#comment-604254

 

Thanks

[Paarslaars]

12 hours ago, Junior R said:

what is everyone top undervalued Japan Play

 

Thanks

Right now? Metaplanet.

[Whensthepaintdry?]

I feel like I slept on Hikari tsushin. Never felt like I had a great handle on it. 

[texual]

To piggyback on Paarslaars: What are people thinking of with Metaplanet?

I am listening to a lot of Chanos talking about the spread in the mNAV over time, seeking to short MSTR and go long bitcoin exposure. I am seeing the argument being the bigger the holdings and larger the treasury, the more we would expect a narrowing of mNAV? And when we look at Metaplanet its quite a higher ratio. Is this something that will crash back down to earth with all BTC treasury companies or is there a legitimate opportunity to get the smaller, "Asian MSTR"

 

OTCMKTS: MTPLT/3350?

[Paarslaars]

1 hour ago, texual said:

To piggyback on Paarslaars: What are people thinking of with Metaplanet?

I am listening to a lot of Chanos talking about the spread in the mNAV over time, seeking to short MSTR and go long bitcoin exposure. I am seeing the argument being the bigger the holdings and larger the treasury, the more we would expect a narrowing of mNAV? And when we look at Metaplanet its quite a higher ratio. Is this something that will crash back down to earth with all BTC treasury companies or is there a legitimate opportunity to get the smaller, "Asian MSTR"

 

OTCMKTS: MTPLT/3350?

 

I'm going to respond to this one on the crypto thread, to avoid going off-topic as people are likely looking for typical japanese net-nets here.

[Spekulatius]

3836 Avant Group. Very encouraging results.

https://data.swcms.net/file/avantgroup-corp/dam/jcr:4038374d-491e-45b9-a86b-c3dec7bd183c/140120250805530352.pdf

If they make their 2028 targets, the stock would be a double without multiple expansion.

[dipod]

5 hours ago, Spekulatius said:

3836 Avant Group. Very encouraging results.

https://data.swcms.net/file/avantgroup-corp/dam/jcr:4038374d-491e-45b9-a86b-c3dec7bd183c/140120250805530352.pdf

If they make their 2028 targets, the stock would be a double without multiple expansion.

I would love to buy some of these issues but my broker does not let me (Chase). Which broker do you use?

[Paarslaars]

I can buy those on IBKR.

[Spekulatius]

5 hours ago, dipod said:

I would love to buy some of these issues but my broker does not let me (Chase). Which broker do you use?

Yes, IBKR is great for Japan as @Paarslaars has noted.

[Eldad]

I found a list of Japanese net nets and about 9 of them still are net nets but I want maybe 20. 
 

Anyway, I started at 5367 and just started typing in the next number on Morningstar. Just got to 5884 and had to share.

Kuradashi (not a net net). 
Company Profile: a shopping site that aims to reduce food loss by selling products, that are still edible but likely to be thrown away, at a reasonable price.
Not profitable haha. 
 

What a crazy country. 4th biggest economy in the world and every company is run by a Great Depression survivor on steroids. Imagine what the country could be with ROEs over 4! 

[Eldad]

I think I will buy a little Kawagishi Bridge 5921. 
 

P/NCAV of 0.66. Making money but not growing. Have started accelerating the buybacks. 
 

It looks like 2 of Buffett’s trading houses own a lot of shares and have board seats. Opens my eyes even more to the brilliance of those investments. They probably collectively are the biggest holders of all of these overcapitalized companies and will be huge beneficiaries of the new policies. And as WB and Greg educate them, they can then take that education down to the various boards they serve on. 

[jfan]

Came across $4980 - Dexerials doing some TIKR screening

 

I would like it to be a bit cheaper. Missed the Liberation Day pull back and trading a bit higher than I like.

 

It makes electrical conductive films for smartphones, laptops, as well as car touchscreens and cameras. They are rolling out products for optical semiconductors for data centers. Some of their products have 90% market share and have been around since 1977. Point72 showed up on their latest earnings call. Only trades on the Japanese exchange. They were spun out from Sony chemicals in 2015, struggled a bit, but one of their internal hires got promoted and has made a big turnaround since 2018. Rote of 40-60%, roic of 24-27% over the past 4 years. Most of their sales outside of Japan, so there is a currency conversion risk, but the management is addressing this with a partnership with an electronics distributor. They have a conservative 5 year plan, which will  double their EPS in the next four years. They've always been conservative forecasters, to the tune of 25%. They've got excess cash on their balance sheet greater than the usual 12% of total assets that most Japanese companies have. At the current price, discounting the dividends that are projected to receive, coupled with no terminal value multiple expansion at year 4, in a more bearish FX scenario, probably a 11% IRR.

 

Management seems shareholder focused with combination of buybacks and dividends, with a flexible re-investment mindset only if the ROC is there.