Japan opportunity

[Dalal.Holdings]

On 7/6/2025 at 4:05 PM, Dalal.Holdings said:

 

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.

 

Mitachi (3321) raised its earnings forecast...now projecting that current FY (ends in May) Sales up to 105B JPY (from 100B JPY), Op Profit 2.25B JPY (up from 2.0B JPY), and EPS of 220 JPY/Share (up from 188 JPY/Share).

 

Traded up over 10% on the news, still at a P/E of 7 for current year forecast and next FY expected to be even better as Denso business gets more integrated...

 

Edited September 22, 2025 by Dalal.Holdings

[Spekulatius]

Bought some Tacmina pump 6322 for my Japan basket. It does not have a catalyst but decent to good fundamentals and half their market cap is in cash and securities. The stock trades at a small premium to tangible book.

 

2025年3月期決算説明資料 (1).pdf

Edited September 28, 2025 by Spekulatius

[jfan]

How do people thinking about sizing their Japanese basket?

 

I've been poking around, and there seems to be a number of very good businesses in addition to the statistically cheap stuff here.

 

There is certainly some informational limitations doing research from a North American armchair, and their disclosures are much more sparse in some ways but transparent in other ways. 

 

I'm always leery to size positions to 15-20% on a single name given my analytical/behavioral short-comings, but the businesses here seem robust at attractive valuations, with a move to be more shareholder friendly, 10% in a 5 - 7 companies feels about right. 

 

@Spekulatius thanks for the tacima idea, looks interesting

 

[Spekulatius]

Sony  Financial spin started trading $8729

 

Mostly a life insurance business and it does not look cheap. equity/share ~94 yen, earnings 11 Yen. They have potentially a massive problem with old insurance written at much lower interest rates that customers could cancel. Looks pretty iffy to me, trading around 150Yen/ share 

https://www.sonyfg.co.jp/en/ir/library/annualreport/

[formthirteen]

Shoei was featured on VIC. Looks cheap: https://quickfs.net/company/SHOFF:US

[winjitsu]

On 9/29/2025 at 8:34 PM, jfan said:

How do people thinking about sizing their Japanese basket?

 

I'm always leery to size positions to 15-20% on a single name given my analytical/behavioral short-comings, but the businesses here seem robust at attractive valuations, with a move to be more shareholder friendly, 10% in a 5 - 7 companies feels about right. 

 

Depends how big your portfolio is. Many of these small cap deep value names have limited liquidity which makes acquiring large positions challenging. 10% is a big position to most, but if your capital base is small relative to your salary, then it's fine.

At the same time, you mention your edge is small siting in NA w/o Japanese knowledge, that is another reason to go smaller. If you think you have a strong edge, then for all means, go bigger. For example, I'm willing to bet the Frenchmen involved in Keihin have a significant amount of their capital invested in the company (https://improve-keihinco.com/), but they have reached out and spoken to management several times. 

 

IMO net-nets and this style of deep value investing works better as a bigger basket, Schloss style. Lots of cyclicals in financials, construction, semi-conductor, and auto-part suppliers. Being too concentrated will bite you when the cycle turns. 

[Spekulatius]

On 9/29/2025 at 9:34 AM, jfan said:

How do people thinking about sizing their Japanese basket?

 

I've been poking around, and there seems to be a number of very good businesses in addition to the statistically cheap stuff here.

 

There is certainly some informational limitations doing research from a North American armchair, and their disclosures are much more sparse in some ways but transparent in other ways. 

 

I'm always leery to size positions to 15-20% on a single name given my analytical/behavioral short-comings, but the businesses here seem robust at attractive valuations, with a move to be more shareholder friendly, 10% in a 5 - 7 companies feels about right. 

 

@Spekulatius thanks for the tacima idea, looks interesting

 

Well, people call it being a basket for good reason. The idea for most here is to buy a basket of individually small positions and regard them as one Japan trade. We do this because we don’t really have an edge with individual stocks.

[jfan]

Thanks for the insights.

 

Here are a couple more, not net nets, but seem to be decent quality boring companies:

 

1) KeePer Technical Laboratory (6036)- services cars by washing and applying a joint developed resin that repels water and dirt via a distribution channel that comprises of their own stores, independent gas station service shops for after-market applications and recently gaining traction with new Japanese (and Volvo) dealership to apply it on new cars. They are also moving into a franchise partnership with a Japanese integrated oil and gas company (with their own service stations). Little footholds in Taiwan and Singapore, as well as moving into household products.  Net cash balance sheet, excess earnings distributed as dividends, no stock buybacks, retained earnings reinvesting in growth, mid 20% post-tax return on capital, 25% owned by founder, and his 2 Co-COOs, operating since 1985, trading at 13-14x next years EPS. 

 

2) Kotobuki Spirits (2222) - Just digging into this one. Makes premium Japanese candy and cakes, sells it via its own storefronts, airports. Founded in 1952. The son of the founder is running the company. Gradual improvement in operating margins and ROE, net cash balance sheet, trading at 21x next year's forecasted EPS. 

 

 

[Marco Van Basten]

18 hours ago, jfan said:

Thanks for the insights.

 

Here are a couple more, not net nets, but seem to be decent quality boring companies:

 

1) KeePer Technical Laboratory (6036)- services cars by washing and applying a joint developed resin that repels water and dirt via a distribution channel that comprises of their own stores, independent gas station service shops for after-market applications and recently gaining traction with new Japanese (and Volvo) dealership to apply it on new cars. They are also moving into a franchise partnership with a Japanese integrated oil and gas company (with their own service stations). Little footholds in Taiwan and Singapore, as well as moving into household products.  Net cash balance sheet, excess earnings distributed as dividends, no stock buybacks, retained earnings reinvesting in growth, mid 20% post-tax return on capital, 25% owned by founder, and his 2 Co-COOs, operating since 1985, trading at 13-14x next years EPS. 

 

2) Kotobuki Spirits (2222) - Just digging into this one. Makes premium Japanese candy and cakes, sells it via its own storefronts, airports. Founded in 1952. The son of the founder is running the company. Gradual improvement in operating margins and ROE, net cash balance sheet, trading at 21x next year's forecasted EPS. 

 

 

With all due respect, paying 21x EPS for a Japanese consumer company seems insane, unless you expect it to double or triple revenues with margin expansion by growing in Vietnam/Indonesia/etc...

[jfan]

3 hours ago, Marco Van Basten said:

With all due respect, paying 21x EPS for a Japanese consumer company seems insane, unless you expect it to double or triple revenues with margin expansion by growing in Vietnam/Indonesia/etc...

I've learned over the years of investing my savings, that I need to try to keep an open mind and not look at the PE multiple as a first pass filter. If it looks like a business I can comprehend, and the economics look reasonable, I dig a bit. TBH, after digging into some of these Japanese companies, I think there are a number of high quality mid-cap businesses that are conservatively run, good historical returns on capital, with what appears at least from my North American armchair, run by managers that understand the value their product and services. Many of these companies have been operating for decades doing the same thing over these years. There seems to be a longevity to them, and they are willing to share excess distributable cash back to shareholders. 21x EPS with excess cash on the balance sheet, 10x sales, expanding both gross and operating margins, with positive cash flows over 10+ years every year, it seems cheap relative to all our magnificent 7, with all their capex spend, and much wider dispersion of future economic outcomes. 

[Marco Van Basten]

1 minute ago, jfan said:

I've learned over the years of investing my savings, that I need to try to keep an open mind and not look at the PE multiple as a first pass filter. If it looks like a business I can comprehend, and the economics look reasonable, I dig a bit. TBH, after digging into some of these Japanese companies, I think there are a number of high quality mid-cap businesses that are conservatively run, good historical returns on capital, with what appears at least from my North American armchair, run by managers that understand the value their product and services. Many of these companies have been operating for decades doing the same thing over these years. There seems to be a longevity to them, and they are willing to share excess distributable cash back to shareholders. 21x EPS with excess cash on the balance sheet, 10x sales, expanding both gross and operating margins, with positive cash flows over 10+ years every year, it seems cheap relative to all our magnificent 7, with all their capex spend, and much wider dispersion of future economic outcomes. 

Where do you think the revenue growth will come from?  Thank you.

[Dalal.Holdings]

The problem is, if I’m willing to pay 21 P/E, there are plenty of western companies I can understand much better that I can invest in around that multiple, so why bother trying to do it in Japan

[Spekulatius]

36 minutes ago, Dalal.Holdings said:

The problem is, if I’m willing to pay 21 P/E, there are plenty of western companies I can understand much better that I can invest in around that multiple, so why bother trying to do it in Japan

I agree with it. While Keeper does not look excessively overvalued, I can find similar business in the USA or Europe. I don‘t see reason to go to Japan for those. I research Japanese companies because I find certain business with valuations that I get only there.

 

I don’t just buy low P/B either. there are some great growth stocks like Elan 6099 (uniforms, supplies for nursing homes etc) that I think are unique Japan and I have not seen anywhere else.

Edited October 3, 2025 by Spekulatius

[jfan]

21 hours ago, Marco Van Basten said:

Where do you think the revenue growth will come from?  Thank you.

Just found the name, haven't done much work on it other than looking at TIKR data and a few investor presentations, will let you know once I read a bit more.

 

21 hours ago, Dalal.Holdings said:

The problem is, if I’m willing to pay 21 P/E, there are plenty of western companies I can understand much better that I can invest in around that multiple, so why bother trying to do it in Japan

That's fair. I'm up here in Canada. Right now its a bit cheaper to look for businesses in Japan than it is in the US, and despite many cheap Canadian resource companies, they are not so much in my wheelhouse. As a broad over-simplification, Japanese balance sheets seem much stronger relative to North American companies, and pre-tax returns on capital of 20 --> 40% that are consistent +/- improving. 

 

21 hours ago, Spekulatius said:

I agree with it. While Keeper does not look excessively overvalued, I can find similar business in the USA or Europe. I don‘t see reason to go to Japan for those. I research Japanese companies because I find certain business with valuations that I get only there.

 

I don’t just buy low P/B either. there are some great growth stocks like Elan 6099 (uniforms, supplies for nursing homes etc) that I think are unique Japan and I have not seen anywhere else.

Keeper's directly owned LABO stores have unit economics of 25% pre-tax returns on operating assets and 20% operating margins. They become profitable after 3 years. Their PROshop partners (25% of all gas service stations in Japan) have pre-tax returns on assets of 70 - 100% with operating margins of 25%. However, there is little growth here due to a decline in service stations, hence their in-roads with auto OEM dealerships (over weighted average 6% share of new Japanese cars among their partners, with Subaru already up to 25%) to get their products into new cars. With the franchising partnership, they can continue to growth their distribution touchpoints with no capex, which should continue to improve their margins over time. Coupled with a recent sale of stock in a partners business (soft99), they will be quite flush with cash. Management has been opportunistic with their buybacks, with a large deployment in 2021, and most of their excess distributable cash paid out to shareholders  as a dividend. With a 16x exit multiple in 5 years, i think it is likely 80-85% of intrinsic value for what appears to me a well-run business with decent ownership skin-in-the-game. Then you get the free option of Singapore, Taiwan, and a move into household cleaning. 

 

I think their service has a certain degree of sustainable demand, given the population density, and lack space for people to detail/wash their cars.

 

Thanks for the Elan tip, will explore. 

Edited October 4, 2025 by jfan

[Dalal.Holdings]

16 hours ago, jfan said:

 

 

Keeper's directly owned LABO stores have unit economics of 25% pre-tax returns on operating assets and 20% operating margins. Their PROshop partners (25% of all gas service stations in Japan) have pre-tax returns on assets of 70 - 100% with operating margins of 25%. However, there is little growth here due to a decline in service stations, hence their in-roads with auto OEM dealerships (over weighted average 6% share of new Japanese cars among their partners, with Subaru already up to 25%) to get their products into new cars. With the franchising partnership, they can continue to growth their distribution touchpoints with no capex, which should continue to improve their margins over time. Coupled with a recent sale of stock in a partners business (soft99), they will be quite flush with cash. Management has been opportunistic with their buybacks, with a large deployment in 2021, and most of their excess distributable cash paid out to shareholders  as a dividend. With a 16x exit multiple in 5 years, i think it is likely 80-85% of intrinsic value for what appears to me a well-run business with decent ownership skin-in-the-game. Then you get the free option of Singapore, Taiwan, and a move into household cleaning. 

 

I think their service has a certain degree of sustainable demand, given the population density, and lack space for people to detail/wash their cars.

 

Thanks for the Elan tip, will explore. 

 

The other thing with buying 21 P/E Japanese cos is the demographic time bomb. I don't think it's relevant for export oriented Japanese businesses, but more domestic ones like these it might eventually become an issue

[Dalal.Holdings]

I'm not sure her favoring restricting immigration is a good idea for Japan...

 

https://www.ft.com/content/3c020865-3984-48b4-844a-aac03231a724#comments-anchor

 

Quote

“For my part, I will be abandoning the concept of work-life balance,” she said, wearing a royal blue suit that recalled her idol Thatcher. “Work! Work! Work! Work! Work!”

 

When did Japan have work-life balance to begin with ?

 

Edited October 4, 2025 by Dalal.Holdings

[Paarslaars]

On 10/4/2025 at 9:08 PM, Dalal.Holdings said:

I'm not sure her favoring restricting immigration is a good idea for Japan...

 

This is in response to a large increase in muslim immigration recently, who are refusing to accept local values and are imposing their way of living. It starts like this:

 

 

And ends up like this:

 

 

No country has ever become better by allowing this, just look at Europe... It is good that Japan can nip this in the butt fast. However this is maybe for the politics thread...

[Dalal.Holdings]

So we have a new Japanese PM interested in expanding defense and nuclear power. Anyone have any related names?

 

I'm not looking for big names like Mitsubishi Heavy Industries (as many are overpriced), but small names that could benefit

 

I owned 6637 which was a Net-Net but sold after quite the run-up in the past year. I might buy back in if it sells off some

[rogermunibond]

Short JPY

 

Long trips to Tokyo

[MungerWunger]

58 minutes ago, rogermunibond said:

Short JPY

 

Long trips to Tokyo

Just booked a trip to Japan. Perfect timing

[jfan]

On 10/3/2025 at 7:13 PM, Marco Van Basten said:

Where do you think the revenue growth will come from?  Thank you.

Dug in a bit more on this name, and as with most things, there are some favorable and unfavorable features.

 

- ~ 85% of their sales relate to domestic Japanese customers, where @Dalal.Holdings is quite correct in that it will face challenges in population decline (-1% per year), with a projected drop in population from 123 million to 100 million by 2050. The saving grace is that the Confectionery consumption (yen - based) has been pretty steady over the past 10 years. The population forecast is shown below:

The per capita purchases ~ 20,500 yen per year per person (~ $160 USD), undoubtedly this will be challenged to grow from a volume standpoint due to a declining population but would be somewhat mitigated by price increases. With Kotobuki, already ~ 2-3% of the market currently, and most other popular brands occupying < 4% of the market each. Kotobuki would need to 1) gain domestic market share and/or 2) improve sales and production efficiency moving forward. 

 

Kotobuki operates a holding company with multiple brands, focused on the more premium market, that owns and operates their own manufacturing facilities, but uses a combination of both their directly-owned retail outlets, pop-up stores in department stores, and wholesale channels (grocery stores, airports, ports, and other large transportation hubs). In the past 5 years, they've been about to grow revenues, gross profits, operating profits, and net operating assets by 40%, 60%, 120%, and 12% (ex-all their cash) respectively.  Their gross margins of 60%, operating profit margins of 25%. Their ROE (with cash reserves equal to 30% of sales) is 30%+ over the past few years. Amusingly, they disclose their cost of capital as 9.5%. 

 

The growth levers that they plan to pull include:

1) increasing production efficiency (moving from 12 - 16 hours worth of shifts ie 1.5 shifts to 2 shifts --> 3 shifts per day per manufacturing plant)

2) increasing sales efficiency (better transport hub sales locations at ie airports, shifting to a large proportion of regular vs temporary employees, better sales on-ramping, mentoring, sharing of best practices). 15% of their sales is at international airports and is tied to the volume of tourists traveling to Japan. Japan's Tourism Agency is aiming to increase the visits from 40 million to 60 million by 2030. With better locations, larger tourist volumes, they hope that these revenues will also increase.

3) increasing the efficiency/speed to introduce new products/eliminate poorly performing products, and increased front-line feedback in product design using their PDSA methodology

 

They have tried to expand overseas, and have encountered slivers of success in Australia, but headwinds in Taiwan, China and Korea. They recognize that their best chances are in their home market, but continue to test and try different things to expand internationally. 

 

They have a FY 2030 management plan that will increase their sales by 10% per year, achieve 30% ordinary profit margins with 35 billion yen in ordinary profit. To get there, they will reinvest 30-40% of their operating cash flows, target cash levels at 30% of sales (they will unlikely load any debt to which it is currently de minimus), and return 50 - 60% to shareholders.

 

The founding family owns 30% of the outstanding shares. They started in 1950s, and in 1999, decided to transition from a wholesale and manufacturing model, to their current manufacturing/retail model with progressively steady improvements on ROE from single digit to 30%+ with a pretty linear upward trajectory (except during covid). 

 

It doesn't look like a bargain deal right now, more like a fair price for a well-run business with a management that has skin-in-the-game, with demographic headwinds in the long-term. It's business success depends ultimately on the success of consolidating the market under multiple brands to achieve increasing economies of scale. 

 

 

 

 

 

 

[Kizion]

On 10/2/2025 at 7:24 AM, formthirteen said:

Shoei was featured on VIC. Looks cheap: https://quickfs.net/company/SHOFF:US

 

 

I get completely different valuation ratios via TIKR. However ROE, cash balance (50% of equity), 4% dividend yield, and 10Y revenue CAGR seem a nice combo, that in combination with my idea that motorcycles will remain popular in future and new use cases like e-bike, e-steps, etc will require helmets.  - I added it to my Japanse basket. 

 

Looking to sales you see that they are dropping from their peak with YoY decline of 15% in EU & China and 30% in Japan (excess supply), while increasing in North America. Currency risk also for their revenues. Nevertheless I still reach a fair ROE after accounting for normalized earning (so far possible) and considering they will distribute their excessive cash in future. 

Edited October 23, 2025 by Kizion

[Dalal.Holdings]

https://www.ft.com/content/61f63a45-e21c-4cda-9020-18ee0edf5ea7

 

Japan's Iron Lady

 

Quote

Japan’s Sanae Takaichi steps up defence spending ahead of visit by Donald Trump

 

[Spekulatius]

My cement play Taiheiyo Cement 5233 is up another 3% plus today - anyone knows why? Did the “Iron lady” come up with an infrastructure program? Half the time, I have no idea why shares go up and down, sometimes significantly. I am not complaining in this particular case, but it’s a bit concerning at times.

Edited October 27, 2025 by Spekulatius

[Dalal.Holdings]

Unfortunately I missed out on adding to my already great gains in 6637.T by selling out too soon. The thing was a net-net when I originally bought it.

 

If the Iron Lady is going to rebuild Japan's maritime defense capabilities and expand shipbuilding with DJT, it's going to be a sustained tailwind