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Anyone looking at Japanese companies?


muscleman
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Last year a few respected super investors talked about Japan, such as Pabrai. Now Japan wants to end the deflation, and Yen is trading at over 100, I think the Japanese financials and manufacturers will probably enjoy the better macro environment.

Right now even the mega banks like MTU are trading at 80% of book value.

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For some exposition, you might watch Kyle Bass's thesis on the matter:

http://www.youtube.com/watch?feature=player_embedded&v=JUc8-GUC1hY

 

Considering the way similar situations have played out in history:

 

A bet on the Japanese stock market may only work well if they inflate gently out of their huge debt load, and even then it's hard to be sure.

 

Actually, it is a lot more likely that the "usual" debt crisis scenario will play out - a massive spike in bond yields, government subsequently can't pay interest, devalues/inflates massively. All paper assets drop like a stone in real terms, including stocks.

 

THEN, and only then, it is time to buy.

 

Sure, buying now and holding for 5-10 years will still turn out OK, because after that 90% drop in real terms it will come back up to fair value over time. I'm just saying - the big profits are made when there's blood on the street, which is definitely not now.

 

 

 

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For some exposition, you might watch Kyle Bass's thesis on the matter:

http://www.youtube.com/watch?feature=player_embedded&v=JUc8-GUC1hY

 

Considering the way similar situations have played out in history:

 

A bet on the Japanese stock market may only work well if they inflate gently out of their huge debt load, and even then it's hard to be sure.

 

Actually, it is a lot more likely that the "usual" debt crisis scenario will play out - a massive spike in bond yields, government subsequently can't pay interest, devalues/inflates massively. All paper assets drop like a stone in real terms, including stocks.

 

THEN, and only then, it is time to buy.

 

Sure, buying now and holding for 5-10 years will still turn out OK, because after that 90% drop in real terms it will come back up to fair value over time. I'm just saying - the big profits are made when there's blood on the street, which is definitely not now.

 

Ok. So Greece sounds like a better time to get in then?

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- Daihatsu Diesel

- Water Oasis

 

Any comments? I got the AR of WO ready for the weekend, looks incredibly cheap

Did you mean Water Oasis(1161.hk) ?

It is from Hong Kong . Not a Japanese one.

 

I have been followed this company since 2010. It looks cheaper after the profit warning.

But the bad point for HK public co is they do not file quarterly report . And the interim report or even annual report does not specific some of financial details clearly.

Part of the profit of Water Oasis in the recent years are from non-operating items.But the good thing is it pays very good dividend. There is some disclosure issue regarding opearting business such as the closure of smaller brand in their portfolio. They launched JM Makeup brand in 2010 but suddenly stopped reporting it in 2012.I assume it was shutdown but no verbal explanatiom in PR or AR at all.

 

PS. I might add position if it fell to around 0.3-0.4

 

 

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Yes that is the one I am talking about.

 

What recently happened is that they lost their rights to be the exclusive distributor of H2O products in PRC and Taiwan (?) due to not reaching the purchasing amounts in the last 3 years as was depicted in the contract.

 

Due to them losing these rights they had several one off costs, 1) part of the labor force that was terminated (high cost) and 2) elimination of H2O inventory which was probably done at fire sale prices as they had to do it in 2 (?) months or something.

 

Apart from those nonrecurring items you see that their entrance and execution in the spa market has compensated their loss in sales from the H2O products and that they are building firmly on the Glycel and Enro Laslzo brands.

 

When going through the AR 2012 I did not see anything "scary" but I have not yet gone into it deeper.

 

I have to look into that JM makeup story, didn't read anything about it.

 

At current prices it looks incredibly cheap though

 

On a more speculative side: Potential target for LVMH or other luxury player to get into the emerging markets?

 

 

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Ok. So Greece sounds like a better time to get in then?

Greece didn't properly restructure yet. So no. Iceland on the other hand....

 

Basically you need a serious dent restructuring (like in the US to some extent) or a default/devaluation (Iceland). Delaying matters like in Japan or Europe won't cut it.

 

Yes, the Nikkei looks cheap. But it will probably be a lot cheaper in real terms at some point in the not too distant future.

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