Idea: 100% Payout Ratio And Still Growing? – TYO: 7865 People Co

Thinking Points

  • People Co (TYO: 7865) is a toy company that consistently pays out nearly 100% of its income.
  • Company strategy is similar to Apple & Keyence (TYO: 6861), focusing on design and outsourcing manufacturing.
  • Explosive US growth provides larger non-Japanese revenue exposure.

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Quick Idea: 101% NCAV With 3.5+% Dividend Yield On Consistent Performance – Nihon Decoluxe (NGO: 7950)

Thinking Points

  • Nihon Decoluxe’s (NGO: 7950) story is profitable, but as boring as it gets.
  • Revenues have only slightly increased over the past 10 years while EBIT delivered 20% CAGR.
  • At 0.37x EV/EBIT and a 3.5+% dividend yield, it’s hard to go wrong with Nihon Decoluxe.

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Japan’s Leading Condom Manufacturer Protects Other Things Too – Okamoto (TYO: 5122)

Thinking Points

  • Japan’s top condom maker, Okamoto (TYO: 5122) is about more than just condoms.
  • Okamoto’s active share buybacks that precede Japan’s push for corporate governance reform is particularly encouraging.
  • Thanks in part to the buybacks, per share metrics look appealing with 10-year revenue CAGR of 3% and EBIT CAGR of 20%.

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Quick Idea: Sushi Machine Maker With No Formidable Competitor – Suzumo Machinery (TYO: 6405)

Thinking Points

  • Suzumo Machinery (6405) is well established in a niche sushi machine industry, holding 90% market share globally.
  • Top-line CAGR of 8.7% in the past 9 years, with particularly strong growth in Europe and N. America.
  • Run up in stock price over the past year probably puts Suzumo at fair value today, but further reading on the sushi market is necessary in order to have an educated discussion about continued growth.

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Quick Idea: 30% Global Share In Diaper Production Machines – Zuiko (TYO: 6279)

Thinking Points

  • Zuiko accounts for 30+% of global diaper production machine market and 80+% of Japanese market.
  • Emerging economies go from cloth or no diapers to disposable diapers as disposable income increases.
  • Chinese competition puts price pressure on Zuiko, and it doesn’t look like the company has figured out a solution (other than to expand its Shanghai facility).

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Idea: 50% Global Share In Premium Motorcycle Helmets – Shoei (TYO: 7839)

Thinking Points

  • Shoei has a 50% global share in premium motorcycle helmets.
  • Made in Japan focus makes the company sensitive to currency fluctuations.
  • Key growth areas are in China/SE Asia and US.

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Idea: 40% Domestic Share In Automotive Rearview Mirrors – Murakami Kaimeido (TYO: 7292)

Talking Points

  • Self-driving cars and camera systems are a thing now, and camera systems are replacing automotive mirrors.
  • With increased competition, the future is tough but not impossible for Murakami Kaimeido, which holds a 40% domestic and 7% global share in automotive rearview mirrors.
  • Murakami’s business performance and price metrics may paint a compelling picture for some investors.

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6121: Takisawa Machine Tool

Summary

  • Over the past decade, inventory levels have greatly increased, resulting in a drag in capital efficiency.
  • Investing in Takisawa at today’s price entails betting on management to quickly improve operational efficiency while assuming higher capital spending in the automotive industry.
  • Overall, Takisawa is technologically competent, but with a few operational problems. With all the pros and cons in mind, Takisawa Machine Tool is worth considering at 114 Yen per share (vs. today’s 177 yen per share).

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9436: Okinawa Cellular

Summary

  • Okinawa Cellular is not currently a buy, but investors ought to follow share prices periodically for buying opportunities at 2,600 yen per share (vs. current 3,555 yen per share).
  • Regional focus provides Okinawa Cellular with a strong market position in an Okinawan mobile carrier market, which accounts for less than 1% of the Japanese mobile carrier market.
  • Although the company is focused on being nimble and open to moving into industries unrelated to the mobile carrier market, its primary growth area today is in its fiber internet business.

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