Thinking Points

  • Fisco released 10 company reports in one week!
  • Among them are one of Japan’s largest pharmacy operators and a credit risk management company that doesn’t actually assume risk itself.
  • And then there’s one company with a story similar to 7-Eleven.

Suddenly, Fisco decided to publish 10 reports in one week! Now that’s a whole lot of reading. Of course, if you have the time, I suggest checking all of them out. While I had time to skim through them all, I did not have the time to prepare summaries. Hence, I chose three of the most interesting companies and prepared summaries.

Also a quick update: Nobody wants a flood of emails. Hence, I removed Fisco Roundups from the free Kenkyo email notifications. The plan is to publish these roundups every Monday morning (US time), unless there are no new reports.

And for a little bit of shameless self-promotion – if you haven’t already signed up for free notification emails, you can join the squad by filling out the little box to the right!

Now onto Fisco reports!


Nihon Chouzai (TSE: 3341)

Nihon Chouzai is one of the top 3 players in a highly fragmented Japanese pharmacy industry. In addition to operating pharmacies, the company manufactures generic drugs.

Perhaps you’ve already read this, but I’ve actually covered the pharmacy industry before. The short story is that the convenience store, drug store, and pharmacy industries are starting to consolidate. For pharmacies specifically, the Japanese government is pushing for “family pharmacists” and generic drugs.

Back to Nihon Chouzai. The company specializes in “Monzen” pharmacies, or pharmacies located just outside of hospitals. The company has about a 40% share in Monzen pharmacies. Historically, this is where most Japanese people get their prescriptions. With that said, the “family pharmacist” push favors neighborhood pharmacies.

In short, Nihon Chouzai is well positioned for the generic drug push, but facing some pressure on the “family pharmacist” front.

Read Fisco’s full report on Nihon Chouzai here.


eGuardian (TSE: 8771)

You should put this company on your watchlist. It’s been on mine for not quite a year. eGuardian is almost an insurance company. Almost is the keyword here. The company builds and sells financial products that help companies mitigate credit risk. For the most part, from what I can tell, eGuardian does not assume risks itself.

So your local steel shop owner (let’s call him Joe) takes on a few construction projects. Joe cranks out some steel and delivers it to the job site. A few days later, he reads the newspaper and discovers that the general contractor went bankrupt. Here’s what he might look like:

With net-60 payment terms, of course Joe is worried about whether he will be eating the cost or getting paid. This is the sort of nightmare eGuarantee helps prevent.

eGuarantee is partnered with many of Japan’s local banks. At the same time Itochu (TSE: 8001), one of Japan’s largest trading companies, is the biggest shareholder. This is eGuarantee’s sales network. The company facilitates the credit risk transfer from business operator to financial institutions, assuming no risk in the process.

As you may have guessed by now, the company is a cash flow machine. Share prices have more than doubled over the last three years. The price point is cheap enough to be interesting (and a watchlist), but not crazy cheap from what I can tell. The recent growth is compelling though.

Read Fisco’s full report on eGuarantee here.


Ferrotec Holdings (TSE: 6890)

Ferrotec does a lot of stuff for big semiconductor manufacturing firms. The company is interesting on several different levels.

First, the company’s story reminds me of 7-Eleven. Ferrotec was originally established as a subsidiary of an American company called Ferrofluidics Corporation. Over time, Ferrotec became less dependent on the parent company. Eventually, Ferrotec acquired its US parent.

Second, I have no clue what the company actually makes. After reading Fisco’s report, I visited Ferrotec’s website. The best I can gather is that they make advanced stuff for some of the big semiconductor players.

Third, apparently Ferrotec cleans 60% of China’s semiconductor manufacturing equipment parts and materials. That sounds like a pretty big deal. Although, and again, I’m not entirely sure what that actually means. I did visit a Texas Instruments semiconductor plant in Dallas several years ago, but quickly determined it wouldn’t be my area of focus. It might be an interesting report for someone more familiar with the industry.

Read Fisco’s full report on Ferrotec here.


Fisco Wrap Up

Again, Fisco released 10 reports last week! I only highlighted the three that were most interesting to me. To see the list of Fisco’s published English language company reports, click here. eGuarantee tops the list for most interesting company this week for me. Probably because it’s one of those companies that’s been on my watchlist for a good while, but I haven’t had the time to take a closer look. Nihon Chouzai is a close second with all that’s going on in Japan’s healthcare industry.

Hope you enjoyed!


Author: Kenkyo Investing

Kenkyo Investing applies a value investing approach to Japanese equities, providing insights that are often unavailable to non-Japanese speakers.