Thinking Points

  • Nippon Antenna (TSE: 6930) primarily manufactures and sells antennas geared for satellite, phones, and cable TVs. Secondarily, the company offers telecommunications related construction work, mainly for cable TV, internet, and satellite.
  • Over the last decade or so, overall antenna sales have been on the decline, even after accounting for the company’s sale of its automotive antenna business.
  • More recently, the company sees favorable opportunities in next generation technologies, like 4K & 8K ready antennas and internet-of-things antennas.
  • At 1,072 yen per share, Nippon Antenna trades at 77.6% of adjusted NCAV with a market capitalization of 11,843 million yen ($109 million USD).
  • Investors can expect an investment CAGR of between 5.4% and 7.6%, inclusive of dividends, over the next 5 to 8 years.

Introduction

Nippon Antenna (TSE: 6930) primarily manufactures and sells antennas geared for satellite, phones, and cable TVs. Secondarily, the company offers telecommunications related construction work, mainly for cable TV, internet, and satellite. Nippon Antenna reports through two segments: Transmission products and Construction.

Source: Company filings

After several years of sluggish business performance, the company has seen an uptick in performance recently as the Tokyo Olympics come into the picture in 2020, increasing demand in 4K & 8K ready antennas. 

The business & environment

Nippon Antenna was founded in Tokyo in 1953. The company started out by manufacturing radio antennas for cars and TV antennas. In 1965, Nippon Antenna added wireless radio communications antenna to its lineup, then started offering telecommunications related construction work.

During the first 30 years of its existence, the company grew domestically, opening sales offices in Fukuoka, Osaka, Nagoya, and a separate sales office in Tokyo. In the 1990s, Nippon Antenna made its first leap outside of Japan, setting up a sales organization in Germany targeting the European market. Nippon Antenna’s key driver outside of Japan was its automotive antennas. 

Meanwhile, the company also expanded its manufacturing facilities overseas, opening a manufacturing plant in the Philippines. In the 2000s, Nippon Antenna further expanded its sales footprint to include the North American market and the Chinese market. 

For a period of time before the global financial crisis, foreign revenues accounted for nearly 20% of company revenues. At the beginning of fiscal 2013, however, Nippon Antenna sold its automotive antenna business to Harada Industry (TSE: 6904), significantly reducing its foreign presence in the process. Adjusting automotive antenna revenues out, here is what historical revenue performance by segment looks like:

Source: Company filings

Since the sale, Nippon Antenna has mostly focused on TV antennas and telecommunication antennas. In addition to Nippon Antenna, companies like DX Antenna (subsidiary of Elecom, TSE: 6750) and Maspro Denkoh (private) manufacture and sell antennas. 

The uptick in 2011 antenna revenues was largely a function of Japan switching from analog TV broadcasting to digital broadcasting. Since the transition, revenue performance has been sluggish. In 2019, however, the segment showed signs of recovery, largely due to an uptick in 4K and 8K ready antennas.

With the exception of 2019, business performance over the last few years have been less than impressive, with operating margins ranging between -2.1% and 2.3% in 2015-2018 compared to average operating margins of 4.9% between 2006 and 2014.

Source: Company filings

For fiscal 2020, the company is expecting 17,300 million yen ($159 million USD, +3.6% YoY) in revenues and 640 million yen ($5.9 million USD, -43.6% YoY) in operating income. 

Shareholders

As of Q4 2019 (ending March 31st, 2019), the company had 14,300,000 shares issued and 3,324,662 shares in treasury, putting outstanding shares at 10,975,338.

Here are the major shareholders:

Source: Company filings & Nikkei

Nippon Antenna stay out of the public light for the most part, with no management interviews or company articles on major news outlets. Presumably, the Takizawa family is the founding family.

On November 10th, 2017, leading shareholder Sayo Takizawa, who owned 19.4% of issued shares, passed away. On July 13th, 2018, Yutaka Takizawa submitted a filing regarding the inheritance of Sayo’s shares. Here are the inheritors.

Source: EDINET filings (Japanese)

On August 28th, 2018, Nippon Antenna performed an off-market share repurchase with a maximum repurchase of 2,500,000 shares or 2,013 million yen ($18.5 million USD). Yutaka, Koichi, Eiko, and Kiyoko sold part of their stakes:

Source: EDINET filings

In the off-market transaction, the company repurchased 1,531,800 shares at 805 yen per share, or for a total of 1,233 million yen ($11.4 million USD). Given that Kenji received a smaller inheritance and did not appear on the major shareholder list prior to the inheritance, there is a possibility that Kenji did not meet the 5% ownership rule, which determines reporting requirements. Hence, it’s also a possibility that Kenji sold a partial stake in the off-market transaction.

The are no equity compensation plans in place for the management team.

Financials & Valuation

  • Nippon Antenna (TSE: 6930) primarily manufactures and sells antennas geared for satellite, phones, and cable TVs. Secondarily, the company offers telecommunications related construction work, mainly for cable TV, internet, and satellite.
  • Over the last decade or so, overall antenna sales have been on the decline, even after accounting for the company’s sale of its automotive antenna business.
  • More recently, the company sees favorable opportunities in next generation technologies, like 4K & 8K ready antennas and internet-of-things antennas.
  • At 1,072 yen per share, Nippon Antenna trades at 77.6% of adjusted NCAV with a market capitalization of 11,843 million yen ($109 million USD).
  • Investors can expect an investment CAGR of between 5.4% and 7.6%, inclusive of dividends, over the next 5 to 8 years.

Nippon Antenna is one of the three major Japanese manufacturers of antennas. Additionally, the company offers telecommunications related construction services. While the company is well established in the industry, it has had a challenging decade, with considerable revenue decline.

In the first 30 years of business, Nippon Antenna grew domestically. This was followed by foreign expansion in the European, N. American, and Asian markets, mainly with its automotive offerings. In the last decade, however, revenues have declined, partially as a result of the sale of its automotive arm. 

In fiscal 2019, business performance recovered modestly with the increase in 4K & 8K ready antenna sales. With that said, the company’s performance remains sluggish compared to historical norms. Combined with insiders offloading shares as a part of a share repurchase program, there are several concerns for investors.

At 1,072 yen per share, Nippon Antenna trades at 82.9% of NCAV with a market capitalization of 11,843 million yen ($109 million USD). Adjusted for long term investment security holdings, the company trades at 77.6% of NCAV.

Shares have traded higher in 2019 compared to recent years as well:

Source: Google

Share prices spiked shortly after Nippon Antenna adjusted full year forecasts for fiscal 2019 on February 1st, 2019. While there are opportunities for the company to take advantage of, Nippon Antenna offers no medium term management plans, making it difficult for investors to figure out where the company is heading.

With lackluster historical performance, share offloading by insiders, and the lack of visibility, Nippon Antenna would be appropriately valued at 100% of adjusted NCAV. Taking this into consideration, investors can expect an investment CAGR of between 5.4% and 7.6%, inclusive of dividends, over the next 5 to 8 years.

The bottom line

Nippon Antenna is one of the three major manufacturers of antennas in Japan. Additionally, the company offers telecommunications related construction services. While business performance has weakened over the last decade, Nippon Antenna showed signs of improvement in 2019. Without any real visibility into the company’s plans, however, it’s difficult to say where the company is headed. Investors can expect an investment CAGR of between 5.4% and 7.6%, inclusive of dividends, over the next 5 to 8 years.


Kenkyo Investing
Kenkyo Investing

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