17 Companies Exclusively Listed On The Sapporo Securities Exchange

Thinking Points

  • It seems there are opportunities in difficult-to-access stocks.
  • Sapporo Securities Exchange is a small exchange consisting of 58 listed companies; only 17 of which are exclusively listed.
  • I compiled a list of the exclusively listed companies with basic valuation metrics and a brief description of each company.

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This Drug Wholesaler Looks Attractive If You Can Get Your Hands On It – SSE: 3055 Hokuyaku Takeyama Holdings

Thinking Points

  • Hokuyaku Takeyama Holdings (SSE: 3055) trades at a discount (negative Enterprise Value!) relative to industry peers despite comparable business performance.
  • Unfortunately, the company is out of reach for many investors as it trades on the Sapporo Stock Exchange.
  • Investors serious about Japanese small caps ought to consider opening a brokerage account with one of Japan’s major securities companies that can trade securities on smaller exchanges or in the “green sheet” market (Japanese OTC).

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Poking The Convenience Giants – Welcia Holdings (TYO: 3141)

Thinking Points

  • Major drug store operator Welcia (TYO: 3141)  is becoming Japan’s neighborhood pharmacy.
  • In doing so, the company directly competes with the convenience industry.
  • Welcia maintains a strong position against the giants in convenience, thanks to Aeon’s (TYO: 8267) backing.
  • With its 18x EV/EBIT price tag and many moving parts, Welcia does not present a compelling investment opportunity.
  • Investors ought to look at pharmacy and drug store related industries for opportunities.

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20% EBIT CAGR With A Walmart Twist – TYO: 3349 Cosmos Pharmaceuticals

Thinking Points

  • Cosmos Pharmaceuticals (TYO: 3349) operates drug stores with a Walmart and 7-Eleven-like strategy, delivering industry leading growth (20% 10 year EBIT CAGR) over the past decade.
  • The company’s larger than normal stores target small areas and resembles a neighborhood supermarket.
  • At 18x EV/EBIT, Cosmos is a high quality business trading at an even higher price.

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Idea: Japan’s American-inspired IKEA competitor going global – Nitori Holdings (TYO: 9843)

Thinking Points

  • Nitori (TYO: 9843) has delivered outstanding performance with a lovable story.
  • Going above and beyond with its “high quality, affordable products” branding, Nitori is Japan’s most loved furniture brand.
  • At 20x EV/EBIT, however, a considerable level of growth is already priced in. I’ll take another look if share price gets below 10,000 yen vs. today’s 16 ~ 17,000 yen.

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Idea: Consistent 60+% Greenblatt ROIC For… Weather Data? – Weathernews (TYO: 4825)

Thinking Points

  • Weathernews is one of the world’s largest private weather data service.
  • After its start in Ocean route planning, Weathernews now offers consulting and data services to airlines, railroads, TV stations, consumers, and many other areas.
  • Leveraging its healthy ROIC performance, Weathernews is exploring different avenues for market and service offering expansion.

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Idea: An Alternative To Activision Or Electronic Arts – Capcom (TYO: 9697)

Thinking Points

  • Capcom (TYO: 9697) is just getting started with digital distribution.
  • With strong Intellectual Property (IP) like Street Fighter and Resident Evil, Capcom is well grounded.
  • If you missed the Activision and/or Electronic Arts digital distribution wave, you might want to consider looking at Capcom.

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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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