• Share Price: ¥1,120

• NCAV: ¥1,081 /share

• Market Cap: ¥3.37 billion

• P/E (LTM): 9.5x

• P/E (Management Forecast): 7.7x

• Dividend: 4%

Thesis: Takasago Tekko (TYO 5458) is practically a net-net (and is one if you include investments) trading at ~9.5x LTM earnings (7.7x NTM) and has rental real estate worth ¥3.8 billion (more than the entire market cap) using the company’s own fair value disclosure. The story gets interesting when we consider the massive Itabashi Factory Land (36,009 sqm in Itabashi-ku Tokyo) which sits on the balance sheet at ¥2 million ($12,800 USD) but is conservatively worth ¥8 billion ($51 million). This is likely worth much more based on comps I found but we’ll use ¥8 billion to be safe. The facility was likely acquired around 1937, which is why it’s carried at near nothing.

The estimate for Itabashi factory land is conservative. See Appendix for true market comps (It could be worth 50-150% more).

• Pre-tax NCAV + real estate value: ¥4,950 /share

• After-tax NCAV + real estate value: ¥3,750 /share

The Good:

• Consistently profitable since FY2014 (12 years of profitability) with strong FY27 profit forecast (7.7x p/e)

• Net debt has decreased from ¥4.71 billion to net cash of ¥1.64 billion. FY26 report shows net cash of ¥2.3 billion.

• Largely flat (slightly declining) share count

• Few employees (~150), which makes transformation easier. Employees could be offered 2x annual pay to retire and it wouldn’t make a big dent in our massive asset base.

• The 4% dividend makes holding this much easier.

• Management is at least saying the right things. In its TSE capital efficiency disclosure, the company targets a 30%+ dividend payout ratio and 1.0x PBR, and explicitly acknowledges that PBR remains below 1.0x. The dividend has also doubled since FY2019, so there’s been some real improvement.

• The huge Itabashi factory sits in a prime logistics hub in Tokyo. Another former steel site across the street from our factory was redeveloped into a modern logistics facility (see Appendix). Could be worth 2x my ¥8bn estimate.

• Very under the radar stock. Only 5 posts so far in 2026 on Yahoo Finance JP board. No one is looking at this.

The Bad:

• Steel adjacent business. Not commodity steel, but steel adjacent names have historically been value traps and rarely re-rate higher. This is a specialty processor / re-roller.

• No room for activists as 30.72% owned by Nippon Steel and 16.65% by Mitsui. In October 2025 a Hong Kong firm named “GLOBAL MANAGEMENT PARTNERS LIMITED” appeared on the shareholder register with a 5% stake. No idea what their plan is, but this seems nearly activist proof.

• The company reported a massive ¥2.2 billion loss during the great financial crisis. This is significant vs the market cap. The company is much smaller today with 150 employees vs ~600 pre-GFC. I don’t think a massive loss like this is likely given their much smaller scale and consistent profitability over the last 12 years, but anything is possible.

• This is not a cash-heavy NCAV. Inventories are roughly one-third of current assets, and much of the NCAV is tied up in working capital rather than cash. Inventories have remained around ¥2.5 billion for the last 5 years.

• Wildly illiquid and small. This is MORE illiquid than some smaller stocks I’ve written up!

Conclusion:

This thing is just too cheap and holding it while nothing happens doesn’t hurt as we’re getting paid 4% a year. The company is sitting on valuable real estate in a prime logistics hub in Tokyo. It makes no sense to use it for low return steel processing. I own an above average basket sized bet here.

Disclosure: I own shares in Takasago Tekko (5458). The security could be sold at any point in time without prior notice. This is a small position as part of a broader basket of cheap Japanese companies so I haven’t dug too deep into this name. If I missed anything important, feel free to share in the comments. None of this is investment advice. Everything in this post is my own opinion and I could be wrong. Do your own due diligence.

Appendix (Deeper dive into our asset and why it’s likely worth much more than my conservative ¥8bn estimate):

Itabashi Factory Location

Our factory is located in an industrial/logistics pocket near National Route 17, the Metropolitan Expressway Route 5 corridor, and Saitama access. While it isn’t as prime as Tokyo Bay for logistics, there are institutional quality logistics assets nearby and the area is a popular in-demand logistics area. Our property is located at 1-1-1 Shingashi, Itabashi-ku, Tokyo. We have a comparable transaction from 2019 at 1-2-2 Shingashi, Itabashi, which is VERY close by (see image below):

Our BEST comparable which is very close by was a deal transacted in April 2019 where 67.5% of the purchase price was attributed to land. Land prices have increased significantly since, so this should be conservative. But even using the 2019 transaction as our benchmark values our property at ¥17.5 billion, more than double my conservative estimate in the writeup.

Some AI Analysis:

D Project Itabashi Shingashi is especially important because it is at 1-2-2 Shingashi, while Takasago is at 1-1-1 Shingashi. Its acquisition price was ¥12.3bn, appraisal value ¥12.4bn, land area 16,545 sqm, and the appraisal’s cost-method value split was 67.5% land / 32.5% building.

Daiwa House REIT’s more recent data show the property’s appraisal value at about ¥14.3bn–¥14.4bn in 2025–2026, above the original acquisition price, which supports the idea that this location has remained valuable rather than impaired.

MLIT commentary for the Shingashi industrial point says demand exceeds new supply, prices are rising, there is firm demand from users requiring a Tokyo location, and large logistics construction has been seen nearby.

Takasago’s own rental real estate appraisal provides an internal sanity check. The facilities table separately lists 9,506 sqm of rental real estate associated with the Itabashi site, while the rental real estate note discloses ¥3.8bn of fair value. The appraisal cannot be cleanly allocated parcel-by-parcel, but it is consistent with nearby public land prices and REIT appraisals suggesting that the separate 36,009 sqm factory site could be worth materially more than the ¥8bn assumed in the base case.

The current use of the Itabashi land is economically hard to justify. Takasago is earning low returns from a steel-processing business on land that nearby REIT transactions and institutional developments suggest is far more valuable as urban logistics real estate.

We also have a proof of concept of an old Nippon Steel site being converted into a modern logistics facility. LOGIFRONT Tokyo Itabashi, completed in 2024 by Mitsui Fudosan and Nippon Steel Kowa Real Estate on a former Nippon Steel factory site in Itabashi. This is literally next door and was an old steel facility! A Nippon Steel site too! Remember, Nippon Steel owns ~30.6% of Takasago Tekko! A company involved in redeveloping a former steel site happen to own 30.6 % of our company. (Technically Nippon Steel Kowa Real Estate was involved, but it’s part of the Nippon Steel complex)

Mitsui describes the project as located in a rare dedicated industrial zone inside Tokyo’s 23 wards, with a 91,000 sqm site, 250,000+ sqm floor area, and six above-ground floors. It is positioned as Tokyo’s largest logistics facility, with good access to the city; the site is 10 minutes from Nishidai Station, has 1.06 million people within 5km, and is about 2.7km from Nakadai IC.

Corporate Video:

• Share price: ¥1,480

• Market cap: ¥13.3 billion ($83.4 million)

• P/E (FY25): ~10.7x

• Dividend: ¥60 (4%)

• NCAV: ¥12.76 billion

• NCAV+Investments: ¥15.55 billion (¥1,708/share)

Art Vivant (TYO: 7523) is a small-cap Japanese company that primarily sells art, especially limited-edition prints and illustration/anime-style works, through traveling exhibition-sales events across Japan. It controls the full value chain, from artist sourcing and product development to framing, sales, delivery, and after-sales service. The company also operates a smaller, non-core hot yoga business. The company also has a highly profitable finance arm that allows for customers to pay in installments. The finance segment serves both Art Vivant’s own customers and outside merchants, but the company does not disclose the current mix

1 sentence thesis: Art Vivant is a cheap adjusted net-net trading at roughly 11x estimated earnings and below the failed ¥1,670 per share MBO price, despite an activist building a 40.13% stake through aggressive open-market purchases, including while the stock traded above ¥2,100.

At today’s price, Art Vivant is effectively a net-net if investments are included. More importantly, the business is growing. The most recent quarter produced the highest operating profit in company history at ¥1.1 billion, at least as far back as 25 years of Koyfin data. Industry tailwinds like the increasing popularity of Japanese culture like anime are also on our side.

Through Q3, operating profit is already ¥2.55 billion versus a full-year forecast of just ¥2.1 billion, implying management expects a Q4 loss. That would be unusual, as Art Vivant has not reported a quarterly loss in 15 years. Management says it is keeping guidance unchanged because it expects to record expenses, losses, and valuation adjustments during the year-end closing process.

Founder Katsumi Nozawa, who owns 36.17% of the shares mostly through his asset management company, launched a ¥1,670 per share takeover bid on August 29, 2025. It failed after Hiroyuki Maki, president and CEO of Buffalo Inc. (TYO: 6676), disclosed a 33.97% stake on October 24, 2025 and chose not to tender, preventing the offer from reaching its minimum acceptance threshold. Maki’s initial September 2 filing described the investment as friendly, but after additional open-market purchases his stance became more control-oriented on October 22. By December 11, his stake had risen to 40.13% and the stated purpose had become “to acquire management control and participate in management.” See Appendix for the full disclosures in the large shareholder reports.

Maki built his stake through aggressive open-market buying, mostly at or above the ¥1,670 tender price. Regulatory filings show he was still purchasing shares in November 2025 even with the stock above ¥2,100. His cumulative cost basis appears to be about ¥1,677 per share.

On March 30, 2026, MAGO Creation, the holding company of artist and entrepreneur Mago Nagasaka, disclosed a 7.16% stake. Before that filing it had remained below the 5% reporting threshold. The increase came from the purchase of a 249,600-share block, or 2.73% of the company, at ¥1,680 per share, ¥10 above the original tender price and about 12% above the market price at the time.

An external activist bought 40.13% of Art Vivant at prices above the original tender offer. Then, as recently as March 2026, an industry participant paid a 12% premium to the market price to acquire a block. Add together the founder’s roughly 36% stake, the activist’s 40%, and the artist’s 7%, and about 83% of the company is shares accounted for, leaving the float very tight.

So what’s going to happen next? I have no idea. But owning Art Vivant at below the initial tender price looks like a reasonable bet to me. Maki is a wealthy operator whose MELCO Group stake plus personal holdings amount to about 49% of Buffalo (TYO: 6676). He directly owns stakes in various other companies too. As CEO of Buffalo, Mr. Maki has implemented shareholder friendly policies over the years including large buybacks and dividend increases, which contributed to Buffalo’s over 400% stock appreciation in the last 2 years. Industry tailwinds played a big part in that too.

You do not need a DCF to see that Art Vivant is cheap. After backing out NCAV and investments, the market is valuing the operating business at less than free, even as the company posts its highest quarterly operating profit in 25 years. This is a cheap stock with improving momentum and an activist trying to gain control.

Conclusion:

I own an 2x average basket sized position here. The bet is simple: either the company remains listed and I collect a roughly 4% dividend yield, or it is taken private at a price above the last tender offer. A take-under is always possible, but the key activist has a record of shareholder friendly actions, at least as his own company. If Art Vivant stays listed, I think the improving fundamentals should eventually be reflected in the share price. What makes this compelling is that this is net-net if we count investments as current assets and the activist situation could get interesting. The business is also improving.

Worth emphasizing that while the market cap here is a bit larger than some of the nanocaps I write about, the float is much smaller.

While I still watch anime on occasion and love the anime aesthetic in video games, these artworks aren’t cheap! Still, perhaps I’ll buy one if this investment works out. The company has stores in Akihabara, Nihonbashi, and Nagoya. I’m fond of this piece on the global homepage for their anime illustrations/print business:

Disclosure: I own shares in Art Vivant (7523). The security could be sold at any point in time without prior notice. This is a small position as part of a broader basket of cheap Japanese companies so I haven’t dug too deep into this name. If I missed anything important, feel free to share in the comments. None of this is investment advice. Everything in this post is my own opinion and I could be wrong. Do your own due diligence.

Appendix:

Art Vivant select financials visualized:

Progression of Maki’s ‘Purpose of holding’ in large shareholder reports:

September 2, 2025 (15.58% holding):

The submitter respects Katsumi Nozawa, the founder and representative director of the issuer, as an art collector, and intends to hold the shares long-term as a friendly shareholder, regardless of whether the issuer remains listed or goes private. The submitter will not request an increase in the tender offer price for the ongoing tender offer. If friendly shareholder discussions take place between the tender offeror and the submitter, the submitter may tender its shares in the tender offer.

September 29, 2025 (21.7% holding):

We will maintain a stable holding position as a major shareholder, aiming not only to acquire a control premium but also to acquire management control. In addition to making important proposals, we may also engage in actions aimed at participating in management or similar actions in relation to art-related businesses (purchase and sale of prints, paintings, and works of art) and the management and disposal of contemporary art works held by the issuer. If the issuer proposes or announces a proposal that restricts shareholders' rights, discriminates against them, or is similar to such a proposal, we may oppose it. Please note that the shareholder negotiations between Orsay Co., Ltd., the tender offeror, and its representative director, Katsumi Nozawa, regarding the tender offer for which a tender offer statement was filed on September 1, 2025, were not concluded and the submitter will not tender shares in the said tender offer.

November 10, 2025 (39.95% holding):

With the goal of gaining management control and participating in management, we will hold the shares stably for the long term as the largest shareholder. In addition to important proposals (including, but not limited to, those related to art-related businesses and the management and disposal of contemporary art works held by the issuer), we may engage in activities aimed at participating in management or similar activities. If the issuer proposes or announces a proposal that restricts the rights of shareholders, discriminates against them, or is similar to such a proposal, we may oppose the proposal.

Shareholding jumped to 40.13% on December 11. Purpose of holding remained the same as November 10.

• Share Price: ¥2,746

• Market Cap: ¥2.3 billion ($14.4 million). Top 10 shareholders are ~70%. So float is TINY.

• Dividend: 1.7%

Osaka Yuka Industry (TYO: 4124) is a tiny Japanese nanocap in the precision distillation / purification services industry (chemicals recycling) that is now largely controlled by an activist investor after a takeover bid from a much larger chemicals company was thwarted. It is not an obviously cheap company on conventional metrics, but the failed bid and subsequent activist involvement are what make it interesting.

1 sentence thesis: If a $1bn+ company bid ¥3,201/share and an activist got involved to block the deal, it’s probably worth at least ¥3,201/share and possibly much more.

Here is how we got here.

Initial bid: on December 13, 2024, Daiseki (TYO 9793), a ¥185 billion company, launched a takeover bid at 3,201 per share for Osaka Yuka, a then 111% premium. They highlighted the company’s recycling technology and synergies with their own much larger operations. The company’s CEO and largest shareholder Teppei Hotta (with a 22.8% stake) supported the takeover bid.

The activist block: Mitsutoki Shigeta, son of Yasumitsu Shigeta (founder and chairman of $10bn+ Hikari Tsushin, TYO 9435), aggressively bought shares on the open market at prices above the ¥3,201 bid. Before the takeover was announced he already owned 15.89% of shares. After, he bought an additional 160,100 shares at an average of ~¥3,209/share, bringing him to ~33%.

Because he did not tender, the bid failed to reach the minimum threshold. The stock then fell from around ¥3,200 to ¥2,375.

Listing issues: With so much of the float tied up, Osaka Yuka ran into listing issues, particularly around tradable market capitalization. To address this, the company introduced unusually generous shareholder perks to attract retail holders. A holder of just 100 shares became eligible for ¥10,000 in QUO cards (think Visa gift cards), which is about a 3.6% yield at today’s price. Including the cash dividend, the total yield for a 100-share holder is now over 5.2%.

The perk was announced on September 1, 2025, and the stock rallied from about ¥2,450 to ¥3,100. A month later it had fallen back to roughly ¥2,500, where it has traded since. The listing issue appears to have been resolved, at least for now.

The massive buyback: After effectively losing control of the company, Teppei Hotta transferred 177,000 shares, about 17% of the company, to family member Asami Hotta, who then sold the stake back to Osaka Yuka through a ToSTNeT-3 buyback on December 22, 2025. The repurchase was priced at the prior day’s close of ¥2,341. In total, the company bought back 197,000 shares, which were later canceled. That pushed the activist’s stake to about 42%.

If the activist had purchased the shares directly it would have likely triggered mandatory tender offer rules. I also doubt the seller would have sold to the activist directly, as by this point these guys likely hate each other. The CEO remains at the company and still owns 7.2% of outstanding shares, making him the #2 largest shareholder.

Now what?

It has been about 3 months since the buyback. The only other notable development came on March 17, 2026, when the company raised its dividend from ¥37 to ¥46 and split the ¥10,000 annual QUO card perk into two ¥5,000 distributions paid every six months.

At the current share price of ¥2,746, Osaka Yuka trades at roughly 2x book and about 24x management’s earnings estimate. That is not obviously cheap. But a much larger unaffiliated company was willing to pay ¥3,201 per share, and the activist was willing to buy stock above that price in order to block the deal. That strongly suggests the public market price may not reflect the company’s strategic value.

I don’t know the business especially well, and I am not underwriting this as a traditional deep value idea. This is a special situations bet.

Mitsutoki Shigeta is a rich man and this is a very small company for him to get involved with. He’s also an unusual person. Seriously, Google his name and look what comes up! He’s been involved in many small caps over the years with mixed results.

His biggest win (% wise) was Ishii Iron Works (6362), which did an MBO at a 233% premium (closed at ¥2,500, bid at ¥8,364/share). His involvement wasn’t direct, but he owned about 15% of shares prior to the bid. Another activist, which held 5% of shares, submitted shareholder proposals trying to unlock value. Those proposals got a little over 20% support, which indicates Mitsutoki Shigeta likely supported them, but this is speculation. He did increase his stake leading up to the eventual MBO though.

Why does this opportunity exist? Mostly because it is too small and illiquid for serious money. The market cap is only about $14.4 million, and a large portion of the shares are locked up by the activist. Most investors cannot deploy meaningful capital here. For me, it is a smaller than average basket position.

So what did Daiseki, our original bidder, see in Osaka Yuka?

According to the tender documents, acquiring Osaka Yuka would allow Daiseki to “utilize the technology and know-how related to precision distillation” and strengthen its response to increasingly sophisticated recycling needs tied to the circular economy. Daiseki’s integrated report also specifically stated that Osaka Yuka had chemical-material distillation technologies Daiseki did not possess.

That is the real asset here. Osaka Yuka has successfully purified more than 1,500 different chemical items. Precision distillation at that level is not easy to replicate. It requires years of accumulated know-how, process refinement, and customer-specific experience. That body of knowledge could easily be worth more inside a larger strategic owner.

Conclusion:

This is probably not worth looking at for most people. It is tiny, illiquid, and not especially cheap on reported numbers. But it is profitable, strategically relevant, and already attracted both a credible buyer and an activist willing to buy in at a higher price and block the sale. One open question for me is why Mitsutoki Shigeta even got involved here. He could have tendered his initial 16% stake for a profit and moved on. This is such a small company and seems hardly worth his effort.

I wrote this mostly to document my thought process behind buying a small position. I purposefully didn’t get into the business as I don’t think it’s relevant to the story. You can get a quick primer on it by asking your favorite AI model though! I also would not have bought shares if this were trading above the initial ¥3,201 bid price. It could be worth way more, but I really have no idea. This is not a high conviction bet. I am risking less than half a percent of my portfolio here.

Disclosure: I own shares in Osaka Yuka Industry (4124). The security could be sold at any point in time without prior notice. This is a small position as part of a broader basket of cheap Japanese companies so I haven’t dug too deep into this name. If I missed anything important, feel free to share in the comments. None of this is investment advice. Everything in this post is my own opinion and I could be wrong. Do your own due diligence.

• Share Price: ¥4,815

• Market cap: ¥53.2 billion

• NCAV+Investments: ¥40.2 billion (Market values the company at just ¥14.4B ignoring non-controlling interests).

• Non-controlling Interests: ¥9.2 billion

Nippon Carbon (5302) is a specialty carbon materials manufacturer founded in 1915. It’s priced as a slow-growth industrial legacy play at roughly 1x Book Value and ~13x FY24 & FY25 earnings. While the core carbon business isn’t terrible, it’s not particularly exciting, but 1x book seems fair given the high dividend (4.2%). The upside comes from the Silicon carbine (SiC) fiber division:

The SiC fiber position is the growth engine. Through its NGS Advanced Fibers JV (50% Nippon Carbon / 25% GE Aerospace / 25% Safran), the company holds an entrenched, qualification-moated position in Silicon Carbide continuous fiber which is the critical material enabling the shift from metal alloys to Ceramic Matrix Composites (CMCs) in jet engines. This is currently a small business, but has immense upside.

Investors are buying a profitable, cash-rich carbon materials business at a reasonable price, with a free call option on non-linear aerospace growth. The core business is not nearly as cheap as most of my writeups, but the 4.2% dividend protects our downside as Japanese investors love dividends and a “stable dividend policy” will keep it steady even in bad years. P/E fluctuates between 12-20x depending on how well the core carbon business performs, which means this isn’t particularly cheap on earnings or assets alone.

The market seems to give the company little credit for the aerospace business. The stock is only up 18% over the last 5 years (more if we include the sizable dividend).

This one isn’t a deep value pitch, but I own this because I’ve had success with aerospace adjacent names in the past. Another reason I like this company is that it’s a sleepy name that few people follow or care about. I couldn’t find any mentions on English X or Substack.

The Core Business: Fine Carbon & Electrodes

The “Carbon Products” segment (¥32.40 billion revenue, ¥2.99 billion operating profit) breaks into two distinct businesses:

• Fine Carbon (¥20.23 billion revenue, down from 23.7 billion last year): High-purity isotropic graphite for semiconductor manufacturing equipment (susceptors, heaters), solar panel production (CZ pullers), and Li-ion battery anodes. This is a higher-value, structural growth market driven by semiconductor infrastructure buildout, not steel cycles. The company has been investing into this segment to be less reliant on graphite electrodes. Management attributed the sales decline to stagnation of power semiconductors (EV market).

• Graphite Electrodes (¥12.17 billion revenue, up from 10.63 billion last year): UHP electrodes for Electric Arc Furnace steelmaking. Cyclical and currently facing headwinds from Chinese oversupply, but cash-generative. Growth came from strong exports to North America despite U.S. tariffs.

Carbon products revenue was down 5.7% YoY and operating profit declined 42.5% year over year. This is based on full year results which were released on February 10. The bad news here is that FY26 profits are expected to be weak. FY26 earnings are forecast to come in at just ¥244.19, which gives us a forward P/E of nearly 20. This may prove conservative though as it’s based on a USD/JPY assumption of 145. A weaker yen will boost their profits.

The Growth Engine: SiC Fibers (NGS Advanced Fibers)

NGS Advanced Fibers is a consolidated JV between Nippon Carbon (50%), GE Aerospace (25%), and Safran (25%).

• FY2023: Revenue ¥2.3B, Operating Profit ¥508M (22% margin)

• FY2024: Revenue ¥2.7B, Operating Profit ¥855M (31% margin)

• FY2025: Revenue ¥4.1B, Operating Profit ¥1,480M (35.8% margin)

SiC fibers are still a small part of the business, but it’s growing more meaningful. Keep in mind though, only half of net income from this division belongs to Nippon Carbide.

SiC fiber CMC parts run at much higher temperatures than metal alloys while being far lighter and requiring less cooling air, improving thermal efficiency, lowering fuel burn, and boosting durability in the hottest engine sections. In aerospace, where material certification takes decades, being “designed in” to the GE/Safran engine architecture is a formidable moat. Competitors like UBE (Tyranno fiber) exist, but Nippon Carbon’s “Nicalon” fiber is the qualified material for this ecosystem. It was essentially locked into the ecosystem over a decade ago because it beat out all other competitors. The engine makers themselves also own a direct stake in Nicalon through their minority ownership in the NGS subsidiary.

Near-Term Catalyst: GE9X Volume Ramp (~2027)

Current NGS revenue is driven by the CFM LEAP engine (737 MAX / A320neo), which uses SiC fiber for only one component: static high-pressure turbine shrouds. The GE9X (powering the Boeing 777X, ~2027) expands CMC usage to five hot-section components: inner and outer combustor liners, Stage 1 shrouds, Stage 1 nozzles, and Stage 2 nozzles. The shift from one small static part to five parts (including large cylindrical liners) implies roughly 5x more SiC material per engine.

Let’s not get too excited though as the GE9X won’t approach LEAP volumes. LEAP delivered 1,802 units in 2025 and targets 2,500/year by 2028. The 777X has ~610 orders with Boeing expected to produce 36–60 planes/year initially (70–120 engines/year). Higher material content per unit helps, but this alone won’t transform the P&L. Near term profits from this division are tied mostly to the LEAP engine, but additional volume from GE9X will certainly help.

Long-Term Blue Sky: The RISE Engine (Mid-2030s)

The real upside is a decade out. The CFM RISE engine, the planned successor to the LEAP, is expected to use ~10x more SiC material per engine, including turbine blades. SiC blade feasibility was de-risked by GE’s XA100 adaptive cycle engine, which successfully demonstrated the technology before losing the F-35 re-engine competition. That XA100 tech is now the baseline for the NGAD (6th-gen fighter) engine program, further de-risking the RISE application.

All competing next-gen engine programs will likely use more SiC, but the blue-sky scenario is specifically if the GE/Safran RISE wins, as they have been the most aggressive CMC adopters. If a competitor wins, NGS growth will be more linear.

There’s huge potential in military application too, which is why GE opened their own factory in Alabama to produce this material (to qualify for DoD contracts and also meet rising demand). In fact, The Air Force provided $21.9 million in funding for GE to produce this material domestically, and GE explicitly said that they license the technology from Nippon Carbon’s NGS Advanced Fibers subsidiary, but unfortunately they haven’t provided any details on the terms of the license.

I’m not going to try and quantify the upside in the NGS subsidiary as I have no idea what it will look like, but it seems clear that modern engines are going to be using a lot more of NGS’s SiC material.

Valuation & Downside Protection

Nippon Carbon trades at ~13x FY24 and FY25 net income (¥4 billion & ¥4.8 billion). Backing out net current assets and investments, the implied price for the actual operating business is only ~¥14.4B. Adding back non-controlling interests brings it to ~¥23.4B, or roughly 6x FY 24’s net income. It’s even cheaper on FY25’s net income (¥4.8 billion), but this figure included a one time gain. Management’s FY26 net income forecast is just ¥2.7 billion though. 20x FY26 net income is expensive, but earnings are volatile in their line of business, with the company earning gangbuster profits of ~¥10 billion in both FY18 and FY19.

The ¥200/share annual dividend (4.2% yield) has been stable since 2019 and the company’s latest midterm plan reaffirms the “stable” dividend policy alongside a flexible buyback program. For a Japanese investor base that prizes yield, this provides a meaningful floor under the stock price. Alongside full year earnings on February 10 the company announced a 5.7% share buyback, the first repurchase plan in over a decade.

I also want to emphasize that Nippon Carbon seems to be a dynamic company that isn’t just resting on their laurels. The fact that they shifted their core business to growing industries and is working on cutting edge materials with GE and Safran is proof that management is ambitious.

Conclusion:

Nippon Carbon is reasonably cheap and has exposure to the booming aerospace business. You’re paying ~15x last 3 years average earnings for a semiconductor and steel supply chain company with a free option on the most significant material science shift in modern aviation. The 4.2% dividend yield and recent buyback limits downside, and the SiC fiber position which is entrenched, high-margin, and tied to a multi-decade aerospace transition offers upside. The core business is cash and securities rich, backing those out gets me comfortable with the valuation on the core carbon business. I own a 1.5x basket sized position here.

Disclosure: I own shares in Nippon Carbon (5302). The security could be sold at any point in time without prior notice. This is a small position as part of a broader basket of cheap Japanese companies so I haven’t dug too deep into this name. If I missed anything important, feel free to share in the comments. None of this is investment advice. Everything in this post is my own opinion and I could be wrong. Do your own due diligence.

Appendix:

GE Aviation and Ceramic Matrix Composition Revolution (Neat video showing the evolution CMCs in engines)

Major Shareholders:

There is no major controlling shareholders here. It looks like ownership is diverse which means activism is possible, but with management maintaining a sizeable dividend and starting up a buyback program, I don’t think an activist is needed. The company does have a poison pill in place to prevent anyone from acquiring more than 19.99% of the company.

Worthwhile reading:

English Integrated Report

There are plenty of deep-value investments in Japan that aren’t microcaps and are quietly executing extremely well. Mitani Corporation (TYO: 8066) is one of them. The company is doing everything right: growing profits, buying back stock, and raising dividends. It has been profitable every single year since at least 1985 (as far back as Koyfin data goes). Despite growing profits nearly fivefold since 2008 and being consistently shareholder-friendly, the market still gives Mitani little credit. That may sound unfair given the stock is up roughly 9x since 2012, but it remains far too cheap.

I originally found Mitani while reviewing the holdings of the Militia Long/Short Equity ETF (U.S.-listed, ticker: ORR). While I own ORR outright, I also own several of its individual holdings, including Mitani.

Valuation Snapshot:

Mitani isn’t just a low-return widget manufacturer barely earning its cost of capital. Despite carrying a massive net cash position, return on equity was still 11.44% in FY25. Management calculates ROIC at 26%, largely because idle cash is excluded from their calculation. Profits have risen consistently for more than 20 years and are up nearly fivefold since 2008.

The Business

Mitani Corporation is a diversified conglomerate with businesses spanning cement trading, IT systems, offshore wind power, spices, and more. The company operates across three main segments:

The Corporate Supply segment is the profit engine, generating the highest absolute operating income with strong margins. Its largest component is the Cement & Ready-mix Concrete business, which has seen profits increase despite declining volumes, driven by improved pricing. According to the company, Mitani is the “#1 cement seller in Japan.” The business acts as a middleman between manufacturers such as Taiheiyo Cement and end customers, providing logistics and related services.

The Corporate Supply segment also includes the building maintenance business through its Nihon Bisoh subsidiary, which holds a dominant share of Japan’s gondola rental market (80%+) as well as sales and maintenance of permanent gondolas, which can be uniquely designed for each building. These are specialized suspended platforms used for high-rise window cleaning, painting, and repairs. The company has more than 3,500 units deployed nationwide, including on landmark buildings such as Roppongi Hills and Tokyo Skytree.

The shift into wind power, spices, IT, and building maintenance represents a strategic move away from lower-margin commodity trading (such as coal and cement) toward higher-margin niche businesses. While revenues have declined since 2008, profits have increased nearly fivefold. Management has made a series of acquisitions with a clear focus on profitability and disciplined capital allocation. Even with a massive net cash position, returns on equity remain surprisingly strong and would be much higher if idle cash was invested. At least rising interest rates in Japan should give cash rich companies like Mitani a boost.

Capital Returns & Recent Performance

The company’s historical metrics are excellent. Management has consistently grown profitability while buying back shares and raising the dividend. While I would prefer more aggressive buybacks, the stock is fairly illiquid, with average daily trading volume of roughly $139,000. Even so, this hasn’t stopped Mitani from steadily increasing its dividend.

FY25’s dividend was ¥66 per share while the forecast for FY26 is ¥77. That’s a 16% increase in a single year and brings the current yield to 3.5%. I suspect dividend hikes will be the main form of capital returns going forward as insiders already own a substantial portion of the company (see appendix) and further repurchases may bump up against float requirements to remain listed.

Profits are forecast to dip 2.7% in FY26, but this looks conservative as the company already thoroughly beat their first half projections but kept full year forecasts unchanged.

Conclusion:

There’s more depth to Mitani’s business, but it doesn’t need over-analysis. The stock is clearly cheap, and management appears to be executing well. Despite a market cap north of $1 billion, Mitani attracts very little investor attention. Yahoo Finance Japan shows only a couple of posts per month on average, and there are just a handful of mentions in English on X.

I own a basket sized position in Mitani.

Disclosure: I own shares in Mitani Corporation (8066). The security could be sold at any point in time without prior notice. This is a small position as part of a broader basket of cheap Japanese companies so I haven’t dug too deep into this name. If I missed anything important, feel free to share in the comments. None of this is investment advice. Everything in this post is my own opinion and I could be wrong. Do your own due diligence.

Appendix:

Ownership:

The company is ~55% controlled by founding family interests through affiliated entities (Mitani Sekisan, Mitani Land Home, family foundations). President & Representative Director is Satoshi Mitani is the 3rd generation; his son Soichiro is now Managing Executive Officer (4th generation succession). The son is only 33 years old and has been the head of finance for 5 years now. Capital returns have increased under his tenure. Hopefully this trend continues.

Given the concentration of ownership, Activism is impossible here, but also not necessary as management is doing an excellent job.

The Pump Maker That Accidentally Became a Mini-REIT

Founded in 1899, Unozawa-gumi Iron Works is a 125-year-old specialist in dry vacuum pumps and rotary blowers for chemical, power, food and semiconductor plants. Named end customers include blue chip Japanese chemical companies such as Mitsubishi Heavy, Sumitomo Heavy, Mitsubishi Chemical, and Sumitomo Chemical.

The company “accidentally” became a mini-REIT when its old Shibuya factory site was redeveloped with Tokyu Fudosan in 1984, and rental income from the Ebisu office complex became the company’s main profit engine. While manufacturing still drives about 87% of reported sales, the vast majority of profits (81%) come from rents.

Base valuation: ¥13,039 per share (more than triple today’s price)

This includes only net current assets, investments, and rental real estate at the company’s appraised value. The operating business and Ota-ku factory are valued at zero and serve as our margin of safety.

The hidden asset: headquarters + factory land

The 18,272 sqm head office + factory site in Ota-ku carries a book value of just ¥48,000 for its land, but government benchmarks price comparable industrial land at ¥8.6 - ¥8.9 billion. Even after a 20% haircut for the sake of being conservative, that’s ¥7 billion, or ¥6,250 per share. That’s 145,000× carrying value!

The company discloses appraised values for its rental properties but not operating assets like its headquarters. Adding this to our base case brings valuation to ¥19,289 per share, of which ¥18,464 is Tokyo real estate (Shibuya office + Ota factory).

Exposure Tokyo land prices

Unozawa-gumi offers exposure to Tokyo real estate at bargain prices. Government benchmarks show our factory site’s value is up 15.8% since 2022. The Shibuya property in Ebisu was appraised at ¥11.4 billion on March 31, 2023. On March 31, 2025 it was appraised at ¥13.7 billion, which is a 20% increase in just 2 years.

With ongoing inflation and yen weakness supporting land values, a 10% increase would add ¥1,846 per share. Not bad for a stock trading at ¥3,600.

Why the Discount Persists / Downsides

• Management is committed to core pumps business: They plan to spend ¥1.8 billion between 2025–2028 on new machining and assembly buildings at the Ota factory, aiming to expand capacity and shorten lead times. The manufacturing business is profitable, but this is a large investment relative to its size and raises an eyebrow. The silver lining: even if returns disappoint, improved facilities retain residual value should the company ever sell or lease the site.

• Family/insider control: Unozawa Corp, tied to chairman and family patriarch Torao Unozawa, holds 34% of shares. The chairman personally owns another 4.6%, giving him nearly 40% voting control. Add in Tokyu Fudosan’s 9% stake and 3% held by financial institutions, and any activist campaign is dead on arrival.

• Extremely Illiquid: This is a ¥4 billion nanocap with the top 10 shareholders owning 75% of outstanding shares.

• Poor shareholder returns: 1.4% dividend and no share repurchases. Share count is flat to marginally down since 1992. If they ever up the dividend, it would do wonders for re-rating the stock.

Potential Catalysts:

• The 86-year-old chairman has no obvious successor: Unozawa-gumi’s family patriarch, Torao Unozawa, is 86 years old with no obvious family members on the company’s board or listed as successors. The company recognizes the need for a succession plan, but doesn’t have one spelled out. While morbid, his death could serve as a catalyst for something to happen. Torao Unozawa’s holding company (Unozawa Corporation) controls 34% of the company’s shares listed him as the sole owner in 2021. That changed in 2025 when ownership of his holding company listed 2 non-profits that he chaired. This is clearly some kind of estate planning. In 2021 he owned 100% of Unozawa Corp and in 2025 most of his stake was moved into a scholarship foundation and another non profit. Whoever is making decisions at the non-profits upon Mr. Unozawa’s passing may ultimately determine Unozawa-gumi’s fate. Even if they don’t sell, perhaps they’ll increase dividends to support whatever charity they were designed to support.

• TSE Reforms: Japan is changing, albeit slowly. While P/B is above 1, it’s only above 1 because of the low historical cost basis for company real estate. Unozawa-gumi has not complied with disclosure requests by the TSE regarding capital costs and stock prices.

Isamu Paint’s value sits in a large portfolio of corporate bonds, which are safe, but slow-growing. Unozawa-gumi’s value is in Tokyo real estate, which should appreciate with inflation. When buying sleepy, overcapitalized Japanese stocks, I want them to own listed equities or rental property (ideally in Tokyo, as despite Japan’s demographics, Tokyo is still growing). Cash and bonds are the worst: they don’t grow. If I’m holding a stock like Unozawa-gumi Iron Works for years, I’d rather it own assets that compound.

Conclusion:

While I didn’t discuss the core manufacturing business much, it’s not awful. Margins are poor, but could improve with the completion of the new facilities. There’s some real talent at the company, as according to them they were the first in the world to commercialize “multi-stage roots-type dry vacuum pumps” and one of their rotary blowers won the Japan Society of Mechanical Engineers “Excellent Product Award” in 2016.

While there’s no immediate catalyst, this thing is just too cheap. This is a half-basket sized position as it’s way too small and illiquid to make it any bigger. It’s in the deep value asset bucket of my Japanese basket. As always, I don’t ever expect to get anywhere close to fair value in any potential take private deal.

Disclosure: I own shares in Unozawa-gumi Iron Works (6396). The security could be sold at any point in time without prior notice. This is a small position as part of a broader basket of cheap Japanese companies so I haven’t dug too deep into this name. If I missed anything important, feel free to share in the comments. None of this is investment advice. Everything in this post is my own opinion and I could be wrong. Do your own due diligence.

Appendix:

Asset breakdown (per share):

Major Shareholders:

The second-largest shareholder is Akihiko Ota, a value investor in Japan with no ties to the company (as far as I could tell)

Major Facilities (from annual report):

Shibuya Rental Properties (1 & 2) near Ebisu Station in Shibuya (Google Maps)

Ota Head Office + Factory Site (Google Maps)

Founded in 1927, Isamu Paint (TYO 4624) is a 98-year-old manufacturer specializing in automotive refinish paint. They manufacture and sell professional grade paint to auto body shops and collision repair centers with most revenue (69%) coming from automotive repair paint.

The company operates entirely in Japan with a zero-debt and a massively over capitalized balance sheet.

30+ Years of Unbroken Profitability

Isamu Paint has never reported a net loss in over 30 years. The company is so consistently profitable that in 30 years it only had a single QUARTER where it reported an operating loss, the full year being profitable.

Investment Thesis

Isamu Paint is a classic deep value opportunity. At today’s price, you receive the NCAV, investment portfolio, and rental real estate (worth ¥8,530 per share), while getting the entire 98-year-old consistently profitable operating paint business completely for free. This is also totally ignored stock with minimal discussion on Yahoo Finance Japan / X. No one is looking at this.

Why the Discount Exists

• Poor shareholder returns: Flat dividend for 20+ years and no meaningful buybacks in 10+ years.

• Low ROE (3.2%): Conservative management with excess cash earning minimal returns.

• Illiquidity: Nano-cap with low trading volume. 47% of outstanding shares are owned by the founding family, making activism impossible. A further 10% is owned by friendly entities (business partner / shareholder associations).

• Shrinking core business: Management explicitly notes shrinking business due to Collisionavoidance / ADAS and future autonomous-driving tech reducing accident repair volumes. Less accidents = less business for Isamu.

Why the Discount is Excessive

• Double-net-net: Stock could DOUBLE and still be free. Even at ¥7,000, you’d still pay less than the value of liquid assets (current assets + investments). This excludes the rental real estate and you pay nothing for the paint business that generates ¥500M+ annually.

• Hidden rental real estate value: ¥1.25 billion unrealized gain on rental properties (FMV 2.6x book) not reflected in P/B. Isamu Paint owns 49% of the real estate subsidiary, so we only get to add back ¥625 million. We are ignoring the value of other operating real estate assets (factories/office).

• Proven survivor: 98 years of continuous operation, 30+ years without a loss through oil crises, bubbles, and pandemics. Koyfin has data as far back as 1995. Company began trading in 1984. I have not checked data between 1984-1994, but 30+ years of consistent profits is impressive as-is!

• Stable cash generation: ¥393M operating cash flow in H1 FY26 alone; Positive Free cash flow for 20+ years.

Key Risks:

Unfortunately there is no obvious catalyst to unlock value. Isamu Paint is certainly cheap, but may remain cheap for a long time. Things are changing in Japan though. The Tokyo Stock Exchange reforms aimed at improving governance has led to a record number of take privates and shareholder payouts this year.

While those reforms have yet to lead to any changes at Isamu Paint, I suspect the most likely outcome for Isamu Paint is an eventuable management buyout (MBO). In the meantime we collect our paltry 1.4% dividend.

Conclusion:

At ¥3,515, the market values NCAV + Investments + Rental Real Estate at 41 cents on the dollar and gives you the entire 98-year-old operating paint business for free. This is a double net-net. The stock could double and you’d still be paying less than the value of NCAV + Investments.

Management is ultra conservative. Despite zero debt, they park most their excess cash in corporate bonds (~80%) instead of stocks (20%). There’s a tiny (less than 2%) fair value impairment on the bonds. These aren’t long duration JGBs, so rising rates won’t hurt them. In fact, it’ll help as their bonds will earn more when rolled over.

Book value per share would be growing much quicker if the huge pile of investments were equities, but oh well. I bought an initial tracking position in Isamu earlier in the year and made it a basket sized position recently.

Disclosure: I own shares in Isamu Paint (TYO 4624). The security could be sold at any point in time without prior notice. This is a small position as part of a broader basket of cheap Japanese companies so I haven’t dug too deep into this name. If I missed anything important, feel free to share in the comments. None of this is investment advice. Everything in this post is my own opinion and I could be wrong. Do your own due diligence.

Appendix:

Asset breakdown (Per Share):

“Investments & Other Assets” are made up almost entirely of investment securities (¥7.2 billion), long term deposits (¥1.9 billion), insurance reserves (¥0.4 billion), and deferred tax assets (¥0.1 billion). Investment securities are primarily corporate bonds held to maturity with a small amount of equity securities (~¥1 billion). There’s a small fair value impairment of ¥0.1 billion in the ¥6.4 billion corporate bond portfolio.

Major Shareholders:

Interview with the president of Isamu Paint (10 years old, but gives you an insight into the company). Youtube has auto transcribe / translation for subtitles. Thanks to @Japan_cap for sharing this video with me.

The company showed off some of their products at a Painting Equipment Exhibition last month. The youtube channel shows off some of their products.

Furubayashi Shiko (TYO 3944)

• Share Price: ¥2,283

• Market cap: ¥2.5 billion ($16.4m USD)

• NCAV+Investment Securities: ¥4.2 billion (¥3,820/share)

• P/B: 0.27x (¥8,680/share)

• P/E (FY25 Forecast): 9.14 (¥251.78 EPS)

• Dividend: ¥50 (2.2%)

• Position Size: ½ Basket

Furubayashi Shiko is a Japanese packaging manufacturer founded in 1934 that produces printed paper cartons and plastic packaging for everyday consumer products such as confectionery, food, and household and personal care items. Its major customers are blue-chip names like Kao, Meiji, and Ezaki Glico. It’s a classic cheap Japanese nanocap, right down to a corporate website that looks like it was last redesigned in 1997:

The company happens to make the packaging for my favorite Japanese chocolate:

The Good:

Dirt cheap: Furubayashi Shiko is stupid cheap net-net with sub 10 P/E. There’s over 50% upside just to get to NCAV+Investment securities. While the operating business is unglamorous, it’s consistently profitable. They’ve been net income profitable for 20 of the last 21 years with a negligible net loss of ¥5.7 million in 2012. Operating income-wise, they’ve only reported a single small loss in 1999 over the last 30 years. The company forecasts it will earn ¥251.78 per share for the FY ending December 31, 2025, which puts P/E at 9x this year’s earnings.

Currently all profits are generated in Japan, but there’s real upside if the Chinese business improves, which currently operates around break-even after being nicely profitable last year.

Undervalued land: While the company’s factories and offices are required to run the business, they’re worth substantially more than their carrying values. The land for their main factory in Totsuka Ward, Yokohama City is likely worth 10x its carrying value. It’s carried at ¥0.23bn vs my fair market value guess of ¥2.4bn (ChatGPT estimate based on government data and a nearby REIT transaction). The head office’s land in Chuo Ward, Osaka City is carried at ¥0.27bn, but is likely worth at least ¥0.82bn. The company announced on November 19 that they are relocating their head office to the 9th floor of a modern building in the same ward/city (leased). Perhaps they will sell or lease their old building? Operating expenses will likely increase as office space in this area costs roughly ~¥30-¥40m a year (estimate).

There are other real estate assets too, but these are the most valuable.

Historical share repurchases: While Furubayashi Shiko hasn’t repurchased any meaningful amount of shares in over a decade, the company has bought back a ton of stock in the past. Shares outstanding fell from 1,772,820 in May 2008 to 1,082,395 in December 2015, a 39% decrease. Shares outstanding today sit at 1,109,484, almost flat since 2015.

The Bad:

Overpaid executive: Takahiro Furubayashi, the company’s 83 year old chairman, was paid ¥172.9 million last year and is routinely compensated well over ¥100 million per year. While this may seem quaint by American standards, it is downright egregious by Japanese norms.

To put this figure into context, the 83 year old family patriarch earns more than the median CEO of a Nikkei 225/Topix100 company (which earns ¥141m). This is despite being a nanocap!

Looking at this another way, Takahiro Furubayashi’s compensation is a whopping 42% of this year’s expected operating profit and 6.7% of the company’s market cap. Despite this, the company remains consistently profitable.

Takahiro Furubayashi only owns 7% of outstanding shares while other members of the Furubayashi family (among the top 10 shareholders) own another 11%. The largest shareholder seems to be an unaffiliated private medical device leasing company based out of Osaka which owns 8% of outstanding shares. They’ve slowly been increasing their position over the last year with tiny open market purchases. At least one seemingly unaffiliated investor likes the name.

Hikari Tsushin sold out: Hikari Tsushin is a publicly listed company that manages a large portfolio of investment securities. They own everything from large caps to nanocaps and seeing them on a shareholder roster is usually a good sign. I’ve found many of my basket holdings by digging through Hikari Tsushin’s holdings. In this case, Hikari Tsushin, which held 6–8% through the early 2020s and was still on the roster at end-2023, appears to have fully exited by 2024. This is usually a yellow flag. It’s one of the main reasons this is just a tiny bet for me.

Hikari Tsushin’s exit was at least partially facilitated by numerous share repurchases by the company during this window. Unfortunately shares outstanding did not decrease, as shares repurchased during this window were immediately reissued to executives as stock-based compensation. Still, a flat share count after massive buybacks in the past isn’t bad.

Flat Dividend: Dividends have been flat for 16 years at ¥50 per share, which is only 2.19%. This more than covers the cost of borrowing yen, but total shareholder returns here are weak, especially since the last major repurchase was in 2015.

Poison Pill: There’s a poison pill in place which makes it difficult for anyone to amass a stake larger than 20%.

Conclusion:

This is not a great business, but it’s extremely cheap. I sized it at a little under half a typical basket position. I see it as a low downside, decent upside bet. There’s no reason for this thing to be public. I’m betting that management will likely take it private eventually.

I don’t expect to ever see anything close to liquidation or fair value, but an eventual take private with a 30-50% premium is a realistic outcome. While many management led buyouts are often ‘too cheap’, we do get some decent ones from time to time. One of my earlier writeups, Sapporo Clinical Laboratory (TYO 9776), got a buyout bid from its management on November 6 at a 73% premium. This is a low conviction bet and is a tiny position in my basket of cheap stocks.

I use Koyfin for looking at historical data, screening, and visualizing financials. Koyfin offers real value to me and I have been a paid user long before they offered me an affiliate link with a 20% discount. The free version is excellent as well! I don’t charge for access to my writeups. I wouldn’t promote something unless I really loved it and I love Koyfin.

Disclosure: I own shares in Furubayashi Shiko (TYO 3944). The security could be sold at any point in time without prior notice. This is a small position as part of a broader basket of cheap Japanese companies so I haven’t dug too deep into this name. If I missed anything important, feel free to share in the comments. None of this is investment advice. Everything in this post is my own opinion and I could be wrong. Do your own due diligence.

TOC Co. (TYO 8841)

• Stock price: ¥801

• Book value per share: ¥1,142

• Market cap: ¥70 billion

• NCAV+Inv Securities: ~¥42 billion

• Adjusted Mcap: ~¥28 billion

• Dividend Yield: 1.25% (¥10/share)

The pitch here is pretty straightforward. This is a real estate company in Tokyo that owns real estate assets worth significantly more than their carrying value. The company also has a large net cash position and investment securities, which are easy to value. Backing out the value of these assets gets us an adjusted EV of ~¥28 billion. ¥28 billion for ¥57.8 billion of real estate at book value isn’t a bad deal, but what makes this interesting is that the fair market value of the real estate (according to the company’s annual report) is ¥184.3 billion.

Figures from FY25 securities report:

• Book value of real estate: ¥57.8 billion

• Appraised fair value: ¥184.3 billion

• Surplus above BV: ¥126.4 billion

Actual earnings aren’t that important as the real value lies in the assets. But the company is consistently profitable. Since 1985 they’ve only reported a net loss once, in FY2001. Earnings have dipped in recent years due to some poor planning surrounding their flagship TOC Building, which kicked out all of its tenants for a major redevelopment. The original plan was to demolish the aging building and better use the huge tract of land, but instead they did small renovations and reopened it. Re-leasing the property will take some time, but earnings are already improving and expected to increase significantly in the coming years. Capex related to earthquake-proofing a building also hit near-term profits.

There are other reasons to be bullish as well. Here are a few:

• The company has done several buybacks over the years including a 5.31% buyback earlier this year.

• Management tried to take the company private in 2007 for ¥800 per share (the same price as today!). A counter-bid came in at ¥1,100 which was later raised to ¥1,300. The competing bidder couldn’t get enough shares to tender to take the company private and it traded above management’s bid, so it remained public. Book value per share in 2007 was ~¥467 vs ¥1,124 today.

• The founding family owns more than 50% of shares outstanding. The chairman, a member of the founding family, died in January. His estate will owe inheritance tax payable sometime in November. This could serve as a catalyst to ‘do something’. Taking the company private can be very advantageous for minimizing tax issues.

• The company owns an 8.4% stake in New Otani, an unlisted hotel company, which is worth significantly more than its carrying value. All unlisted stakes for TOC are carried at ~¥0.85 billion, but just multiplying 8.4% by New Otani’s net assets is ¥7.6 billion. The company is likely worth much more given undervalued land. New Otani also earned ~¥10 billion in net income in FY24 and FY25.

I stumbled on this idea from Travis Lundy on SmartKarma. If you’d like to learn more about it, I strongly recommend reading his articles on it. They’re much more thorough. This is currently the biggest position in my cheap Japanese basket. While upside isn’t as large as some of the smaller names I own, the stock isn’t very volatile. It’s also more liquid than most of the names I write about.

Sankyo Kasei Corp (TYO 8138)

• Stock price: ¥3,890

• Book value per share: ¥9,750

• Market cap: ¥3.5 billion

• NCAV+Inv Securities: ~¥7.1 billion

• Adjusted Mcap: -¥3.6 billion

• FY26 Net Income (Management forecast): ¥624 million (¥678/share)

• FY26 Operating Profit (Forecast): ¥465 million

• Dividend Yield: 2.5% (¥100/share)

Sankyo Kasei is a small trading company (middleman) that supplies chemicals and other materials to its customers along with technical expertise. The core business, while boring, has been consistently profitable. The value is in the balance sheet and the massive buyback earlier this year.

Here are the highlights

• Double net-net valuation. Meaning the stock could double in price and still be valued at less than zero after backing out NCAV + investment securities.

• Consistently profitable. Operating income has been positive since 1998 and has been mostly steady the entire time.

• Massive accretive buyback. In February 2025, Sankyo Kasei repurchased 31% of outstanding shares, almost entirely from Black Clover and Swiss-Asia. These shares have since been canceled. In May 2025, the company repurchased another 2.5% of outstanding shares. Shares outstanding have fallen from 1,333,699 to 895,765.

• There’s some parallel here to Mansei which also did a giant buyback (also from Black Clover). Black Clover’s strategy seems to be to buy up a sizable stake in cheap companies then offer to sell back to the company at near market price, profiting from the price uplift from their own buying. While an interesting strategy, they’re leaving a lot of money on the table and creating value for remaining shareholders.

• While margins are pretty terrible (1.7% EBIT margin), they’ve been rising in recent years.

• The company’s head office is in Osaka and sits on 492 sqm of land in a pretty good location. Book value for the land is ¥242 million. If we include the building, the head office + land is booked at ¥952 million. The land alone is easily worth double this figure.

This is a 1.5x-sized basket position. It is illiquid, so be careful!

Takase Corporation (TYO 9087)

• Stock price: ¥1,248

• Book value per share: ¥3,590

• Market cap: ¥2.5 billion

• NCAV+Inv Securities: ~¥1.8 billion

• Adjusted Mcap: ~¥700 million

• FY26 Net Income (Management forecast): ¥180 million (¥89/share)

• Dividend: 2.8% (¥35/share)

Takase is yet another small cheap logistics company. Readers and followers on X should know by now that I’m a fan of the sector, especially since the biggest win in the Japanese basket was Nissin Corp (9066) which I wrote about last year. It’s up 80% since then, but it’s a name I’m up over 200% on, as I bought it in early 2024.

While Takase isn’t as consistently profitable as other logistics names I like (such as Keihin 9312 and Nanso Transportation 9034), its small size and tiny adjusted market cap relative to the fair market value (FMV) of its assets give us a lot of upside.

Here are the highlights

• Takase owns logistics assets in Sapporo, Tokyo, and Kawasaki. Some properties are leased out to third parties to generate rental income while others are operated by the company. The rental assets have a book value of ¥2.1 billion but fair value is ¥4.4 billion, which is an uplift of ¥2.3 billion (vs a market cap of just ¥2.5 billion and adjusted mcap of ¥700 million!). There is no clear breakdown of which properties are rented out vs owner-operated except for rental properties being located in “Tokyo and Kanagawa.”

• This FMV uplift is only for their rental assets. Owner operated properties do not have a fair value disclosure. Some properties have an overlap with a portion of the property leased out to third parties, and those also include a fair market disclosure that shows an additional ¥266 million uplift. The individual properties included in this FMV uplift are not disclosed.

• The core operating business is not nearly as good as Keihin (9312), Nanso Transportation (9034) and other logistics companies I like. The company has been profitable on an operating income basis every single year since 1988, except for an operating income loss of 115 million in FY2017. However, operating income has been declining for decades, and net income has swung to losses many times.

Even if we assume zero further uplift from their entirely owner-operated assets, this is pretty cheap. Given the nanocap size and less consistent operating business, this is a much smaller position for me than many other Japanese logistics companies in my portfolio. My Keihin (9312) and Nanso Transportation (9034) positions, for example, are multiples larger than my Takase position. Takase is a half-basket sized position. While I haven’t written about Nanso Transportation on Substack before, I’ve posted about it on X.

While ‘undervalued land asset’ plays can be interesting, I don’t like making bets in the space unless the operating company is consistently profitable. One idea I passed on recently was Omikenshi (3111). For a quick look at that idea, click the link below to my X post.

I use Koyfin for looking at historical data, screening, and visualizing financials. Koyfin offers real value to me and I have been a paid user long before they offered me an affiliate link with a 20% discount. The free version is excellent as well! I don’t charge for access to my writeups. I wouldn’t promote something unless I really loved it and I love Koyfin.

Disclosure:I own shares in 8841, 9087, and 8138. These securities could be sold at any point in time without prior notice. These are small positions as part of a broader basket of cheap Japanese companies so I haven’t dug too deep into any of these names. If I missed anything important, feel free to share in the comments. None of this is investment advice. Everything in this post is my own opinion and I could be wrong. Do your own due diligence.

• Stock Price: ¥2,885

• NCAV+Investments Value Per Share: ¥5,220

• Market Cap: ¥4 billion

• Book Value Per Share: ¥6,724.78

• P/B: 0.43x

• P/E (LTM): 3.18

• P/E (Management Forecast): 7.78

• Dividend: ¥100 (3.6%)

Tokyo Automatic Machinery Works (TYO 6360, aka TAM) has two core businesses: (1) packaging machines for food and consumer goods, sold mainly in Japan, and (2) production lines for soft contact-lens factories, almost all of which are supplied to long-term partner Johnson & Johnson Vision overseas. TAM also provides engineering, maintenance and spare-parts services. Founded in 1955 and listed in 1966, the company is a seasoned, albeit tiny, industrial player.

TLDR 2 Sentence Pitch:

TAM is just another dirt cheap profitable net-net trading at ~0.4× book value, but the real catalyst is management’s new willingness to lift capital returns and target a 1× P/B. Customer concentration is a risk, but the bet here is that shareholder returns will improve further.

Investment Thesis:

• Net net valuation. Net current assets + investment securities were ¥7.3 billion vs a market cap of just ¥4 billion. Upside to this figure, which values the business and other fixed assets at zero, is nearly 90%.

• Valuable rental RE. The corporate head office is located on a prime corner in Chiyoda, Tokyo on 485 sqm of land. The company’s own appraisal values it at ¥1.6 billion vs its carrying amount of ¥1.1 billion. This seems conservative. This is a prime location 2 minute walk to Akihabara station and 1 minute to Iwamotocho Station. Most of the value here is derived from rental income from the ground floor which is rented by a large convenience store chain. Ownership of this property is not essential to the business and it would be easy to sell (for a big profit). Adding the appraisal value of this single property to NCAV+Investments get us to 125% upside.

• Improved shareholder returns. On Feb 7, 2025 the company released a document highlighting their goals to comply with the Tokyo Stock Exchange’s push for improved corporate governance. The company announced that dividend payout ratios going forward will be 30%, which resulted in their dividend for the FY jumping from ¥80 to ¥240 (stock price today is ¥2,885).

• While FY2025 earnings were extremely strong at ¥871 per share, forecast for FY2026 is for an EPS of just ¥356.20. Given that 30% payout ratio is the target, the company expects to pay ¥100 yen per share in dividends. The decrease from ¥240 to ¥100 led to a quick fall in share price. The enthusiasm from the original increase (which was tied to a great year) quickly faded and shares are now flat YTD despite committing to paying out a higher payout ratio than ever before.

• The dividend payout ratio for the last 5 years have been 27.5% (FY2025), 15% (FY2024), 10.5% (FY2023), 15% (FY2022), and 10.3% (FY2021). The commitment to aim for a 30% payout is a big deal and is more than doubles the company’s historical payouts.

• The company mentioned that their PBR is still well below 1 and they aim to address that. They clearly outlined “PBR over 1” as a goal. Growth investments,

• While Tokyo Automatic Machinery is a tiny company (¥4 billion marketcap), no entity controls a large share of stock. The top shareholders list is almost entirely financial institutions. There are no obvious blocking shareholders.

Risks:

• Customer concentration. Johnson & Johnson Vision is a major customer and makes up a large percent of total revenues and almost all of the company’s profits. This is not new. As far back as the 2006 annual report, they were Tokyo Automatic Machinery’s biggest customer. In FY2024 they were 61.4% of the company’s total revenues and 52.5% in FY2025. While customer concentration is a real risk, this is a multi-decade long partnership. The machines J&J purchases from TAM are bespoke systems jointly engineered, which makes switching costs high.

• The product machinery division which supplies contact lens production lines to J&J made up 55% of revenue in FY25 and practically all of the company’s profits. The remaining 45% of revenue is from packaging machinery which has razor thin margins. The company has been working to diversify their customer base and grow the packaging business, but there is currently extreme reliance on J&J for profits. The packaging business supplies machinery to some of the biggest CPG manufacturers in Japan (Calbee, Morinaga, Japan Tobacco, etc), but profits have been razor thin in the segment.

• Overearned in FY24&25. Johnson & Johnson spent €100m Euros expanding their contact lens factory in Ireland. TAM benefited from this tremendously but as those orders wrap up, sales and profits will fall, which is why profits are expected to fall so much in FY26 (Operating profit forecast of ¥400 million in FY26 vs ¥1,565 million in FY25). This increased install base of TAM machinery will yield additional parts & service revenue in out years.

Conclusion:

Tokyo Automatic Machinery trades at a deep discount to both net current assets and conservative real-estate marks, while management has pivoted to a 30 % dividend policy and an explicit 1× P/B target. Reliance on a single customer caps position sizing, but the contact-lens end-market is secularly growing (4–6 % CAGR to 2033). While the packaging business has been lackluster so far (in terms of profits), the company has been trying to grow it. They showed off their newest machines at trade shows in Japan and Thailand in June.

I use Koyfin for looking at historical data, screening, and visualizing financials. Koyfin offers real value to me and I have been a paid user long before they offered me an affiliate link with a 20% discount. The free version is excellent as well! I don’t charge for access to my writeups. I wouldn’t promote something unless I really loved it and I love Koyfin.

Disclosure: I own shares in Tokyo Automatic Machinery Works (TYO 6360). The security could be sold at any point in time without prior notice. This is a small position as part of a broader basket of cheap Japanese companies so I haven’t dug too deep into this name. If I missed anything important, feel free to share in the comments. None of this is investment advice. Everything in this post is my own opinion and I could be wrong. Do your own due diligence.

Appendix:

This is their corporate HQ in Chiyoda, Tokyo. 485 sqm of prime land 2 minutes to Akihabara station and 1 minute to Iwamotocho Station. A major convenience store chain Daily Yamazaki rents out the bottom floor. I suspect the valuation of the entire building in their securities report was based on this rental income alone, while the entire expenses of the building were used to offset that income, despite the upper floors being used for corporate purposes and not rented out. While the company has 266 total full time employees, just 43 work at the head office and it seems like a large building for just 43 people. Either way, this is a prime property that wouldn’t be difficult to sell.

The location of the building on Google Maps can be seen below:

The corporate website was recently renewed and is available in English.

Case Study of Packaging Line used by Tirol Choco Co., Ltd (Released July 11, 2025)

• Share Price: ¥3,320

• NCAV: ¥ 2,560

• NCAV+Investments: ¥4,389

• P/E (LTM): 3.95

• P/E (FY26 Forecast): 5.43

• P/B: 0.5x

• Dividend: ¥102 (~3.1%)

• Market cap: ¥17.9 billion ($124m USD)

OUG Holdings (TYO 8041) is a vertically integrated seafood group that auctions fresh fish at major markets, runs a nationwide cold-chain for trading, processing, and delivering seafood to stores and restaurants, and farms premium buri and bluefin tuna. Because it controls aquaculture, logistics hubs, and its own truck fleet, it moves product from port to plate faster and fresher than rivals that outsource storage and transport. They currently have dominant market share in Osaka and are slowly expanding to Tokyo.

Source: Koyfin

Why I like OUG:

Dirt cheap: This company is trading at half of book value and below the value of its net current assets + investments. This figure isn’t as “clean” as some other net-nets I wrote up, as a big portion of current assets are “goods & products”. OUG’s actual business is actually quite good with return on equity coming in at above 12% for the last 3 years despite being over capitalized. The business also returned to growth after Covid with revenues in FY25 finally exceeding 2008 levels. Topline has been in decline since 1997 and has finally turned around. Profits have also followed, reaching their highest level ever in both net and operating income. There’s a lot of hard asset value to backstop the cheapness. Land acquired in good locations in Osaka is likely worth significantly more than carrying value.

New dividend on equity policy: Last year OUG Holdings announced a dividend on equity policy of 1.6%, meaning ~1.6% of shareholders equity will be paid out as dividends. This ensures smooth dividend payments in off years and investors can expect rising dividends as book value continues to grow. The current dividend is not bad, but the bet here is that shareholder returns will improve from here. Management also closed 2 unprofitable divisions, unwinded 2 cross holdings, and introduced a new KPI for management compensation tied to improving return on capital.

Diversification: Many dirt cheap companies are automotive parts or niche machinery manufacturers. This one is not. While I own plenty of stocks in those industries, OUG Holdings adds some diversification to the basket. They’re also almost entirely tied to the domestic fortunes of Japan, with domestic sales exceeding 90% of total revenues.

Benefits from tourism: While this is marginal, increased tourism to Japan, Osaka specifically, should add incremental revenue and profits for OUG, which sells both to wholesalers and direct to restaurants, supermarkets, hotels, and convenience store chains.

No blocking insider shareholder: OUG Holding’s largest shareholder is Maruha Nichiro (TYO 1333), a ¥152 billion seafood company, which holds 13.8% of outstanding shares. The remaining top 10 holders are mostly financial institutions. The company was founded as a co-operative back in 1946 and has long ago converted to a regular joint stock company. Management seems to only own a tiny percent of outstanding shares, ~0.6% by my calculation. If you add the OUG Group Employee Stock-holding Association ownership to that, we get ~3%. Activism looks possible.

Fairly consistent profitability: Only 2 losses since the great financial crisis. ¥637m in FY13 and ¥96m in FY18. Both relatively small losses.

Potential risks / downsides:

Over earned in FY2025: FY2025 earnings were strong because of robust shrimp and tuna prices. The company’s FY2026 forecast is for EPS of ¥611.25, down from ¥839 in FY25. Despite the decline, the company remains cheap with a forecasted P/E of 5.4. EBIT margins for FY25 were the highest ever for the company at 1.46%. Wholesale is a majority of their business, so low margins are the norm.

Cheap can stay cheap: This is a risk with any deep value investment. OUG Holdings seems to be signalling that they’re taking improved corporate governance requests from the Tokyo Stock Exchange seriously. Their response included RoE targets of over 8%, better shareholder communication, and improved shareholder returns. The 1.6% dividend on equity policy is a good start, but they need to bump this up to 3% to see their shares re-rate higher. They did buyback shares a few years ago, but they could do a lot more on this front.

Conclusion:

OUG Holdings is cheap, pays a decent dividend, and has responded to the TSE request to improve shareholder returns. Their shareholder returns could be better, but with a dividend on equity policy, shareholders will be rewarded so long as book value continues to grow. This is an above average size position in my Japanese basket.

I use Koyfin for looking at historical data, screening, and visualizing financials. Koyfin offers real value to me and I have been a paid user long before they offered me an affiliate link with a 20% discount. The free version is excellent as well. I don’t charge for access to my writeups. I wouldn’t promote something unless I really loved it and I love Koyfin.

Disclosure: I own shares in OUG Holdings (TYO 8041). The security could be sold at any point in time without prior notice. This is a small position as part of a broader basket of cheap Japanese companies so I haven’t dug too deep into this name. If I missed anything important, feel free to share in the comments. None of this is investment advice. Everything in this post is my own opinion and I could be wrong. Do your own due diligence.

Appendix:

OUG Holdings Corporate Video [English]:

• Share Price: ¥3,110

• Market Cap: ¥4.90 billion (~$34m USD)

• Book Value Per Share: ¥12,724

• NCAV Per Share: ¥1,642

• NCAV+Investments Per Share: ¥8,522

• P/B: 0.25x

• Dividend: ¥100 (3.15%)

Nippon Pigment (TYO: 4119) is a Japan-based specialty chemicals company that produces resin compounds and colorants (pigments and dyes) primarily for plastics, coatings, and textiles. The company has operated successfully in its niche for over a century. Since going public in 1961, the company has maintained a strong track record of profitability, posting losses in only two of the past twenty years (2009 and 2022). While the company has been profitable, its topline has been declining for 30 years. That’s changing though. The company made a transformative acquisition last year.

On April 30, 2024, Nippon Pigment acquired 97% of Sumika Color (now called PLASiST) from Sumitomo Chemical for ¥1.0 billion. A few months later, Nippon Pigment recorded a one time huge negative goodwill (bargain purchase gain) of ¥6.8 billion. They recorded EPS of ¥4,332 due to the acquisition. Compare that to the company’s ¥3,110 share price today.

This unusual situation occurred because Sumitomo Chemical, a ¥550 billion company affiliated with the ¥4.4 trillion giant Sumitomo Corp, effectively paid Nippon Pigment to take over Sumika Color. In their announcement, Sumitomo Chemical stated that they recapitalized Sumika Color before the sale and identified Nippon Pigment as the ideal owner for long-term operation due to their strong market position. Nippon Pigment, in turn, believes this acquisition will boost growth and enhance its competitive edge. Sumika Color and Nippon Pigment serve the same industries and have similar product offerings.

This wasn’t a market transaction. The division was seemingly sold (given) to Nippon Pigment because Sumitomo Chemical believed it was the best company to operate the division for the long term. I imagine Sumitomo Chemical considered shutting the division down, but that’s not a good look in Japan where shareholder primacy isn’t the dominant belief. So they basically paid Nippon Pigment to take the division off their hands.

Sumitomo Chemical is currently undertaking "intensive performance improvement measures," aiming to restructure and streamline operations to boost profitability. The Sumika Color division was presumably too minor and non-core, prompting Sumitomo Chemical’s decision to exit at a cost.

Yes, this is strange and sounds too good to be true, but given the size of the players involved I don’t think the story is implausible.

When I first stumbled on this announcement I wasn’t eager to buy Nippon Pigment as I was worried that integration would prove difficult and maybe the acquisition would prove to be a big liability. While I’m not certain that isn’t the case, the company reported FY2025 results and their forecast for FY2026 is encouraging:

Historically, Nippon Pigment’s sales averaged around ¥28 billion annually (2020–2024). The Sumika Color acquisition significantly boosts revenue, adding approximately ¥13 billion annually. Additionally, there's potential upside if the acquisition strengthens Nippon Pigment’s pricing power with suppliers and customers.

Before Sumika Color was recapitalized and sold, its financials for the FY2021-FY2023 were not great. The bet here is that after the big recapitalization and synergies with Nippon Pigment it could be a winner. “Could” is the key phrase. I know little about this industry and despite ¥45.8 billion in combined revenues, they seem like a small player compared to bigger players like DIC Corp, though DIC’s offerings are broader.

While FY2026’s forecast looks fine, there’s no certainty that the acquisition will work out in the long run. Still, Nippon Pigment today is just too cheap. Net income for FY2025 came in at 3,327, a bit less than the purchase gain as the company recognized impairment losses across 2 consolidated subsidiaries.

The bet here is that FY27 will begin to show real synergies, as the forecast for FY26, while cheap, isn’t gangbusters cheap. While 5x operating profit and 7x net income is cheap, it’s nothing to get excited about given long term decline in revenues. Nippon Pigment is only a bargain in the context of 7x P/E along with ¥8,522 a share in NCAV+Investment securities. The 3% yield helps, but shareholders will only really win if diviends increase or the company begins doing buybacks. The company has not yet complied with the TSE request for improving their book value yet, but the dividend isn’t terrible.

Bizarre Negative Goodwill Deals

It’s fair to be skeptical here, but this isn’t the first acquisition I've seen in Japan where the buyer immediately recognized a massive one-time gain. My initial thought here was that they probably acquired some environmental liabilities, pension liabilities, or something else that made this deal more fair, as there’s no way anyone would just sell a business for less than free. But keep in mind, these aren’t market transactions.

That acquisition didn’t involve manufacturing or chemicals; it was a mobile game developer. Cave Interactive (TYO 3760) acquired Dera Game back in 2022 for ¥5 billion then recorded ~¥3 billion in one time gains from negative goodwill. This isn’t an employee-heavy business or one that comes with legal liabilities either. While I thought this was a slam dunk deal for Cave Interactive, I wasn’t interested in the stock as the mobile games business is brutally competitive and Cave has burned a lot of investor cash over the years. That acquisition did make them profitable though.

Activism isn’t impossible but the company is too small

While activism isn’t impossible here, Nippon Pigment is just too small for anyone to care. I doubt anyone tries to go activist on a ¥4.94 billion company. Then again, I mentioned in a previous writeup that Tokyo Soir saw an activist despite being even smaller. So who knows. Still, the banks and the business partners association are likely friendly to management, so it won’t be easy. Oh, and the stock is stupid illiquid. More so than most names I’ve written about, so taking any meaningful sized position is basically impossible.

Conclusion:

This is cheap and I own some as part of my Japanese basket. This is only a half-basket sized position as I don’t particularly like the commodity-esque nature of the core business.

Unfortunately shareholder returns have been disappointing over the years. The 3% yield isn’t bad, but share count has been flat over the last 30 years. Still, the stock is up 90% over the last 5 years, so investors did okay. Not so Longer term. Since 2000, the stock is up only 46% (excluding dividends).

So why even bother with a name like this? Because something happened. If the acquisition works well and they improve capital returns, the stock could do great. Even without improving fundamentals, increasing the dividend alone would re-rate the stock higher. Sanyo Industires, which I wrote up in the past, rocketed after doubling their dividend despite flat net income growth.

I use Koyfin for looking at historical data, screening, and visualizing financials. Koyfin offers real value to me and I have been a paid user long before they offered me an affiliate link with a 20% discount. The free version is excellent as well. I don’t charge for access to my writeups. I wouldn’t promote something unless I really loved it and I love Koyfin.

Disclosure: I own shares in Nippon Pigment (TYO 4119). The security could be sold at any point in time without prior notice. This is a small position as part of a broader basket of cheap Japanese companies so I haven’t dug too deep into this name. If I missed anything important, feel free to share in the comments. None of this is investment advice. Everything in this post is my own opinion and I could be wrong. Do your own due diligence.

I am however grateful to the numerous people who chose to be a paid subscriber despite getting absolutely nothing in return. I thought about offering something to paid subscribers without compromising on the idea that all my writeups/commentary will be free to everyone and landed on sharing a semi-annual snapshot of the 120+ stocks in my cheap Japanese basket. The snapshot will include

• Tickers / Names

• Average purchase price

• Sizing (quantity of shares and % of basket)

There won’t be any commentary in these semi annual snapshots or trade history. Just a list of companies in the cheap Japanese basket with my current sizing and historical average cost basis.

I’m already pretty open about most of the names in the basket and routinely comment about them on my X account and on Substack.

I appreciate paid subscriptions as they’re a signal that others value my work. Nothing will change for free subscribers. You should not expect anything from me for subscribing. Think of it as a tip! I write on here mostly for fun. I may stop publishing this at my discretion. The annual price is the Substack default of $80. I’m not trying to maximize revenue.

Below is the Third snapshot (May 12, 2026):

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Kinki Sharyo (TYO 7122) is a Japanese manufacturer of rolling stock that supplies Japanese railways as well as mass transit systems around the world. They also have manufacturing in the United States and have provided railcars to the Los Angeles, Seattle, Phoenix, Santa Clara, and Dallas metro systems. The U.S. business specializes in light rail vehicles, but they also produce heavy vehicles for the Japanese and other international markets. They’ve been in business since 1920 and are a listed subsidiary of Kintetsu Group (9041).

• Stock Price: ¥1,432 (¥10 billion market cap)

• NCAV+Inv Securities: ¥2,979

• NCAV+Inv Securities+Rental Real Estate (conservative): ¥3,997

• Upside while valuing operating business at zero: 175%

• P/TBV: 0.3x (Near all time lows)

• Adjusted P/TBV: 0.23x (Using company’s fair value for rental real estate)

• Dividend Yield: 3.5%

I’ve periodically posted on X about this name and briefly mentioned it on the Substack, so I’ll keep this short. This is a riskier bet than some of the consistently profitable names I usually cover, but it’s cheap, offers a decent dividend (3.4%), and plays on the parent-child takeover theme.

The Good:

• Net-net valuation. Net current asset value sits at ¥14 billion vs a market cap of ¥10 billion. There’s also ¥6.5 billion of investment securities. A bit under half of current assets are “orders in progress”, so this isn’t a super clean figure.

• NCAV+Inv securities are worth ¥2,979 per share vs a market price of just ¥1,432. That’s 100% upside even if we value the business and the other assets at 0.

• The company owns rental real estate as an investment. Sales from this segment are mainly from their Higashiosaka (Osaka) and Tokorozawa (Saitama) commercial facilities. Sales were ¥612 million and Operating income was ¥528 million year to date (Q1-Q3). Annualizing this figure gets us ¥704 million in operating income.

• What’s the real estate worth? Let’s be conservative and assume a 10% cap rate on operating income. This is stupidly conservative and values the rental real estate at ¥7 billion. Adding that to our NCAV+INV securities figure gets us to ¥3,997 per share. This is super conservative. The company itself estimates these properties are worth ¥10.2 billion (7% cap rate) and are held on the balance sheet at just ¥1.5 billion:

  

• Effissimo Capital Management is a shareholder and has been for some time. They’re an activist fund that has been involved in many Japanese stocks. They own 8.45% of the company.

• On March 31, 2025 the company announced that their U.S. subsidiary won a contract to assemble 182 HRVs (heavy rail vehicles) for Hyundai Rotem for use in the Los Angeles County Metro. The base contract value for the entire project is $663.7 million and the value of final assembly is likely between 10-20% (this figure is a ChatGPT estimate and sounds reasonable). This contract is scheduled to run from 2026-2030. The market has not given the company any credit for this win.

• The company aims for ‘stable dividends’, so even during weaker years (like this year), investors should get ¥50 per share (~3.5% dividend)

• If the U.S. succeeds in isolating China, Kinki Sharyo has a much better chance of winning international contracts. Chinese state-owned CRRC is the global leader in rolling stock and has won big contracts even in the U.S. (for heavy rail, which Kinki Sharyo does not make in the U.S). Kinki Sharyo’s pricing power internationally would improve if they didn’t have to compete with Chinese companies.

The Bad:

• The company had a disastrous quarter in Q2 2016 where it reported a loss of ¥11.82 billion. It took 6 years for book value to return to 2016 levels. The primary cause of the loss was cost overruns and low margin contracts. While book value has grown since, share price has declined significantly.

• ¥3 billion of that loss was due to Yen appreciation. A sudden appreciation in JPY will likely hurt profits in the future. Since this disastrous quarter, practically every earnings forecast has proven conservative except briefly after COVID. Yen weakness was likely the main reason they beat their own forecasts.

• Net income is bumpy as fulfilling orders can take a long time. Profitability should be measured over a couple years. For example in FY2024 net income was ¥4.3 billion and FY2025 is expected to be just ¥100 million.

• No real share buybacks in 20+ years. Share count is down 0.4% since 2004.

• Stagnant core business. Revenues are flat since 1998.

• Kinki Sharyo is a child listing of Kintetsu Group (9041) which owns 30.3% of the company through Kintetsu Railway Co and another 14.1% directly for a combined ownership of ~44.4%. This makes outside activism practically impossible. The most likely exit here is an eventual MBO by Kintetsu.

• The company lost a slip and fall lawsuit in California in May 2024 that resulted in $58 million judgement. It was settled for $21 million in August, 2024. This was likely covered by the company’s insurance as it was not specifically mentioned in previous quarterly reports, so it is likely just business as usual for them.

Conclusion:

I think Kintetsu Group just takes Kinki Sharyo private eventually. There’s been a lot of parent-child takeovers over the last few years and this trend seems to be accelerating lately. Most recently, AEON made a bid to take over 2 of their listed subsidiaries in late February.

Kinki Sharyo market cap is tiny at just ¥10 billion vs Kintetsu Group’s ¥586 billion and they already own almost half the company. Kintetsu isn’t averse to taking their listed subsidiaries private. They purchased the 52% of Kintetsu World Express they didn’t own back in 2022 for a 40% premium, an all time high price for the company. That figure valued Kintetsu World Express at ~¥300 billion. Kinki Sharyo on the other hand is a much smaller company and is trading at a massive discount to its net current assets and rental real estate. I consider the core business riskier than most of my basket positions, but it’s too cheap to not be a part of my basket. It’s an overweight position in the basket.

I use Koyfin for looking at historical data, screening, and visualizing financials. Koyfin offers real value to me and I have been a paid user long before they offered me an affiliate link with a 20% discount. The free version is excellent as well. I don’t charge for access to my writeups. I wouldn’t promote something unless I really loved it and I love Koyfin.

Disclosure: I own shares in Kinki Sharyo (TYO 7122). The security could be sold at any point in time without prior notice. This is a small position as part of a broader basket of cheap Japanese companies so I haven’t dug too deep into this name. If I missed anything important, feel free to share in the comments. None of this is investment advice. Everything in this post is my own opinion and I could be wrong. Do your own due diligence.

Update July 3, 2025:

Posted on X about this, so I figure I’ll add it to this writeup. The investment property Kinki Sharyo owns with FMV ~¥10 billion (vs 1.2 bil book) is in the same lot as their huge factory in Osaka. This is facility is obviously required to operate the business, but there’s no reason manufacturing has to be done in THIS location. Nearby properties are all residential and commercial. They could sell theoretically sell this facility to a developer and build a new facility outside Osaka. Fair market value in the below screenshot is from their English annual report. The area shaded in blue is the rental property which is adjacent to their factory.

Appendix:

Top Shareholders:

Kinki Sharyo Company Videos

Parent-child listings in Japan are a good hunting ground for stock ideas given the trend of parent companies buying out their listed subsidiares. This is a side effect of governance reform in Japan. EastAsiaStocks covers recent trends in parent-child listings well, so no need to rehash it here.

I’ve previously looked for a list of publicly traded stocks in Japan with parent companies but I couldn’t find one. I quickly compiled my own list below using AI for assistance. I definitely missed a bunch, but the table below should be useful for anyone looking for parent-child listings. There are ~230 names in the table below. Some aren’t strictly parent companies, but own substantial stakes.

I own a bunch of these including: 7122, 4224, 7614, 5753, 7229, 5658, 8291, and 4356. I found copying the entire list of child company tickers into a Koyfin watchlist helpful, as I can easily see financial metrics there.

Disclosure: I own shares in several stocks mentioned in this post. These securities could be sold at any point in time without prior notice. None of this is investment advice. Everything in this post is my own opinion and I could be wrong. Do your own due diligence.

Tigers Polymer Corporation (TYO 4231) manufactures and sells various polymer and resin products, including hoses, sheets, and molded parts, primarily serving the automotive, electronics, and industrial markets with autos being the largest.

While the company is based in Japan, the majority of its profits come from the United States, where it operates a manufacturing facility in Ohio. The company also has an industrial hose manufacturing joint venture in Illinois with Kuriyama (TYO 3355). Given all the news about tariffs lately, a company like Tigers Polymer with U.S. manufacturing stands to benefit.

• Share Price: ¥668

• NCAV+Inv Securities: ¥1,321 per share

• Market Cap: ¥13.2 billion

• P/E (LTM): 7.5

• P/E (Management Forecast FY2025): 8.4

• Dividend Yield: 5%

Tigers Polymer has been operating in the United States in their Ohio facility since 1987. The company also manufactures in Japan, Thailand, and China, but the U.S. is currently their most profitable market. The Chinese business is currently marginally unprofitable.

The Good:

• The story here is pretty straight forward. Tigers Polymer is extremely cheap and trades at an undemanding multiple of 8.4x FY2025 earnings. NCAV + investment securities are ¥26.3 billion vs a market cap of just ¥13.2 billion. It’s stupid cheap.

• The operating business has been remarkably consistent over the years. The company only ever reported a net loss in FY2009 and it was a tiny loss of just ¥19.8 million. The company has been profitable since 1985 with only 1 FY loss.

• Tariffs have been in the news quite a bit this year and they could provide a boost to Tigers Polymer given their U.S. manufacturing.

• Dividend of 5% in FY2025. Management aims to pay out at least 30% of profits to shareholders.

The Bad:

• Tigers Polymer could be over-earning as it earned ¥3 billion in FY2024 and is expected to earn ¥1.6 billion in FY2025. The 2025 profit forecast is still well ahead of FY2020-2023 figures, but is slightly below pre-covid numbers. FY2025 profits were revised downward in November from ¥2.2 to ¥1.6 billion.

• High customer concentration with 41.5% of revenue coming from Hondo Motor Co in FY2024. Their #2 customer is Kuriyama of America at 14.7%.

• The company has a poison pill in place and has had it since June 2022, which makes it difficult for outsides to acquire a large stake in the company.

• The shareholder register is dominated by those friendly with management. The highlighted shareholders are almost certainly aligned with insiders. Shareholder concentration + poison pill make activism impossible. The ideal exit is an eventual MBO. In the meantime, shareholders can collect a decent dividend.

• The balance sheet has ¥2.7 billion of non-controlling interests, but given that we’re ignoring all the other asset values, it doesn’t change the story. This thing is cheap. It’s still a deep value net-net even accounting for this.

Conclusion:

Tigers Polymer is dirt cheap net-net with consistent profitability and I like the U.S. manufacturing side of the business. There are plenty of cheap auto parts manufacturers in Japan, but not too many in the U.S.

This is a 1/2 basket sized position in my cheap Japanese basket. I bought this position in April 2025. I also own shares in Kuriyama Corporation which has a joint venture with Tigers Polymer in the U.S.

I use Koyfin for looking at historical data, screening, and visualizing financials. Koyfin offers real value to me and I have been a paid user long before they offered me an affiliate link with a 20% discount. The free version is excellent as well. I don’t charge for access to my writeups. I wouldn’t promote something unless I really loved it and I love Koyfin.

Disclosure: I own shares in Tigers Polymer (TYO 4231). The security could be sold at any point in time without prior notice. This is a small position as part of a broader basket of cheap Japanese companies so I haven’t dug too deep into this name. If I missed anything important, feel free to share in the comments. None of this is investment advice. Everything in this post is my own opinion and I could be wrong. Do your own due diligence.

3 Quick pitches for 3 cheap Japanese stocks in my basket.

Nippon Shindo (TYO 5753)

• Share Price: ¥1,970

• Market Cap: ¥4.2 billion

• NCAV: ¥8.6 billion

• Book Value: ¥11.6 billion (¥5,463 per share)

• Price/Book: 0.36x

• P/E: 4.3

• Dividend: 0.7%

Nippon Shindo specializes in the manufacturing and sale of brass bars, brass wires, and other nonferrous metal products, primarily serving the automotive, industrial machinery, and construction sectors. The company has been around since 1938.

The investment pitch here is simple. This is a deep value double net net (NCAV is double the market cap) and it also owns some land which is likely worth above book value. Earnings have also improved significantly over the years which can be seen here:

I can’t attach a Koyfin chart showing net income as data providers can’t seem to pull correct numbers for Nippon Shindo, which makes this name impossible to find on some screens (like Koyfin). Even Google Finance's financial statements stopped in 2015 for some reason.

That reason may have to do with the company becoming majority owned by CK San-Etsu (TYO 5757) in 2015. They currently own 55.4% of the company. CK San-Etsu is a prime market listed company in Japan which means they’ve shown some willingness to improve corporate governance. CK San Etsu’s share of ownership has increased over the 5 years due to repurchases by Nippon Shindo. Shares outstanding are down ~10% over the last 5 years.

Parent-child listings have faced increasing scrutiny in Japan over the last few years with the Tokyo Stock Exchange requiring additional disclosures for companies that maintain such relationships on public markets. The easy solution to resolve these issues and reduce compliance costs has been to just buy out the listed subsidiary. CK San-Etsu is Nippon Shindo’s obvious buyer. There have been several recent examples of parent companies taking over their listed subsidiaries over the last year. Aeon taking over 2 subsidaries in late February were the most recent.

The company’s primary industrial property is on Osaka Bay and is likely worth more than book value. The facility sits on 37,385 sqm of land and is on the books at just 2.3 billion yen (2 billion of which is the land). While this won’t be sold as its essential to the business, the major fixed asset on the balance sheet is also valuable. Real estate in far flung locations are much more difficult to value, but this sits on Osaka Bay near many other industrial properties.

Conclusion:

This is a full basket sized position for my cheap Japanese basket. There’s a lot to like here including: double net net, good earnings growth, likely undervalued RE, share purchases, and a clear strategic acquirer with CK San-Etsu.

It’s not all positive though. On the downside the dividend is low (0.7%) and the company has an arrangement to reimburse CK San-Etsu for assistance with management and guidance for the company. It isn’t an egregious amount, but it's a bit unusual.

Nakakita Seisakusho (6496)

• Share Price: ¥3,135

• Market Cap: ¥11 billion

• NCAV+Investments: ¥17 billion

• Book Value: ¥24.8 billion (¥7,034 per share)

• Price/Book: 0.46x

• P/E: 6.21 (includes one time gains)

• Operating Profit: 8.46x

• Dividend: 3.2%

Nakakita Seisakusho is a net-net manufacturer of automatic control valves, butterfly valves, and remote control devices for ships and power plants. They even make valves for nuclear power plants. The company has been profitable every single year since 1977 and have been in business since 1930. I’ve done very little work on this name and bought it on financials and historical profitability alone.

A breakdown of their products/sales:

Nakakita Seisakusho is open to doing M&A to grow their business as they recently acquired Ace Valve in South Korea (price not disclosed). M&A seems like a waste of money when the company’s own shares are so undervalued, but it's still a better use of cash than just letting it pile up. The company also does small scale share repurchases regularly. Since 2015 shares outstanding has decreased ~8%.

Ace Valve is profitable based on disclosed data which is reassuring. I enjoyed browsing Ace Valve’s website which was built in 1998 and even has a hit counter!

Conclusion:

This is a full sized basket position. It’s very cheap and has a long history of profitability. Hat tip to @Japan_cap for bringing it to my attention.

Wood One (TYO 7898)

• Share Price: ¥982

• Market Cap: ¥9.2 billion

• Book Value: 45 Billion (¥4,776 per share)

• Price/Book: 0.2x

• Dividend: 2.4%

Wood One. is a Japanese company primarily engaged in the manufacturing and sale of wooden building materials, including flooring, doors, stairs, storage systems, etc. The core operating business is lousy, but has been marginally profitable historically. Unlike most names I own, this one is not a net net and has a lot of debt. I considered excluding this one in the writeup, but I own a tiny position and figured I’d write a bit about it.

Wood One’s value lies on the balance sheet where the company currently manages 40,000 hectares of forestry in New Zealand which they mostly acquired in 1990. The company also owns significant art assets (¥7.7 billion book value including a Van Gogh and several Renoirs). Net assets have been growing steadily since the financial crisis.

The New Zealand forestry assets were mostly acquired in 1990 when the company purchased Crown Leases from the government. They invested $40 million NZD initially and another ~$60 million or so in the years after. They divested some of these assets for a gain in late 2012.

Only 12,431 hectares of the forests Wood One owns are freehold with the rest being crown leases. The freehold interest makes them the 32nd largest private landowner in New Zealand.

Conclusion:

I own this name, but it’s a tiny position. I like Nankai Plywood much more (TYO 7887) which is in the same industry but the investment case is much simpler. It has a similar discount to book value and is a net-net. Wood One may have more upside if there are some hidden gems in the art assets or if the New Zealand forestry assets are worth a lot more than book value or if other owned real estate appreciated over the decades. This is a very low conviction bet and sized as such.

The company has never disclosed the artworks they own, but the art is publicly on display at the Wood One Museum. The company obviously has no intention to sell the artwork, but things are changing in Japan. DIC Corporation, which owns over $1 billion in artwork on display in their own museum, did cave to an activist shareholder’s demands to sell them. Unlike DIC though, the Wood One art doesn’t feature any $100 million pieces or anything too expensive. The Van Gogh they own isn’t exactly his best work:

I use Koyfin for looking at historical data, screening, and visualizing financials. Koyfin offers real value to me and I have been a paid user long before they offered me an affiliate link with a 20% discount. The free version is excellent as well. I don’t charge for access to my writeups. I wouldn’t promote something unless I really loved it and I love Koyfin.

Disclosure: I own shares in all 3 stocks mentioned. These securities could be sold at any point in time without prior notice. This is a small position as part of a broader basket of cheap Japanese companies so I haven’t dug too deep into any individual name. If I missed anything important, feel free to share in the comments. None of this is investment advice. Everything in this post is my own opinion and I could be wrong. Do your own due diligence.

Asaka Industrial is a dirt-cheap manufacturer of shovels, gardening tools, and logistics equipment. According to its annual report, the company was “the first in Japan to produce and commercialize shovels and scoops” back in 1893. The company itself was founded around 1661. We’re buying a piece of history here!

• Stock price: ¥1,595

• Market cap: ¥1.5 billion ($10 million)

• Net current asset value: ¥1.9 billion

• Investments: ¥1.6 billion

• NCAV+Investments: ¥3.5 billion (¥3,678 per share)

• P/E (Forecast): 6.8x

• P/E (Last FY): 5x

• Dividend: 3%

The company is the #1 manufacturer of Japanese made shovels and spades.

Asaka Industrial is undeniably cheap—both on earnings and assets. But it gets even better.

The company owns two properties in Sakai City (near Osaka), one spanning 9,394 sqm and the other 12,290 sqm.

Yet, on the books, the land portion of these properties are carried at just ¥1.4 million ($9,500 USD) and ¥1.9 million ($12,500 USD), respectively. Combined, that’s just $22,000. Clearly, these assets are worth far more.

The company’s history mentions they built their head office and factory in Sekai City back in 1940. This explains why the land is carried at such a low amount.

The corporate office can be seen below. There’s also an adjacent industrial property not visible in the image.

So what’s the 21,684 sqm of land actually worth? No clue. But when I asked ChatGPT and Deepseek, the most conservative estimate I got was ¥40,000 per square meter, which would peg the total value at ¥867 million (260x its book value).

That ¥40,000 per sqm estimate assumes everything is zoned industrial, which isn’t the case. The corporate HQ clearly isn’t, but we’re being conservative. And that’s not even factoring in the buildings themselves, which also have value.

The value of the real estate doesn’t even matter. It’s just a bonus. Net current assets + investments alone are already double the market cap, and the stock trades at less than 7x this year’s net income.

I doubt there’s much growth here, but management is clearly savvy. For a tiny subscale manufacturer, they’ve done an impressive job staying profitable.

Shareholder Register:

Family members (those with the Asaka surname) own just 8.61% of outstanding shares (among the top 10 shareholders). But Activism is still unlikely as every other top shareholder is likely friendly with management (business partners / cross shareholders).

Activism is also unlikely because the market cap here is ¥1.5 billion. This thing is absolutely tiny and there just isn’t much juice (in absolute terms) to squeeze for any activist.

Zojirushi Trademark

Interestingly, Asaka Industrial has owned the “Zojirushi” (象印) trademark since 1897 and uses it in their logo. This initially confused me as Zojirushi Corporation (TYO 7965) is a much larger $750 million company best known internationally for their ricecookers. They also happen to own 2% of Asaka Industrial’s outstanding shares.

Asaka’s use of the trademark of course applies only to their shovels and spade products to avoid any confusion. While the company website specifically says they own the “Zojirushi” (象印) mark, their products are marked with Kinzoujirushi “金象印”.

Maybe Zojirushi Corporation will just buy Asaka Industrial to avoid any trademark confusion! I jest. But I did find this amusing.

Stock Hasn’t Moved Much

Since 2000 Asaka Industrial stock is down 8% despite improving fundamentals. Besides a huge rally back in 2005-2006, the stock doesn’t move much.

Conclusion:

Asaka Industrial is too small and illiquid for most investors, making it a tough recommendation. But I still own a small position in my cheap Japanese basket partly because I find the company fascinating. It’s the smallest market cap company I own.

In an era where everyone is cutting corners to make the cheapest possible product, this tiny company is doing the opposite– sticking to high-quality, Made-in-Japan shovels.

I use Koyfin for looking at historical data, screening, and visualizing financials. Koyfin offers real value to me and I have been a paid user long before they offered me an affiliate link with a 20% discount. The free version is excellent as well. I don’t charge for access to my writeups. I wouldn’t promote something unless I really loved it and I love Koyfin.

Disclosure: I own shares in Asaka Industrial (TYO 5962). The security could be sold at any point in time without prior notice. This is a small position as part of a broader basket of cheap Japanese companies so I haven’t dug too deep into this name. If I missed anything important, feel free to share in the comments. None of this is investment advice. Everything in this post is my own opinion and I could be wrong. Do your own due diligence.

Appendix:

Manufacturing process for Asaka Industrial’s Shovels:

Asaka Industrial Products on Amazon Japan

• Stock price: ¥2,690

• Book value: ¥8,526 per share (0.3x p/b)

• Market cap: ¥5.8 billion ($38.3 million USD)

• NCAV: ¥9 billion

• Investment Securities: ¥7.5 billion

• NCAV+Inv Securities: ¥16.5 billion (¥7,654 per share)

• Dividend: 1.8% (¥50 per share)

Kaneshita Construction is a small, overlooked net-net construction and civil engineering firm that’s been public since 1972. It’s highly illiquid, with barely any investor attention. There’s only been 19 Yahoo Japan message board posts in the last four years. Retail investors checked out a long time ago.

The core construction business isn’t exciting, but it’s been reliably profitable every year since 2013, with net income fluctuating between ¥45m and ¥503m over the last six years.

Net income by year:

• 2019: ¥188m

• 2020: ¥503m

• 2021: ¥45m

• 2022: ¥190m

• 2023: ¥270m

• 2024: ¥321m

• 2025 (forecast): ¥180m (forward P/E of 32)

Despite steady profits, the company is massively overcapitalized, leading to an abysmal 0-2% return on equity. The real story here isn’t earnings, it’s the balance sheet. Net current asset value (NCAV) alone is almost double the company’s market cap and there’s another 1.3x in market cap of investment securities on the balance sheet.

What’s the core construction business worth? No idea. Let’s assume it’s worth nothing. Let’s also write off all fixed assets including ¥1.2 billion in land as worthless. Even then, just the NCAV and investment securities are worth ¥7,654 per share, compared to today’s price of ¥2,690, a 65% discount.

The NCAV figure is clean and is comprised of almost entirely cash and accounts receivable:

Kaneshita Construction should have put more of its excess cash into investment securities, as those would have earned a decent return. This is why I like Takigami Steel Construction (TYO 5918). Their book value should compound faster than Kaneshita’s as there’s less excess cash sitting around earning near nothing. Still, Kaneshita is stupid cheap at these levels.

The top 3 equity positions disclosed by Kaneshita from their last securities report are the following: Kyoto Financial Group (TYO 5844), Raito Kogyo (TYO 1926), and Nichireki Group (TYO 5011). The value of these assets have increased significantly over the last few years. Their second largest holding Raito Kogyo announced on February 7, 2025 their own plan to increase shareholder returns and be more conscious of capital costs which led to the stock rallying 16%.

Buybacks and Capital Returns

Unlike many dirt-cheap Japanese stocks, Kaneshita Construction actually buys back shares. Since 2009, it has reduced outstanding shares by 42.5%, from 3.75 million to 2.15 million.

The last big repurchase was in early 2020 and was Black Clover selling their stake back to the company. While the repurchase was accretive, it wasn’t by much. Book value at the time was 6,800 and the company bought back the shares for ~5,090. The stock wasn’t attractive back then, but it is today.

The disconnect between price and value today has widened significantly since the buyback in 2020. The stock price has drifted from ¥5,000 to ¥2,690 while book value per share increased from ¥6,800 to ¥8,500.

Is Activism Possible?

Unlikely. The company is just too small, and the Kaneshita family controls ~11% of the shares. The largest shareholder, Sei Shoji, is an associated company which was taken private years ago and is likely friendly with management. All of the largest shareholders including the banks and the employee stock association are also likely friendly with management. If we add these all up, about ~45% is friendly with management.

Kaneshita Construction is also Kyoto based, which is even further behind than Tokyo based companies in governance reform. Steel Partners, a U.S. based investment company, did own shares 20 years ago but has since given up. The company is significantly cheaper today than it was back then. The Tokyo Stock Exchange reforms are also a tailwind today. Even Kyoto based companies are slowly getting on the shareholder return bandwagon.

I think the company will eventually be taken over by management in an MBO. It could also do nothing and drift around for another decade. 20 years ago in early 2005 Kaneshita Construction’s stock price was almost exactly the same price as today. While book value did increase from ¥6,150 to ¥8,564 since, this is a terrible 20 year return. If they invested their excess cash in investment securities or real estate, they would have done a lot better.

Risks:

The biggest risk? Management making a dumb move. But given how conservative most Japanese companies are, that’s unlikely. Still, that didn’t stop them from opening a conveyor belt sushi restaurant last year. While this is almost certainly a waste of money, they only spent ¥203 million on it.

Cash-rich companies burning money on questionable acquisitions is nothing new. Take Oizumi (TYO 6428), a small-time Pachinko machine manufacturer that went on a bizarre diversification spree—buying into protein bars, gummy snacks, supplement manufacturing, and even alcoholic beverages.

Many overcapitalized Japanese companies at least park excess cash in real estate, which tends to be a better move than letting it sit idle. But blindly scooping up random businesses with zero synergies? That rarely ends well. And sure enough, Oizumi’s stock is down 26% over the past year.

Cheap could also stay cheap a lot longer. Kaneshita Construction has been cheap for a long time (outside of the 2009 financial criss though its never been cheaper). The two ways to win are either the company finds religion on shareholder returns due to TSE reforms or they take themselves private. Absent that, Kaneshita could stay cheap for another decade or more.

Conclusion:

I own some Kaneshita Construction as part of my cheap Japanese basket. Sizing is a typical basket position. There’s no reason this company should even be public. It’s a small-time construction business trying to diversify into conveyor belt sushi. Management should just take it private.

I’m not greedy. NCAV + investment securities are worth ¥7,654 per share. I’d happily take ¥5,000 in a buyout. That would mean management getting the entire operating company for free, plus ¥2,654 per share in excess cash and securities. An 86% premium to my cost basis? Sounds like a win-win.

Thanks to Value Trapped (@TheLongHappy) for bringing this name to my attention.

Updated with some additional context around activism thanks to Travis Lundy

I use Koyfin for looking at historical data, screening, and visualizing financials. Koyfin offers real value to me and I have been a paid user long before they offered me an affiliate link with a 20% discount. The free version is excellent as well. I don’t charge for access to my writeups. I wouldn’t promote something unless I really loved it and I love Koyfin.

Disclosure: I own shares in Kaneshita Construction (TYO 1897). The security could be sold at any point in time without prior notice. This is a small position as part of a broader basket of cheap Japanese companies so I haven’t dug too deep into this name. If I missed anything important, feel free to share in the comments. None of this is investment advice. Everything in this post is my own opinion and I could be wrong. Do your own due diligence.

Japan is often seen as a market full of value traps, but that's changing fast. Record buybacks, rising dividends, and increasing takeovers are unlocking hidden value. While steady shareholder returns are nice, I think we’re going to see a lot more high-premium buyouts of dirt-cheap stocks.

On January 31, 2025, Chuoh Pack Industries (3952) received a buyout offer from Nikkon Holdings (9072) at ¥5,034 per share, a massive 273% premium over its last closing price of ¥1,349. Chuoh Pack was a textbook deep-value net-net: a ¥6.7 billion market cap company, consistently profitable for over 20 years, trading at just 0.5x price-to-tangible-book in the boring world of packaging and corrugated products. I own dozens of stocks that fit this description!

The premium looks extreme at first glance, but it’s actually well within reason. A discounted cash flow analysis from the tender document valued the company between ¥2,629 and ¥4,817 per share. When you factor in the excess current assets, the buyout price makes sense. In fact, what’s truly crazy is that a company profitable for over two decades was ever trading below the value of its net current assets in the first place.

The ¥5,034 per share price wasn’t random it came from a competitive bidding process. The company’s bankers contacted 19 operating companies and investment funds, inviting them to participate. The fact that a small cap company ran a competiti

For over a decade, Chuoh Pack’s stock drifted between ¥900 and ¥1,500 per share, quietly paying out ~4% in annual dividends. It was the definition of a sleepy Japanese deep-value stock.

Unfortunately I didn’t own it because it trades exclusively on the Nagoya Stock Exchange and Interactive Brokers doesn’t provide access. Those with local brokerage accounts should have no problem accessing it though.

The driving force behind the Chuoh Pack buyout? Pressure from the Tokyo Stock Exchange’s corporate governance reforms. Chuoh Pack’s largest shareholder, Toyoto (~24%), informed the company in March 2024 that they planned to divest their stake to align with the new guidelines. After consulting Nomura Securities, the company decided by August 2024 that the best path forward was a full sale which maximized value for all shareholders.

Chuoh Pack isn’t alone. Several other high-premium buyouts have caught my attention recently.

• Ishii Iron Works (6362) - Received a tender offer from its founding family on Aug 9, 2024 for ¥8,364 per share, a 188% premium to the last closing price of ¥2,900. One reason provided for the MBO was that the company had no real reason to be public as they haven’t relied on equity financing in over 60 years.

• Faith (4295) - Received a tender offer from its founder and longtime CEO on November 11, 2024 for ¥1,220 per share, a 222% premium to the last closing price of ¥379. They also mentioned that they have no reason to be public as they haven’t raised capital from markets since IPOing.

I expect to see many more takeovers and management buyouts in Japan in the coming years. But while these deals are exciting, they aren’t necessary. Japanese net-nets have outperformed the market for years, even before the recent governance reforms. The surge in buyouts is just a bonus.

I didn’t own Ishii Iron Works or Faith, but I have a feeling some of my basket stocks will get bought out soon enough.

I remain incredibly bullish on deep value net-nets in Japan.

I use Koyfin for looking at historical data, screening, and visualizing financials. Koyfin offers real value to me and I have been a paid user long before they offered me an affiliate link with a 20% discount. The free version is excellent as well. I don’t charge for access to my writeups. I wouldn’t promote something unless I really loved it and I love Koyfin!