Analyzing Bargain Stocks

Imasen (‘company’) is primarily engaged in manufacturing and supplying seat adjusters for automobiles. It also has small operations in manufacturing wire harness products for aircrafts and machine tools; as well as welfare equipment such as electric wheelchairs. Its seat adjusters are ultimately sold to Honda (36.1% of sales), Nissan (11.8%), Subaru (16.9%), and Mitsubishi (13.3%) among others – via intermediate auto parts suppliers. It sells its products in Japan (43% of sales), USA (27%), China (15%), and Thailand (10%) among others – though ultimately its fortunes are linked with automobile demand in North America and China. Automobile demand was severely impacted during the pandemic and the company reported losses, which included impairment of its USA and Mexico operations (605m yen) and inventory losses (80m yen). It reported TTM sales (to September 2020) of 92b yen (FY 2019: 118.6b yen), ebitda of 3.9b yen (2019: 8.3b yen) and net losses of 2.7b yen (2019: 2.5b profit). However,...

Sun-wa Technos (‘company’) operates in the industrial electronics and mechatronics industry. It is affiliated with various manufacturers and trades in products used in automobiles, smartphones, semiconductors, and industrial machinery – among others. The company sells in Japan (74% of sales), China and South East Asia (22%), and the West (4%). It reported product segment sales as follows: Electric (15% of sales), electronic (77%), and machinery (8%). It appears to have a diversified customer and supplier base but is dependent on capital investment trends. The company’s products were unfortunately at the forefront of the US-China trade conflict attracting tariffs. Further, the coronavirus pandemic has delayed capital investment plans and therefore, reduced demand for the company’s products. It reported TTM sales (to September 2020) of 132.1b yen – down from a 2018 high of 146.8b yen. Similarly, ebitda and net profits were 2.1b yen and 1.4b yen – down from 2018 highs of 4.4b yen and 3.1b...

Yotai (‘company’) primarily manufactures refractories, which is an indispensable basic material in the steel, chemical, cement, glass, and other high heat industries. The company operates two segments: a) manufacturing of refractories (85-90% of sales based out of four factories in Japan), and b) engineering, which is the design and construction of kilns that meet the demand of refractory customers (based out of one subsidiary in China). The company’s primary customer is the steel industry, which has been sluggish lately. This adversity was exacerbated by pandemic-related restrictions. Further, there were large increases in the price of raw materials sourced from China. Moreover, competition in the industry is fierce and intensifying. It reported TTM sales (to September 2020) of 24.1b yen (FY 2019: 27.9b), ebitda of 4b yen (2019: 5.9b yen), and net profits of 2.2b yen (2019: 3.6b yen). Recent free cash flows were good at 5bn yen. The financial position is strong with net cash o...

Tigers Polymer (‘company’) manufactures rubber products such as hoses (26% of 2020 sales), rubber sheets (13%), molding products (58%), and others (3%). Hoses are sold for home appliances and industrial uses. Rubber sheets include packing and cushioning materials, and mats (for entrance). Rubber molded products are used in automobile parts. The company manufactures and sells throughout the world: Japan (30% of assets, 50% of revenues), USA (36%, 30%), South East Asia (19%, 7%), and China (15%, 13%). Its largest customer is Honda Motor Company, which contributed 44% of 2020 sales. The coronavirus impacted demand and reduced sales and profits in the latest period. Prior to that, the US-China trade tensions adversely hit the US operation, which resulted in impairment losses at its Ohio facility. The company reported TTM sales (to September 2020) of 36.2b yen, below the 2019 peak of 43b yen; ebitda of 2.4b yen, and net losses of 475m yen – mainly as a result of the 432m yen impairment (abo...

Nakayama Steel (‘company’) manufactures and sells steel products – in the form of crude, rolled, and processed steel – primarily to the construction, automobile, and industrial machinery industries. It also has small engineering, and real estate leasing/brokerage operations. The company sells its output within Japan with significant sales to Hanwa and Nippon Steel – both major shareholders. One competitive advantage it has is in securing low-cost raw materials via its scrap iron facilities. The steel industry suffered during the pandemic with a drop in steel prices and volumes. Beyond that, the Japanese steel industry suffers from a sluggish demand outlook with a declining population. Further, competition is expected to intensify with excess capacity of Chinese steel mills set up in South East Asia. Moreover, it suffers from increasing labor, transport, and electricity costs. The company reported TTM sales (to September 2020) of 115.7b yen, down from a 2019 high of 153.7b yen; eb...

Techno Ryowa (‘company’) is engaged in the design and manufacture of construction equipment using air conditioning and sanitation equipment technology. It generates practically all of its sales within Japan from industrial equipment construction (58% of 2019 sales), general building equipment construction (39%), and electrical equipment construction (3%). The private sector contributes over 80% of its revenues with the balance coming from government work. The pandemic adversely affected capital investment demand from the private sector and sales efforts were badly hampered. Orders dropped 28% over the year, and sales declined 18%. Further, 78% of its business is generated via competitive bidding and the balance via “special mission” projects. The company reported TTM revenues (to September 2020) of 55.7b yen down from the 2019 high of 67.4b yen. TTM ebitda and net profits were 3.3b yen and 2.1b yen - down from 4.8b yen and 3b yen respectively in 2019. Average earnings were 2.6b y...

Shinnihon (‘company’) is another construction business operating in Japan. In addition to civil engineering and construction contract work (60% of sales), it engages in purchase and development of properties (40% of sales). It engages primarily in residential condominium construction but is also engaged in contracts to build hospitals, hotels, dormitories, etc. It also develops and rents office space. Management intends to strengthen its capacity in logistics/commercial construction – with a particular focus on large-scale steel frame construction. The pandemic has disrupted activity in Japan’s construction sector. In addition to sluggish demand, the company faces severe competition, and increasing prices of construction materials and labour. The company reported TTM sales (to September 2020) of 102.2b yen (FY 2020: 112.5b yen), ebitda of 13.1b yen (2020: 15.2b yen), and net profits of 8.9b yen (2020: 10.5b yen). It generated average free cash flows of 11.9b/year. It had substantial ca...