Analyzing Bargain Stocks

Tokyo Energy (‘company’) designs, manufactures, and sells electric power equipment for the thermal, nuclear, hydro-electric, and solar power generation industries. It procures orders for construction as well as operations and maintenance of equipment. The company is 26.5% owned by Tokyo Electric Power Company (TEPCO). It generates 80% of its orders on “special mission” projects and the balance on competitive bidding. Its major customers are TEPCO, JERA (the largest power generation company in Japan), and Mitsubishi Electric – which accounted for 56% of 2020 sales. Practically all sales are currently in Japan but the company recently expanded into Thailand by investing in a subsidiary to exploit the growth of future energy demand from South East Asia. Recent orders fell 13% over the year as a result of reduced construction work for thermal and solar power industries – but nuclear power work has picked up. The industry is subject to full-throttled competition resulting in price war

Toso (‘company’) manufactures and sells interior-decoration related products focused on windows - such as curtain rails (approximately 44% of sales), blinds (44%), and partitions among others (12%). These products are sold primarily through distributors mainly in the housing market. It also has a small operation in elderly care products such as canes and walking sticks. Its operations are primarily based in Japan (90% of tangible assets) but it has subsidiaries in Indonesia (7%) and Shanghai, China (3%) as well. The company’s fortunes are tied to the Japanese construction market, which is experiencing declining activity – initially due to the consumption tax hike in 2019 and then exacerbated by the coronavirus pandemic. In addition, it faces increasing logistics costs due to labour shortages. It is also exposed to rising input costs of steel, aluminium, and natural wood products – a lot of which is imported, and subject to currency exchange risks. It reported TTM sales (to Septem

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