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Sanko Techno Co. Ltd.

Sanko Techno (‘company’) manufactures and sells fastening materials (75-80% of sales) and functional materials (20-25%) – primarily used in the construction industry. Its sales are generated in Japan but it has subsidiaries in Thailand and Vietnam as well. The company’s fastening materials include post-construction anchors (its flagship product), drills and fasteners, and related earthquake-resistant supplements. Its functional materials include electro-hydraulic tools, fiberglass reinforced plastic (FRP) sheets, electronic printed circuit boards, and various measuring instruments (like breathalyzers). It also recently acquired a subsidiary importing plastic molding and packaging machines from Europe. The company’s fortunes are largely tied to the Japanese construction industry, which is off the peak of the Tokyo Olympics construction boom, and sluggish currently. The industry suffers from intractable problems of skilled labor shortage and also rising material costs. Further, its produ

Fukuvi Chemical Industry Co. Ltd.

Fukuvi Chemical (‘company’) manufactures and sells housing materials (65-75% of revenues) and industrial materials (25-35%) – primarily made of general-purpose plastic resins. The company’s housing materials are used in exterior, interior, and flooring applications. The industrial materials are used in manufacturing home appliances, vehicle parts, precision products, furniture parts, etc. More than 90% of current sales are generated in Japan but the company has subsidiaries in the USA, Thailand, and Vietnam - which account for 12% of tangible assets. The company’s fortunes are tied to housing starts, and construction floor area in Japan – both of which have been declining for the last few years primarily due to Japan’s shrinking population; and exacerbated by other factors such as the consumption tax hike in 2019, stricter lending criteria, and the pandemic. It is also subject to labor shortages. The company reported TTM sales (to September 2020) of 37.5b yen (FY20: 41.3b), ebi

Sata Construction Co., Ltd.

Sata Construction (‘company’) is a small civil engineering and construction company operating solely in Japan. It generates about 1/3 rd of revenues from civil engineering work and 2/3 rd from construction orders. It also operates a small business selling asphalt. The company wins a majority of its orders by competitive bidding (over 60%) with the balance under “special mission” contracts. The revenue split between government orders and the private sector is about 55%/45%. Like other Japanese construction companies covered in this blog, the company is beset by a sluggish demand outlook - worsened by the consumption tax hike in 2019. It is also struggling with a shortage of skilled labor and rising material costs. It reported TTM sales of 35.4b yen (FY20: 36.5b), ebitda of 1.9b yen (FY20: 1.7b) and net profits of 1.2b yen (FY20: 1.1b). Free cash flows averaged 1.1b yen/year over the last five years. However, management forecasts earnings of only 750m yen/year to 2023. The bala

Tokyo Energy and Systems Inc.

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 Corporation

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 Electric Industrial Co., Ltd.

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 Co., Ltd.

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