Hi,
I am sharing here some screening and filtering research.
Japan! A land for value investors. But also a land of value traps that keep all the cash on the balance sheet and pay a 1.3% dividend while at a P/E of 6.
Due to the low level of dividends and buybacks in Japan, I am looking for fast growth companies only. And some of it can be of good value.
Here is my first introduction of some Japanese tech companies:
These were Softbank, Zholdings, Rakuten, Zigexn, and Medical net
Here are more companies screened and watchlisted. If anyone owns or know one company, please comment and provide your feedback about the competitive position, products or management.
I do not plan to add any company to the portfolio as of yet, since I have nothing to sell.
I will do a part 3 and part 4!
SuRaLa Net Co Ltd (3998)
SuRaLa Net Co.,Ltd. is a Japan-based company mainly engaged in the provision of e-learning education services and operation consulting services. The Company provides online learning materials SuRaLa service to cram schools and general schools which are targeting for elementary, junior high and high school students. SuRaLa service is an interactive animation teaching material that allows children from elementary school to high school to learn Japanese, mathematics, and English through Internet. The Company also provides management support services and learning content. The functions of SuRaLa include lecture function, adaptive learning function, learning management function, test system, gamification, and everyday TOEIC L&R TEST
PE 13.
7 years revenue CAGR: 23.24%
7 years profit CAGR: 44.5%
Pros:
+market not saturated
+international expansion
Cons:
-no dividend
-covid boosted on the profit side?
I’rom Holdings Co Ltd (2372)
Ok, this one is not really a tech company, because I also did a healthcare service company screen. It has similar growth rates and moat.
I'rom Group Co.,Ltd. is engaged in medical fields such as regenerative medicine and gene discovery. The Company operates through four business segments. The SMO segment provides support services for contracting or substituting a part of the work related to conducting clinical trials from the conducting medical institution. The CRO segment provides all or part of clinical trial operations from pharmaceutical companies and others. The Advanced Medicinal Treatment segment is engaged in the development of gene therapy products, the development, manufacture and sale of products in the field of regenerative medicine based on iPS cells related technologies, as well as the provision of contract manufacture services. The Medical Support segment provides general and comprehensive support for medical business management, such as setting up and renting clinic malls, selling products and related services. The Company also provides business utilizing IT infrastructure.
PE 9.
7 years revenue CAGR: 21%
7 years profit CAGR:NA, was unprofitable before. Good profit now.
Pros:
+niche market
+dividend payer
Cons:
-FCF very low
-loss making pharma segment is being funded with profit from contract research.
Internet infinity Inc (6545)
Internet infinity INC. is a Japan-based company engaged in the healthcare solution business and the home care service business. The Company operates its business through two business segments. The Healthcare Solution Business segment is involved in the provision of short-time rehabilitative day service for seniors, as well as the operation of a Website that corresponds to nursing-care-related information. The Home Care Service Business segment is involved in the provision of home care support service, home-visit nursing service, as well as nursing home care service (day service), among others.
PE 10.
7 years revenue CAGR: 10.8%
6 years profit CAGR: 17%
Pros:
+niche market
Cons:
-no dividend
-low 5% profit margins.
-slowish growth, most of the business is not the tech business.
Commerce One Holdings Inc (4496)
Commerce One Holdings Inc. mainly operates e-commerce (EC) platform business that provides services supporting the operation of EC sites in the form of Software as a Service (SaaS) for small and medium-sized e-commerce sites operating in Japan. The Company operates the EC Platform business segment. The segment provides EC site interface construction and operation application service for EC business operators, systems for centrally managing the backyard of e-commerce site operators operating multiple stores, as well as management support tools based on EC site authentication service and data analysis.
PE 14.
4 years revenue CAGR: 15.2%
4 years profit CAGR: 20.86%
Pros:
+high quality businesss. A bit like shopify but profitable
Cons:
-no dividend
I3 Systems Inc (4495)
i Cubed Systems Inc is a Japan-based company mainly engaged in the provision of management services for managing mobile terminals as Software as a Service (SaaS), and the investing activities. The Company operates through two business segments. The CLOMO business segment provides functions for visualizing the usage status of mobile terminals, setting and restricting function
PE 16.
4 years revenue CAGR: 20.55%
4 years profit CAGR: 26.27%
Pros:
+high quality business
Cons:
-nothing special, just complex business to understand
IPS Inc (4390)
IPS, Inc. is mainly engaged in telecommunications business. The Company operates through four business segments. The International Telecommunications segment is in the provision of international connectivity and Internet bandwidth from the Philippines to Hong Kong, Japan and North America. The Domestic Telecommunications segment is in the provision of telephone calling service, it is also engages in sales of call center systems to call center operators. (etc) The screener puts this company under Tech. It is a high growth company.
PE 12.
4 years revenue CAGR: 20%
4 years profit CAGR: 45%
Pros:
+high quality business (submarine cables, healthcare, corpotate ISP)
+Founder led company
+Unique Philippines oriented company listed in Japan
Cons:
-lowish dividend
Temona Inc (3985)
TEMONA.inc. is a Japan-based company mainly engaged in the provision of electronic commerce (EC) business support services. The Company provides two services. Tamago repeat is involved in the provision of a Website service dedicated to repeat mail order with shopping cart. Hikiageru is a sales promotion tool. The Company is involved in the provision of computer software’s planning, design, development, operation, sale and rental services, as well as the planning, sale and intermediation services for information media’s advertising through the Internet. The Company is also involved in the information provision business through the Internet, as well as the provision of shopping malls’ planning, operation, production, maintenance and management services
.
PE: unprofitable in 2022 due to extra costs and reduced sales. They aim to turn profitable again by “Continuing to invest and controlling costs”
For 2021: PE 10.5
7 years revenue CAGR: 25.85%
6 years profit CAGR: 39.71% (until 2021) unprofitable (2022)
Pros:
+high quality business - B2B Software
Cons:
-unprofitable in 2022 due to costs rising and sales reducing, needs to improve in 2023.
Conclusion:
I hope you enjoyed these discoveries. The selection process is quite an effort.
Almost all these businesses are cheap and fast growing. I removed IT services companies and favor companies with their own intellectual property or assets.
IPS with it’s exposition to the Philippines is interesting.
Temona is a bargain If and only If they can retrieve their past profitability.
I3, Commerce one and Irom holdings seem to have incredible low price for great businesses, but lrom is cash flow negative.
All these need further research to be potentially invested in. That’s my plan.
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Thanks!
I'll have to look through these. Another interesting one I don't think you've brought up is Hamee Corp (3134). They have two businesses: The first which I'm not that into is the sale of mobiles phone accessories and other products online. The second is the sale of software and cloud services for ecommerce of which they are the largest in Japan. The first business is larger than the second, but the second is growing much faster. The second also outgrew from the first with the company startin as ecommerce and eventually deciding to sell their automation tools they'd developed to automate their own business as SAAS.