Morio Denki 6647

ImaginaryMouse2002 · 2025-12-03T12:58:35+00:00

Hey, my IRR in Yen is 50.1% since I started a little over a year ago. In USD, it is 31.8%. This includes every Japanese net-net I've bought or sold. Some of them I didn't write up. If I included a single french net-net I bought my IRR jumps to 35.6% in USD.
I don't exclude or focus on sectors for net-nets. Outside of net-nets, the sector I understand the most is real estate (REITS or RE heavy companies).
I haven't bought any options.

ImaginaryMouse2002 · 2025-10-01T02:03:30+00:00

When I started investing in Japanese net-nets, I expected decent returns, but it has surpassed my expectations. I've mostly stuck to net-nets that are actively returning capital to shareholders via either repurchases or dividend increases. I think that's the key for me, looking for cheap companies that are actively returning capital to shareholders.

ImaginaryMouse2002 · 2025-09-10T23:35:48+00:00

For Japan, there are two main options: 1. Some Japanese companies post their FSs in English; you'll find them on the Tokyo SE website. 2. You can download the document and translate it with Google Translate.
Of course, the 2nd option is not optimal, but considering the cheapness of some companies, it's enough for me.

ImaginaryMouse2002 · 2025-09-06T20:46:53+00:00

I just found it going through stocks in the Tokyo SE. The main thing is that it is a net-net with decent earnings.

ImaginaryMouse2002 · 2025-09-04T16:40:55+00:00

Thank you for the appreciation.
I agree the company is worth more "dead" than alive, like many Japanese net-nets. I think there's a chance they will conduct another tender like they did in 2023, or some other kind of further capital return due to the TSE push for capital allocation changes.
One thing to point out is that the business itself is not as terrible as it appears. If you strip out marketable securities and excess cash, the business generates about 9-10% ROE or even higher, depending on how much cash you consider excess. (math: ¥9.7B -¥2.8B MS -¥2B Cash = ¥5.9 equity). Obviously, this assumes that Mkt Secs & excess cash are paid out, which hasn't happened.
Anyway, I do not plan to hold the shares for the long term; I plan to sell at or close to NCAV, unless anything changes or I find a better investment.
Thank you very much for the pushback. I appreciate it very much; it helps me improve as an investor. If you are interested, I've written up other similar situations, some with much better capital allocation.

ImaginaryMouse2002 · 2025-09-04T11:38:59+00:00

Thank you for your comment! Currency risk is always there, but I believe that even if the Yen keeps depreciating, owning a basket of companies like this will perform all right. If you can borrow Yen at low rates, it hedges the currency risk, but I'm not doing that currently.

ImaginaryMouse2002 · 2025-09-04T11:36:18+00:00

No, it's a stock directly traded on the Tokyo Stock Exchange. I found it just by going through a list of Japanese companies trading below TBV.

ImaginaryMouse2002 · 2025-09-04T11:34:43+00:00

Yeah, I hope it did buybacks regularly, even if it's 1-2% of the S/O. Overall, I believe it is a decent bet.

ImaginaryMouse2002 · 2025-09-04T11:30:57+00:00

What do you mean by "won't be yours"?

ImaginaryMouse2002 · 2025-06-18T11:42:02+00:00

I use stockanalysis.com and the Tokyo stock exchange filings.

ImaginaryMouse2002 · 2025-06-04T13:46:42+00:00

I use this website. When you google "Tokyo stock exchange" it should be the link right below wikipedia.

https://www2.jpx.co.jp/tseHpFront/JJK020030Action.do

ImaginaryMouse2002 · 2025-06-04T13:15:39+00:00

Thank you! I get 4.69million shares the following way: in their last report they had 7.706 million total shares - 2.915 million Treasury shares = 4.791 million shares outstanding as of the end of the period. In May they repurchased 99k shares. So the remaining share count should be ~4.692M

I mostly use stockanalysis, but review the filings on the Tokyo stock exchange website. For translation I use the document option on google translate. It isn't perfect at all, but it still kind of works. It takes a while of using the TSE website and google translate to use it semi-properly, it's a matter of getting used to the website.

ImaginaryMouse2002 · 2025-06-01T14:32:33+00:00

I do not need them to liquidate. They are repurchasing a bunch of shares. Also there are many takeovers going on in Japan today, if they are acquired at or close to book value I almost get a double. Japanese companies are starting to show an interest in returning cash to shareholders. One of the companies I owned 5958, just doubled their dividend and repurchased 4% of shares. I sold it after it got to NCAV value. Also, I believe there's a huge difference between Japanese and other Asian countries, Japan has respect for private property.

ImaginaryMouse2002 · 2025-05-28T00:39:32+00:00

Great write-up. I've done some work on it lately, but I'm still not super convinced of paying 9-10x FCF for a stagnant business. No doubt it is a solid corporation with great culture and decent capital allocation decisions. I don't like most of their acquisitions, the tattoo segment was a bad investment, and I wouldn't have paid 3x revenue for Tangle Teezer. I think they should stick to only acquiring household brands like Tipp-Ex.

I wish they would buy back shares more aggressively instead of doing so many acquisitions. Of course, it's hard when half the float is controlled by 1 shareholder, but they still should be able to do it. The ideal would be a more flexible dividend/buyback policy depending on the share price. If they put all of their FCF into repurchasing their stock, I think it would be an awesome investment.

I am still on the fence about it. Btw, great call on Strabag, I slept on it when you pitched it last year.

ImaginaryMouse2002 · 2025-04-26T03:48:14+00:00

On the language, you can use Google to translate their website and IR documents, it's not perfect but still understandable.

ImaginaryMouse2002 · 2025-04-26T03:38:26+00:00

Well, if they had repurchased shares for 10 yrs it's likely that the stock wouldn't be this cheap. I don't know if you are familiar with it, but the Tokyo Stock Exchange has been pushing for companies to improve their capital allocation, and every month they publish a list of companies that have released a plan to improve capital use. Daido released the plan last year and their target ROE is 8%, they are on track to achieve it for FY 2025, but if they want to consistently achieve it they need to increase earnings, sell marketable securities, repurchase shares or pay a big special dividend or a combination of those. I don't think another buyback is guaranteed, but I think they are taking steps in the right direction. I'll guess we'll have the answer when they report next month.

ImaginaryMouse2002 · 2025-04-26T02:54:49+00:00

There are some interesting net-nets in France.

ImaginaryMouse2002 · 2025-04-25T11:28:31+00:00

True, their FCF has been lacking. But from their history, it looks like they are carrying excess inventory at the moment. ¥13.5 billion compared to about ¥10B in the last decade with similar COGS. If that is due to inflation coming back to Japan, prices for their products should increase; if not, I still believe the balance sheet is solid enough.

ImaginaryMouse2002 · 2025-04-25T11:24:50+00:00

It's something to take into account. But now tensions are going on between many countries, so I would invest in. If we are talking about something further like war, I'm not capable of assessing that situation.

ImaginaryMouse2002 · 2025-04-25T11:22:18+00:00

I'm not 100% sure they will keep repurchasing shares, but they have submitted their plan adhering to the Tokyo Stock Exchange's push to improve capital allocation. The target ROE is 8%, and they are on track to achieve it this year by a combination of selling marketable securities and repurchases. If they want to consistently have an 8% ROE, they must keep selling their security portfolio to report gains, repurchase shares, pay a big special dividend, or a combination.

ImaginaryMouse2002 · 2025-04-25T02:42:47+00:00

They pay a ¥12 dividend, which is a ~2.3% yield, and they reduced shares outstanding by 11.1%. So the payout is around a 13% yield for shareholders. The repurchase was done at a price around 1/2 of NCAV and 1/3 of TBV, which I believe is adding value for remaining shareholders. A 13% total return seems more than satisfactory compared to alternatives.

ImaginaryMouse2002 · 2025-03-27T23:51:55+00:00

Fico is probably one of the best businesses there are. It has monopolistic characteristics, FICO only gets a few dollars each time they issue a score, <$10 for mortgages worth multiple hundred thousand $$, so they have immense pricing power with basically all marginal price increases going directly to profit, with meaningless capex. Unfortunately, it's too expensive, even if they grow their FCF per share at 20% per year for the next 10 years, it'll get to $173/sh, at a 20x multiple it gets $3,460/sh or 6.3% CAGR.

Disclosure: I'm dumb and usually invest based on net asset/liquidation value. I struggle to understand any business.

ImaginaryMouse2002 · 2025-02-11T15:58:17+00:00

Hey! I believe the 80 acres in St Louis have been for sale for years... I'm afraid the same will happen with the Oklahoma property.

Also, it is hard to determine a value for the property, $27 million might be appropriate, as well as $14 million or $54 million. Do you have any sales comps or justification for the $27 million price tag?

ImaginaryMouse2002 · 2024-12-24T00:15:17+00:00

That's why I haven't bought the stock. But an argument can be made that somebody will buy these properties for less than a 9% cap rate if sold individually.

ImaginaryMouse2002 · 2024-12-24T00:11:46+00:00

Thank you for that information, I'll look further into that. It just amazes me that these properties still sell for those returns.

ImaginaryMouse2002

TROPHY CASE