Nankai Plywood Co Ltd (7887:Tokyo)

Japanese net-net

Nankai Plywood Co. is another Japanese net-net. Earnings over the last 10 years have been volatile but, on average, positive. Management guides to a net profit of ¥15.50 per share for the FY 2016. According to the Japanese Company Handbook, the company is a top ranked manufacturer of Japanese-style room ceilings and floors, holding the highest market share in laminated ceilings. At its current market price of ¥412 per shares, it’s trading at a market cap of ¥3.988 billion (= US$32.034 million). With such a small market cap, institutional investors are effectively excluded from participating. It trades at a 49% discount to its NCAV of ¥7.894 billion. If one includes long-term investments in NCAV – which is sensible, I think, if one views NCAV as a proxy for liquidation value – it trades at a 59% discount. The company also owns a substantial amount of tangible fixed assets. Especially land, which I conservatively valued at 50% of book value in the liquidation analysis, could be worth more. The P/Tang.B is very low at 0.23.

Below is the translated balance sheet (using Google Translate) and a liquidation value analysis:

ncav + liq. value publish

(Source: Quarterly report for the first quarter of FY 2016)

Disclosure: The author is long 7887:Tokyo.

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