An uncannily similar pattern to the 2012 bottoming in Tokai Senko may herald imminent rises!

 

A 'double bottom' in Tokai Senko (東海染工) similar to that in 2012 when the Nikkei index was dredging its 8,500 lows may just play out bullishly in the next 6 months: 12 years prior, the shares rose from a ¥770 low in Oct to ¥1,410 within 8 months, albeit at a time when the Nikkei was extremely bullish coming off a generational low, which also explains why a downward revision of the annual profit from ¥22 per share to ¥8 at year's end did not dent that rally. 

This time, the spike (circled orange) occurred when the co. announced a projected 48% increase in next year's net profit, the 4th consecutive quarter of increase starting from a reversal from a -¥40.3 loss per share in Apr-Jun '23 to ¥12.1 per share in the black in the following quarter to  ¥18.7 and finally ¥50.7 in the Jan-Mar '24 quarter, accompanied by a 1% - 17% rise in revenue for 5th successive year from '21 -'25 inclusive, reaching a forecast ¥13.9 billion yen for '24-'25, a 5% rise which brings it to just below the levels of 12 years prior.

More vitally, large shareholder Misono Service has seen its holding increase to 14.75% in Sep '23 from 14.08% in Mar '23, 11.26% in Sep '22, 10.21% in Mar '22, 9.52% in Sep '21 & a paltry 7.14% in Mar '21, representing a doubling in its stake in the last 30 months, in tandem with the co's own share buybacks which has lifted the treasury share count from 366,600 in Mar '21 to 457,400 in Sep '23 or 12.66%, making the co. its own 2nd largest owner by a country mile! The Master Trust BoJ holding has conversely dropped from 299,000 in '21 to 150,000 in Sep '23 while Mitsubishi UFJ has trimmed its stake by 1%, representing about 40,000 shares. Nisshinbo, Inabata & Nagase, textile companies that are likely its big customers hold about 3.2% each, while 2 of the chairman's family members hold almost 6% between them, leaving an estimated free-float of about 48% or 1.735 million shares, which could go as low as 44% in reality if Yashiro Kosan's holding of  3.93% is also related to the chair Yoshiaki Yashiro.

Tokai S.'s capital adequacy ratio has improved to 47% from 45% since Mar '23 & its book value has risen almost 10% in that timeframe, with operating cashflow a +ve ¥189 million & Grahamian net-net rising from -¥70.88 mil in FYE '23 to +¥156.76 million in FYE '24, equating to ¥43.4 per share. Curiously, as its NTA rose 12.39% in the last 2 years, the price dropped 27.39% out of a stable trading range of ¥1,000 to ¥1,200 that held from early '19 till late last year. It can also be clearly seen below that the stock price has roughly attained the bottoming margin of ¥500 to ¥1,000 of '98, '02-'03 & '09-'12 as well as much further back to '70-'71, meaning that its downside is likely very limited with the current projections.

 

An interesting background anecdote is that I almost bought the stock in Jan '18, predicting that its '12-'17 uptrend would continue to ¥2,000 especially after a 66% price spike in Sep '17. Fortunately, my queued price was not matched & my attention shifted to other stocks like Nomura & Mizuho.

 Dividend yield is a modest 2.4% at current levels, still over double the yen risk-free deposit rate. It's in the business of dyeing, printing & finishing textiles, including Indonesian batik patterns as well as developing & selling industrial machinery and dates back to 1941.

First conservative target is ¥999 followed by ¥1,070-1,120 within a year.