Effissimo Capital, the S'pore division of a famous Japanese specuvestor called the Murakami Fund, has upped its stake from 10% in 2018 to 19.1% via a 2021 TOB @ ¥5,205 that only achieved half of its targeted purchase quantity. Subsequently, it purchased more shares from Jun 13th 2024 when the price was no lower than ¥6,300,added 260,300 on July 5th three weeks later when the price was climbing above ¥7,000, bought another 215,400 on July 24th when the price was above ¥7,300, another 375,700 the day the Nikkei broke a 37-year record for points fallen & the stock fell over ¥800 to an intraday low of ¥5,812, tacked on 447,200 shares 3 days later when the price was just over ¥6,000, upped the ante further a month later by 408,100 shares when they were falling below ¥6,500, increased the holding by 339,000 shares on 9.9.24 & finally trickled it up by 79,700 shares eleven days later when the stock was breaking ¥6,500 from the other direction after revisiting its Aug low earlier that month. Its stake now stands at 7,191,357 shares [ from around 2,500,000 in 2018 ] or roughly a third of the outstanding stock as adjusted by cancelled treasury shares. Another fund, Oasis Management, has 1,959,600 shares as of its last report back in March 2023 when it added roughly 261,000 at between ¥8,720 & ¥9,250.
The company itself began aggressively buying back its own shares from December last year, upping it from 3.4% where it has stood for decades, to 7.52% within 2 months beginning with 280,500 shares averaging ¥6,085 in the last month of 2024, then gradually chasing higher prices with more tenacious buybacks that culminated with a 521,500 share acquisition averaging ¥8,540 throughout August & capping the campaign with another 279,900 at ¥7,949 on a per share basis in the first 16 days of September, the outlay reaching just below the ¥30 billion limit for 4,172,700 shares which implied a cost per share of ¥7,189.43. This perhaps accounted for the steep drop in cash holdings from a reported ¥51.4 billion at the end of FY '25 to ¥35.5 billion at last count but the result is that a fifth of the outstanding float has been cancelled.
Debt has conversely risen ¥53.04 billion to ¥70.30 billion in the same period. The latest half-year operating cashflow red ink has however almost halved to (¥882 million) from (¥1,520 million) while operating losses have shrunk 83.8% from (¥5,658 million) to (¥916 million) for 1H '24 vs 1H '25. For the latest Jul-Sep quarter, Sanken lost (¥533 million) which pales in comparison to the (¥12,594 million),(¥2,690 million)&(¥864 million) in 1Q '24, 2Q '24 & 2Q '25 respectively but is 125% more than the loss quantum 2 quarters prior. Equity ratio, or CAR thus suffered a 4% point drop in the last half-year. However, the company is #4 in the global Intelligent Power Modules market & 3rd ranked in Japan. It's also involved in the xEV or electromotive vehicles market which includes hybrids, plug-in hybrid EVs & fuel cell EVs, on top of the industrial air-conditioning & semiconductors for white goods & appliances markets, the last sector proving to be the biggest drag on recent performance.
From net-net +¥25 billion six months ago, total liabilities now exceed current assets (- ¥1.821 billion) but working capital is still a +¥50.232 billion, down from +¥82.592 billion, with the funds expended in share buybacks aforementioned accounting for most of the discrepancy. Based on the data from the time of the dot.com bubble, it can be deducted that Sanken was flirting with a net-net position from both sides of the line from 1996 till 2000 & even then had a debt load of between ¥67 - ¥71 billion balanced by cash of of ¥9-10 billion less than currently which perhaps explains the measurably lower equity ratio of 28-45% which prevailed from the 1990s to the early 2000s:
Book value rose from ¥2,430 at the turn of the century to peak at ¥3,400 in '07 before the last financial crisis [ ¥5,888 / ¥4,909 adjusted/unadjusted for treasury shares now ]. Then, record consecutive annual losses of (¥13 billion) & (¥15.6 billion) helped lower net assets per share for 5 consecutive years to ¥1,360, accompanied by a -91% deflation in stock price from ¥11,600 to ¥1,090, which was just below its '71, '76 & '82 peaks. The company forecasts a loss of ¥9.7 billion after last suffering losses of ¥8.1 billion in '24, ¥5.6 billion in '20, ¥7 billion in '21, ¥11.4 billion in '18, the record deficits aforementioned in '09 & '10, a ¥1.8 billion loss in '99 & much further back, ¥474 million, ¥342 million & ¥288 million losses in '75, '76 & '83. In '75-'76, net asset dropped 29% from ¥134 to ¥95 per share & the stock bottomed at a round ¥100 in late '74 from ¥617 in '70 & ¥650 in '62, before net asset value rebounded back to ¥187.3 in '83. Interestingly, the price corrected 56% from a near all-time high of ¥646 in Jul '81 to ¥281 in '82, at which point it had a PE of 32 & was trading at a 50% premium to book value. The record high was re-written in July '83 even as Sanken posted a small loss in March that year.
Oasis' assessment that Sanken's Allegro stake had exceeded the parent's own market cap by 41% back in Nov '19 proved prescient in predicting its price rise, especially after the latter went public & soared above $33 in Jan '21, over $34 in Sep '21 & beyond $36 in December of the same year. However, the stock also dipped below $20 in July '22 & came close again in October that year whereupon Sanken cratered at ¥4,360 & ¥4,390 in July & September but proceeded to jump beyond ¥8,000 in Feb '23 as Allegro vaulted to a new record & then sailed past ¥10,500 [ after touching a record ¥190 higher than its old 2006 high ] when the former rewrote its own '21 high by exceeding $48 briefly at the end of Mar '23. A sharp correction below $36 within a month brought a dip below ¥10,000 in Sanken & both then rewrote their records in the same July/August juncture with zeniths of $52.72 [18 Jul '23] & ¥14,770 [1 Aug '23] respectively. Currently, the gap between the two stands at a conservative discounted 62% [ 98% if assessed strictly at market ] thanks to the parent's price tumbling much faster than that of the US associate due to the recent worsened FY forecast & quarter abovementioned. This is compared to the 102% premium in Mar '23 & the 82% gap in Aug '23.
