The above car loans issuer is interesting to me as an activist fund has been accumulating shares from first crossing the 5% threshold [8,986,800] on 1st July '25 till its stake reached 10.77% [18,505,000] on 10th Feb '26. The record EPS was way back in '82 [ top snapshot ], which, adjusted for 2 reverse share-splits, is 14x the forecast FY '26 figure of ¥70.1. Surprisingly, former 16% holder Itochu has cut its stake to below 5% while banking giant Mizuho has remained its major holder with over 48% for more than a decade.
The stock is about 16% undervalued if a direct comparison of the '82 EPS relative to stock price with the forecast '26 EPS relative to today's price is made. However, yen rates were over 7% back then compared to the 0.5% now so such an analogy is probably erroneous. What probably does support buying it now is that the 3Q profit progress rate of 94% versus the previous 2 years' figures of 68.5% & 62.3% respectively. Capital adequacy has also advanced two % points to 8.2% this year while dividend yield is a respectable 3.4%.
Due to massive losses of over (¥89), (¥17) & (¥102 billion) in financial years '01-'03, book value fell below zero, going from (¥54) in '05 to (¥543) in '07,clawing back to (¥136) in '12 & turning +ve to ¥781 by '15. Dividends were halted for many years, resuming only briefly in '06 at 75% of this year's payout & then again at 50% of March's quantum in '17, '18 & '19 and then increasing to the '06 level from '20 till '22 before reaching this year's level from '23 onwards. Its stock has barely doubled from the 2010 low of ¥52 despite the earnings almost doubling since 2013. Of course, it rocketed by almost 5-fold anticipating a jump in EPS to ¥330 the following year, which itself is nearly 5x [4.7] the forecast '26 earnings per share. Market cap has been on a long erosion course since that price peak of ¥4,720 in May
'13 till the '25 low of ¥654 which sort of qualifies it as a long double-bottom pattern spanning 2010-2025. Despite heavy resistance at the ¥1,700 to ¥1,800 band in the medium term, technically the stock could rise to the first Fibronacci target of around ¥2,200 within the next 2 years due to a spillover from the bullishness surrounding finance-related stocks.
Futaba Corp [below] is an interesting high conviction buy call due to :
1. It's forecast turnaround to profit that implies a P/E of below 17
2. A likely outperformance in the upcoming quarter given its low loss base last year
3. +ve FCF & operating CF last year
4. A long downtrend that resulted in a likely '23-'25 'saucer bottom' will likely target its '12 low of ¥822 given the spillover of the Nikkei's record run to cheaper stocks
5. Zero debt & high capital adequacy of over 75% despite recent persistent operating losses.
Curiously, Sakai Heavy's 酒井重工業 turnover forecast for '26 is only double the sales in 1978! Of course, the high that year was also 13.8% higher than the current price while latest forecast net profit is 3.33x the level in 1978 & dividend is nearly 4x the earlier quantum. I bought it for the dividend yield of 4.7% before the Trumpanic of '25 & the relative bargain after a 38% correction from the '24 peak, which anticipated the 2nd highest annual EPS of ¥287.4 finalized in March of that year. Naturally, the price declined -52% by Apr '25 as the EPS fell 41% as announced in May '25 & is forecast to fall further -38% by May '26. Both free cashflow & operating cashflow have remained +ve for the last 3 consecutive years.
With the Nikkei 39% higher than when the tractor maker's equities hit their two-year high, I am expecting the stock to revisit the ¥2,800-3,000 level with the next quarter perhaps likely to show an improvement from a low base of a small loss, coupled with the anticipated portfolio rebalancing towards small cap Japanese stocks as the main stock index accelerates its climb towards nosebleed levels.
