Nakakita Seisakusho Co Ltd (6496:TYO)

Recent Share Price: ¥2,790

Accounting: Japanese Accounting Standards

Fiscal Year: May 31st

Market Cap: ¥10.7 billion ($97 million)

NAKAKITA SEISAKUSHO CO., LTD. is a Japanese manufacturer of automatic control valves, butterfly valves and remote controllers for ships and power plants. The Company offers three types of products:

  • Automatic Control Valves (41% Revenue)
    • which include auto actuated valves, servo actuated control valves, remote control valves, cylinder valves, safety valves, air purge-type automatic regulatory equipment, actuators, valves for nuclear plants, superheated steam pressure reducers and attemperators, other special automatic control valves and controlling equipment;
  • Butterfly Valves (32% Revenue)
    • which include manual butterfly valves, remote control butterfly valves, and butterfly valves for low-temperature use
  • Remote Control Devices (27% Revenue)
    • which include cargo handling and ballast remote controllers and remote water level indication and warning equipment for ships.
Plant / ShipUseKind of product
For Plant・Power Plant
・Steel Works
・Desalination Plant
・and etc.
・Control / Shut-off Valve
・Butterfly Valve
For Ship・Cargo line
・Ballast line
・Butterfly Valve
・Valve Remote Control System
・Level Gauging System
・In Engine Room ・Control / Shut-off Valve
  • Number of employees : 346 people.

Recent History

2017

1 for 5 reverse stock split

Capital Allocation

The company has a stated goal of a dividend payout ratio of at least 40%. In the past 3 years, the company has paid out ¥1.3 billion (~12%) in dividends and has bought back over ¥330 million (~3%) in stock.

Regarding the distribution of profits to shareholders, we aim to maintain a steady dividend, and we will strive to achieve the results of that period and forecasts for the following year […] In addition, the Company acquires treasury stock as part of returning profits to shareholders. Although we have reviewed and implemented cancellation and retirement, we would like to consider buying tremendous treasury stock in the future.

2018 Annual Report (Google Translate)

Insider Ownership

Insiders own over 30% of shares outstanding.

Shareholders
NameEquities%
Miyata Family 442,00011.50%
Kenichi Nakakita,264,4006.90%
Akihisa Miyata,114,0002.97%
Ikuko Watanabe 114,0002.97%
Tomoko Kurota 114,0002.97%
Hiroko Nakakita 114,0002.97%
Kazuko Miyata 109,0002.84%
Hiroaki Miyata 106,0002.77%
Sumitomo Mitsui Financial Group, Inc.86,0002.24%

Equity Holdings

The company holds over $6 million in stock.

Holdings
NameEquitiesValuation
Maruichi Steel Tube Ltd (5463) 120,000 $3,765,622 
KOKUYO CO., LTD. (7984) 72,200 $1,049,457 
KIMURA CHEMICAL PLANTS CO., LTD.(6378) 270,000 $860,714 
Kobelco Eco-Solutions Co Ltd (6299) 40,000 $539,757 
HYOKI KAIUN KAISHA, LTD. (9362) 10,300 $124,809 
Mitsui OSK Lines Ltd (9104) 2,693 $58,508 
Sumitomo Mitsui Trust Holdings Inc (8309) 633 $23,057 
JSR Corp (4185) 1,063 $15,932 
Sanoyas Holdings Corp (7022) 2,640 $4,112 
Naikai Zosen Corporation (7018) 100 $1,246 

Financials

Disclosure: We own shares in Nakakita Seisakusho Co Ltd (6496:TYO)

3 thoughts on “Nakakita Seisakusho Co Ltd (6496:TYO)

  1. Hi and thanks for this post!

    This company looks cheap and the quality seems ok. The only thing that concerns me is that in the last 5 years it shows more or less the same discount to NAV, so reversion to the mean is not really helping in this case.

    One questions: from where did you get the balance sheets figures and the stock portfolio? I can’t find an investor relation section in English on their website.

    Like

    1. Thanks for your interest in my blog and thanks for the comment!

      I agree that the price in relation to liquidating value has not shown a propenstity to converge in the last five years; albeit for a possible trading window in late-2017 and early-2018. This, however, is not a firm screening criterion for me — although I do pay attention to it.

      In Security Analysis (1934, 1940), Ben, many times, referenced a previous high for a potentional net-net, but he never mentioned that it was a primary criterion (to my knowledge). I have learned over the years that if Ben Graham mentioned something, briefly or not, it is wise to take it very seriously. In other words, he had that data point in the book for a reason; it wasn’t on a whim. So I agree with you; it is a factor worth looking at.

      However, one sell method proposed by Ben Graham was to sell a stock once it appreciated by 50% within a two-year window. This opportunity presented itself multiple times in 2016.

      I have the company valued at an approximate liquidating value of ¥15.5 billion. At this valuation, I could argue the stock is the cheapest it has been in the last 5 years. I think it is worth the odds.

      As to your question, I would advise always verifying data from company reports. (The English website, if the company offers one, is never as good as the Japanese version.) Google translate works well if there is a language barrier.

      But to get a quick look:
      Financials: https://www.kaijinet.com/jpexpress/
      Holdings: https://www.marketscreener.com

      Like

  2. Thanks for your answer and sorry for commenting back so late, but I wasn’t back on your site until today while looking again at Nakakita again this morning.

    I agree with you about the propensity to converge as a factor worth looking at it, but not really a firm criterion. I am putting more attention to the current discount compared to the 5 years discount.

    Concerning Nakakita I also agree with your valuation and I think that the stock is worth a place in my basket of Japanese companies.

    I usually screen and check the financials figures on FT.com and then I also double check (using google translate) before buying. I don’t use marketscreener.com and therefore I missed the holdings list. It is definitely useful.

    Thanks for sharing your thoughts!

    Liked by 1 person

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