Somar Corp (8152:TYO)

Recent Share Price: ¥1,741

Accounting: Japanese Accounting Standards

Fiscal Year: Mar. 31st

Market Cap: ¥3.4 billion ($31 million)

Industry: Basic Materials / Plastics Material and Resin Manufacturing

Somar Corporation is a Japanese manufacturer of primarily resin products for various industrial uses (e.g., smartphones, automotive parts). In their environmental division, they make various cleaner and disinfectant products, as well as chemicals used in the papermaking business. In the food division, they make food additives (mainly thickening stabilizers) and dehydrated vegetables. The also have small interests in managing golf courses (with Nagatsuta Corp, Sink Co., and Tama Kosan Co.), a real estate rental management business (Soya Co.), and an insurance agency business (Sowawa).

[Nagatsuta Corporation is a wholly owned subsidiary of Think Corporation. Sink Co., Ltd. is a wholly-owned subsidiary of Sakai. Tama Kosan Co., Ltd. is a wholly owned subsidiary of Soya.]

The company was founded in 1943 by Tadashi Masutani to produce tatami mats.

In addition to their Japanese operations, they have 8 subsidiaries (Hong Kong, Zhuhai (China), Taiwan, Thailand, India, U.S., Europe, and Vietnam)

The Sotani Family owns 15% of the company. President, Futoshi Sotani, owns 10,600 shares personally.

Revenue JPY (in million)20182019%
Industrial¥17,205¥17,05574.0%
Environmental¥4,232¥4,66920.3%
Food¥1,203¥1,2595.5%
Other¥54¥660.3%
Revenue per region JPY (in million)20182019%
Japan¥18,384¥18,07278.4%
Asia¥3,938¥4,67920.3%
Other¥192¥2961.3%
  1. Industrial Materials
    • Coating Products
      • Film for electronic parts, precision parts, industrial materials, design & copying
    • Resin Products
      • Resins for electrical insulation, adhesives and sealing resins for electronic components
    • Electronic Materials
      • Circuit board materials, circuit forming materials, functional films
    • Functional Resin
      • Thermosetting resin, thermoplastic resin, additive for resin
  2. Environmental Materials
    • Industrial disinfectants, industrial fungicides and other fine chemicals
    • Papermaking
      • Paper coating binders & paper-related chemicals (slime control agents, preservatives, water retention aids)
  3. Food Materials
    • Food Ingredients
      • Thickening stabilizer (e.g. guar gum), dehydrated vegetables (e.g., onion, garlic), food additives

Outlook

A lot of the companies I’m looking at seem to be using similar phrasing, so it’s hard to get a read on it. I don’t know how Brexit affects a lot of these Japanese microcaps, but apparantely it does!

[The Company] is supported by relatively strong overseas economies in the first half under the government’s continued economic measures and the Bank of Japan’s monetary easing policy improvements in business performance, employment and income conditions continued, and the Japanese economy maintained a moderate recovery trend. In the seconde half of the year, the US-China conflict, especially the US-China trade friction, the UK’s exit from the EU; as a result of geopolitical risks that continue in the Middle East and East Asia, the global economy slowed down clearly. However, the country’s economy is gradually changing to a downward phase, and it is in a difficult situation that does not allow foresight.

2019 Annual Report (Google Translate)

Recent History

2019

Established Somar Vietnam Co., Ltd. (currently a non-consolidated subsidiary) in Hanoi, Vietnam.

2018

Obtained IATF 16949 certification, an international standard for the manufacturing industry in the automotive industry.
Established Somar Europe BV (currently a non-consolidated subsidiary) in North Holland, the Netherlands.

2017

Established Somar North America Corporation (currently a consolidated subsidiary) in New York, USA.

Financials

 5 YEARS10 YEARS
Change in Working Capital ¥      (1,953,313,000) ¥  (1,751,556,000)
Net Income ¥          430,745,000  ¥  (2,310,039,000)
D&A ¥       2,202,858,000  ¥   6,525,032,000 
Other non cash charges ¥       2,213,367,000  ¥   2,509,298,000 
Capex ¥      (1,180,360,000) ¥  (9,304,143,000)
Owner Earnings ¥       1,713,297,000  ¥  (4,331,408,000)

Disclosure: We own shares in Somar Corp (8152:TYO). Leaven Partners, LP may hold any securities mentioned on this blog and may buy or sell these securities at any time.

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