Sep 2025 Update: Mandom (4917 JP), Japan’s leading men’s cosmetic and hairstyling brand, which was the investment idea of this post, announced its privatizaton via management buyout (MBO) with CVC Capital, a UK private equity fund.
Mandom shares will be bought at JPY1,960, with the total cost of c.80 billion yen which is c.35% over its undisturbed share price (c.JPY1,485 per share).
Mandom has been engaged by multiple activists, notably Hibiki Path Advisors amongst others. This has been a successful stock call although we hoped that the takeover price could be higher. Our blended intrinsic value was JPY2,200 per share.
Nevertheless the portfolio benefited from this transaction, making c.50% return from this name. This portfolio will be taking profit. PT Mandom Indonesia TBK (TCID:IDX, Mkt Cap: c.USD60mn, PER: negative, PBR: 0.5x) is still listed and could potentially be taken private as well.
We have made this post free for all readers, with updated comments in italics. This situation is “live” and new information and future events might render current analysis irrelevant. Please do your own research (D.Y.O.R). Not investment advice.
Following up from the last discussion, we shall analyze another Japanese company trading below book and generating strong free cashflow for the last few years. Again, this company piled up so much cash that it makes up almost half of its market cap. All this while its marketing team creates crazy commercials like the one below:
As usual, financial numbers are as follows:
Simple Financials (Mar 27 estimate, JPY)
Sales: 80bn, OP: 5.2bn, Net income: 4bn
EBITDA: 8bn, FCF: 5bn
Dividend: 42 yen per share, Yield: 3.3%
Debt: -28bn (Net cash), Mkt Cap: 57bn
Financial Ratios
ROE: 5%, OPM: 6.5%
EV/EBITDA: 3.6x (Mar 26)
PER: 14.3x (Mar 26)
FCF yield: 8.8%
These numbers are two years out and some improvement in earnings have to be incorporated for the valuation to be this cheap. That said, the assumptions are not aggressive and merely represents normalization and what is conservatively achievable. The firm has achieved this numbers in the past.
1. Background and Business
Mandom (4917 JP), is the largest men’s cosmetics manufacturer in Asia having great businesses such as hairstyle grooming and hygiene care. With its Gatsby brand, Mandom dominates the male hairstyle grooming market and has since branched out to do face care and body care for both men and women.
The company first started out as a perfume company almost 100 years ago but its big break was with its Gatsby’s hair grooming products for men in the 1980s. Then, in the early 2000s, it started expanding out of Japan in Asia and built strong franchises in South East Asia, North East Asia and more recently China.
As with Okamoto, the last investment idea, Mandom has an activist angle. While they do not appear in the shareholder registry, activists are circling this stock (well, it’s certainly delicious with 50% of market cap is cash and strong and growing free cashflow generation) and the company’s allegiant shareholders such as the founding family and banks do not hold a lot of shares.
Next, let’s go through the usual fundamentals and risks.
2. Fundamentals
Mandom is in the Fast Moving Consumer Goods (FMCG) business which we know is highly cashflow generative because its goods are consumables, evokes brand loyalty and therefore generates recurring sales. For Mandom, it is more interesting because the firm competes in the niche of male cosmetics which encompasses hair grooming & hair care, skin care and face care.
The company has also branched into female cosmetics and its portfolio of key brands are now Gatsby and Lucido for men and Bifesta, Pixy, SilkyGirl and Lucio-L for women. As an early mover overseas, it has also grown that business nicely with 50% of its revenue now coming from Asia outside of Japan.
Here’s the investment thesis for Mandom:
Mandom is one of the niche Japanese male cosmetics manufacturer in the lucrative FMCG sector where companies generate strong free cashflow with recurring revenue coming from customers loyal to its brands. It is trading cheaply and there is an activism angle because the company holds a lot of cash and does not have enough allegiant shareholders to protect management against activists. The stock has potential upside of >70% should its business recover to pre-pandemic margins. FCF yield is also strong at c.8%.
As discussed, Mandom started to move out of Japan and into Asia very early on, in the late 1990s. As such, it gained early mover advantage into Asia, China and Indonesia, dominating the men’s hair grooming markets. It splits its businesses into the three segments above: Japan, Indonesia and Other Overseas. As of Mar 2024, the margins were 0.2% for Japan, -5.2% for Indonesia and 13.2% for Other Overseas. Pre-pandemic, the same numbers were 6.5%, 3.6% and 13%. As such, one key positive for Mandom is re-establishing its long term growth trajectory in Asia driven by recovery in the next few years back to pre-pandemic levels.
There are several other positives for Mandom.
Positives
Brand loyalty: Mandom is the undisputed #1 brand in men’s hairstyling with 55% market share in Japan. In Asia, Mandom commands the same market share levels and high brand awareness and loyalty with its Gatsby brand. Needless to say, there isn’t much alternatives out there since this is such a niche segment. The following recommendations below S$15 from Watson’s (Singapore’s big drugstore chain) website says it all:
Follow Me: S$3
Gatsby: S$5 (average price of full suite of sub-brands)
Mandom: S$5
Lucido-L: S$6
Bigen: S$13
Johnny Chop Shop: S$15
Three of the six choices are Mandom’s: Gatsby, Mandom and Lucido. Interestingly, Lucido-L which is meant for ladies also get picked up because there’s just not enough variety. A simple visit to the stores shelves will confirm this. There is really just Mandom / Gatsby. In a sense, users also become loyal by default, since there is no other choice. This is analogous to how Gillette dominated the shaver business for decades.
Cash extraction and potential MBO: As mentioned above, 50% of Mandom’s market cap is cash. There is another JPY7bn which is another 12% of its market cap is Mandom’s 65% stake in PT Mandom Indonesia, which is its listed subsidiary on the Indonesian Stock Exchange. Should the management (i.e. the founding family) wants to remain listed, paying out this cash will boost its share price significantly. They probably should not sell PT Mandom Indonesia, so that 12% is not extractable.
The other more “sinister” plan would probably be taking the company private. The founding family, together with its foundation and employee shareholder association owns c.20% of outstanding shares. Should they decide to take the company private, they would first need to fork out c.JPY70bn or c.USD400m (including c.30% premium over today’s market cap) but effectively, only 1/3 because 50% of the market is cash and they already own 20%. I am sure someone is thinking about this. If it’s a Singaporean name, the family would find ways to trash down the share price further over years, then take it private*, screwing all minority shareholders. Hence, it’s a sinister plan. Hopefully Japanese executives, with more honor and integrity, will not do this.
To prevent this, activists might have to be involved. They would be able to call management out if the takeout price is too cheap. Then again, Mandom’s management has executed well and is attuned to Japan’s push on corporate governance. Mindful of such issues, they would probably think twice about screwing minority shareholders.
* CK Tang, Osim and Koufu amongst other names. CK Tang’s story is portrayed at https://8percentpa.blogspot.com/2009/12/on-bad-management.html
Comment as of Sep 2025: the MBO scenario happened as described. The MBO price is acceptable, in our opinion, but is at the low end of reasonable range after multiple rounds of negotiations. Hibiki Path Advisors will be fighting for higher payout. Excerpts from the publicly released documents:
Tender Offeror submitted seven revised proposals, raising the price incrementally from JPY 1,600 to JPY 1,650, JPY 1,700, JPY 1,750, JPY 1,800, JPY 1,920, and JPY 1,950.
The JPY 1,950 offer on 5 September 2025 was presented as the "best and final offer". However, the Company countered with a proposal of JPY 2,100 per share.
Ultimately, on 6 September 2025, the Tender Offeror submitted an eighth proposal of JPY 1,960, stating it had decided to agree to raise the price again to maximise the interests of the Company's general shareholders.
The Company and the Special Committee accepted this price on 7 September 2025. This final price represents a 360 yen per share increase (22.5%) from the initial proposal. Managment
Mandom’s management is the second and third generation scions of the founding Nishimura family. The father and son tag team runs the shop but CEO Ken Nishimura is probably quite powerful, having strong academic and business experience. Their credentials are shown below.
In its annual report, CEO speaks about ESG and the importance of achieving targets. The reports reviewed past mid term plans, where are the lessons learnt and discussed implementations including rationalizing its workforce which we all know is very difficult in Japan. We are highlighting all this to show that management i.e. the found family is progressive and hence not likely to do things that would be unfair towards minority shareholders. But, we never really know, don’t we?
Next let’s discuss some risks with this stock.
Risks
China and Indonesia remains weak: In the next 6-12 months, investors would be looking at these two geographies: China and Indonesia. China has remained weak as the macro economy continue to languish so investors might be more forgivable. That said, Mandom has a strong market position and it is perplexing that recovery has been so muted. It might have to do with its small size (market cap at c.USD380m) and hence its inability to restore its supply chain fast enough.
The bigger issue is Indonesia. Mandom has lost money in Indonesia for 4 years (i.e. since the pandemic struck). It was touted as the next growth driver but now the path to profitability seemed uncertain despite them being the market leader.
Inability to turn things around: By and large, Mandom’s management has executed well over the years. But with Japanese companies, there is always the risk that they would just slack. Sometimes it is hard to pin down the mistakes. After all, Japan is a society that sees the money differently. Management is not motivated to make the next million dollars more than firing their long-time colleagues, friends, buddies.
Mandom did make the effort to outline their KPIs. They are targeting high single digit growth, operating margins and return on invested capital. That’s commendable by Japanese standards. Even if management missed by 10-20%, the stock would do well.
The real risk would be executions such as bad M&As, or bad investment capex, burning up the cash. Or it could be drastic failure in business operations, with no improvement in revenue, margins and ROICs. But then again, this is status quo and that’s the reason why share price is where they are right now. In other words, share price is not factoring in any improvement. If things do improve, we get the upside.
3. Technicals
The chart below shows that the market cap went as high JPY180bn before the pandemic hit. That’s 3x. Today, we are at rock bottom. We are way below the pandemic lows. The last time share price was this low was more than 10 years ago. And before that, the GFC, when share price was JPY900 and market cap was JPY42bn (about 30% below today’s price).
Regardless of how we cut it, the risk reward profile is very attractive. We can think of it has 3x upside vs 30% downside (using the GFC low) or perhaps close to 100% upside vs <10% downside using JPY100bn market cap reached around 2021. Next, valuations!
4. Valuations
In this final section, we will discuss valuation. Again, the multiples are undemanding using Free Cashflow (FCF) and Price Earnings Ratio (PER) at 15x and EV/EBITDA at 10x. When we look at its global peers, we have PER at 23x, EV/EBITDA at 13x on average. Incorporating say a 20% Japan discount, our multiples are still vaid. As with Okamoto though, we added back the significant cash (JPY28bn) for FCF and PE which gives us a blended intrinsic value of JPY2,200 or 74% upside. If we do not consider the cash, the blended intrinsic value drops to JPY1,800, still with 40% upside.
As alluded to above, in the peer comparison table below, Mandom valuations are significantly below peers but that’s also partly because both operating margins (OPM) and return on equity (ROE) had been dismal. As such, we need activists to hold management accountable such that they would achieve the above-mentioned mid term targets.
To conclude, Mandom (4917 JP) is a buy at current share price. On the upside, we have the 74% based on valuations, and 1-3x based on technicals. Should activism drum things up, management does an MBO which ironically means that upside could be capped at the usual takeout premium of 30-40%. On the downside, as discussed, both valuation and technical point to very limited downside unless we use the GFC lows (c.30% downside from here) which could be too conservative and not realistic.
The portfolio will be initiating a small position.
Huat Ah!
This post does not constitute investment advice and should not be deemed to be an offer to buy or sell or a solicitation of an offer to buy or sell any securities or other financial instruments.