Investment Idea #27 - NTV

More on Japan activism

This idea builds on the recent pivot to discuss shareholder activism.

Activism had always been around. That’s how Berkshire Hathaway got started in the first place. Warren Buffett bought a big chunk of the company to force things to happen. His legacy started because he was an activist! That was in 1965. Then we saw some action around the 1980s with Barbarians At The Gates. But around the 2000s, that was when modern shareholder activism first started to go into vogue in the US. From 2000 to 2020, US activists really took centre-stage and shook up a lot of companies, including big ones!

Today, the stage is Japan. We have close to 80 activist funds targeting lots of undervalued companies. 7-11 was targeted by activists multiple times and last year we saw how overseas strategic buyer - Couche-Tard, the largest convenient store operator in Canada, wanting a piece of the action. So, on this substack, we are looking at the third Japan activist idea after Okamoto and Mandom. This one revolves around one of Japan’s best known export - animation or in short anime.

Princess Mononoke - one of Japan’s best animation movie ever created…

Let’s look at the financial numbers:

Simple Financials (Mar 27 estimate, JPY)

• Sales: 525bn, OP: 52.5bn, Net income: 50bn

• EBITDA: 66bn, FCF: 50bn

• Dividend: 42 yen per share, Yield: 1.4%

• Debt: -168bn (Net cash), Mkt Cap: 728bn

Financial Ratios

• ROE: 5%, OPM: 10%

• EV/EBITDA: 8.5x (Mar 27)

• PER: 14.6x (Mar 27)

• FCF yield: 6.9%