EV/FCF of 1.6x? ROE of 18%..only in Japan, net-net's part 3

This is a continuation of my series where I've been looking through 100 Japanese net-net's.  I narrowed down the initial list to 34 that I determined were worth a closer look.  The first two installments of this series can be found here:

As with the other two this post and subsequent ones will follow the same pattern.  The company name and description, investment highlights, and my net-net worksheet.  At the end of this post is the cumulative spreadsheet with data from all the companies I've looked at.

Sakai Trading (9967:JP)

Sakai Trading is a chemical additive company.  They make resins and plastic additives, some of their products are used in the production of flat panel TV displays.  The company has been in existence for 85 years.

  • Trading at a P/E of 5.38
  • Negative EV
  • No debt
  • Osaka Exchange traded
  • Eye popping 15% ROE (ex-cash)
  • Negative cash flow last year due to working capital changes.

ICOM Inc (6820:JP)

ICom is a wireless radio manufacturer, their radios can be found in a variety of devices such as marine devices, aeronautical devices, amateur radio and transceiver radios.  The company has offices worldwide, but their main office is located in Japan.  The company website really played up their marine products such as this marine commander setup.  The commander has all the screens, radar and radios you'd need to completely outfit the deck of a boat.


  • The company throws off quite a bit of cash with free cash flow slight over ¥100 per share last year.
  • EV/FCF of 1.68x
  • EV/EBIT of 2.13
  • Tokyo exchange traded
  • The company was founded in 1954, and manufactures 100% of their products in Japan.
  • US Dept of Defense is a customer, as well as the Japanese military.

Odawara Engineer (6149:JP)

Odawara Engineering manufactures winding motors, I read about their products and have absolutely no clue what they are.  Some sort of engine assemblies, they have a very nice English website with loads of technical literature.  The company was founded in 1950 and went public in 1979.  The company has subsidiaries in Italy, China, and the US (Ohio).


  • Negative EV, and only selling 33% above it's net cash value.
  • The business appears to be decent, a ROE of 18%
  • Net margin of 8.27%
  • FCF is very lumpy, it appears the company has large working capital requirements every few years.
  • The company actually appears to use some of their cash horde from time to time to finance expansion and working capital needs.

Summary spreadsheet

Here are all of the Japanese net-net's I've looked at since I undertook this project a month back.


I'm waiting to finish my project before buying anymore Japanese net-net's, but in this list I'd say Odawara Engineering possibly had the most business potential, while Icom looked the cheapest.  No matter what an investor who purchased any of these stocks below NCAV and sold at NCAV would do fine, all of these companies have considerable margins of safety.

Disclosure: No positions


  1. Hi,

    Thanks for these analysis. Which broker offers you the possibility to be connected to Japan Market?


    1. Hi,

      Sorry for the slow response, I use Fidelity as my broker. They have access to all Japanese markets for Y3000 per trade.


  2. Nate,

    What makes you think that Odawara has the most business potential out of these stocks?

    1. Lawrence,

      I went off the ROE ex-cash and net margin when I said that. The truth is without digging deeper it's not really possible to say this for certain.