Quality-first, Business-perspective Strategy, Urbem (HK) Limited

Steven Chen

Quality-first, Business-perspective Strategy

Equity Bottom-Up

<ul>
<li>Japan's largest M&amp;A advisor for SMEs reported its Q2 results for the current FY ending March 2021;</li>
<li>The company continued to underperform its major peers in growth throughout the pandemic;</li>
<li>The economic moat remained intact, in our opinion, and venturing businesses kept booming;</li>
<li>We see the decline in volume as a major risk to our previous valuation assumption and will keep a close eye in this regard.</li>
</ul>


Japan's largest M&amp;A advisor for SMEs reported its Q2 results for the current FY ending March 2021;
The company continued to underperform its major peers in growth throughout the pandemic;
The economic moat remained intact, in our opinion, and venturing businesses kept booming;
We see the decline in volume as a major risk to our previous valuation assumption and will keep a close eye in this regard.


Nihon M&A Center: Our Takeaways From The Q2 Results

<ul>
<li>Without a doubt, Nihon M&amp;A Center offers a lot of qualities that we like;</li>
<li>However, the valuation should discourage many alpha-seeking investors, including us;</li>
<li>The high price multiple resonates with the low-total-return estimate based on our DCF analysis.</li>
</ul>


Without a doubt, Nihon M&amp;A Center offers a lot of qualities that we like;
However, the valuation should discourage many alpha-seeking investors, including us;
The high price multiple resonates with the low-total-return estimate based on our DCF analysis.


Nihon M&A Center: Superior Quality But Hefty Valuation

Japan Specialist

Mark Chadwick

Frontier Management Inc / Equity Bottom-Up

<div><p><span xml:lang="EN-US" data-contrast="auto"><a href="https://www.smartkarma.com/entities/frontier-management-inc" target="_blank" data-smartkarma-citation="entities:29135:1" rel="noopener">Frontier Management Inc (7038 JP)</a>  (FM) has seen its stock rise 330% over the past year, far outpacing rivals in investment banking and consulting services. </span><span data-ccp-props='{"201341983":0,"335559739":160,"335559740":259}'> </span></p></div><div><p><span xml:lang="EN-US" data-contrast="auto">While the Corona virus </span><span xml:lang="EN-US" data-contrast="auto">impacted</span><span xml:lang="EN-US" data-contrast="auto"> FM’s ability to close cross-border M&amp;A deals in 1H20, the management consulting and business revitalization work grew solidly. The group’s more aggressive headcount additions suggest confidence in the 2H pipeline and longer-term outlook. </span><span data-ccp-props='{"201341983":0,"335559739":160,"335559740":259}'> </span></p></div><div><p><span xml:lang="EN-US" data-contrast="auto">Demographic and economic shifts in Japan are propelling demand for business strategy and M&amp;A consulting in Japan. Moreover, with the introduction of the corporate governance and stewardship codes, Japanese companies are facing scrutiny to improve financial returns, improve profitability and maximize shareholder returns. These trends are likely to remain a tailwind for Frontier’s core services. </span><span data-ccp-props='{"201341983":0,"335559739":160,"335559740":259}'> </span></p></div>

Frontier Management Inc (7038 JP)  (FM) has seen its stock rise 330% over the past year, far outpacing rivals in investment banking and consulting services.  While the Corona virus impacted FM’s ability to close cross-border M&amp;A deals in 1H20, the management consulting and business revitalization work grew solidly. The group’s more aggressive headcount additions suggest confidence in the 2H pipeline and longer-term outlook.  Demographic and economic shifts in Japan are propelling demand for business strategy and M&amp;A consulting in Japan. Moreover, with the introduction of the corporate governance and stewardship codes, Japanese companies are facing scrutiny to improve financial returns, improve profitability and maximize shareholder returns. These trends are likely to remain a tailwind for Frontier’s core services.  

Small Cap Growth: Frontier Management (7038) - Borderless Services

Thematic (Sector/Industry)

<ul>
<li>One of our previous articles briefly touched upon the M&amp;A market for Japanese SMEs;</li>
<li>Given the promising prospect of the space, we would like to explore and compare the top three players;</li>
<li>Our evaluation is conducted from both business fundamentals and share valuation perspectives.</li>
</ul>


One of our previous articles briefly touched upon the M&amp;A market for Japanese SMEs;
Given the promising prospect of the space, we would like to explore and compare the top three players;
Our evaluation is conducted from both business fundamentals and share valuation perspectives.


A Deeper Look into Japan's SME M&A Advisory Boutiques

<ul>
<li>The Japanese SME segment is filled with its unique structural challenges, which provides opportunities for "pick and shovel" suppliers;</li>
<li>Many of these SME backers (including oRo, which we covered previously) have generated tremendous shareholder value in the past and may continue to do so while addressing clients' key pain points alongside multiple long-term tailwinds.</li>
</ul>


The Japanese SME segment is filled with its unique structural challenges, which provides opportunities for "pick and shovel" suppliers;
Many of these SME backers (including oRo, which we covered previously) have generated tremendous shareholder value in the past and may continue to do so while addressing clients' key pain points alongside multiple long-term tailwinds.


Japan

M&A Capital Partners Co., Ltd. is an M&A advisory firm. The Company provides advisory service in M&A due diligence, business strategy, corporate regeneration, capital increase strategy to support owners of small and medium companies with business succession.

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M&A Capital Partners (6080 JP)

Nihon M&A Center: Our Takeaways From The Q2 Results

Despite the formidable economic moat, superior profitability, and booming venturing businesses, we would stay cautious concerning the near-term...

Steven Chen

Nihon M&A Center: Superior Quality But Hefty Valuation

The high price multiple resonates with the low-total-return projection based on our DCF analysis and should discourage many alpha-seeking investors.

Steven Chen

Small Cap Growth: Frontier Management (7038) - Borderless Services

Frontier Management (FM) has seen its stock rise 330% over the past year, far outpacing peers in investment banking and consulting...

Mark Chadwick

A Deeper Look into Japan's SME M&A Advisory Boutiques

It is not difficult to understand the promising prospect of the space, driven by a combination of multiple structural shifts in the country: e.g.,...

Steven Chen

Top Picks: Two More Japanese SME Backers

The Japanese SME segment is filled with its unique structural challenges, which provides opportunities for "pick and shovel" suppliers.

Steven Chen

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