Senior Technology Analyst, Japanese Equities, LightStream Research

Scott Foster

Senior Technology Analyst, Japanese Equities

Equity Bottom-Up

Zuken has dropped back nearly 10% from a new high of ¥1,412 reached on April 5, suggesting that interested investors might wait for FY Mar-17 results (likely to be released in early May) before deciding if or when to buy. The peak share price coincided with the announcement of a partnership between Zuken and Nano Dimension of Massachusetts to develop design-to-manufacturing processes for 3D printing of multi-layer printed circuit boards. This is a positive development, but the impact on overall sales and profits is likely to be incremental rather than game changing.We have a positive long-term view of Zuken, but quarterly results can be volatile and management's guidance for the fiscal year just ended looks somewhat optimistic. That having been said, the expansion of the company's business in North America should add a new profit center to Japan and Asia over the next few years, while the weak European economy does not appear to be too much of a drag. Zuken is Japan's leading Electronic Design Automation (EDA) software and consulting firm, ranking fourth worldwide after Cadence Design, Mentor Graphics and Synopsis. Unlike the other three companies, Zuken focuses on printed circuit board (PCB) rather than integrated circuit (IC) design and it works in partnership with Synopsis. It is also well entrenched in its home market and with Japanese customers overseas.Zuken is financially sound, with zero debt and sufficient cash on hand to finance M&amp;A if an attractive opportunity arises.

Zuken has dropped back nearly 10% from a new high of ¥1,412 reached on April 5, suggesting that interested investors might wait for FY Mar-17 results (likely to be released in early May) before deciding if or when to buy. The peak share price coincided with the announcement of a partnership between Zuken and Nano Dimension of Massachusetts to develop design-to-manufacturing processes for 3D printing of multi-layer printed circuit boards. This is a positive development, but the impact on overall sales and profits is likely to be incremental rather than game changing.We have a positive long-term view of Zuken, but quarterly results can be volatile and management's guidance for the fiscal year just ended looks somewhat optimistic. That having been said, the expansion of the company's business in North America should add a new profit center to Japan and Asia over the next few years, while the weak European economy does not appear to be too much of a drag. Zuken is Japan's leading Electronic Design Automation (EDA) software and consulting firm, ranking fourth worldwide after Cadence Design, Mentor Graphics and Synopsis. Unlike the other three companies, Zuken focuses on printed circuit board (PCB) rather than integrated circuit (IC) design and it works in partnership with Synopsis. It is also well entrenched in its home market and with Japanese customers overseas.Zuken is financially sound, with zero debt and sufficient cash on hand to finance M&amp;A if an attractive opportunity arises.

Zuken (6947 JP) - Printed Circuit Board EDA Specialist

Japan

ZUKEN INC. plans, develops, and sells computer-aided design (CAD), computeraided manufacturing (CAM), and computer-aided engineering (CAE) system services. The Company operates an overseas production subsidiary in England and sales subsidiaries in the US, England, the Netherlands, Germany, Austria, Switzerland, France, Italy, Korea, and Singapore.

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Zuken Inc (6947 JP)

Zuken (6947 JP) - Printed Circuit Board EDA Specialist

Zuken has dropped back nearly 10% from a new high of ¥1,412 reached on April 5, suggesting that interested investors might wait for FY Mar-17...

Scott Foster

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