Japan Experts, Extraordinary Performance, Astris Advisory Japan

Astris Advisory Japan

Japan Experts, Extraordinary Performance

Our Corporate Advisory service is designed to give clients access to a wider range of investors. These include Japan specialists as well as global investors. The goal is to help achieve a fair equity valuation.

Equity Bottom-Up

Sanyo Trading Co. Ltd. provides international and domestic trading services. The Company imports, exports, and sells a variety of products such as rubbers, chemical products, industrial products, machinery and materials, and scientific instruments.

<div><div><div><div><ul><li>Firm results with a reserved outlook – Q1- 4FY9/24 results were ahead of guidance and highlighted that Q4 FY9/24 trading was in line with expectations, in contrast to a strong start to the year.</li><li>The company made positive developments in improving the sales mix in the Chemicals and Overseas Subsidiaries segments and has increased FY9/24 DPS to ¥55 from the previously guided ¥45, which was a positive surprise.</li><li>Guidance for FY9/25 appears to be conservative in our view. Nevertheless, it telegraphs a slowdown in earnings momentum and mixed earnings visibility with an expected slowdown from life science activity at subsidiary SCRUM Inc., balanced with contributions from large projects in the wood biomass-related business.</li></ul></div></div></div></div>

Firm results with a reserved outlook – Q1- 4FY9/24 results were ahead of guidance and highlighted that Q4 FY9/24 trading was in line with expectations, in contrast to a strong start to the year.The company made positive developments in improving the sales mix in the Chemicals and Overseas Subsidiaries segments and has increased FY9/24 DPS to ¥55 from the previously guided ¥45, which was a positive surprise.Guidance for FY9/25 appears to be conservative in our view. Nevertheless, it telegraphs a slowdown in earnings momentum and mixed earnings visibility with an expected slowdown from life science activity at subsidiary SCRUM Inc., balanced with contributions from large projects in the wood biomass-related business.

Sanyo Trading (3176 JP) - Conservative FY9/25 Guidance with Potential Avenues to Enhance Returns

Japan Elevator Service Holding / Equity Bottom-Up

Japan Elevator Service Holdings Co. Ltd. offers elevator and escalator maintenance, inspection and renewal services.

<ul><li>Ongoing growth and margin expansion – The company continues to display positive characteristics of a high-quality franchise business with growth opportunities, with Q1-2 FY3/25 results showing sustained double-digit sales (+17.0% YoY) and OP growth (+30.6% YoY).</li><li>Maintenance contracts grew 13.8% YoY organically, and Modernization units remain on a positive trajectory with strong underlying demand given the company’s competitive advantage as an independent provider.</li><li>The company has maintained FY3/25 guidance; we believe the earnings outlook for H2 FY3/25 remains positive given the increasing utilization at the JIK (JES Innovation Center Kansai) and geographic reach, and ongoing productivity enhancement of its engineers resulting in operating leverage.</li></ul>

Ongoing growth and margin expansion – The company continues to display positive characteristics of a high-quality franchise business with growth opportunities, with Q1-2 FY3/25 results showing sustained double-digit sales (+17.0% YoY) and OP growth (+30.6% YoY).Maintenance contracts grew 13.8% YoY organically, and Modernization units remain on a positive trajectory with strong underlying demand given the company’s competitive advantage as an independent provider.The company has maintained FY3/25 guidance; we believe the earnings outlook for H2 FY3/25 remains positive given the increasing utilization at the JIK (JES Innovation Center Kansai) and geographic reach, and ongoing productivity enhancement of its engineers resulting in operating leverage.

Japan Elevator Service Holdings (6544 JP) - Demonstrating High-Quality Characteristics

IBJ Inc provides marriage matchmaking services. The Company offers marriage consulting services through the Internet. IBJ also offers and consults business events and seminars.

<div><div><div><div><ul><li>Positive results from core activities – Driven by sustained growth at the core matchmaking business, Q1-3 FY12/24 results were stronger than expected which was a positive surprise.</li><li>The company has maintained FY12/24 guidance, but has telegraphed stronger OP expectations and has announced an FY DPS of ¥8 (+33.3% YoY), indicating a more progressive shareholder returns policy.</li><li>With affiliate franchisee numbers on an uptrend and membership numbers continuing to rise at the Directly-Managed Lounge Business, we believe this demonstrates the company’s core business activities are growing, with improvement in the quality of earnings.</li></ul></div></div></div></div>

Positive results from core activities – Driven by sustained growth at the core matchmaking business, Q1-3 FY12/24 results were stronger than expected which was a positive surprise.The company has maintained FY12/24 guidance, but has telegraphed stronger OP expectations and has announced an FY DPS of ¥8 (+33.3% YoY), indicating a more progressive shareholder returns policy.With affiliate franchisee numbers on an uptrend and membership numbers continuing to rise at the Directly-Managed Lounge Business, we believe this demonstrates the company’s core business activities are growing, with improvement in the quality of earnings.

IBJ (6071 JP) - Raising the Quality of Earnings

JTEC Corporation of Osaka manufactures bio-technology systems and equipment. The Company produces life science devices, x ray mirrors, and automated cell culture systems. JTEC also develops pharmaceutical products. JTEC serves clients in Japan.

<ul><li>Improving sales mix lift gross margins – Gross margin increased to 65.9% in Q1 FY6/25 from 52.5% the previous year, demonstrating an improvement in the sales mix at the core Optical business segment which experienced demand for high-precision products with premium pricing.</li><li>While operating losses remained relatively flat YoY, the company is investing in IT systems that will improve its production and sales management which we believe will improve the quality of earnings, as well as assist in new business development.</li><li>Overall, we believe the company performed in line with guidance, with no change regarding expectations of the earnings profile to be concentrated in H2 FY6/25.</li></ul>

Improving sales mix lift gross margins – Gross margin increased to 65.9% in Q1 FY6/25 from 52.5% the previous year, demonstrating an improvement in the sales mix at the core Optical business segment which experienced demand for high-precision products with premium pricing.While operating losses remained relatively flat YoY, the company is investing in IT systems that will improve its production and sales management which we believe will improve the quality of earnings, as well as assist in new business development.Overall, we believe the company performed in line with guidance, with no change regarding expectations of the earnings profile to be concentrated in H2 FY6/25.

JTEC Corp (3446 JP) - Indications of Improving Returns

Sodick Co., Ltd. develops, manufactures, and sells electric machines and equipment.  The Company's product line includes computerized numerical control electrical discharge machine (EDM), super high precision wire cut EDM, CAD/CAM system for mold design and production, injection molding machine, and high speed manual drilling machine.

<ul><li>Reforms transforming returns – Although the demand environment remains somewhat mixed, we believe that demand has bottomed for the key product Electronic Discharge Machines.</li><li>Q1-3 FY12/24 results highlighted that definitive progress is being made in terms of raising returns through structural reforms.</li><li>This focus on raising profitability can be seen through upselling activities and improved factory utilization.</li></ul>

Reforms transforming returns – Although the demand environment remains somewhat mixed, we believe that demand has bottomed for the key product Electronic Discharge Machines.Q1-3 FY12/24 results highlighted that definitive progress is being made in terms of raising returns through structural reforms.This focus on raising profitability can be seen through upselling activities and improved factory utilization.

Sodick (6143 JP) - Key Metrics Point to Recovery and Upside