BEST SMALL CAP COMPANY
Nippon Ceramic
The philosophy of Nippon Ceramic is to “contribute to mankind by means of providing products of true value for people around the world”. The company has religiously stuck to this goal, making it a preferred picked among analysts as Japan’s best small-cap corporate of the year.
Nippon Ceramic develops, manufactures, and sells various types of ultrasonic sensors and pyroelectric infrared sensors. Like other Japanese exporters, the company is not immune to the market uncertainty and the strong yen, yet it has battled against these currents to produce astoundingly good figures.
The company managed to grow net income 41.21% from ¥1.64 billion (US$20 million) in the financial year ending in December 2010 to ¥2.31 billion in the following financial year. Nippon Ceramic managed to reduce the cost of goods sold as a percentage of sales from 71.08% to 68.3%, which helped it to grow net income despite flat revenues.
But Nippon Ceramics does not impress merely for trimming around the edges. The company focuses heavily on research and development and is eager to expand into foreign markets like the US.
“Nippon Ceramic has solid material development technologies that have enabled them to obtain a higher market share in the censor market worldwide,” says an equity strategist at a Japanese securities company to Asiamoney. “We expect their solid growth momentum to continue on the back of the green market expansion.”
Analysts offering 12 month price targets for Nippon Ceramic have a median target of ¥1,340, representing a 7.63% increase from its closing price on November 27. That’s a good return for a small-sized Japanese corporate in tough economic times.
BEST MEDIUM CAP COMPANY
Calbee
Calbee, Japan’s largest potato-chip maker, made an inauspicious public debut on the day of Japan's devastating Tohoku quake in March 2011. But investors who bought and held onto its stock are laughing now; its shares have more than tripled in value since, giving the company a US$3 billion market capitalisation.
To put that in perspective the Topix, one of Japan’s big equity indices, has returned 19.4% over the same period.
Calbee is the Frito-Lay of Japan. In fact, Frito-Lay’s parent PepsiCo owns 20% of the Calbee too, and in 2009 Frito-Lay Japan itself became a Calbee subsidiary.
The snack-maker’s management has some bold financial targets. It intends to reach a 10% profit margin by 2014, up from 8.5% a few years ago as it streamlines production. It eventually wants to reach 15%.
To meet such goals Calbee plans to use its PepsiCo relationship to begin distributing products in the US, and to gain access to China's market via a recent joint-venture with Chinese beverage and instant-noodle maker Tingyi. A combination of Calbee’s strong performance and its strategic goals make it a firm favourite with equity analysts as well as investors.
Not all of the news for Calbee is good. On November 20 it admitted that glass might have gotten into some bags of its chips because of an accident at a factory, which led to an embarrassing recall announcement. That caused its stock valuation to slip from ¥7,260 to ¥6,680 two days after the admission.
But there is little reason that the stock should not rebound and resume its upward trend. Calbee looks set to have a bright future as it expands into the world’s second largest economy.
BEST LARGE CAP COMPANY
Nidec
Several large cap corporates impress the analysts and investors in Japan, but Fanuc and Nidec stand as the most popular picks. The companies both specialise in tech-related products – the former factory robotics and the latter micro motors – but of the two Nidec stands out the most.
Nidec supplies the motors for devices ranging from computers to smart phones to cameras, in addition to camera shutters and phone vibrators. Its ubiquity in the technology space means that it is able to remain profitable even as Apple and Samsung Electronics unseat other Japanese companies as leaders in consumer electronics.
Now the world’s biggest manufacturer of motors for hard disk drives, Nidec made two notable strategic decisions during 2012. The first was the acquisition of Kinetek Holdings, an Illinois-based manufacturer of custom-engineered electric motors, in November. Even credit rating agency Moody’s said that the acquisition was credit positive.
Additionally, Nidec has been quick to benefit from Japan’s proximity to the growing emerging markets of Asia. In June it revealed that it would set up the seventh factory in Ho Chi Minh City. With an investment capital of US$39.6 million on four hectares of land, the factory is scheduled to become operational in September 2013. It’s a sensible investment, given Vietnam’s low cost base and large population of 90 million.
Because of such strategies, Nidec's profit margins are much higher than those of other hard disk drive manufacturers. It expects its profit to rise 23% to ¥50 billion in the 2012-2013 fiscal year as sales climb 5.5%, the company forecast on October 24.
For its commitment to expand outside Japan’s borders and strong financials despite ongoing global headwinds, Nidec deserves recognition.
BEST EXECUTIVE
Shigenobu Nagamori, founder and CEO, Nidec
Investing into high value-added electronic components and subassemblies with high technological barriers to entry makes a lot of sense, and it’s a strategy that has greatly benefited Nidec.
The world's largest manufacturer of spindle motors for hard disk drives has built a very profitable business by becoming the go-to supplier for high value-added electronic components. Most the hard disk drives used in the world today have a Nidec motor in them.
In this trying period where the global economy continues to be plagued by volatility and uncertainty, Nidec’s ability to increase its market share is down to its excellent leadership. Shigenobu Nagamori, the founder and CEO of Nidec, has been the man with the vision behind the company’s success since 1973.
While natural disasters made for a tough 2011 – the earthquake in Japan affected operations and floods in Thailand disabled a plant there – Nidec recovered rapidly and looked to reduce its reliance on Thai factories for hard-disk motors by diversifying production bases to China and Philippines.
And although Nidec continues to face headwinds in its domestic market with the strong yen impacting its exports, under the supervision of Nagamori the company is expanding its footprint elsewhere, viewing market volatility as an opportunity.
In November Nagamori publicly announced that Nidec was interested in buying a 55% stake in power engineering firm AnsaldoEnergia, which had been put on the block by Italian state-owned defence company Finmeccanica.
Such farsighted strategic efforts mean that Nidec should remain well-placed for years to come, despite the potential impact of natural disasters and market uncertainty.
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