Focus on Smaller Cap Value Names, Altay Capital

Altay Capital

Focus on Smaller Cap Value Names

Long time value investor. Long/Short portfolio that’s always net long (between 30-80%). I have extensive experience in the video game industry as I founded a leading media company in the space, which I have since exited after an acquisition. Gaming companies only make up ~15% of my portfolio, but its a sector where I believe I have an edge. A newsletter about value investing! Mostly focus on smaller cap value names that aren't widely covered.

Equity Bottom-Up

Applied Co., Ltd. sells personal computers, its parts, and peripheral devices. The Company also manufactures its own brand personal computers, and provides technical support services.

<ul><li>Applied Co is a small cap regional Japanese PC retailer and IT provider with surprisingly good execution that’s moving into higher margin local AI deployments (HPC) and IT services.</li><li>Company-wide return on equity was 17.6% in FY26 despite carrying more than half its market cap in net cash.</li><li>FY23 and FY24 were historically bad years with 12.3% RoE while FY2016-FY2022 bounced around 17-20%. This is incredible for such an over capitalized business.</li></ul>

Applied Co is a small cap regional Japanese PC retailer and IT provider with surprisingly good execution that’s moving into higher margin local AI deployments (HPC) and IT services.Company-wide return on equity was 17.6% in FY26 despite carrying more than half its market cap in net cash.FY23 and FY24 were historically bad years with 12.3% RoE while FY2016-FY2022 bounced around 17-20%. This is incredible for such an over capitalized business.

Applied Co. (TYO 3020): A Cash-Rich Japanese PC/HPC Company at ~1.5x EV/EBIT...

MegaChips Corporation manufactures and markets Large-Scale-Integration (LSI) circuits and digital monitoring systems.  The Company's products are used in video games and other electronics.

<ul><li>MegaChips Corp (TYO 6875) is one of several companies in Japan with a large stake in a publicly listed company in the U.S. that dwarfs its own market cap.</li><li>In this case, MegaChips owns ~10% of SITM. Off the top of my head there’s also Sanken Electric (TYO 6707) which owns 32% of ALGM.</li><li>But there’s a reason I’m writing about MegaChips instead of Sanken Electric: the discount is wider AND the remaining operating business is both simpler and better.</li></ul>

MegaChips Corp (TYO 6875) is one of several companies in Japan with a large stake in a publicly listed company in the U.S. that dwarfs its own market cap.In this case, MegaChips owns ~10% of SITM. Off the top of my head there’s also Sanken Electric (TYO 6707) which owns 32% of ALGM.But there’s a reason I’m writing about MegaChips instead of Sanken Electric: the discount is wider AND the remaining operating business is both simpler and better.

MegaChips Corp (TYO 6875): Trades at ¥11,250 but Gets You ¥19,842 of After-Tax SiTime

Sanyo Engineering & Construc / Equity Bottom-Up

Sanyo Engineering & Construction Inc. is a mechanical and electrical engineering firm.  The Company constructs indoor wiring and power transmission lines. Sanyo Engineering also installs air conditioning, water supply, and sewage facilities in buildings and plants.  Additionally, the Company manufactures and sells mechanical devices.

<ul><li>In late May, Kinden Corp. (1944) announced a takeover of Kodensha (1948) at a massive premium.</li><li>Kodensha was trading around ¥2,500 per share in late 2025, then more than doubled before a Nikkei article came out in January 2026 suggesting that Mitsubishi Electric would sell its 50% stake in the company.</li><li>By then, the stock was trading around ¥6,500. Kinden then announced it would take the company private at ¥11,501 per share. </li></ul>

In late May, Kinden Corp. (1944) announced a takeover of Kodensha (1948) at a massive premium.Kodensha was trading around ¥2,500 per share in late 2025, then more than doubled before a Nikkei article came out in January 2026 suggesting that Mitsubishi Electric would sell its 50% stake in the company.By then, the stock was trading around ¥6,500. Kinden then announced it would take the company private at ¥11,501 per share. 

Two Near Net-Net Japanese Electrical Contractors at ~3.5x EV/EBIT with Industry Tailwinds

TAKASAGO TEKKO K.K., affiliated with Nippon Steel, manufactures stainless hoops and strip hoops.  The Company also manufactures rolled iron core, chains, and rims through its subsidiary.

<ul><li>Takasago Tekko (TYO 5458) is practically a net-net (and is one if you include investments) trading at ~9.5x LTM earnings (7.7x NTM) and has rental real estate worth ¥3.8 billion (more than the entire market cap) using the company’s own fair value disclosure.</li><li>The story gets interesting when we consider the massive Itabashi Factory Land (36,009 sqm in Itabashi-ku Tokyo) which sits on the balance sheet at ¥2 million ($12,800 USD) but is conservatively worth ¥8 billion ($51 million).</li><li>This is likely worth much more based on comps I found but we’ll use ¥8 billion to be safe. The facility was likely acquired around 1937, which is why it’s carried at near nothing.</li></ul>

Takasago Tekko (TYO 5458) is practically a net-net (and is one if you include investments) trading at ~9.5x LTM earnings (7.7x NTM) and has rental real estate worth ¥3.8 billion (more than the entire market cap) using the company’s own fair value disclosure.The story gets interesting when we consider the massive Itabashi Factory Land (36,009 sqm in Itabashi-ku Tokyo) which sits on the balance sheet at ¥2 million ($12,800 USD) but is conservatively worth ¥8 billion ($51 million).This is likely worth much more based on comps I found but we’ll use ¥8 billion to be safe. The facility was likely acquired around 1937, which is why it’s carried at near nothing.

Takasago Tekko (5458): A Profitable ¥3.3bn Nanocap near Net-Net

Nippon Carbon Co., Ltd. manufactures and markets artificial graphite electrodes, silicon carbide fibers, and special carbon products.  The Company also produces industrial machinery, operates parking lots, and leases a building.

<ul><li>Nippon Carbon (5302) is a specialty carbon materials manufacturer founded in 1915.</li><li>It’s priced as a slow-growth industrial legacy play at roughly 1x Book Value and ~13x FY24 &amp; FY25 earnings.</li><li>While the core carbon business isn’t terrible, it’s not particularly exciting, but 1x book seems fair given the high dividend (4.2%).</li></ul>

Nippon Carbon (5302) is a specialty carbon materials manufacturer founded in 1915.It’s priced as a slow-growth industrial legacy play at roughly 1x Book Value and ~13x FY24 &amp; FY25 earnings.While the core carbon business isn’t terrible, it’s not particularly exciting, but 1x book seems fair given the high dividend (4.2%).

Nippon Carbon (5302): A 120 Year Old $350 Million Japanese Carbon Manufacturer Trading at 1x Book