Founder at Stock Spin-off Investing, Stock Spin-Off Investing

Richard Howe

Founder at Stock Spin-off Investing

Stock Spin-Off Investing

Generate attractive returns by taking advantage of inefficiencies in the stock spin-off market.

Stock Spin-offs

Equity Bottom-Up

<ul>
<li>Some of my favorite situations are international spin-offs because they fly under the radar. Hamee has not been written up on VIC, Seeking Alpha or Twitter (I found one writeup on Substack).</li>
<li>The company is 3 months away from breaking up into two separate companies which both look attractive. It is currently classified as a Specialty Retail company but will spin off a high growth, high margin, SaaS company in November that I estimate is worth more than the entire company’s market cap today.</li>
<li>The stock looks compelling on an absolute basis (5.1x NTM EBITDA) and SOTP basis. I see 31% to 117% upside over the next 6 months as the break up is completed.</li>
</ul>


Some of my favorite situations are international spin-offs because they fly under the radar. Hamee has not been written up on VIC, Seeking Alpha or Twitter (I found one writeup on Substack).
The company is 3 months away from breaking up into two separate companies which both look attractive. It is currently classified as a Specialty Retail company but will spin off a high growth, high margin, SaaS company in November that I estimate is worth more than the entire company’s market cap today.
The stock looks compelling on an absolute basis (5.1x NTM EBITDA) and SOTP basis. I see 31% to 117% upside over the next 6 months as the break up is completed.


Director, Pearl Hill Advisors

Nicholas Tanner

Director

Pearl Hill Advisors

Eizo was established in1968 by the founder of Murata (thus its significant holding in Murata, more later) and listed in 2002. It makes high-end monitors for a variety of commercial uses (75% of sales) but also has a very close relationship with Sanyo Bussan, Japan’s number 1 but unlisted maker of Pachinko machines for whom it makes monitors, undertakes software development and R&amp;D work (c 25% of sales).The monitor business has seen and should continue to see steady but pedestrian growth but the pachinko business unsurprisingly has been somewhat volatile and this year is very poor due to another change in the pay-out ratio of machines.The shares are, however, very cheap. The company has a cash filled balance sheet, c Y33bn worth of investments and owns 6.2% in itself. Thus, although its market cap is Y93bn, EV is currently about Y35bn. On our numbers, ebitada for next year is about Y12bn putting the shares on EV/ebitda of 2.9x. The shares yield 2.4% and trade at 0.9x book. Earnings will bounce next year after a poor 3/19. We would thus buy on a six to twelve month view. Longer term, however, the pachinko market may well remain problematic and we would question the growth in their niche monitor business as well.

Eizo was established in1968 by the founder of Murata (thus its significant holding in Murata, more later) and listed in 2002. It makes high-end monitors for a variety of commercial uses (75% of sales) but also has a very close relationship with Sanyo Bussan, Japan’s number 1 but unlisted maker of Pachinko machines for whom it makes monitors, undertakes software development and R&amp;D work (c 25% of sales).The monitor business has seen and should continue to see steady but pedestrian growth but the pachinko business unsurprisingly has been somewhat volatile and this year is very poor due to another change in the pay-out ratio of machines.The shares are, however, very cheap. The company has a cash filled balance sheet, c Y33bn worth of investments and owns 6.2% in itself. Thus, although its market cap is Y93bn, EV is currently about Y35bn. On our numbers, ebitada for next year is about Y12bn putting the shares on EV/ebitda of 2.9x. The shares yield 2.4% and trade at 0.9x book. Earnings will bounce next year after a poor 3/19. We would thus buy on a six to twelve month view. Longer term, however, the pachinko market may well remain problematic and we would question the growth in their niche monitor business as well.

Eizo (6737) A Very Cheap Company with Earnings Set to Recover Next Year.

Japan

Eizo Corp develops, designs, manufactures, and markets computer displays and monitors for amusement products.  The Company's products include liquid crystal displays (LCD) and cathode ray tube (CRT) displays.

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Eizo Corp (6737 JP)

Buy Hamee Corp

Some of my favorite situations are international spin-offs because they fly under the radar. Hamee has not been written up on VIC, Seeking Alpha...

Richard Howe

Eizo (6737) A Very Cheap Company with Earnings Set to Recover Next Year.

Eizo was established in1968 by the founder of Murata (thus its significant holding in Murata, more later) and listed in 2002. It makes high-end...

Pearl Hill Advisors

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