Recent Share Price: ¥4,770
Accounting: Japanese Accounting Standards
Fiscal Year: Mar. 31st
Market Cap: ¥3.9 billion ($37 million)
Industry: Industrials / Switchgear Manufacturing
NKK Switches Co., Ltd., formerly NIHON KAIHEIKI IND. CO., LTD., is mainly engaged in the manufacture and sale of various industrial switches. The company offers illuminated, process sealed, miniature, specialty, surface mount and LCD programmable switches. The company also manufactures toggle, rocker, pushbutton, slide, DIP, rotary, keypad and keylock switches.
The company was established in 1953 by then chairman, Shigeo Ohhashi. The Ohhashi family remains deeply involved in the company via operations and ownership.
| Insiders | Shares | % |
| YK Big Bridge* | 132,000 | 16.0% |
| Hiroshige Ohhashi – Europe & China Sales | 29,300 | 3.5% |
| Naoko Ohhashi | 28,000 | 3.3% |
| Chizuko Ohhashi | 20,100 | 2.4% |
| Tomoshige Ohhashi – President | 19,200 | 2.3% |
| *May be part of Ohhasi family |
The Company operates in three business segments (company and five subsidiaries). The Asia segment is involved in the assembly processing of switch products in China, and the sale of products in Hong Kong, China, and rest of Asia.
| Revenue – JPY (in million) | 2018 | 2019 | % |
| Japan | ¥4,466 | ¥4,482 | 58% |
| United States | ¥2.499 | ¥2,414 | 32% |
| Asia | ¥761 | ¥769 | 10% |
| Largest Customers by Revenue- JPY (in million) | 2018 | 2019 | % |
| Chiyoda Electronic Equipment Co., Ltd. | ¥1,470 | ¥1,438 | 18% |
| Nippon Denka Industries | ¥1,036 | ¥995 | 13% |
The company has developed a medium-to-long term plan of pushing global growth beginning in 2017 called “Change100” [google translate].
The company aims to break away from mere switch sales, from the “design process” of Kawakami to “production process” of the downstream.
This 4-year initiative to accelerate international growth is not gaining traction, based on the numbers. Management has sited a slowdown in China and trade disputes as headwinds. They also point to increasing raw material costs, rising labor costs (in China and Japan), and costs due to the “Mactan plant construction”.
Because of this, the company has lowered their 4-year goal from ¥10 billion in revenue and a 10% operating margin to ¥9 billion in revenue and a 7.8% operating margin (¥700 million). As of recent annual report, order backlog is at ¥8.4 billion.
Reverse stock split 1-10 in 2017
The company holds ~¥1 billion in common securities which is ~10% of TBV.
The company owns rental real estate that generated non-operating income of ¥10 million in 2018 and has an estimated market value of ¥391 million which is ~4% of TBV.
Financials
Disclosure: We own shares in NKK Switches Co Ltd (6943:TYO)