Billionaire Shigeta’s Hikari Tsushin gets market love again

TOKYO: Yasumitsu Shigeta, the founder and chairman of Hikari Tsushin Inc, was once among the world’s richest persons, before earnings disasters caused the company’s shares to sink 99% in 2000. Almost two decades later, some investors are having a second look at the Japanese company, and recent market moves suggest they like what they see.

Shares of the office-equipment seller have jumped 25% this year to the highest since 2000, outperforming the Topix stock index’s 6% gain. Three of four analysts surveyed by Bloomberg have a “buy” recommendation on its equity.

In the bond market, Hikari Tsushin sold its longest-ever notes this month, and the issuance amount was increased due to strong investor demand.

Shigeta’s company has come a long way. A darling of the stock market in the 1990s, Hikari Tsushin was considered one of Japan’s promising new firms along with SoftBank, until it faced a crisis in 2000: its stock sank as its mobile phone sales business unexpectedly lost money.

Now the market is bullish once again toward the seller of everything from copiers to office water servers to mobiles, as equity investors cheer its rising profits and regular shareholder payouts, while bond buyers appreciate the extra yields on its notes.

Hikari Tsushin is “a very exciting stock from our perspective,” said Richard Kaye, a portfolio adviser at a Japan unit of Comgest Global Investors S.A.S., which has about US$100mil invested in the company’s stock. The shares are cheap, the company’s business model is attractive and it’s growing steadily, according to Kaye.

Hikari Tsushin’s net income climbed to 39 billion yen (US$358mil) in the 12 months ended March 31, from 7.8 billion yen five years earlier. Kaye expects the firm’s annual net profit to break above 50 billion yen in the coming five years.

The earnings recovery follows years of restructuring that involved the company closing mobile-phone retail outlets, while it expanded sales to corporate clients including office automation and also started selling insurance.

It’s a “quite good company,” according to Akihisa Motonishi, a chief analyst at Japan Credit Rating Agency.

He said the company had shifted its sales strategy in the past five years or so from getting a single payment on each product sold, to receiving small monthly commissions as long as the user keeps using the product, stabilising its earnings. — Bloomberg