Techno Medica: Undervalued, Cash-Rich Company With Clear Catalyst

Jiro Yasu and Patrick Rial of Varecs Partners presented their investment thesis on Techno Medica (Japan: 6678) at Asian Investing Summit 2023.

Thesis summary:

Techno Medica is the dominant provider of blood testing preparation machines in Japan. The company is a fabless producer and generates profit mainly from consumables such as labels and printer ink.

Varecs Partners is proposing that the company raise its dividend payout ratio to 100%, reflecting the lack of capex needs and the large cash balance.

The shares recently traded at an EV/EBIT multiple of 3.2x. Jiro and Patrick believe the share price could double if the dividend policy is changed. A similar proposal garnered significant support at last year’s annual meeting. With support from a few other like-minded shareholders, Jiro and Patrick believe success is near.

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About the instructor:

Jiro Yasu has two decades of investment experience in the Japanese equity markets including at Varecs Partners, First Eagle Investment Management and Daiwa Securities America. As the Representative Director of Varecs Partners, Jiro spearheads the investment firm’s efforts to identify mid-sized listed Japanese companies where corporate value can be realized for all stakeholders by working together with management. Jiro holds a BA in economics with a specialty in econometrics from Keio University.

Patrick Rial joined VARECS Partners in 2015 as Senior Analyst. He joined from J.P. Morgan Securities Japan where he worked in equity strategy and small cap research. Prior to J.P. Morgan, he was a product manager at Morgan Stanley MUFG Securities. Mr. Rial began his career as a financial journalist covering Japanese equity markets. He has been a CFA charterholder since 2011. He holds a BA in economics and history from Georgetown University.