Japanese net-net Takachiho Koheki Co Ltd

Takachiho Koheki Co Ltd (2676.Japan)

Price: ¥831 (6/7/2011)

Takachiho Koheki is a fascinating company they are basically a Japanese middle man.  They import or export technology products.  I know import/export seems like a very generic business but it appears they partner with Western countries to bring a technology over and then act as customer support as well as on site expert in finding partners and a distribution network.

The company began as a mainframe computer importer in the 1950s and has continued to build out their profile from that point.  The company has offices in Silicon Valley and Israel which I am presuming are used to source new technologies.

My main question with this company is how much is their business model in demand still?  They seem to completely specialize in technology and from the website computer technology.  In the age of the internet a consumer in Japan can order from a supplier worldwide as long as the supplier is willing to ship to Japan.  This could be the reason the company is trading at such a low price.

Valuation

Here is the net-net worksheet I put together.

The company is trading at a nice discount to ncav and discounted ncav, it's also trading at a few yen more than cash per share.  The balance sheet looks great, a high amount of cash, moderate receivables and inventory.

Operating Highlights
-EV/EBIT of 1.52
-CFO of ¥136 per share for a P/CF of 6.11 or a EV/CF of .78
-FCF of ¥122 per share for a P/FCF 6.81 or EV/FCF .87
-CFO has been a bit spotty, it went negative in 2006 and then climbed to ¥196 in 2009 before declining to ¥136 in 2010.
-Capex has been between ¥4 and ¥13 a share the past five years.
-The cash balance has been steadily increasing.
-The company pays a 2.8% dividend.

While this company looks great on a cheap statistics basis I'm taking a pass.  The reason is the business model seems outdated, I just don't see a need for a technology importer anymore in this global internet connected age.  Back in the 60s and 70s I could see how a company in the US or Europe might want Japanese expertise to gain access to the local market.  I'm just not convinced of a need for this anymore.

Talk to Nate about Takachiho Koheki Co or net-net investing.

Disclosure: I have no positions in any issue mentioned in this post.