Deep Value – ItoKuro [6049.T] Initial Report – 01/01/2025 – BUY
· Significant market overreaction to overvaluation -> discount to NCAV.
· Business Model: Education recommendation service, referral-based revenue from schools.
· Industry: Ed tech, highly competitive and speculative, low-cost growth.
· Current 24.35% discount to NCAV, discount for ~2.5 years.
· Negligible burn rate, -0.15% 3-year avg, allows time for thesis to play out with downside protection.
· Strong balance sheet with adequate liquidity.
· Historical operating performance is volatile and mediocre but doesn’t justify current discount.
· Dividends and share repurchases – 0, past 5 years.
· Management – broadly effective, no issues.
· Ownership – CEO owns ~60% of shares, BOD unable to keep him in check.
· Sufficient volume for personal investors/small funds – US$66k/day 3-month average.
· The only relevant risk is value not being recognised by the market. Very possible, especially in Japan.
· Value is the catalyst.
Further reading: