The Long Happy

Synchro Foods $3963.T

ValueTrapped — Mon, 14 Apr 2025 03:09:19 GMT

Continuing to surf in the wake of activists, Synchro Foods is the highlight of the day. Just a quick post to highlight what I am seeing.

Company Overview

Synchro Food was founded in 2003 and provides a comprehensive suite of tools for restaurant operators. With a growing base of over 311,069 restaurant operators and 351,117 jobseekers, Synchro generates substantial revenue through targeted advertisements on its platform.

Financial Performance

Synchro has seen ~15% average revenue annual growth with EBIT margins that are consistently in the high 20s. The business is high cash generative, with an OCF yield of ~5% and limited Capex requirements.

Synchro Food has two main business lines - Media Platform and M&A Brokerage

Per CapitalIQ, “Synchro Food Co., Ltd. operates various media platforms for the food and beverage industry. Its platforms include Ryokuten.com, a support site for opening and operation of restaurant; Jobs@Restaurant.com, a restaurant job information site; Jobs@Interior Design, a job search site for the interior industry; Store Design.com, a matching site for store design companies; Ryokuten.com Unoccupied Sales, a purchase appraisal site for unoccupied stores; and Mobimaru, a kitchen car share matching site.”

In 2024, Synchro Food captured an 11.4% share of the nationwide job posting services market, with a dominant 33.8% share in Tokyo, Japan’s restaurant hub. With 60% of aspiring restaurateurs being new to the industry, Synchro is well-positioned to meet growing demand. To further accelerate expansion, the company plans to extend its presence beyond Tokyo, Osaka, and Nagoya, combining direct sales and distributor channels for nationwide growth.

There is also a much smaller M&A Brokerage which is highly volatile with fluctuating margins, but an important complimentary offering to its core business.

Valuation:

Synchro currently trades at 12x 2024 EBITDA, with ~30% of its market cap in cash. The company just paid a ¥15 dividend last month for a 2.5% yield. From CIQ below:

Register & Shareholders:

What makes Synchro particularly appealing to me, is the presence of both AVI and LIM Advisors, two of the most active and successful small cap activists

AVI has been actively acquiring shares in Synchro throughout March and April. On 9 April 2025 AVI declared a 10.06% shareholding in the company, having paid an average of ¥479/share.

LIM Advisors 31 March 2025 declared a 12.12% shareholding in Synchro having paid an average of ¥412/share.

Disclosures here on Edinet

As a result, what you have now is an incredibly stacked register, with the combination of LIM, AVI, VIS, Grandeur Peak, and SPARX owning 39% of the company! I feel like I’ve seen this movie before…!

It is even more noteworthy that LIM Advisors, which has seen incredible success in its engagements of late, deems Synchro worthy of being its’ largest holding.

Conclusion:

I am long just based on the register alone. But paraphrasing Kerrisdale this is not investment advice, and “is provided to you solely for your own entertainment purposes”.

TCOM | AC | NU | PSH

ValueTrapped — Tue, 07 Jan 2025 02:20:10 GMT

TCOM 7.7% Position

Trip.com Group (TCOM) is the leading player in China’s online travel agency market, with >50% market share. TCOM leverages its strong domestic position to capitalize on the burgeoning travel markets in China, India, and Southeast Asia. The company’s dual-market strategy, which includes brands like Ctrip, Qunar, Trip.com, and Skyscanner, positions it to capture gains in both domestic and international travel. Despite macroeconomic challenges, the resilience of China’s domestic tourism and the rebound of international travel post-pandemic provide significant growth opportunities.

TCOM’s distinct advantages include its deep connections within China, enabling it to negotiate favorable terms with partners, and its stronghold in the domestic market, which foreign competitors cannot easily penetrate. Additionally, TCOM’s stake in India’s MakeMyTrip and Trip.com's rapid market share expansion in Southeast Asia and the UK further solidify its global presence. TCOM is currently trading at FY25 PE ratio of 16x, but given the superior growth prospects, it should be trading at or even in excess of BKNG at 23x

Day 1 Portfolio

ValueTrapped — Tue, 31 Dec 2024 15:37:07 GMT

The purpose of this blog is simply to document my portfolio, investment decision and thinking in real time for posterity.

My investing style is eclectic, reflecting my training. I've been fortunate to generate returns across a range of asset classes in different geographies: junk bonds, equities, structured products, real estate, and options. My approach emphasizes keeping an open mind and seizing opportunities wherever they arise.

At its core, investing is about keeping score. I've given myself three years—starting today—to prove that I can excel at this. My portfolio is heavily weighted toward international markets (>80%), and while I've done well against the international indexes, simply buying the SPY would have been a better financial choice in hindsight. Although what would I do with all my extra time?

Current Portfolio Positioning:

China Tech ETF, 22% Position:

Expressed via 3067.HK + KWEB + BEN notes that track both 3067.HK/KWEB

This is a simple bet that the pessimism on China has been taken too far, and that 10x P/E on trough earnings is too little.

While the vicious competitive environment in China has no parallel anywhere in the world, these ETFs own leading companies with dominant market positions (think Tencent with Wechat, Alibaba with Alipay, etc).

The companies are incredibly cash generative (Alibaba has ~40% of its market cap in cash) and have now started returning capital to shareholder by the truckload (JD has bought back 8.1% of its shares to end sept this year).

Buying KWEB or 3067.HK directly would be the simplest play, but because it is highly possible that the market takes a long time to recognize the value here, I'm converting my position slowly to a series of BEN notes (~1/3 of the exposure).

BEN Notes are structured products where you pick two underliers (3067 / KWEB in this case), and at the end of the contract period, they reference the worst of the two performers. If the worst underlier return <0% you take the downside 1:1. If performance is >0%, then you take a minimum return of the [coupon] or if higher, then you take the upside 1:1. So the payoff looks something like:

There’s no free lunch however, and in this particular instance, you take the default risk of the issuing bank (generally low in my view) and you give up the dividend (worthwhile in my view given the coupon).

As a live example of the coupons available, this was priced 19 Dec 2024:

You can do BENs in any tenure, at a discount to market, etc. Because stocks move for any variety of reasons, I've chosen 3067.HK + KWEB, which are two ETFs tracking China Tech, main difference being KWEB holds US listed names and 3067.HK holds HK listed names. There are some significant differences (i.e. PDD or Xiaomi), but most large chinese tech companies are duo listed, and the two ETFs generally move together.

I’ve chosen to pursue this strategy as the step-function improvement in returns in a positive price scenario vastly outweighs giving up the dividend or the slight risk in the composition of the ETFs. At the end of the day, I’m going long China Tech beta with a potential returns kicker.

Structured products are interesting when volatility is high, or market sentiment is at an extreme. Not to be used liberally, but in small targeted doses, I feel pretty good about them.

More to come on this position at a later date.

AJSS. 20% Position.

Japan is an incredibly exciting market. The market is cheap, especially at the smaller end of things, but cheapness in itself is not a great place to be - I have the scars to prove it.

BUT in Japan, with the corporate governance reform that is happening, more and more activists showing up, you have a potent catalyst for a market filled with previously classic value traps. Most companies do not have controlling shareholders (perhaps given taxes), and where there are cross shareholdings and parent companies pulling strings, the government is doing everything it can to unwind such influence.

As a first step, I want Japan beta -> Japan small cap beta -> small cap beta + activist catalyst. As we go along, I will take stock specific exposure, but in the meantime, I want on the Japan train NOW.

The best option I’ve found is AJSS, the UCITS version of AJOT, with some modifications to fit the rules. It’s a publicly traded close end trust with annual liquidation which allows for a tight NAV spread (look at PSH for how much NAV vs stock price can blow out). AVI is incredibly active in Japan, and they are thoughtful with the work they do.

This is currently a 20% allocation in JPY, 50% funded in USD + 50% funded with a JPY margin loan at 1% per year. One thing I have never been able to figure out is currency. That said, Japan just feels incredibly cheap and JPY just feels mis-priced), so I'm happy to take a 10% exposure to the Yen. If it move another 30% to ~200 USDJPY, that's a 3% hit to the book - manageable. USJPY feels intuitively that it should be closer to 100 vs 200, although I admit this could swing either way.

I believe this strategy should return a minimum of 10% per year gross, which after deducting a 1% margin cost will be 19% on the net 10% equity exposure.

The are fairly public about their positions and view, more information here: www.assetvalueinvestors.com/ajot/

I’ve posted plenty on Japan and you can follow me here to read more: www.x.com/thelonghappy

More thoughts to come.

Paraphrasing Kerrisdale this is not investment advice, and “is provided to you solely for your own entertainment purposes”