The T. Rowe Price Japan Fund (Trades, Portfolio) began in 1991 and has been led by Archibald Ciganer since 2013. The fund invests at least 80% of assets in a wide range of Japanese companies and aims to offer long-term capital growth through Japan’s strongest industries, which includes automobiles and electronics.
The fund poses a higher risk than others due to its geographical concentration, which may subject it to unfavorable currency exchange rates or political and economic events abroad.
Last year, the fund posted returns of 29.96%, its second highest return since 2005, when the fund had its best performance at 40.04%.
Ciganer is a graduate of the Paris Institute of Political Studies and has 13 years of experience in the Japanese equity market. He joined the fund in 2007.
Here are the most recent changes to T. Rowe Japan’s portfolio:
New buys
Mabuchi Motor Co. (TSE:6592, Financial)
T. Rowe purchased 42,100 shares of Mabuchi Motor at ¥8,682.38 per share. Mabuchi manufactures small electronic motors used in vehicles such as car mirrors, door locks, power windows and electric parking brakes.
Gross profit increased about 21% in FY 2013 to ¥26,854 million. Gross margin was 24.77%.
The company reported long-term debt for the first time last year at ¥397 million. Total current assets are still more than enough to cover liabilities.
Mabuchi’s P/E ratio is 25.9, which is just a bit higher than the industry median.
Nikkiso Co. (TSE:6376, Financial)
T. Rowe purchased 167,000 shares of Nikkiso for ¥1216.54 per share.
Nikkiso’s industrial division produces fluid equipment for process industries, and water conditioning systems for thermal and nuclear plants. Its aerospace division manufactures reinforced plastic products, while the medical division manufactures hemodialysis machines, dialyzers, blood tubing sets, and other medical products.
Gross profit has increased every year since 2008, and went up 22% in FY 2014.
The current P/E ratio is 16.9. Nikkiso’s dividend yield is 1.16%, which is near the two-year high. The five-year dividend growth rate 18.7%, while the share buyback rate is 0.9%.
Adds
Nippon Seiki (TSE:7287, Financial)
T. Rowe’s largest add in terms of portfolio impact is Nippon Seiki, which manufactures instrument panels for automobiles and motorcycles, as well as LCD displays and modules. The fund has held shares since the second quarter 2013, and added 170,000 shares at ¥2186.33 per share.
Nippon’s dividend yield is 1.1%, and the five-year growth rate is 32.4%.
The company is likely undervalued; according to the Peter Lynch chart, Nippon’s earnings line has been above the price line since about June 2010, and earnings continue to outpace price. The stock currently trades at ¥2,130, while its DCF valuation is ¥3,478.12, giving a 39% margin of safety.
Its P/E ratio for the trailing 12 months is 9.2, lower than 88% of the companies in the global auto parts industry.
T. Rowe Price Japan also added to its positions in NTT DoMoCo (TSE:9437, Financial), Credit Saison (TSE:8253, Financial), Familymart (TSE:8028), Temp Holdings (TSE:2181), Hikari Tsushin Inc. (TSE:9435), Start Today Co. (TSE:3092), Sumitomo (TSE:8053), GMO Payment Gateway (TSE:3769) and Mitsubishi Electric (TSE:6503).
Sold out
Aisin Seiki Co. (TSE:7259)
T. Rowe sold 73,400 shares of Aisin Seiki for ¥3,967.30 per share. The fund had owned shares since the fourth quarter 2012.
Aisin Seiki’s stock has been down 17% since the start of the year. The company is the linchpin of 178 companies that make up AISIN Group. Aisin Seiki produces and sells automotive parts, and is expanding into other areas such as lifestyle and energy-related companies.
Though gross profit improved in FY 2014, it was still only 14.53% of revenue — a shaky margin that may have contributed to the sell out.
Return on equity in FY 2014 was 10.57%, while return on assets was 5.39%.
Ichiyoshi Securities (TSE:8624)
T. Rowe sold out its 132,800 shares of Ichiyoshi at ¥1330.59 per share. The fund has owned shares since the fourth quarter of 2013. The stock price has declined 23% since the beginning of the year.
Ichiyoshi is based in Osaka, Japan, and provides financial services such as dealing, brokerage, underwriting, and investment trust.
The company’s dividend yield is 3.41%, but has not grown over the past five years.
The operating margin is 27.98%, while the industry median is 46.24%.
NHK Spring Co. (TSE:5991)
The fund sold 194,600 shares of NHK Spring for ¥923.90 per share; it has owned shares of the company since the second quarter 2012. The stock price declined 13% since the start of the year.
NHK Spring operates in four industrial segments: automotive suspension springs; automotive seating; precision springs and components; and industrial machinery and equipment.
Profit margins were a low 13.53% in FY 2014. Cash-to-debt ratio is 1.14, which is higher than 78% of companies in the global auto parts industry.
T. Rowe also reduced its positions in Terumo Corp (TSE:4543), Central Japan Railway Company (TSE:9022), and Japan Tobacco (TSE:2914).
