MinebeaMitsumi Looks Seriously Undervalued, But There Are Significant Upcoming Challenges

Japan’s MinebeaMitsumi (“Minebea”; also sometimes written as “Minebea Mitsumi”) (OTCPK:MNBEY) (6479.T) is certainly not a household name to most investors, but this odd mix of precision machined and electrical components is a strong leader in several attractive markets, and has uncommonly robust opportunities to drive improved operating and product synergies in the coming years. At the same time, though, the company is facing some significant product cycle risk and there are no guarantees that the synergy efforts will pan out.

Minebea looks undervalued on the basis of long-term revenue growth of just 3%, but revenue could be choppy over the next several years and the margin/FCF generation improvement I expect may prove to be beyond management’s capabilities. I’d also note that these ADRs are not very liquid at all, so investors should factor that into their evaluation process (the Tokyo-listed shares are quite liquid, for investors who wish to pursue that option).

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MinebeaMitsumi Looks Seriously Undervalued, But There Are Significant Upcoming Challenges

Alps Electric Worth Another Look On Improving Auto And Phone Trends

Between a near-term rebound in camera phone actuators and a longer-term opportunity in car electronics, I think this is a good time to reconsider Japan’s Alps Electric (OTCPK:APELY) (6770.T). Although the U.S. ADRs aren’t as liquid as investors might like, Alps looks undervalued below the $60’s and could have further upside as the company’s auto electronics business really starts to take off in a few years.

The biggest downside at this point would appear to be another disappointing cycle for Apple (AAPL) and its new phones, as Alps has maintained strong share in the OIS actuator market and has meaningfully operating leverage potential on higher volumes.

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Alps Electric Worth Another Look On Improving Auto And Phone Trends