JPMorgan Japan Smaller Companies has announced that, for the year ended 31 March 2015, the total return on net assets was 30.9%, well ahead of the return of the Company’s benchmark, the S&P/Citigroup Japan Extended Market Index, which rose by 22.4%. Over the same period, the Company’s share price increased by 35.9%, reflecting a narrowing of the discount to the diluted net asset value per share from 13.5% to 10.3%.
The manager’s report says the stocks that contributed most positively to the excess return include Invincible Investment Corp. (real estate), Anicom Holdings (insurance), Asahi Intecc (health care equipment & services), Misumi (capital goods) and Nippon Shinyaku (pharmaceuticals, biotechnology & life sciences).
Invincible Investment Corp. is a Real Estate Investment Trust (‘REIT’) that has increased exposure to hotels through acquisitions. The REIT has continued to perform strongly, supported by rising hotel revenues. The hospitality industry is enjoying strong demand from an increasing number of inbound tourists, in particular from Asia. Anicom provides pet insurance, a market which is still in its infancy in Japan and continuing to grow strongly. The ageing population is a tailwind for the company as an increasing number of older people live with pets and they have a high propensity to spend on them. Asahi Intecc designs and manufactures medical equipment. Its main products include percutaneous transluminal coronary angioplasty guide wires and catheters. Supported by growth in end demand combined with market share gains, Asahi Intecc has delivered a 16.2% compound annual growth rate in revenue over the last 10 years. They believe that there remain large opportunities for the company to continue to grow strongly over the next 10 years and beyond. Misumi is a leading supplier of factory automation equipment and moulding components in Japan. It has grown strongly overseas, where sales have risen from 14.3% of total in 2005 to 44.4% in 2013. Another growth driver is its ‘VONA’ e-commerce site for consumable goods used at manufacturing facilities. They think, as wages rise in emerging countries and the working population shrinks in developed countries, the need for automation will intensify. Nippon Shinyaku, meanwhile, rallied after the announcement that one of its new drugs showed good results in phase 3 clinical trials.
On the other hand, Teikoku Electric Manufacturing (capital goods), Tokyo Tatemono (real estate) and Fuji Seal International (materials) were among stocks that detracted from performance.
JPS : JPMorgan Japan Smaller outperforms by large margin