Dirt Cheap Net-Net

There is a stock right now trading at:

• 7x earnings

• ⅔ of net current asset value

• 53% of tangible book value

• Buying back 2.5% of shares per quarter

SE Holdings (9478) is a Japanese company, and its main business is publishing books and magazines, as well as online marketing.

While I do not have great insight into the publishing business in Japan, SE Holdings has been profitable for the last 9 out of 10 years. It's trading at ¥280 per share, with the following financials:

9478 is clearly a cheap stock, but Japan is famous for having a bunch of cheap stocks, and this wouldn’t be the cheapest of them all. What I really like about SE is their capital allocation. SE is on track to buy 8.5% of the outstanding shares in fiscal year 2025. They bought back 2.5% of shares in Q3 of 2025, 1.5% in February and are on track to buy an additional 1% in March.

SE has reduced its share count by 25% in the last 5 years, from 22.53 million shares to 16.86 million shares in the last quarter. Most (if not all) of these repurchases have been done below tangible book value (mainly comprised of net current assets), which should be accretive to shareholders. As you can see in the following chart, they started doing repurchases only when the share price was consistently below the tangible book value per share.

As a result, SE has compounded TBV per share at 21% in the last 5 years and 11.6% in the last 10 years.

What’s wonderful about their repurchase policy is that the business doesn’t have to do extremely well for them to increase shareholder value. If they can keep spending ¥450 million per year in repurchases, and somehow the share price doesn’t increase above ¥300, they will take out 45% of shares and compound TBV at 12% per year for the next 5 years. This is my mental gymnastics:

These assumptions are obviously flawed; there is no assurance that they can or will keep spending that amount on repurchases. But it is to show how accretive the current capital allocation policy is, considering the stock is cheap. On top of this, they pay a small ¥3.50 dividend, for a total shareholder yield (dividend + repurchases) of 9.75%.

Overall, SE Holdings is a cheap stock with great capital allocation, doing a lot to increase shareholder value. I hold it as a part of a larger basket of Japanese net-nets with similar characteristics.