Starts Publishing has experienced a fivefold increase in book sales compared to 2016, with a consistent rise in sales outside the Covid-period. The company reported a significant operating profit growth of 43% year-over-year in FY12/23, achieving an operating margin of 27.3%—the highest in the Japanese publishing industry. Additionally, the company boasts ROE of 23% and operates debt-free.”
Recently, the company gained recognition for producing the hit movies ‘If We Could Meet Again on the Hill Where That Flower Blooms’ and ‘Devil’s Bride.’ The former grossed JPY 4 Bn at the box office and led to the sale of 1.25 MM novel copies. ‘Devil’s Bride,’ a comic series, has sold 2.5 MM copies across print and digital formats.
BUT,
The stock trades at PE of 6.5x(FY12/25) and PB of 1.82x.
Why?
Investors’ concerns center on the perception that the publishing industry is in decline, and they attribute the company’s strong performance in FY12/23 to the unusual release of three movies in a single year—a feat they doubt can be replicated. Additionally, the company’s low liquidity and modest market capitalization of JPY 13.1 Bn are deterrents for many foreign institutional investors.
In my report, I have outlined reasons supporting my belief that Starts Publishing can sustain its success by continuing to produce best-selling books. Their unique “one-source-multi-use-loop system” is set up to ensure steady stream of likely-big-hit contents.
President Kikuchi summarizes their unique positioning as follows at an investor event on 6/10/24:
In the contracting publishing sector, new entrants are rare, and existing publishers have generally assumed a conservative approach. However, the company stands out for its assertiveness, consistently introducing new imprints annually. This strategy of augmenting best-sellers and pursuing growth is distinctive and provides a competitive edge in a shrinking market.
For those intrigued by Stars’ upside potential, I have compiled an in-depth report of their unique business model, available for purchase. Interested? Please direct message me at kyoshiawase@gmail.com for further details.
Side info) Blackstone has agreed to take a controlling stake in Infocom -Japanese Manga Firm for $1.7 Bn in 5/24. Blackstone sees value in the Manga industry.
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