Japan Bull Fischer Says Short Cyberdyne as Valuation High

  • Seth Fischer says he will be buyer if market cap falls 95%
  • Fischer says assistive-limb market not as large as believed

Oasis Management’s Seth Fischer, a bull on Japanese equities, chose to present a bearish stock call at an annual hedge fund conference in Hong Kong.

Cyberdyne Inc., a maker of robot exoskeletons for patients with spinal difficulties, is overvalued and poised to fall, Fischer said at the Sohn Conference Hong Kong 2016 presented by the Karen Leung Foundation. The company $4.7 billion market capitalization would have to drop 95 percent before Fischer would consider investing, he said.

“If you’re a sell-side analyst, how do you justify the current valuation?" Fischer said of Cyberdyne at the conference on Wednesday. “I’d be a happy buyer at a $200 million market cap.”

All five analysts tracked by Bloomberg who cover Cyberdyne rate the stock “buy” or “outperform.” Nomura Holdings Inc.’s Kyoichiro Shigemura has a target price of 3,200 yen for the stock, 27 percent above Wednesday’s closing price, Bloomberg data show. Cyberdyne shares slipped 2.9 percent after declining in late trading.

Cyberdyne trades at 9.7 times book value and about 660 times estimated earnings, according to data compiled by Bloomberg.

‘Long-term Potential’

‘We have many long-term investors who believe in our products and in the long-term potential of these devices,” Cyberdyne’s Chief Financial Officer Shinji Uga said. “We have never met this hedge fund and they probably don’t really know what our business is about.”

The company’s shares have jumped more than sixfold since listing in Tokyo in 2014, and Fischer attributed most of those gains to optimism about cash flows that won’t come until 2024 or later. Japan’s market for assistive-limb technologies isn’t as large as people think, Fischer said, adding that Cyberdyne’s founder is against his technologies being used for military purposes, ruling out a potential source of revenue.

Fischer’s decision to focus on a short-selling idea in Japan comes as the benchmark Topix index has tumbled 12 percent in 2016 and many foreign investors have fled the market. Fischer, an activist investor who tends to focus on undervalued stocks, said innovative companies often cost too much in Japan as investors get carried away. The Mothers Index of smaller growth shares with newer technologies has gained 27 percent as the broader market has fallen. Fischer says this shows how investors overpay for such companies.

Fischer said he is actively engaged with positions in 10 Japanese companies. He said last year that electronics maker Kyocera Corp. should return as much as $4 billion to shareholders by selling a large shareholding in KDDI Corp., a telecommunications carrier that shares the same founder.

Oasis has 50 percent to 60 percent of its money in Japanese equities, Fischer said in an interview last year. He’s betting Abe’s moves to overhaul corporate governance rules will make companies more capital efficient and investor friendly, and he’s the most bullish on Japan in many years, he said at the time.

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