Monolith Capital

Chances are Korea will be ripped to pieces in the short term. What are you looking to buy? Aside from direct AI beneficiaries, I’m thinking defense (Hanwha Aerospace $012450, MNC Solution $484870, Firstec $010820), power equipment (Hyundai Electric $267260, Hyosung Heavy Industries $298040), and ships (HD Korea Shipbuilding & Offshore Engineering $009540, Hyundai Marine Solution $443060). Give me what you got.

$6777.T Great to see Santec’s advanced optical instruments finally being specified for high-volume manufacturing equipment, rather than just R&D labs. GMT Global ($4573.TW) lists Santec’s tunable lasers and power meters in a standard configuration of fiber-array and lens-coupling stations used to make transceivers and optical components. GMT achieved explosive growth this year, with cumulative sales up 208% through September. In August, Santec told me that “our measurement instruments in this area remain primarily focused on R&D.” I hope to see a more detailed management update on design wins at the upcoming results. After all, Advantest ($6857.T) and Teradyne ($TER) are already shipping automatic testing stations for silicon photonics too.

$6643.T For a final surprise, Togami sharply increased its profit guidance for Q2 today after hiking product prices earlier this year. This company has become dirt cheap, despite excellent execution and improving shareholder returns. Easy double. (allegedly)

$255A.T GLTechno had arguably the best quarter among my holdings, yet the stock fell 4% after the results came out last Friday and finished down 11%. The semiconductor business is firing on all cylinders: sales are accelerating, margins are expanding, and orders are booming. The order backlog is up 130% YoY and 51% QoQ, with a book-to-bill ratio at 1.7. Applied Materials $AMAT is placing massive orders for GLTechno’s quartz glass components to service installed equipment and build new tools. In turn, GLTechno plans to double its flame-processing capacity in Japan starting in January 2027. As a bonus, the analytical instruments business is also performing well, fueled by robust sales of water-testing consumables. At 12 P/E, I think GLTechno has the highest risk-adjusted upside across my AI-related positions and buy candidates. It deserves a higher portfolio weight.

Togami Electric ($6643.T) is off to a good start this year: sales increased 12% while operating profit jumped 40% in Q1. Rising demand for electrical distribution equipment and higher prices for key products are driving earnings growth, as Japan upgrades its power grid. The revised guidance is conservative – I think operating income will turn out 15-20% higher than expected. Management should raise dividends from today's sub-30% payout and accelerate buybacks, as cash continues to pile up and now equals ~28% of market cap. I believe Togami is significantly undervalued and see it doubling in the next 24 months. I will maintain my current position.

$6135.T Makino was pitched today at the Sohn Tokyo Investment Conference. With Japanese machine tool exports at record levels, the company has strong momentum while its valuation remains reasonable. New orders and backlog are the key variables to watch in the upcoming results.

$4368.T FUSO Chemical trades at a discount to CMP slurry formulators (Fujifilm, Entegris, Qnity Electronics, Anji Microelectronics), even though its competitive advantage is arguably stronger and more durable. FUSO has effectively monopolized the ultra-high-purity colloidal silica market and has become a critical supplier to leading-edge chip production lines globally. Strong performance figures sustained over multiple quarters, recent silica price hikes, and investor outreach should improve the company’s perception over time.

The bottom is likely in for Okamoto Machine Tool Works ($6125.T). Capital spending on 300mm wafer manufacturing has already turned a corner: Okamoto posted a 370% YoY jump in wafer polisher orders last quarter, as SUMCO, Shin-Etsu, and GlobalWafers reported tight 300mm wafer capacity and planned production line upgrades. The company’s grinders for packaging applications have also stirred up interest, thanks to Mitsui’s commercial push in Taiwan. I expect these two product families (wafer polishers and grinders) to power a strong earnings recovery starting this year. With demand stabilizing, the machine tool business should no longer depress margins after hitting its lowest profitability in 15 years. I believe Okamoto’s current valuation offers at least 50% upside. I bought a few thousand shares today.

$6492.T I sold Okano Valve today for a 60% gain in six months. Thanks to @scg_oz astute comments, I revisited my valuation assumptions and realized they were too aggressive. I went through Okano’s numbers before the Fukushima disaster, made a few adjustments, and updated my earnings estimates. As a result, I now think Okano is worth around ¥17,000 per share instead of ¥22,000, when I implicitly assumed 9-10 reactors would be online by 2031. I believe 6-7 reactors is a more reasonable forecast today. I also don’t expect international expansion and next-generation reactors to move the needle soon, given regulatory hurdles. More inspection and restart work could create additional upside, but I wouldn't bet on it. Altogether, I think Okano is close to fair value today. Thanks everyone for the critical feedback, keep it coming!

$6135.T In a March interview, Makino's sales executive said: “We’ve heard about Starlink-related components, so that might be a positive development for our company as well.” I checked, and he is right - SpaceX likely uses Makino's machines to make Starlink satellites. SpaceX manufactures Starlink satellites at the dedicated facility in Redmond, Washington. GPT 5.5 helped me unearth local county permit records, which show new foundations for relocated machinery and related fire-alarm alterations in early 2025 under the project name "SPACEX SE03 - MAKINO EXPANSION AND HITL". In addition, SpaceX is looking for experienced machinists for the Redmond facility to operate multi-axis CNC machines, including 5-axis mills and 6-axis lathes. This convinced me that Elon is also a fan of Makino's gigantic "mother machines".

One of the main reasons I invested in Santec $6777.T was its highly lucrative medical business – MOVU. I generally understood where the optics are going, but couldn’t imagine the speed and scale of transition. On the other hand, Santec’s success in the eye diagnostics market in partnership with Alcon $ALC was evident, but not everyone paid close attention. Two years ago, I thought investors failed to price in the upcoming launch of ARGONAUT – the new multi-modal eye imaging system that would supplement the ARGOS biometer. The irony is that the ARGONAUT is still awaiting FDA approval, while Santec’s share price took off without it. We might finally see the ARGONAUT later this year, though. On the recent earnings call, Alcon’s management indicated that Unity DX whole-eye analyzer (Alcon’s branded version of the ARGONAUT) is about to launch. Considering Santec's rich valuation, I don’t think this will move the share price much when it happens, but it could still be a nice surprise.