Overlap (414A) - All Aboard or Over-board?!

Overlap Holdings (414A) is a manga and light novel publisher that listed in October 2025.

The company IPOd at 1,650 yen, traded lower on its first day, and is now priced at 963 yen (-42%)

This may be an interesting time to look at the stock. 1H results on April 14th may bring a catalyst.

The company has committed to a 40% dividend payout ratio, but have yet to disclose their actual forecast dividend for the current fiscal year ending in August.

It is a small company with a market cap of 19bn yen (about $120mn) and thus individual investors are the most likely potential buyers of the stock. When individuals go to web sites like Yahoo Finance or Monex Securities, they see a projected dividend yield of 0% at the moment. Thus it likely fails their initial screen.

Source: Monex

Source: Yahoo Finance

Dividend Catalyst

I believe the company is likely to announce its dividend forecast at the 1H. One reason is that the lockup on the PE funds that IPOd Overlap expires today. They are likely eager to see the share price at a more attractive level before they actually sell out.

The company projects EPS of 111.6 yen this year. At a 40% payout, that would equate to a ~44 yen dividend.

Below is a sensitivity table for DPS, dividend yield and stock price.

At 44yen and a 3.5% yield for the stock, the shares would trade at 1,257, or 31% above the current level.

The below table shows a similar sensitivity analysis based on EPS and P/E levels.

Shares currently trade at ~8.5x P/E. For a high-margin, medium-growth, asset-lite company, it seems reasonable to estimate a fair value P/E quite a bit higher. At 13x P/E and 112 EPS, the shares would trade at 1,456, or 51% above the current level.

The company certainly carries a substantial debt load, a Scarlet Letter gifted by their former PE owners. However, this is no sin in my eyes. Overlap generates 37% operating margins with no investment needs. It can afford 1x Net Debt / EBITDA. One might argue they could handle quite a bit more!

I won't delve deeply into the business today. They are quite similar to Alphapolis and Starts Publishing in taking User Generated Content to create published books. They are a few years ahead of their competitors in taking such content and turning it into anime.

The publishing industry had a brief surge during COVID-19 with people stuck at home, but has reverted to a slight declining trend. Manga had been on a growth trend, but recently also flattened out.

The domestic market for Digital Comic continues to increase slightly, up to 527bn last year.

Source: Shuppan Kagaku Kenkyujo

The shrink in the publishing market has a lot of people wringing their hands and avoiding stocks like Overlap. However, I think they are missing 1) the overseas opportunity in Manga and 2) the new revenue stream from Anime derived from Manga.

The Anime market continues to expand at a heady clip, reaching 3.84 trillion yen in 2024. All of this growth is from outside Japan, namely streaming distribution platforms like Netflix and CrunchyRoll.

Source: Association of Japan Animations

Publishing companies were historically reluctant to invest in anime as most were loss-making. However, with overseas demand surging, nearly all anime is now profitable, clearing the $3mn production budget for a 12-episdoe run. Thus, publishing companies, as owners of the IP, are getting more interested in taking a stake in the anime and benefiting from this trend. Overlap is only at the beginning stage of monetizing this particular potential revenue stream.

All that said, it is still possible the company 1) declines to release its dividend forecast on April 14th and 2) downgrades its earnings forecast.

It is hard to say regarding 1 why they would continue to leave this item un-disclosed. They are new to being public and generally inexperienced, in my view.

As for 2, PE brought the company to market and may very well have inflated the projections for this FY. That said, 1Q was decent (Sales +11%, OP -7% due to IPO costs), and so I do not expect a huge shortfall vs. projections at this stage.