The Longleaf Partners Funds have published their 1Q 2018 report(s). It includes some commentary on a new holding in Japan (AIN Holdings) for the International Fund. Excerpt below:

“AIN Holdings (+30%, +0.62%), the largest prescription pharmacy chain in Japan, was a new investment in the quarter and quickly contributed. Japan’s prescription dispensing pharmacy industry is highly fragmented among 58,000 pharmacies, mostly run by single-store operators. AIN, with roughly 1,000 stores and 3% market share, is the largest and most profitable chain. Despite the government’s downward drug price revisions, the pharmacy market is expected to grow 3-5% annually, as prescriptions increase with an aging population and fulfilment moves from hospitals to pharmacies. Japan’s most recent price revision for April 2018 penalizes large chains, which gave us the opportunity to buy the stock at a discount. CEO Kiichi Otani, who owns over 9% of the company, remains confident that AIN can repeat its historic success at overcoming the impact of price controls. The company’s net cash balance sheet should give AIN an advantage in both ramping up organic growth via on-site hospital pharmacies and acquiring under-performing pharmacies at single-digit earnings before interest, taxes and amortization (EBITDA) multiples. During the quarter, the company reported increased sales and margins and continued to close unprofitable stores while opening new stores that have a rapid payback.’