Japan Experts, Extraordinary Performance, Astris Advisory Japan

Astris Advisory Japan

Japan Experts, Extraordinary Performance

Our Corporate Advisory service is designed to give clients access to a wider range of investors. These include Japan specialists as well as global investors. The goal is to help achieve a fair equity valuation.

Equity Bottom-Up

CERES Inc provides internet marketing services. The Company's registered members earn reward points when they take actions at their website such as purchasing products. CERES also provides temporary staffing services online.

<ul><li>Ceres completed the sale of its bitbank stake on 1 October for ¥8.6bn and, the same day, announced a buyback of up to ¥2.5bn, as planned in June when the transaction was announced.</li><li>We think the buyback is incrementally positive for ROE, and if Ceres completes the buyback at the current share price by the end of FY12/26, we estimate that FY12/27E ROE would increase to ~18%.</li><li>The shares trade at 0.63x our SOTP value, so each share that Ceres buys back is also accretive to SOTP value per share.</li></ul>

Ceres completed the sale of its bitbank stake on 1 October for ¥8.6bn and, the same day, announced a buyback of up to ¥2.5bn, as planned in June when the transaction was announced.We think the buyback is incrementally positive for ROE, and if Ceres completes the buyback at the current share price by the end of FY12/26, we estimate that FY12/27E ROE would increase to ~18%.The shares trade at 0.63x our SOTP value, so each share that Ceres buys back is also accretive to SOTP value per share.

Ceres Inc. (3696 JP) - Exit Closed, Buyback Under Way

Arr Planner Co.,Ltd. operates real estate businesses. The Company provides custom houses development, house sales, house renovation, housing rental, commercial building designing, and other services. Arr Planner provides its services throughout Japan.

<ul><li>Arr Planner’s affordable luxury positioning continues to drive strong growth amid a competitive homebuilding market, with record company-wide H1 order value.</li><li>Gross margin continued to expand on higher per-unit selling prices across both custom-built and development homes, supported by stronger product appeal and brand image.</li><li>With the broader homebuilding industry raising prices, the Company has room to lift unit prices.</li></ul>

Arr Planner’s affordable luxury positioning continues to drive strong growth amid a competitive homebuilding market, with record company-wide H1 order value.Gross margin continued to expand on higher per-unit selling prices across both custom-built and development homes, supported by stronger product appeal and brand image.With the broader homebuilding industry raising prices, the Company has room to lift unit prices.

Arr Planner Co., Ltd (2983 JP) - Guidance Raised; H2 Still Has Upside

Kyoto Financial Group  / Equity Bottom-Up

Kyoto Financial Group, Inc. offers financial services. The Company provides commodity securities transaction, securities investment, trust, credit guarantee, banking related services, and other services. Kyoto Financial Group also operates real estate management and leasing, economic research, and other businesses.

<ul><li>A long tail of earnings growth – Although investor attention on Kyoto FG centers on its significant equity holdings in Kyoto-based companies and the unwinding of those positions we believe the more important story is the improving operating trend at the underlying bank which we think is underappreciated and offers a long tail of earnings growth that is unique among Japan's regional banks as its fixed-rate loan book gradually reprices.</li><li>The equity portfolio is an additional kicker, providing shareholder return optionality well above peers as it is monetized, and together we think they warrant a premium valuation for what the Bank offers.</li><li>Conservative targets, strong start – The new MTP targets net income of ¥90bn+ by FY3/29 (~2x FY3/26 excluding the gain on Nintendo shares), alongside ROE of 8%+, OHR in the 40% range, ¥300bn+ of shareholding reduction, and a total payout of 50%+.</li></ul>

A long tail of earnings growth – Although investor attention on Kyoto FG centers on its significant equity holdings in Kyoto-based companies and the unwinding of those positions we believe the more important story is the improving operating trend at the underlying bank which we think is underappreciated and offers a long tail of earnings growth that is unique among Japan's regional banks as its fixed-rate loan book gradually reprices.The equity portfolio is an additional kicker, providing shareholder return optionality well above peers as it is monetized, and together we think they warrant a premium valuation for what the Bank offers.Conservative targets, strong start – The new MTP targets net income of ¥90bn+ by FY3/29 (~2x FY3/26 excluding the gain on Nintendo shares), alongside ROE of 8%+, OHR in the 40% range, ¥300bn+ of shareholding reduction, and a total payout of 50%+.

Kyoto Financial Group (5844 JP) - Much More Upside Beyond Equity Monetization

Nippon Flour Mills Co., Ltd. produces and sells flour.  The Company also produces a wide variety of food products in the health, processed, and frozen foods product categories.  Nippon Flour Mills is a member of the Mitsui group.

<ul><li>Q1 profitability was impacted by higher depreciation from the newly operational Chita Mill and cost inflation, exacerbated by the ongoing Middle East tensions, that outpaced pricing, but we believe the weakness is transitory rather than a change in the Company’s operating performance.</li><li>Flour Milling continued to show underlying operating improvement and is tracking ahead of its full-year plan, while price revisions in the Food segment should drive a profitability recovery in H2. Importantly, SG&amp;A growth decelerated versus FY3/26 as NIPPN executes on cost reduction measures, a sign of the efficiency discipline that drives medium- to long-term profitability improvements.</li><li>Furthermore, NIPPN's capital structure optimization continues to progress steadily, with further cross-shareholding disposals planned through the remainder of FY3/27.</li></ul>

Q1 profitability was impacted by higher depreciation from the newly operational Chita Mill and cost inflation, exacerbated by the ongoing Middle East tensions, that outpaced pricing, but we believe the weakness is transitory rather than a change in the Company’s operating performance.Flour Milling continued to show underlying operating improvement and is tracking ahead of its full-year plan, while price revisions in the Food segment should drive a profitability recovery in H2. Importantly, SG&amp;A growth decelerated versus FY3/26 as NIPPN executes on cost reduction measures, a sign of the efficiency discipline that drives medium- to long-term profitability improvements.Furthermore, NIPPN's capital structure optimization continues to progress steadily, with further cross-shareholding disposals planned through the remainder of FY3/27.

NIPPN Corporation (2001 JP) - Transitory Weakness with Recovery in H2

IINO KAIUN KAISHA, LTD. owns and operates specialized tankers such as oil, chemical, and LPG carriers.  The Company transports crude oil, petroleum gasoline, and various dry consumer and agricultural goods.  Iino Kaiun Kaisha also leases and sells real estate.

<ul><li>Shipping is cyclical, and earnings volatility has long been the sector's biggest weakness for investors.</li><li>IINO Lines has successfully reduced the volatility of its earnings by combining its real estate business with shipping.</li><li>The Company was profitable through all seven years of the FY3/15–FY3/21 shipping market downcycle and grew BVPS +26.9%, while the major domestic peers recorded multiple years of losses and saw BVPS decline meaningfully</li></ul>

Shipping is cyclical, and earnings volatility has long been the sector's biggest weakness for investors.IINO Lines has successfully reduced the volatility of its earnings by combining its real estate business with shipping.The Company was profitable through all seven years of the FY3/15–FY3/21 shipping market downcycle and grew BVPS +26.9%, while the major domestic peers recorded multiple years of losses and saw BVPS decline meaningfully

IINO Kaiun Kaisha (9119 JP) - Navigating a Shipping Downcycle with Strength