Index Rebal/Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Index Rebal/Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Index Rebalance

Japan Business Systems  / Index Rebalance

<ul>
<li>Quiddity's "Who is Ready" series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.</li>
<li>Our long-term TOPIX Inclusion pre-event candidate <a href="https://www.smartkarma.com/entities/core-concept-technologies-inc" target="_blank" data-smartkarma-citation="entities:34323:1" rel="noopener">Core Concept Technologies Inc (4371 JP)</a> has experienced a sharp price decline and has moved further away from the required thresholds for Section Transfers.</li>
<li>Separately, <a href="https://www.smartkarma.com/entities/japan-business-systems-inc" target="_blank" data-smartkarma-citation="entities:40379:1" rel="noopener">Japan Business Systems (5036 JP)</a> has announced a potential move to the Prime market which could result in a TOPIX inclusion in late-October 2025.</li>
</ul>


Quiddity's "Who is Ready" series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
Our long-term TOPIX Inclusion pre-event candidate Core Concept Technologies Inc (4371 JP) has experienced a sharp price decline and has moved further away from the required thresholds for Section Transfers.
Separately, Japan Business Systems (5036 JP) has announced a potential move to the Prime market which could result in a TOPIX inclusion in late-October 2025.


TOPIX Inclusions: Who Is Ready (Sep 2025)

IR & Research Intelligence, Sessa Investment Research

Sessa Investment Research

IR & Research Intelligence

Sponsored research focusing on Japanese small cap.

Equity Bottom-Up

Japan Business Systems  / Equity Bottom-Up

<ul><li>On the back of brisk 1H performance and strong profit recovery led by Cloud Integration Business including NEXTSCAPE, JBS revised up full-term consolidated net sales by 10.0% to +17.1% YoY, OP by 31.6% to +63.3% YoY (OPM from 3.8% → 4.5%), and profit attributable to owners of parent by 35.1% to +230.1% YoY.</li><li>In addition to management successfully turning around profitability of Cloud Integration Business, this also reflects the underlying strong business environment from ongoing demand for DX investment in the cloud, AI and security.</li><li>Strong results momentum continued in Q3, as can be seen from the teal-colored bars in the two graphs below representing the quarterly trend of FY25/9 consolidated net sales and OP. </li></ul>

On the back of brisk 1H performance and strong profit recovery led by Cloud Integration Business including NEXTSCAPE, JBS revised up full-term consolidated net sales by 10.0% to +17.1% YoY, OP by 31.6% to +63.3% YoY (OPM from 3.8% → 4.5%), and profit attributable to owners of parent by 35.1% to +230.1% YoY.In addition to management successfully turning around profitability of Cloud Integration Business, this also reflects the underlying strong business environment from ongoing demand for DX investment in the cloud, AI and security.Strong results momentum continued in Q3, as can be seen from the teal-colored bars in the two graphs below representing the quarterly trend of FY25/9 consolidated net sales and OP. 

Q3 Follow-Up - Japan Business Systems (5036 JP) - September 5, 2025

<ul><li>In Q2 FY24/9 financial results reported exactly one year ago, profit attributable to owners of parent declined -74.1% due to recording an impairment loss of JPY 1,720mn in the 2Q as an extraordinary loss for the entire unamortized balance of goodwill associated with the acquisition of consolidated subsidiary NEXTSCAPE Inc.</li><li>In SIR’s follow-up report, we wrote “management promptly recognizing the impairment and withdrawing the FY25/9 OP MTP target effectively minimizes future down-side risk.</li><li>In the meantime, core business performance continues to grow at double-digits. ”</li></ul>

In Q2 FY24/9 financial results reported exactly one year ago, profit attributable to owners of parent declined -74.1% due to recording an impairment loss of JPY 1,720mn in the 2Q as an extraordinary loss for the entire unamortized balance of goodwill associated with the acquisition of consolidated subsidiary NEXTSCAPE Inc.In SIR’s follow-up report, we wrote “management promptly recognizing the impairment and withdrawing the FY25/9 OP MTP target effectively minimizes future down-side risk.In the meantime, core business performance continues to grow at double-digits. ”

Japan Business System (5036 JP) - Cloud Integration Profitability Recovering Sharply

<ul>
<li>The Tokyo Stock Exchange (TSE) calculates Free-Float Weight (FFW) for each listed company and uses this value as a key component of TOPIX Index Calculation.</li>
<li>For companies with "low liquidity" the FFW will be multiplied by a fixed liquidity factor of 0.75x to derive the final FFW used for index calculation.</li>
<li>Every April, the application of this liquidity factor is reviewed by the TSE. In this insight, we take an early look at what could happen in April 2026.</li>
</ul>


The Tokyo Stock Exchange (TSE) calculates Free-Float Weight (FFW) for each listed company and uses this value as a key component of TOPIX Index Calculation.
For companies with "low liquidity" the FFW will be multiplied by a fixed liquidity factor of 0.75x to derive the final FFW used for index calculation.
Every April, the application of this liquidity factor is reviewed by the TSE. In this insight, we take an early look at what could happen in April 2026.


TOPIX Index Upweights: An Early Preview Of "The Big April Basket" 2026; US$1bn+ Index Flows Possible

<ul>
<li>Quiddity's "Who is Ready" series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.</li>
<li>Section-Transfer name <a href="https://www.smartkarma.com/entities/japan-business-systems-inc" target="_blank" data-smartkarma-citation="entities:40379:1" rel="noopener">Japan Business Systems (5036 JP)</a> is expected to be included in the TOPIX index at the end of October 2025.</li>
<li>New listings <a href="https://www.smartkarma.com/entities/orion-breweries-ltd" target="_blank" data-smartkarma-citation="entities:45701:1" rel="noopener">Orion Breweries (409A JP)</a> and <a href="https://www.smartkarma.com/entities/tekscend-photomask-corp" target="_blank" data-smartkarma-citation="entities:45819:1" rel="noopener">Tekscend Photomask (429A JP)</a> are expected to be included in TOPIX at the end of October 2025 and November 2025 respectively.</li>
</ul>


Quiddity's "Who is Ready" series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
Section-Transfer name Japan Business Systems (5036 JP) is expected to be included in the TOPIX index at the end of October 2025.
New listings Orion Breweries (409A JP) and Tekscend Photomask (429A JP) are expected to be included in TOPIX at the end of October 2025 and November 2025 respectively.


TOPIX Inclusions: Who Is Ready (Oct 2025)

Japan

Japan Business Systems, Inc. offers information technology services. The Company provides system integration, application development, cloud integration, cloud services, and other services. Japan Business Systems also offers license products.

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Japan Business Systems (5036 JP)

TOPIX Inclusions: Who Is Ready (Sep 2025)

There are currently 143 names that satisfy all 5 key Segment Transfer requirements based on current data. Another 145 names can satisfy 4 out of 5...

Janaghan Jeyakumar, CFA

Q3 Follow-Up - Japan Business Systems (5036 JP) - September 5, 2025

On the back of brisk 1H performance and strong profit recovery led by Cloud Integration Business including NEXTSCAPE, JBS revised up full-term...

Sessa Investment Research

Japan Business System (5036 JP) - Cloud Integration Profitability Recovering Sharply

In SIR’s follow-up report, we wrote “management promptly recognizing the impairment and withdrawing the FY25/9 OP MTP target effectively minimizes...

Sessa Investment Research

TOPIX Index Upweights: An Early Preview Of "The Big April Basket" 2026; US$1bn+ Index Flows Possible

There are 20 names in our high and medium conviction groups which could collectively see up to US$1.1bn index buying if their 0.75x TOPIX Liquidity...

Janaghan Jeyakumar, CFA

TOPIX Inclusions: Who Is Ready (Oct 2025)

We expect Orion Breweries (409A JP) to outperform Yakult Honsha (2267 JP) until the close of trading on 30th October 2025 due to strong opposing...

Janaghan Jeyakumar, CFA

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