Smartkarma Daily Briefs

• On 26 August at the close, 2 names will get added to and 5 names deleted from a global index provider’s major Japan/global “standard” index.
• 6 of 7 changes were in the Quiddity Index predictions as of end Jun-2025. One dropped, then two got added. Our final predictions had all seven plus one more DEL.
• These changes were well-flagged so well pre-positioned. This insight looks at shareholder structure, historical fundamental ratios, and performance vs Peers. Watch the direct peers.

• On 26 August at the close, 2 names will get added to and 5 names deleted from a global index provider’s major Japan/global “standard” index.
• 6 of 7 changes were in the Quiddity Index predictions as of end Jun-2025. One dropped, then two got added. Our final predictions had all seven plus one more DEL.
• They were well-flagged so well pre-positioned. This insight looks at shareholder structure, historical fundamental ratios, and performance vs Peers. This sets up a possible trade before or into the event.

• In response to Minebea Mitsumi (6479 JP) matching its Shibaura Electronics (6957 JP) offer on 14 August, Yageo Corporation (2327 TT) increased its offer by 7.0% from JPY6,200 to JPY6,635.  
• To remain in the game, Yageo had to bump. The latest bump underscores Yageo’s confidence in securing regulatory approvals. 
• The Minebea CEO suggested that its JPY6,200 offer would be the final one. If Yageo secures regulatory approval (likely), Minebea will walk rather than match Yageo’s latest offer. 

• Freee KK (4478 JP)  reported 4Q and full-year FY06/2025 results last week which disappointed the market leading to a sell-off.
• After reporting 3-consecutive quarters of Adj. OP, profitability dipped in 4Q due to higher advertising and D&A costs. However, freee expects to return to profits in the current fiscal year. 
• Following 4Q results, premium over Money Forward has disappeared and Freee is currently trading at a huge discount to MF which seems unwarranted

Dentsu’s Q225 performance was a little below management expectations, with conditions remaining challenging outside Japan. Group operating margins were controlled for H125 at 12.0%. With a further goodwill write-down of ¥86.0bn, Dentsu reported a statutory loss for H125 and is not now paying an interim dividend. A decision on the full year will be made later, and our model assumes dividends resume for FY26. Our FY25 forecasts have been realigned to match revised guidance, with a slightly more cautious stance on growth for FY26. Management’s target for operating margins of 16–17% by FY27 remains in place, predicated on the targeted cost reductions in the mid-term management plan.

• Q1 FY2025 was weak with Steel swinging to losses (–¥2,300/t) on spreads, FX, and inventory drag, leaving recovery hinging on H2.
• We retain our FY25–28 earnings estimates, assuming stable ~15–16% EBITDA margins and volume growth to 31.6 Mt by FY28.
• At ~US$525/t EV/t (adj.), JFE trades at a deep discount to Nippon Steel, but upside depends on spreads stabilizing and tariff risks not worsening.

• More companies are mentioning share buybacks, reducing cross-shareholdings, capital allocation policies, and capital costs. However, the ROE of most companies has not improved significantly.
• “TSE’s request” is at critical juncture addressing whether it’ll lead to formal improvements such as the introduction of corporate governance code, or whether it’ll enable sustainable growth in corporate value.
• Looking at recent market trends, investors are increasingly expecting activist investors to directly demand management reforms from companies, in anticipation that it’ll take time to realize results of internal reforms.