Smartkarma Daily Briefs

• On Friday 9 October, largest BASE Inc (4477 JP) shareholder MAKI Hiroyuki who is also President and CEO Melco Holdings (6676 JP) (a.k.a. Buffalo Inc), announced his new larger stake.
• Or part of it. He got to 23.32% by 2 October. I expect it’s 26-27% as of now, but could be slightly higher. He also released a change in purpose.
• That change suggests substantial disagreement with and distrust of management. It threatens a Tender Offer to get over 30% (which he says he intends). Interesting times lie ahead. 

• The widening gap between Japanese single stock and index implied volatility appears concentrated rather than broadly distributed across the market.
• Information Technology and Industrials account for much of the concentration among stocks trading at unusually wide implied vol spreads.
• A number of stocks have gone from merely over-extended to dislocated, potentially pointing to a regime change in their volatility relationship against the Nikkei.

• Japan Post is monetizing a JPY 1.6 trillion portfolio, unlocking JPY 700bn in gains through private funds under activist pressure, creating a generational asset pipeline.
• Mitsui Fudosan is uniquely positioned to dominate these mandates, expanding asset management fees and driving ROE toward 10% via aggressive share buybacks without balance sheet bloat.
• Accelerated fund launches offer massive upside, while Bank of Japan rate shocks pose limited downside due to resilient fixed-rate corporate debt and robust Tokyo office rental growth.

• Funding done, stock’s shares still falling – what is the market pricing?Softbank has invested $64.6bn for about 13% of OpenAI, and the $40bn bridge loan has been repaid and cancelled.
• What is left is a mark, not a cash call. The stake is both equity upside + collateral for a $10bn margin loan priced at SOFR plus 425 basis points.
• 10 November Earnings: results for the six months to 30 September will show whether that mark holds.

• Context: This Insight follows up on previously highlighted relative value opportunities, using a statistical methodology based on mean-reversion to identify opportunities in paired securities.
• Highlights: In Japan, currently two pair trade opportunities persist across two sectors.
• Why read: Statistical analysis offers a unique perspective on relative value. Gain insights into actionable statistical pair trade opportunities and monitor performance of previously highlighted pairs.

• 2QFY2/27 OP of ¥7.2bn beat our forecast by 32% and the Street by 31%; excluding FX, 1H OP still grew c.16%.
• The FY2030 plan targets ¥180bn of sales and a 15%+ OPM, with services and defence delivering nearly half of the growth.
• We raise FY2/27–29E OP by 8–12% and our target to ¥8,870 (from ¥7,770); we remain Bullish.

• Ajinomoto, the Japanese company best known for seasoning, makes a thin film that sits between the layers of wiring under nearly all high-performance computer processors, by its own account.
• AI chips sit on ever bigger and thicker bases, so by my reading each one needs more of that film than the chip before it.
• Chipmakers rarely switch to a rival film, because testing a new one takes a long time, and that keeps the growth with Ajinomoto.

• Stick with restaurant group Colowide Co Ltd (7616 JP), despite the elevated implied stub and NAV discount. And Genting Bhd (GENT MK) craters on rights issue plan.
• Preceding my comments on Colowide and Genting are the current setup/unwind tables for Asia-Pacific Holdcos.
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

• Sharp Corp (6753 JP) has a valuation disconnect: Free Cash Flow, Reported Earnings and Share Price. 
• Sharp’s heavy capex business model shrank its Free cash flow over time, leading to an underperformance while Panasonic Corp (6752 JP) has pivoted to new industries. 
• The management of Sharp will need to pivot to AI or any asset light business but it may not come any time soon. 

• Soliton Systems K.K. (3040 JP) is demonstrating significant operating leverage, driven by strong growth in its core IT Security segment, which fueled a 15.1% YoY revenue increase and a 124.1% YoY surge in operating profit in 1H FY12/26.
• The company’s margin profile is expanding structurally as the sales mix shifts toward proprietary software licenses and cloud security services, reaching a 51.5% gross margin in Q2 2026 while supporting an upward revision to full-year FY12/26 revenue and profit forecasts.
• Soliton maintains an exceptional balance sheet with zero debt, robust free cash flow generation (JPY 3,428.0M in FY2025), and an accelerated shareholder return program that delivered a 50.0% 3-year dividend CAGR alongside upcoming growth catalysts in Phase Two GIGA School deployments and edge AI development.

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