Japan

• On Friday 21 March, LY (4689 JP) made an announcement it had received all the required approvals and would launch the Tender Offer on 24 March. 
• Some were upset about the price originally but unlike other deals, this one traded below terms for three months since original announcement. Three activish funds had pitched in their 30%.
• This is now trading tight, and will continue to trade tight. If you own, whether you hold through early May depends on whether you are bullish or bearish the market.

• Japan’s top defense and aerospace contractor is being rerated to account for the limits on relying on the U.S. for defense in an alarming national security environment.
• A reasonably optimistic scenario brings MHI’s P/E ratio down to 22X in FY Mar-28, by which time Japan’s defense spending is scheduled reach 2% of GDP.
• The Trump administration wants Japan to spend more, but getting the budget through the national Diet is difficult enough as it is. 

• I tally 52 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma.
• Three news new deals discussed this week: the Westgold Resources (WGX AU)/Spartan Resources (SPR AU) merger, and EcoNaviSta (5585 JP)‘s Tender Offer.
• Key updates/news took place on: Dropsuite Ltd (DSE AU),Shandong Fengxiang (9977 HK), Proto Corp (4298 JP), and Shinko Electric Industries (6967 JP).

• Buy Hankyu Hanshin REIT, Inc. (8977 JP) on any weakness. There will be strength ahead.
• With ENN Energy (2688 HK) suspended pursuant to the Takeovers Code, a third party Offer, as opposed to ENN Group, seems more likely. 
• Be long Idemitsu (5019 JP) vs ENEOS for the next several weeks. Light and easy drift trade based on pressure increasing and pressure ending before new news in May.

• 3D Investment Partners launched a Partial Tender Offer to buy a 10+% stake in Hankyu Hanshin REIT, Inc. (8977 JP). The REIT finally responded with a “Neutral” stance. 
• But they also upgraded earnings forecasts, bought a building, and announced the Sponsor would buy units in the market over the next year. It’s big. 
• And that creates flows, which then engender other reactive flows, and cascading flows, and because the sector isn’t rich, there may be a tailwind.

• We believe the key highlight of Q1-2 FY7/25 results is OPM expansion YoY from 4.7% to 6.6%.
• The company aims to secure high-margin projects aligned with its strategic aims while maintaining business investment in new hires to grow.
• Business expansion via strategic alliances is bearing fruit with Itochu Corporation (8001), with other initiatives being unveiled in the food and logistics sectors to expand and diversify the solutions portfolio and accelerate growth. 

• Japan System Techniques (hereafter, the Company) announced its Q3(9M)
• Key consolidated figures net sales of JPY 20,549 mn (+10.9% YoY), operating profit of JPY 2,041 mn (+26.5% YoY), ordinary profit of JPY 2,116 mn (+28.4% YoY), and profit attributable to owners of parent (hereafter, net profit) of JPY 1,417 mn (+28.9% YoY).
• Higher sales and profits in the DX&SI business and Package business contributed in Q3 earnings growth.

• Q3 FY2025/3 Earnings results summary: Takamiya (hereafter, the Company) reported its Q3(9M) FY2025/3 consolidated earnings results: sales of JPY 32,335 mn (+0.5% YoY), operating profit of JPY 1,316 mn (-45.3% YoY), ordinary profit of JPY 1,209 mn (-52.1% YoY), and profit attributable to owners of parent (hereafter, net profit) of JPY 867 mn (-49.8% YoY).
• Due to the postponement of the large-scale projects’ commencements, rental volumes fell short of initial expectations.
• Additionally, due to delays in the delivery schedule of sales and OPE-MANE projects, the net sales saw only a slight increase.

• When investing in a larger company, one can expect higher liquidity, higher expectations of endorsement of the activist investor’s views because of the large institutional holdings, and smoother communication.
• As cross-shareholding structures are beginning to break down, there’re many opportunities for activist investors to attack such companies because they couldn’t create value and grow due to underutilization of resources.
• Activist investors have invested in Japanese companies in the past, but never with such success. This success is largely due to a change in the environment.

• Melco Holdings (6676 JP) chairman Hiroyuki MAKI bought up a 14% stake in BASE Inc (4477 JP) in just under two weeks. It was done quite transparently. He announced daily.
• He wants to get to 30% in a Tender Offer. The method, approach, lack of transparency, and similarity to previous situations where he invested has the company wary. 
• This looks like a Poison Pill case in the offing. It WAS a cheap stock. It is not expensive now. But it is not clear what the endgame is here.

• In February, Idemitsu Kosan (5019 JP) announced a new buyback to start when the then-existing one had not yet been completed. This is a pattern the last few years.
• On Tuesday, Idemitsu announced the method. Shareholder structure means there is pressure here, and its major peer sees buyback pressure drop imminently. 
• Be aware of tilts and timing, and what might come in May.

• Huang throws cold water on a potential TSMC led deal for INTC fab business, saying he ‘wasn’t invited’ to any discussions. 
• Micron guidance beats consensus which should be a positive for related names such as Micronics. 
• CoWoS and advanced packing maker Shibaura Mechtronics raised guidance on Wednesday ahead of street, yet stock still trading around recent lows points to further upside.

• The reorganization of Panasonic Holdings was far from restructuring its business portfolio, as it brought highly profitable subsidiaries and affiliates into the parent company while leaving low-profit businesses alone.
• Although Panasonic’s disclosure was successful as IR in instilling “expectations” in investors by showing targets, a possibility cannot be denied that it’s temporary phenomenon that came at market turning point.
• Now, 3 years after “TSE’s request,” many investors are looking to improve profitability by restructuring their business portfolios, and will likely demand steady results year after year.

• In today’s Morning Views publication we comment on developments of the following high yield issuers: Softbank Group
• In the US, the FOMC has unanimously voted to maintain the Fed Funds target rate unchanged at 4.25-4.50%, in line with market expectations. In its statement, the FOMC noted that “uncertainty around the economic outlook has increased”, removing previous language that the risks to achieving employment and inflation goals are “roughly in balance”.
• Meanwhile, the Fed dot plot showed that the US central bank’s officials continue to see a median of two 25-bp rate cuts in 2025, two cuts in 2026 and one in 2027, with the long-run Fed funds rate unchanged at 3.0%.

• Every year it’s the same trade. But sometimes it is not. This year it is Thursday and Friday. Or not.
• The month-end and quarter-end bring big flows, or not, depending on how things have gone.
• Over the past 10 years or so, the two-day return on the March trade is pretty good. This year? Well read on!

• The Makino Milling Machine Co (6135 JP) Board has proposed introducing countermeasures to nudge Nidec Corp (6594 JP) to delay the start of the tender to 9 May. 
• The countermeasure was likely needed to facilitate a competing offer rather than force Nidec to provide the required information and delay the start (Nidec is still evaluating the request).
• Nidec’s offer at current terms has a low chance of success, necessitating revised terms. The Board claims that there is a sufficient probability of a competing proposal.

• Trelleborg plant in the US to shut down in April, 2025
•  Israel, Prague plants too stop working in 2025
• Hangzhou to have car tire plant producing 9 million tires a year

• Late on the 17th, Proto Corp (4298 JP) released a filing to the TSE saying activist-ish investor and objector to the current MBO, Kaname Capital, had filed an injunction.
• The injunction suit against two directors says procedures were unfair and the decision violated the duty of due care. They ask the Court to rule the directors halt support and…
• …that the MBO actor YOKOYAMA Hiroichi not terminate the offer on 21 March 2025. Injunction filings against directors for Tender Offers are rare for a reason.

• EcoNaviSta (5585 JP) has a couple of interesting product lines and platforms. That makes it attractive, and scalable. Synergies to a big buyer are reasonably obvious.
• Eisai Co Ltd (4523 JP) is that big buyer, having decided to be interested last summer. I could imagine others could be interested too. The tech has uses.
• For the moment, it is a high EV/Revenue bid on an interesting small company. The chairman, cross-holders, directors, and a couple of financial institutions own 66+%. But…

• JX Advanced Metals (5016 JP) priced its IPO at JPY820 per share to raise gross proceeds of US$2.5 billion. The shares will start trading on 19 March.
• Relevant notes: JX Advanced Metals (5016 JP) IPO: The Bull Case, JX Advanced Metals (5016 JP) IPO: The Bear Case, JX Advanced Metals (5016 JP) IPO: Price Range Is Fair.
• Since the price range was announced, the peers have modestly re-rated. My SoTP valuation of JPY859 is slightly above the IPO price, suggesting the price is fair.

• JX Advanced Metals raised 438.6 billion yen (US$3 billion) on its IPO offering after pricing the IPO at 820 yen per share, valuing the company at 761.3 billion yen. 
• Our base case valuation of JX Advanced Metals is price per share of 863 yen, based on P/E of 9.9x using our estimated net profit of 81 billion yen (2026E).
• Therefore, we would sell into strength if the share price of JX Advanced Metals rises to the 863 yen to 1,044 yen per share.

• SanBio reported no operating revenue for FY01/25, with an operating loss of JPY3.5bn, narrowing from JPY4.5bn.
• Non-operating income was JPY628mn, primarily from foreign-exchange gains, while non-operating expenses totaled JPY134mn.
• The company expects no operating revenue for FY01/26, forecasting operating expenses of JPY3.5bn, focusing on AKUUGO® approval.

• During FY25, SanBio Co Ltd (4592 JP) did not generate any revenue and incurred an operating expense of ¥3.5B, down 23% YoY.
• The company successfully completed two commercial production runs to accumulate inventories in preparation for launch of Akuugo. The earliest possible timing for shipment is assumed to be Q2FY26.
• SanBio has a cash runway through FY26. Further, in March, the company has raised funds of ¥2.1B through third party placement.

• JX Advanced Metals (5016 JP)’s parent, ENEOS Holdings (5020 JP), raised around US$2.5bn via selling more than half of its stake in JXAM in its Japan IPO.
• JXAM engages in business activities primarily focused on the development, manufacture and sale of materials made from copper and rare metals, which are used in the semiconductor and ICT fields.
• We have covered various aspects of the deal in our previous notes. In this note, we will talk about the trading dynamics.

• After dropping by half, Tokyo Electron’s share price has bounced. But it is still vulnerable to cutbacks in AI-related investments and tariff-induced recession.
• A positive scenario has net profit rising by 8% in FY Mar-26. In a negative scenario, it drops by 25%. We take the positive view.
• Innovations in manufacturing point toward a big step up in profit margins by the end of the decade. But watch out for a cyclical downturn between now and then.

• The Nikkei 225 (NKY INDEX) has been in a paralyzed trend since August 2024. Then at the end of February 2025 it started to correct.
• As explained by Travis Lundy and Brian Freitas the index rebalance on March 5th, 2025 was a bit unexpected and minimal in terms of changes.
• The index bottomed 1 week after the March 2025 Nikkei 225 Average Review, and then started a rally, quite modest for now which could be signaling short-term tactical weakness.

• Emphasizing sales volume expansion – Q1-3 FY4/25 results indicated strong sales volume growth at 32.2% YoY, as the company continued diversifying into market sectors such as medical, recruitment and finance.
• Although prioritizing growth has meant a shift in the customer mix away from traditionally high margin brick-and-mortar in-store experiences, we believe this strategic shift is positive given their larger addressable markets.
• The company revised its FY4/25 guidance, providing greater clarity over the short term, and highlighted its medium-term expectations for sustained double-digit growth.

• Even if a company goes private due to listing costs, it is good for investors to shift to a more share price-conscious management in order to maintain the listing.
• Many companies want to take over management rights with the founding family, but find it not easy to continue as a publicly traded company and consider going private.
• New problems lie ahead in the coming years between founding families who chose MBO to inherit the management control of “family business” and MBO funds who have to Exit.

• Revenue grew 11.8% YoY to JPY52.2bn, driven by Overseas Solutions orders and yen depreciation, despite extraordinary losses.
• Operating profit increased 76.4% YoY to JPY787mn, impacted by business liquidation expenses and additional co-development costs.
• FY01/26 forecasts sales of JPY55.1bn, operating profit of JPY1.2bn, and net income of JPY310mn, with a JPY16.00 dividend.

• Striving to dominate a new market – Koukandekirukun is an innovative online platform offering home appliance and sanitaryware replacement services.
• With an early-mover advantage, it aims to transform the ¥2.8tn residential equipment replacement market, where just 2% of orders are handled online.
• Efficiencies gained from its comprehensive online quote service help undercut traditional rivals by about a third and generate data to continuously improve SEO, driving traffic to its site. 

• Tsuruha and Welcia are on the road to a merger, where Tsuruha takes over Welcia but Aeon ends up owning “more than 50% but less than 51%” of Tsuruha.
• The Price Ratio is now 4.24x. Trailing EPS ratios is >5. Forward EPS ratios are further above 5. BVPS ratio? Near 5. Welcia grows storecount. Tsuruha makes more money/store.
• Tsuruha changed its FY-end to match that of Welcia/Aeon so both will report earnings/guidance in just over 3 weeks. That will likely influence the ratio.

• We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads: Tenma Corp (7958 JP), Seven & I Holdings (3382 JP), OneConnect Financial Technology (OCFT US), Soundwill Holdings (878 HK), Insignia Financial (IFL AU).
• Lowest spreads: Makino Milling Machine Co (6135 JP), Shibaura Electronics (6957 JP), Domain Holdings Australia (DHG AU), Proto Corp (4298 JP), PointsBet Holdings (PBH AU). 

• Seven & I continues to seek shareholder approval for its own path, offering not just improved efficiency but a massive ¥2 trillion buyback albeit one over a long time frame.
• This is a lot, especially when the core Seven Eleven chain in Japan is still struggling to keep up with its peers on monthly growth rates.
• But this forgets retail media which is set to become a major new income stream for CVS and, judging by forecasts, would help pay for a chunk of that buyback.

• Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
• On the IPO front, we had a look at a few of the upcoming listings in Hong Kong.
• On the placements front, Japan Post Bank (7182 JP) managed to do better than its last deal while Austal Ltd (ASB AU) didn’t do too well.

• Earnings Momentum in 2025 – Canon expects 5% revenue growth and 17% EBIT expansion this year, driven by high-margin segments like semiconductor lithography, medical devices, and network cameras.
• Aggressive Shareholder Returns – With ¥350 billion in planned buybacks and dividends in 2024, Canon’s 6.8% TSR and strong free cash flow offer a compelling value proposition.
• De-Risked Upside – 2025 guidance provides earnings visibility, while valuation suggests ~40% upside, supported by resilient end-markets and an under-leveraged balance sheet.

• We assess the effectiveness of short volatility versus long volatility positioning.
• Nikkei’s performance relative to SPX is analyzed across three distinct time frames.
• Volatility remained muted ahead of next week’s Bank of Japan meeting, while option volumes increased week over week.

• Nikkei Business reported Friday 14 March that Gunma Bank (8334 JP) and Daishi Hokuetsu Financial Group (7327 JP) (“DHFG”) were in talks to integrate to create a Super-Regional Bank
• Gunma and Daishi-Hokuetsu are part of the same multiple-regional bank alliances, including the Gunma-Daishi Hokuetsu Alliance since 2021, in order to collaborate regionally, build scale, and lower service provision cost.
• As Gunma and Daishi Hokuetsu serve adjacent jurisdictions, and they are already exploring sharing branches, this makes sense. The World with Interest (rates above zero) may cause more integration talk.

• I tally 58 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma.
• Three news new deals discussed this week: Soundwill Holdings (878 HK), Tenma Corp (7958 JP), and Naigai Trans Line (9384 JP).
• Key updates/news took place on: Seven & I Holdings (3382 JP), Silk Logistics (SLH AU), ESR Group (1821 HK), Proto Corp (4298 JP), and Japfa Ltd (JAP SP).

• Tenma Corp (7958 JP) has recommended an MBO tender offer at JPY3,580 per share, a 37.1% premium to the last close of JPY2,611.
• Despite implying a P/B multiple of 0.89x, the offer is attractive compared to historical trading ranges and peer multiples and represents an all-time high. 
• An irrevocable from Dalton, the largest shareholder, lowers the risk of activist agitation. Given that the offer is reasonable, the required minority acceptance rate of 28.5% is attainable. 

• In Prime Market where 99% of companies already disclose some material in English, it is a step that is expected to expand the number of disclosure materials disclosed in English.
• Companies with 10-20% foreign ownership have followed the TSE’s request to disclose information in English. These companies remain reluctant to disclose information-rich materials in English.
• Companies with over 30% foreign ownership improved more than any other group by foreign ownership in disclosing information-rich materials in English, which is result of responding to overseas investor demand.

• Plastic household goods maker Tenma Corp (7958 JP) has been “undervalued” for decades. A variety of activish/activist holders have come and gone. Dalton went substantial in 2016, is 18% now.
• The family has always controlled the company, and in the last decade, the company has bought back shares, raising the family stake. Now they are buying out minorities. 
• The deal is at 4.1x Adjusted EV/EBITDA for March 2026 (adjusted for securities sales, etc) and 0.82x book for the non-cash/securities portion of the business. But Dalton has thrown in.

• Post COVID investors have been monitoring Keisei Electric Railway Co (9009 JP) as part of the shareholder activism program. 
• Recently, the management has announced a share buyback of up to 8 million shares. In 2022, they bought back 5 million shares, and the share price rallied 21% that year. 
• It currently trades at 6x PER while Topix trades at 14x PER. 

• Zeon will develop BR and Yokohama will make tires with it
•  Facility to be installed at Zeon’s Tokuyama Plant in Shunan City in Japan
• Trial production scheduled for 2026 and mass production by 2030

• Ever since Itochu Shoji acquired Familymart, it has tried to leverage the more than 16,000 stores to sell product from its many other interests, including clothing. 
• With Convenience Wear a clear hit, it is now going further, adding new cosmetics and other products for the young.
• It is also bringing in The Bathing Ape’s founder to turn Familymart into a new kind of Conbini-Variety store.

• Cumulative Q3 FY04/25 revenue, operating, and recurring profit increased 1.4%, 0.4%, and 1.0% YoY, respectively; net income declined 11.9%.
• Revenue grew 5.6% YoY, but operating profit declined 25.7% YoY due to communication equipment and human resource costs.
• Revenue declined 3.7% YoY, operating profit rose 7.0% YoY; excluding fiscal change, revenue and profit increased 5.5% and 27.3%.

• In 1H FY07/25, the company reported revenue of JPY16.4bn (+14.5% YoY) and operating profit of JPY3.7bn (+8.2% YoY).
• Consumer Service segment saw revenue of JPY15.1bn (+17.6% YoY), with a 24.7% operating profit margin, down 0.7pp YoY.
• Online Advertising segment reported revenue of JPY1.2bn (-13.9% YoY) and segment profit of JPY77mn (-70.3% YoY).

• Operating revenue grew 69.5% YoY to JPY5.1bn, driven by strong sales of TDM-621 across multiple regions.
• The company revised its FY04/25 forecast, expecting JPY7.0bn in revenue and a reduced operating loss of JPY769mn.
• Foreign exchange fluctuations impacted recurring loss, with JPY649mn in losses due to yen appreciation against USD and EUR.

• Revenue increased 9.8% YoY to JPY7.3bn, with operating profit up 50.5% YoY to JPY2.0bn.
• Desknet’s NEO Cloud revenue grew 17.4% YoY, driven by a 3.5% user increase and a price revision.
• The Overseas segment’s revenue rose 53.5% YoY, but operating loss increased due to higher personnel and startup costs.

• On 12 March 2025, a minor Twitter account @nanahoshiuk started in January announced a website shiftnissantokyo.com where they point out the value proposition in Nissan Tokyo Sales (8291 JP). 
• The writeup is by a UK company led by a young man with an equity-investing career, some experience at an activist shop, who now runs a “Shareholder Activism Outsourcing Service.”
• The content sounds familiar to my piece in December, has a few unpolished edges, but clearly points out the value proposition. The stock deserves a re-visit. My comments are below.

• On 13 March, Alimentation Couche-Tard (ATD CN)’s management held its first press conference in Japan since it disclosed its Seven & I Holdings (3382 JP) offer.
• The Couche-Tard charm offensive was designed to pressure the Board to engage and facilitate a definite agreement. The press conference provided incremental new information.
• The Board’s next move will likely provide limited due diligence, partly to avoid a protest vote at the May AGM. However, the prospect of a Board-recommended binding proposal remains low.

• An undisclosed seller is looking to raise around US$520m via selling 0.5% of its stake in Recruit Holdings (6098 JP) .
• We have covered a number of placements in the stock over the past few years, most of which have ended up doing well.
• In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

• Amazon’s growing lead in Japan’s e-commerce market looks increasingly inexorable. 
• While growth in Japan was slower than some other Amazon markets, it still outpaced Rakuten. LY Corp did better but partly in reaction to poor results the year before. 
• Meanwhile, a recent survey suggests growing interest in brand-operated online stores, particularly to read more in-depth content and use brand-based points.

• Sales in cumulative Q3 decreased by JPY90mn (-2.7% YoY) due to business transfers and service discontinuations.
• Operating profit increased by JPY25mn (+12.5% YoY) despite a JPY6mn decrease in recurring profit due to foreign exchange loss.
• Concourse, Inc. will acquire MTI Ltd.’s divination business, contributing JPY330mn in sales through an absorption-type split.

Dentsu has published its FY24 results, which show a strong Q424 in its Japanese business, ensuring that the group effectively met November’s net revenue guidance despite continuing weakness in international trading. As a result of higher discount rates and shifts in the international risk profile, Dentsu has taken a ¥210.1bn impairment charge, split ¥153.0bn in EMEA and ¥57.1bn in the Americas. The group has also now launched its new mid-term management plan (MTMP), targeting organic revenue growth of 4% in FY27, with operating margins of 16–17% by the plan’s completion. This involves a re-evaluation of the underperforming businesses within the group and laying solid foundations on which to build.

• Following promotion of collaborative engagement, which was demanded by investors, the law will now be amended to allow companies to request disclosure of beneficial shareholders, which was requested by companies.
• This is due to the fact that the company is wary of overseas investors as the cross-shareholding structure begins to crumble and the foreign ownership remains at a high level.
• Under the guise of “to activate engagement,” it is expected that SR activities will become more active in order to address proxy voting.

• Startia Holdings, Inc. (hereafter, the Company) announced its Q3 (9M) FY2025/3 results on February 14. On a cumulative nine-month basis, the Company reported net sales of JPY 16,179 mn (+12.2% YoY), operating profit of JPY 1,902 mn (+15.7% YoY), ordinary profit of JPY 1,956 mn (+20.5% YoY), and net profit of JPY 1,405 mn (+35.3% YoY).
• Progress toward the Company’s full-year forecast (revised at the time of its interim results announcement) stood at 75.4%, 72.6%, 74.4%, and 78.1%, respectively.
• As they are tracking close to the 75% mark, the results appear largely in line with the Company’s full-year forecast.