Japan

In today’s briefing:

Proto Corp (4298 JP) – Activists Getting More Activish, Watch for Position Changes?
NaiGai Trans (9384 JP) – Small LCL Shipping Founder Gets an Exit
Bottom Fishing: SoftBank (9984 JP) Looks Attractive After -18% Drop
Stock Splits Meet Many Companies’ Needs to Increase the Shareholdings of Individual Investors
Initiation – Moresco (5018 JP)
Kissei Pharmaceutical (4547 JP): FY25 Looks Stable; Recent Licensing Deals Key To Near Term Growth
CellSource (4880 JP): Q1 FY10/25 flash update
Frontier Management Inc. (7038 JP) – Reported Losses in FY2024/12…
CRE Inc/Japan (3458 JP): 1H FY07/25 flash update

Proto Corp (4298 JP) – Activists Getting More Activish, Watch for Position Changes?

The MBO for Proto Corp (4298 JP) where the founder/chair is buying out from minorities is being done at the wrong price. His reasons are good, but not for minorities.
One large foreign shareholder – the second largest shareholder of the firm – has offered substantial pushback in the form of a letter asking for discussions. That went nowhere.
So now they have come out harder. The solution here is a really big bump or a broken deal if investors keep the share price above the TOB price.

NaiGai Trans (9384 JP) – Small LCL Shipping Founder Gets an Exit

Naigai Trans Line (9384 JP) is a small logistics provider. They specialise in LCL (“Less-Than-Container-Load” shipments around Asia.
On 7 March 2025, the company agreed to a buyout via Tender Offer by IAPF2 – a buyout vehicle of IA Partners – a 3yr old PE firm in Japan.
This is 5.9x EBITDA. There’s minimal transparency. No guidance. The PE firm is putting down an equity check of 2x EBITDA and 4x earnings. But it’ll probably get done.

Bottom Fishing: SoftBank (9984 JP) Looks Attractive After -18% Drop

By Nico Rosti

Softbank Group (9984 JP) has lost nearly 18% of its stock value since February 7th. The stock has been falling for 4 weeks, our model indicates a very oversold condition.
SoftBank’s has a number of strategic investments and initiatives that make it an attractive investment.
Below, we outline key fundamental factors that align with our quantitative model’s view, suggesting the stock is oversold and could be a compelling buy at its current price.

Stock Splits Meet Many Companies’ Needs to Increase the Shareholdings of Individual Investors

The increase in stock splits can be attributed to TSE requesting more effective measures from companies after market restructuring and to more companies whose stock prices have risen.
Companies are obsessed with getting individual investors on their side. It seems that the interests of companies and TSE are aligned in conducting stock splits to increase individual investors’ shareholdings.
Now that many companies want to increase the number of individual investors, it may be a good time to resolve the cost issue and consider changing the share unit system.

Initiation – Moresco (5018 JP)

MORESCO Corporation (hereinafter referred to as “MORESCO” or “the Company”) is a R&D-oriented company that has developed products boasting market-leading shares in Japan, such as fire-resistant hydraulic fluid for the steel and automotive industries and liquid paraffin used as ingredients in cosmetics, with the aim of achieving domestic production of special lubricants.
In recent years, the Company has successfully brought to market water soluble die casting lubricants and environmentally friendly hot melt adhesives.
In addition, it has also gained a leading global share in synthetic lubricants such as high temperature greases and hard disk surface lubricants.

Kissei Pharmaceutical (4547 JP): FY25 Looks Stable; Recent Licensing Deals Key To Near Term Growth

By Tina Banerjee

Kissei Pharmaceutical (4547 JP) reported 14% YoY jump in revenue during 9MFY25 driven by Beova and Tavneos amidst price revision pressures and generic competition.
The company has reiterated FY25 guidance of revenue rising 14% YoY, with major drugs witnessing growth.
Main trigger point happens to be the in-licensing deal and the sub-licensing agreements the company has signed with various players giving an opportunity to expand its market in near future.

CellSource (4880 JP): Q1 FY10/25 flash update

Revenue decreased by 27.6% YoY to JPY849mn, with operating and recurring losses of JPY62mn and JPY61mn, respectively.
Contract processing services revenue fell 16.4% YoY, with orders declining 12.4% YoY to 4,981 in Q1 FY10/25.
Medical device sales revenue dropped 26.7% YoY, while cosmetics sales revenue decreased 65.2% YoY in Q1 FY10/25.

Frontier Management Inc. (7038 JP) – Reported Losses in FY2024/12…

Frontier Management announced its full-year FY2024/12 results after market close on February 13, 2025.
Net sales came in at JPY 9,265 mn, surpassing the forecast target of JPY 9,000 mn, mainly thanks to an increase in revenue from deals in the M&A Advisory Business.
In addition to this increase in sales, cost-cutting measures in consulting-based businesses proved successful, which helped reduce operating losses from the forecasted JPY 950 mn to JPY 632 mn.

CRE Inc/Japan (3458 JP): 1H FY07/25 flash update

In 1H FY07/25, the company reported sales of JPY22.6bn (-3.9% YoY) and business profit of JPY3.1bn (+124.0% YoY).
The company resolved to support a Tender Offer by SMFL MIRAI Partners and plans to delist its stock.
As of end-January 2025, floor space under management reached approximately 6.6mn sqm with high occupancy rates.

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Mar 12

Daily Brief Japan: Seven & I Holdings, JX Advanced Metals, Baudroie, Tokyo Metro, Japan Steel Works, GiG Works, Nippon Shinyaku, Shimojima and more

In today’s briefing:

7&I (3382) Update – Couche-Tard Responds
JX Advanced Metals (5016 JP) IPO: Big Retail Allocation Means No Fast Entry
Baudroie (4413 JP) – Fast Growth, Prime Promotion, and TOPIX Inclusion
TOPIX Inclusions: Who Is Ready (Mar 2025)
Japan Steel Works (5631) | Artillery Giant Reloads for Growth
GiG Works (2375 JP): Q1 FY10/25 flash update
Nippon Shinyaku (4516 JP): Strong 9MFY25 Numbers; FY25 Guidance Raised; Regular Launches Remain Key
Shimojima (7482 JP) – OPM Rebounded from Q2 3.4% → Q3 8.6% on Price Hikes

7&I (3382) Update – Couche-Tard Responds

On 10 March, Alimentation Couche-Tard (ATD CN) issued a release “UPDATE ON PROPOSAL FOR A COMBINATION WITH SEVEN & i“.
They felt obliged to be transparent in the wake of the 7&i Letter To Shareholders released yesterday. The content/nuance of the two letters differ significantly.
Two parties competing to get a truth which cannot be both could be problematic. We are still many months away from any kind of ACT/7-11 deal.

JX Advanced Metals (5016 JP) IPO: Big Retail Allocation Means No Fast Entry

By Brian Freitas

JX Advanced Metals (5016 JP) has priced its IPO at ¥820/share, at the top end of the IPO range but lower than the initial indication of ¥862/share.
With the bulk of the domestic offering going to retail investors, there is no chance of Fast Entry for the stock in global indices.
TOPIX INDEX inclusion will take place at the close on 28 April, while inclusion in major global indices is likely to take place in August and September.

Baudroie (4413 JP) – Fast Growth, Prime Promotion, and TOPIX Inclusion

In late November of 2024, Baudroie (4413 JP) announced it would try to move to TSE Prime and that day they announced a 2.76mm share secondary offering and a buyback.
The buyback was a bit less than a quarter of the offering. Fast forward 3mos and in early March the company announced it would move to Prime. Yesterday it did.
That puts the company in line for a TOPIX inclusion in end-April , and likely other index effects later. In the meantime, earnings and guidance are out ~10 April.

TOPIX Inclusions: Who Is Ready (Mar 2025)

By Janaghan Jeyakumar, CFA

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.
Recently, IT-solutions company Baudroie (4413 JP) announced a move to the Prime Market. This would result in a TOPIX Inclusion event for the stock at the end of April 2025.
Separately, the TOPIX Liquidity factor removal event will take place in April 2025 and there could be some positive index flows for Tokyo Metro (9023 JP) during this event.

Japan Steel Works (5631) | Artillery Giant Reloads for Growth

By Mark Chadwick

Defense Windfall: JSW dominates Japan’s artillery market, set to benefit as defense spending triples, driving a 232% surge in defense sales to 80 billion yen by 2028.
Strategic Expansion: Exclusive forging capabilities secure JSW’s artillery monopoly, while investments in railguns and next-gen armoured vehicles fuel long-term growth.
Energy Tailwinds: JSW’s nuclear and offshore wind expertise ensures stable revenue, with reactor restarts and turbine foundations boosting its power segment’s profitability.

GiG Works (2375 JP): Q1 FY10/25 flash update

GiG Works reported a revenue of JPY5.9bn, an 8.6% YoY decline, with all profit categories turning to losses.
The On-demand Economy business, accounting for 42% of Q1 revenue, saw a YoY decline in revenue and profit.
The Sharing Economy business achieved YoY revenue and profit growth, with a 10.8% revenue increase to JPY1.2bn.

Nippon Shinyaku (4516 JP): Strong 9MFY25 Numbers; FY25 Guidance Raised; Regular Launches Remain Key

By Tina Banerjee

During 9MFY25, Nippon Shinyaku (4516 JP) reported revenue growth of 8% YoY to ¥121B, while operating profit stood at ¥33B, up 8% YoY.
Viltepso witnessed growth both in Japan and the U.S. and licensing income also increased on higher overseas sales of Uptravi.
Guidance for FY25 have been raised with sales now expected to be ¥160B, up 8% YoY.

Shimojima (7482 JP) – OPM Rebounded from Q2 3.4% → Q3 8.6% on Price Hikes

While 1H profits struggled under pressure on COS from the weak yen, price hikes for roughly 80% of products were implemented from September, a portion from October, so Q4 will see a full 3-month contribution.
Note also success in controlling SG&A from Q3. Sapporo-based Ohkura Sangyo will be consolidated from Q1 FY26/3 with the acquisition completed in Jan-2025.
In this report, we look at three TOPICS. The first is an update on CY2024 booming inbound demand, which is continuing coming into 2025.

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Mar 11

Daily Brief Japan: Seven & I Holdings, Makino Milling Machine Co, Sodick Co Ltd, Geniee Inc, Toyobo Co Ltd and more

In today’s briefing:

7&I (3382) – Artisan Writes (Again) And 7&I Updates (Again) – More Positive Outlook Now
Seven & I Holdings (3382 JP): Reading Between the Lines of the Public Letter
Makino Milling Machine (6135 JP): A White Knight Bidder Is Emerging
Sodick (6143 JP) – Signalling a Positive Shift
Geniee (6562 JP) – SaaS Drives Accelerating Growth, M&A Adds Momentum
Toyobo (3101 JP) – Strong Profit Growth Despite One-Off Costs

7&I (3382) – Artisan Writes (Again) And 7&I Updates (Again) – More Positive Outlook Now

On Thursday 6 March we got a Nikkei article then a company announcement for Seven & I Holdings (3382 JP)‘s proposed management measures and update on ACT Bid Process.
It involved Isaka-san stepping down, Stephen Dacus stepping up, selling York to Bain for ¥814.7bn, IPOing 7-Eleven US, a ¥2trln share buyback over 5yrs, and ACT process update.
It was OK. Good, bad, and ugly. But Artisan wrote a letter over the weekend and 7&i responded and suddenly, their concerns are mostly addressed and the outlook is different.

Seven & I Holdings (3382 JP): Reading Between the Lines of the Public Letter

The Seven & I Holdings (3382 JP) Board has released a public letter to address Artisan Partners’ letter and provide more details on the Alimentation Couche-Tard (ATD CN) constructive engagement.
The letter effectively addresses most of Artisan’s concerns. The Board is engaging with Couche-Tard, particularly by agreeing on a strategy to find a solution to secure antitrust approvals.
However, the statement suggests that the Board retains deep scepticism that the Couche-Tard is viable and is manoeuvring to shift the blame on a failed bid on a flawed proposal.

Makino Milling Machine (6135 JP): A White Knight Bidder Is Emerging

Makino Milling Machine Co (6135 JP) has disclosed that it has received initial letters of intent from multiple third parties, reportedly private equity funds, to launch a competing tender offer.
My analysis suggests that a white knight bid could be as high as JPY13,284, 20.8% higher than Nidec’s JPY11,000 offer and 10.2% higher than the last close price of JPY12,050.
Nidec Corp (6594 JP) will take a wait-and-see approach. However, regardless of whether a white knight bidder emerges, Nidec will eventually have to bump.

Sodick (6143 JP) – Signalling a Positive Shift

By Astris Advisory Japan

A turnaround in progress – Q1-4 FY12/24 results were significantly ahead of guidance and a positive surprise, showing a solid recovery YoY with 9.7% sales growth YoY and a return to positive earnings territory.
This indicates solid execution of structural reforms, with fixed costs being reduced by streamlining overseas staff and internalizing parts production that were previously outsourced.
An uptick in demand in Q4 FY12/24 for both Machine Tools and Industrial Machinery was driven by connectors used in high-density fiber optic connections in the data center and telecommunications sectors.

Geniee (6562 JP) – SaaS Drives Accelerating Growth, M&A Adds Momentum

By Astris Advisory Japan

Geniee delivered accelerating double-digit growth in sales (+40.6% YoY) and normalized OP (+50.8% YoY) with its Q1-3 FY3/25 results.
The new Digital PR business (formed following the Social Wire acquisition) is in its early days, but there are signs that it is performing above. forecasts.
Coupled with accelerating growth and improving profitability in the Company’s Overseas and Marketing SaaS segment, we think Geniee is turning a corner on its growth trend.

Toyobo (3101 JP) – Strong Profit Growth Despite One-Off Costs

By Astris Advisory Japan

Q3 FY3/25 results showed strong OP recovery (+23.3% YoY), fuelled by price hikes, volume expansion, and cost reduction efforts.
Although the OP run rate was 60% of the full-year target, relatively low for Q3, reflecting one-off costs, FY3/25 guidance was maintained.
By segment, Films was the largest contributor to segment OP growth (+11.5x YoY), followed by Functional Textiles and Trading, which reduced its segment operating loss.

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Mar 10

Daily Brief Japan: Nikkei 225, Mitsui O.S.K. Lines, Daihatsu Diesel Mfg, TSE Tokyo Price Index TOPIX and more

In today’s briefing:

Index Rebalance Strategy YTD Performance: Not Many Places to Hide in Asia
The USTR’s New “Proposed Actions” For Section 301 Investigation on China’s Maritime/Shipping Sectors
Daihatsu Diesel (6023) Buyback Tender Results Signal Overhang and Opportunity
Significant Share Buybacks Are Key to Improving Profitability of Capital
Nikkei Index Options Weekly (Mar 03–07): Implied Volatility Climbs as Market Extends Decline

Index Rebalance Strategy YTD Performance: Not Many Places to Hide in Asia

By Brian Freitas

We look at the performance of the index rebalance strategy over the year using weekly forecasts. In short, it has been a mixed bag for Asia.
India and China have been among the worst performing markets in the region while Australia and Korea have been among the better performers.
A lot of the outperformance appears to be front loaded, so getting the forecasts right early in the review period is of paramount importance.

The USTR’s New “Proposed Actions” For Section 301 Investigation on China’s Maritime/Shipping Sectors

The USTR issued a Section 301 report in January 2025. The report suggests China has tried to achieve dominance in global shipping, to the detriment of US commerce.
The report is flawed, in data (it somehow manages to make up data which is otherwise available from MARAD), analytics, and conclusions, but the Trump administration has run with it.
In February, the USTR announced “Proposed Actions” – fees for Chinese liners and international liners with Chinese ships, and restrictions on future exports. US users lose. And there are loopholes.

Daihatsu Diesel (6023) Buyback Tender Results Signal Overhang and Opportunity

In late January, Daihatsu Diesel Mfg (6023 JP) announced its once/former parent would sell all its shares; in part to a private company in the industry and a 20% buyback.
The buyback – a below-market own-share tender offer – was priced low enough to be a big win. Accretion added to that.
Buyback Tender Results and External Changes signal overhang and opportunity. Either way, it’s cheap, but good governance could make it even cheaper.

Significant Share Buybacks Are Key to Improving Profitability of Capital

While the company’s attitude toward shareholder returns has been positive, the 11% dividend increase is not expected to reduce cash on hand by much.
In a condition where so much cash has accumulated, it’s not a bad idea to use DOE as a guide to avoid accumulating cash on hand above a certain level.
Since FY3/2025 profits will grow in non-manufacturers, which has relatively low profit margin, the overall profit margin of companies won’t increase. Therefore, unless assets are reduced significantly, ROE will soft.

Nikkei Index Options Weekly (Mar 03–07): Implied Volatility Climbs as Market Extends Decline

By John Ley

Nikkei breaks lower, USD/JPY and trade tensions weighing on the market.
Implied volatility rose as the market declined. We discuss implications of current spot levels that is dominated by Put open interest.
Historic volatility continues to lag implied vol, we provide visuals on the extent of the lag.

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Mar 09

Daily Brief Japan: Japan Post Bank, Seven & I Holdings, Eisai Co Ltd and more

In today’s briefing:

Japan Post Bank (7182 JP) – Not Cheap Enough Vs Others, or Holdings
Seven & I Holdings: Mega Share Buyback Plan and IPO of North American CVS Unit to Boost Share Price
(Mostly) Asia-Pac M&A: Oneconnect, Snt, Aeon Delight, AEON Mall, Insignia, 7&I, Sun Art
Eisai (4523 JP): 3L Drive 9MFY25 Result; FY25 Guidance Reaffirmed; Leqembi at an Inflection Point

Japan Post Bank (7182 JP) – Not Cheap Enough Vs Others, or Holdings

The Offering of Japan Post Bank (7182 JP) is not taking place the way “the right pattern” would suggest, but last time was kind of special. This time is different.
Last time was a “second IPO” and coincided with a US regional bank crisis. This time the offering is smaller outright, and much smaller as a portion of float.
Pricing is Monday. It hasn’t moved much vs JPH. It needs to move more to be attractive. And there is still a bit of overhang to come.

Seven & I Holdings: Mega Share Buyback Plan and IPO of North American CVS Unit to Boost Share Price

By Douglas Kim

If indeed the company proceeds with 2 trillion yen buyback over five years, this would represent buyback of about 7.3% of its shares per year (37% of market cap).
Seven & I Holdings’ plans to massively buyback shares and IPO its North American CVS business are major catalysts that should have positive impact both near and long term.
Certainly, the company’s action plan to sell its non-core assets (including supermarket, restaurant, and specialty stores) to Bain Capital for $5.5 billion is a step in the right direction.

(Mostly) Asia-Pac M&A: Oneconnect, Snt, Aeon Delight, AEON Mall, Insignia, 7&I, Sun Art

By David Blennerhassett

I tally 55 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma.
Three news new deals discussed this week:Soundwill Holdings (878 HK), Oneconnect Financial Technology (6638 HK), Snt Corp (6319 JP), Aeon Delight (9787 JP), and AEON Mall (8905 JP).
Key updates/news took place on: Insignia Financial (IFL AU), Seven & I Holdings (3382 JP), Sun Art Retail (6808 HK), and Macromill, Inc (3978 JP).

Eisai (4523 JP): 3L Drive 9MFY25 Result; FY25 Guidance Reaffirmed; Leqembi at an Inflection Point

By Tina Banerjee

In 9MFY25, Eisai Co Ltd (4523 JP) reported 9% YoY growth in revenue, driven by 3Ls. Operating profit rose 48% YoY and net profit climbed 56% YoY to ¥45.5B.
Eisai kept its FY25 total revenue guidance unchanged, implying a weaker Q4FY25 with a probable loss on the cards.
Lenvima growth stabilizes on indication expansion, Leqembi awaiting approvals and untangling safety concerns in a bid to reach its full market potential.

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Mar 08

Daily Brief Japan: Japan Post Bank, Naigai Trans Line, Pharmarise Holdings, Japan Business Systems , TSE Tokyo Price Index TOPIX and more

In today’s briefing:

Japan Post Bank (7182 JP): The Current Playbook
Naigai Trans Line (9384 JP): IA Partners’ JPY4,065 Tender Offer
Pharmarise HDS (2796 JP) – Navigating Industry Restructuring…
Japan Business Systems (5036 JP) – Cloud Integration Profitability Recovering in FY25/9
Transition to Regional Stock Exchange Means Continued Unhappy History for Shareholders

Japan Post Bank (7182 JP): The Current Playbook

Since the offer announcement, Japan Post Bank (7182 JP)/JPB’s shares have declined by 2.5%. On 3 March, JPB completed the ToSTNeT-3 buyback by acquiring 13.3 million shares for JPY20 billion.
To understand JPB’s trading pattern, it is instructive to examine its 2023 offering, Japan Post Insurance (7181 JP)/JPI’s 2019 offering, and Japan Post Holdings (6178 JP)/ JPH’s 2021 offering.
JPB’s shares follow the trading pattern playbook of its 2023 and JPH’s 2021 offerings, in which investors buying the offer were rewarded with positive returns at the payment date.

Naigai Trans Line (9384 JP): IA Partners’ JPY4,065 Tender Offer

Naigai Trans Line (9384 JP) has recommended a tender offer from IA Partners at JPY4,065 per share, a 62.3% premium to the last close.
Despite being below the midpoint of the target IFA’s DCF valuation range, the offer is attractive compared to historical trading ranges and represents an all-time high.
Given that the offer is reasonable, the required minority acceptance rate is attainable. The offer is from 10 March to 21 April, with payment on 28 April.

Pharmarise HDS (2796 JP) – Navigating Industry Restructuring…

Japan’s elderly population is projected to continue to grow through 2040, and Pharmarise HDS will benefit from the corresponding increase in the number of prescriptions.
However, there are expected to be revisions to national health insurance (NHI) drug prices , one measure to restrain medical spending, and revisions to dispensing fees, which are made once every two years.
Among the industry, the company is keen on preparing to counter downward pressure on prices by focusing on capturing technical fees, including community support system premiums and family pharmacist guidance fees.

Japan Business Systems (5036 JP) – Cloud Integration Profitability Recovering in FY25/9

For FY25/9, JBS is forecasting OP to increase +24.1% YoY (OPM 3.3% → 3.8%), in large part driven by a recovery in profitability for Cloud Integration including NEXTSCAPE, addressing rectification of unit prices and NEXTSCAPE project delays which depressed GPM, and also recouping leading investment in personnel, new HQ, etc.
Q1 FY25/9 consolidated net sales increased +7.9% YoY, operating profit +61.7%, and profit attributable to owners of parent +96.9%.
Profitability improved sharply, where Q1 GPM rose 1.8pp from 13.4% → 15.2%, the ratio of SG&A expenses declined 0.4pp from 8.8% → 8.4%, and OPM increased 2.3pp from 4.5% → 6.8%, in large part due to the recovery in profitability of Cloud Integration business, which accounted for nearly two-thirds of the total increase in consolidated OP, a solid result kicking off the new fiscal year.

Transition to Regional Stock Exchange Means Continued Unhappy History for Shareholders

Many companies that cannot meet listing criteria have challenges with their tradable stock market capitalization in Prime markets, both in Standard markets, and tradable share ratios in Growth markets.
As a result of the market restructuring, the role of regional securities exchanges became a “receptacle” for ensuring trading of shares of companies that cannot meet the TSE listing criteria.
For a company that considers the purpose of a stock listing to be to improve the company’s credibility and name recognition, going private or an MBO isn’t on their mind.

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Mar 07

Daily Brief Japan: Seven & I Holdings, Japan Post Bank, BayCurrent Consulting , JX Advanced Metals, Makino Milling Machine Co, Trial Holdings, PAL GROUP Holdings Co., Ltd., Mec Co Ltd and more

In today’s briefing:

7&I (3382) Possibility of YUUUUUGE Buyback?
7&I (3382) – A Starting Point for the Standalone Plan – The Good, The Bad, The Ugly
Seven & I Holdings (3382 JP): Board’s Plan to Unlock Value Is a Stop-Gap Measure
Japan Post Bank US$4bn Deal Updates – Needs to Correct More. Discount Vs Deal Performance Analysis
Nikkei 225 Sep25 Rebal: One ADD, One DELETE Probable – Less Interesting Than Before
JX Advance Metals IPO: Priced Reasonably but The Timing Isn’t Great
Makino Milling Machine (6135 JP): State of Play
Trial a Top 10 Retailer After Seiyu Purchase from KKR (With Big Synergies)
PAL Group (2726JP): 3Coins Still Growing Very Fast
MEC Co., Ltd (4971 JP): Research Update

7&I (3382) Possibility of YUUUUUGE Buyback?

Last Thurs the MBO died. Tuesday an article said the ACT deal had died. Then 7&i denied that. Yesterday an article said Bain’s York Holdings deal would be approved today.
That meant a Board meeting which would approve receipt of ~¥700bn of cash. What to do with it?
Just now, Bloomberg says Seven & I Holdings (3382 JP)‘s board will consider a massive buyback. THAT is the capital allocation news my last piece suggested necessary. It’s HUGE.

7&I (3382) – A Starting Point for the Standalone Plan – The Good, The Bad, The Ugly

Today, partway through the day, we got a Bloomberg article suggesting a large-scale buyback was to come. Post-close, we got the full details.
“Seven & i Holdings Announces Plan to Unlock Shareholder Value Through Leadership Changes and Transformational Capital and Business Initiatives”.
Sale of York. Management change. Update on Special Committee work with ACT. Commitment to return ¥2trln to shareholders via buybacks by FY2030. Higher divs. IPO of 7-Eleven Inc (US).

Seven & I Holdings (3382 JP): Board’s Plan to Unlock Value Is a Stop-Gap Measure

The Seven & I Holdings (3382 JP) Board announced a plan to unlock and distribute significant value to shareholders.
The initial excitement focused on the positives of leadership changes, US Assets IPO, a higher-than-expected valuation for the Superstore Business and a considerable buyback.
The negatives of a long-dated buyback, inevitable rejection of the Couche-Tard offer, an uncertain US Assets IPO and ongoing HoldCo discount suggest the initial excitement will fizzle out.

Japan Post Bank US$4bn Deal Updates – Needs to Correct More. Discount Vs Deal Performance Analysis

By Sumeet Singh

Japan Post Holdings (6178 JP) (JPH) aims to sell around US$4bn worth of Japan Post Bank (7182 JP) (JPB), trimming its stake to below 50%.
JPH had last sold around US$9bn worth of JPB shares in Mar 2023. That deal had a similar structure and it didn’t end up performing well.
We have looked at the deal dynamics in our previous notes. In this note, we talk about updates and look at discounts vs performance for past secondary deals.

Nikkei 225 Sep25 Rebal: One ADD, One DELETE Probable – Less Interesting Than Before

By Shifara Samsudeen, ACMA, CGMA

The March 2025 Nikkei 225 review came out with a sparse set of changes. That gives us hints for the September 2025 review.
I see one ADD and one DELETE. Fast Retailing capping is right on the border. BayCurrent will see an upweight.
The lack of effort to address sector imbalances within the rules suggests the rules are not as hard as people thought. Intra-review changes could be more interesting in years ahead.

JX Advance Metals IPO: Priced Reasonably but The Timing Isn’t Great

JX Advance has announced the terms for its IPO and set the pricing at ¥810-820 per share, at a much lower pricing range than previously expected ¥862 per share.
ENEOS is planning to offer 465.2m shares at the IPO raising around ¥377-381bn (US$2.5bn) at a market capitalisation and EV of ¥760bn and ¥857bn respectively.
Our SOTP valuation suggests that JX Advanced Metals (5016 JP)’s shares are priced reasonably, however, given the negative sentiment over AI and tech stocks, we remain cautious.

Makino Milling Machine (6135 JP): State of Play

By Nippon Investment Bespoke Research UK

On 27 December, Nidec Corp (6594 JP) announced a hostile preconditional tender offer for Makino Milling Machine Co (6135 JP) at JPY11,000 per share.
The Board has raised several issues with the Nidec proposal through two questionnaires. Some assertions are valid, while others do not stand up to scrutiny.
The Board has launched an ambitious MTM plan to thwart the offer and hinted at potential competing offers. Nidec’s offer increasingly needs a bump.

Trial a Top 10 Retailer After Seiyu Purchase from KKR (With Big Synergies)

By Michael Causton

Trial was already one of Japan’s leading discount retailers with a strong network of stores down south in Japan although rather low margins.
Buying Seiyu transforms this local retailer into a national champion and one of the top 10, with a highly complementary set of stores, product expertise, warehouses and tech.
Together, the two will now be able to take on Aeon, Seven & I, PPI and other major retailers in building the first true national grocery chains in Japan.

PAL Group (2726JP): 3Coins Still Growing Very Fast

By Michael Causton

3Coins is the non-apparel part of PAL Group, and its fastest growing sub-brand.
With pressure from import costs due to the weak Yen, the company spent FY2024 looking to boost product-level profitability through price increases for higher end items and new ranges.
Results look positive and operating profit for the group is due to rise 23%.

MEC Co., Ltd (4971 JP): Research Update

MEC’s (4971 JP) reported FY24 (Dec year-end) results, producing OP of ¥4,562mil (+83.0% YoY) on sales of ¥18,234mil (+30.1% YoY).
FY24 Chemical segment sales rose +27.0% YoY to ¥17,478mil, thanks to 1) a steady increase in demand for chemicals used in high-end packages, and 2) a gradual recovery in demand associated with PCs, smartphones, and general servers.
MEC is guiding for FY25 1H OP of ¥2,250mil (-4.8% YoY) on sales of ¥9,600mil (+8.1% YoY), and full-year OP of ¥5,000mil (+9.6% YoY) on sales of ¥20,000mil (+9.7% YoY).

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Mar 06

Daily Brief Japan: BayCurrent Consulting , TSE Tokyo Price Index TOPIX, Geechs Inc, Dydo Drinco Inc and more

In today’s briefing:

Nikkei 225 Index Rebalance: Baycurrent (6532) Replaces Mitsubishi Logistics (9301); Kokusai Elec👎
Nikkei 225 Mar25 Rebal: BayCurrent (6532) IN, Mitsubishi Logi (9301) OUT (Re-IPO). Kokusai MIA
Big Gap Between Companies that “don’t Have a Gap in Investors’ Viewpoints” and Those that Don’t
Geechs (7060 JP) – IT Freelance Matching Business (Overseas)
Dydo Drinco Inc (2590 JP): Full-year FY01/25 flash update

Nikkei 225 Index Rebalance: Baycurrent (6532) Replaces Mitsubishi Logistics (9301); Kokusai Elec👎

By Brian Freitas

In a big surprise, there is only one change for the Nikkei 225 (NKY INDEX) in March with BayCurrent Consulting (6532 JP) replacing Mitsubishi Logistics (9301 JP).
The non-inclusion of Kokusai Electric (6525 JP) is a big surprise given that the stock was ranked among the top 75 stocks by liquidity. There could be selling near-term.
BayCurrent Consulting (6532 JP) has been added at a 0.5 PAF and that will increase to 1 in September. Fast Retailing (9983 JP) could be capped yet again in September.

Nikkei 225 Mar25 Rebal: BayCurrent (6532) IN, Mitsubishi Logi (9301) OUT (Re-IPO). Kokusai MIA

The March 2025 Nikkei 225 Average Review was announced last night. Something of a disaster for Team Quiddity. I had expected 2-3 ADDs and 2-3 DELETEs.
We got only one change, and that was my second choice ADD and second choice DELETE. Top 75 name Kokusai Electric (6525 JP) was missing in action. BIG Disappointment. 🤔
BayCurrent Consulting (6532 JP) is in at a PAF of 0.5, with an upweight end-Sep. Mitsubishi Logistics (9301 JP) is OUT. Fast Retailing (9983 JP) will see US$2.3bn of sells.

Big Gap Between Companies that “don’t Have a Gap in Investors’ Viewpoints” and Those that Don’t

A common feature of the three companies that clearly indicated the conditions for implementing share repurchases and their position in the cash allocations is high foreign ownership.
Japanese companies’ share buybacks are less than 10% of net income, but on a cash flow basis, taking depreciation into account, share buybacks would be much less.
If the cost of capital was calculated, it shouldn’t be tremendous requirement to indicate cash allocation and share repurchase terms necessary for targeted return on capital and corporate value.

Geechs (7060 JP) – IT Freelance Matching Business (Overseas)

On February 14, 2025, Geechs Inc. (hereafter, “the Company”) announced its Q3(9M) FY2025/3 earnings results.
Net sales rose 5.2% YoY to JPY 18,705 mn, EBITDA rose 67% YoY to JPY 440 mn, and operating profit rose 503% YoY to JPY 348 mn.
This reflected steady growth in the core IT freelance matching business (Japan), reduced losses in the IT freelance matching business (Overseas), improved profitability in the Seed Tech business, and an end to losses from G2 Studios (formerly the Game business) following its sale at the end of FY2024/3.

Dydo Drinco Inc (2590 JP): Full-year FY01/25 flash update

Revenue for FY01/25 was JPY237.2bn (+11.2% YoY), with operating profit at JPY4.8bn (+28.3% YoY).
Domestic Beverage business saw a revenue decline of 4.0% YoY to JPY145.5bn due to lower sales volume.
International Beverage business revenue increased 112.8% YoY to JPY56.3bn, driven by Turkish operations and Wosana consolidation.

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Mar 05

Daily Brief Japan: Seven & I Holdings, Keisei Electric Railway Co, Japan Post Bank, Macromill, Inc, Toyo Seikan Group Holdings L, Sinfonia Technology, TSE Tokyo Price Index TOPIX, Sapporo Holdings and more

In today’s briefing:

Seven & I Holdings (3382 JP): Shares Under Pressure as Rumours Swirl
Keisei Railway (9009) Gets Bad Advice from Activists, Which Is Good for The Rest of US
Japan Post Bank US$4bn Placement Updates-Performing Similar to Its Last. Past Large Deals Comparison
CVC Bump Higher (¥1,275) Than Their Final Price (¥1,250), Get GMO to Roll In Their 12.1%.
Toyo Seikan (5901) – Big New Buyback Shows The Way To a Breakout of 20yr Range
Sinfonia Technology (6507): A Strategic Asset in Japan’s Defence Ecosystem
Dissolution of Parent-Subsidiary Listing Is Just Beginning. Included Affiliates, It’ll Grow Further
Sapporo’s 2025 Potential Holds Limited Upside After Investor Activism’s 300% Gains
Macromill (3978 JP): CVC Bumps to JPY1,275 Despite Declaring the Previous Offer Final

Seven & I Holdings (3382 JP): Shares Under Pressure as Rumours Swirl

Seven & I Holdings (3382 JP) denied a Yomiuri article that the Board has decided not to accept an Alimentation Couche-Tard (ATD CN) bid in favour of the restructuring plan.
Despite the Board’s assertions that it is still having constructive discussions with Couche-Tard, its actions suggest otherwise.
Couche-Tard remains interested but faces increasing roadblocks. The valuation is undemanding but the news flow is unlikely to support a rerating in the near-term.

Keisei Railway (9009) Gets Bad Advice from Activists, Which Is Good for The Rest of US

By Michael Allen

Activist investors, confusing market price with intrinsic value, have shot themselves in the foot by offering terrible advice to Keisei Railway’s management.
When Keisei followed advice from the activist, selling just 1% of the shares of Oriental Land, Keisei’s share price collapsed, proving market price has nothing to do with intrinsic value.
Keisei’s revenue growth and return on investment are stronger than most of its peers, and the crash in its stock price caused by activists might create an opportunity for others.

Japan Post Bank US$4bn Placement Updates-Performing Similar to Its Last. Past Large Deals Comparison

By Sumeet Singh

Japan Post Holdings (6178 JP) (JPH) aims to sell around US$4bn worth of Japan Post Bank (7182 JP) (JPB), trimming its stake to below 50%.
JPH had last sold around US$9bn worth of JPB shares in Mar 2023. That deal had a similar structure and it didn’t end up performing well.
We have looked at the deal dynamics in our previous note. In this note, we talk about the updates since then.

CVC Bump Higher (¥1,275) Than Their Final Price (¥1,250), Get GMO to Roll In Their 12.1%.

Today, the last day of the ¥1,250 “Final Price” CVC Tender Offer for Macromill, Inc (3978 JP), CVC has bumped price to ¥1,275 and extended another two weeks.
In the process, they got agreement from GMO to tender their 12.1% and GMO gets to reinvest into an 18-19% position in the Bidco.
Investors are now competing against “activists” who aren’t in public markets. 20.6% of the register don’t like the ¥1,250-1,275 price either. But they aren’t selling. They’re re-buying there. You’re not.

Toyo Seikan (5901) – Big New Buyback Shows The Way To a Breakout of 20yr Range

Toyo Seikan Group Holdings L (5901 JP) started down the “good governance path” a couple of years ago. The stock ran up. Then it drifted back lower.
They had promised a decent payout ratio, cross-holding sales, and “buybacks conducted in an agile manner.”
On Friday 28 Feb, the company announced a large buyback and future share cancellation.

Sinfonia Technology (6507): A Strategic Asset in Japan’s Defence Ecosystem

By Mark Chadwick

Sinfonia Technology is strategically positioned to benefit from Japan’s rising defence and semiconductor investments, leveraging its expertise in precision motion systems and power electronics.
The company holds a leading market share in aerospace and semiconductor handling, underpinned by robust financial performance and a well-defined strategy for future growth.
Amid increasing geopolitical tensions, Sinfonia’s integral role in space and defence applications enhances its long-term growth potential, making it a noteworthy player in Japan’s industrial expansion.

Dissolution of Parent-Subsidiary Listing Is Just Beginning. Included Affiliates, It’ll Grow Further

With the TSE requiring disclosure of rationale regarding parent-subsidiary listings, etc., it is certain that more companies will move to dissolve parent-subsidiary listings.
The background for the high TOB premium in Japan was that many companies had stock prices considerably lower than their intrinsic value.
There are total of 1,217 companies: 230 listed subsidiaries and 987 equity method affiliates. In addition to this, industry restructuring is also required; there are still numerous opportunities for TOB.

Sapporo’s 2025 Potential Holds Limited Upside After Investor Activism’s 300% Gains

By Oshadhi Kumarasiri

Sapporo Holdings (2501 JP)’s beer, food, and soft drinks businesses are now trading near 19.0x our 2025 OP estimate, suggesting some remaining upside, especially if guidance is revised upward.
We believe the company’s 2025 guidance is overly conservative, as Sapporo stands to benefit the most from Japan’s liquor tax revisions.
If growth momentum persists, we estimate 2025 OP could reach ¥22.3bn, surpassing the current ¥17.5bn guidance, though the 300% upside driven by investor activism has mostly run its course.

Macromill (3978 JP): CVC Bumps to JPY1,275 Despite Declaring the Previous Offer Final

Despite declaring the previous JPY1,250 offer final, CVC has bumped its Macromill, Inc (3978 JP) offer by 2.0% to JPY1,275.
CVC has secured an irrevocable from GMO. The total irrevocable represents a 23.67% ownership ratio. Despite the bump and GMO irrevocable, success still hangs in the balance.
Securing TriVista’s support remains elusive, and CVC could try to lower the minimum tendering condition. The downside is low, as the backend will have support on a deal break.

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Mar 04

Daily Brief Japan: Toyota Motor, JX Advanced Metals, MS&AD Insurance, Tokyo Metro, Medical Data Vision, HIRANO TECSEED Co (Kinzoku) and more

In today’s briefing:

Toyota’s New Shareholder Benefit Program – Either a Bribe for Retail or Odd Advertising
JX Advance Metals IPO – Digestable, but Not Really Attractive
Japan CorpGovReports: TSE “Mgmt Conscious Blah Blah” (Mar25), 🚨 Read TSE Update Doc 3 🚨
TOPIX Index Upweights: Final Expectations For “The Big April Basket” 2025
JX Advanced Metals (5016 JP) IPO: Price Range Is Fair
JX Advanced Metals IPO Valuation Analysis
Medical Data Vision Co., Ltd (3902 JP): Research Update
Hirano Tecseed Co., Ltd. (6245 JP): Research Update

Toyota’s New Shareholder Benefit Program – Either a Bribe for Retail or Odd Advertising

Today, Toyota Motor (7203 JP) announced a new Shareholder Benefit Program (株主優待 or kabunushiyutai). Often these programs are designed to give small unknown companies a way to build shareholder awareness/loyalty.
Toyota, needless to say, is not a small, unknown company building awareness. So this is a bribe or inducement to own shares or get people to use higher value product.
This is not a great look, and not great for shareholders. It smells of Toyota trying to buy votes as crossholders sell. But below we look at the math.

JX Advance Metals IPO – Digestable, but Not Really Attractive

By Sumeet Singh

JX Advanced Metals (5016 JP)’s parent, ENEOS Holdings (5020 JP), is looking to raise 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 IPO pricing.

Japan CorpGovReports: TSE “Mgmt Conscious Blah Blah” (Mar25), 🚨 Read TSE Update Doc 3 🚨

TSE-Listed companies are asked to file “Management Conscious of Capital Cost/Stock Price” awareness reports/policies. Many have. Some are still working on it. And policies change, and CGR reports are updated.
161 new CGRs were filed in February 2025. Our tools show every report, links to every document, and now a new diff file tool. Input a name, see the changes.
THE BIG NEWS: The “Document 3” (linked below) of the TSE’s 20th Council Meeting 18 Feb is worth reading carefully. This will set the stage for more takeover fun.

TOPIX Index Upweights: Final Expectations For “The Big April Basket” 2025

By Janaghan Jeyakumar, CFA

In the TOPIX Index, some “low liquidity” names carry a liquidity factor of 0.75x resulting in their actual index weights being smaller than their default weights.
These names are reviewed every April and if the liquidity factor of a stock gets removed, the stock will see index inflows from passive trackers of TOPIX.
In this insight, we take a look at Quiddity’s final predictions for the names that are likely to see their Liquidity Factors removed in April 2025 and their flow implications.

JX Advanced Metals (5016 JP) IPO: Price Range Is Fair