Japan

In today’s briefing:

Not Promptly Retiring Treasury Stock Has Increased the Market Cap of Japanese-Style Calculations
World Buys Mitsubishi Clothing Business

Not Promptly Retiring Treasury Stock Has Increased the Market Cap of Japanese-Style Calculations

The fact that few companies promptly retire treasury stock is the reason for the large gap between market capitalization including treasury stock and market capitalization calculated without including treasury stock.
It’s odd that EV/EBITDA of a company will be smaller after cancelling treasury shares than before, but this shouldn’t be too much trouble for institutional investors who analyze it closely.
Although this gap may widen for more companies as more cross-shareholdings will be bought back with treasury stock, the increase in share repurchases is a favorable development.

World Buys Mitsubishi Clothing Business

By Michael Causton

World may finally have found the key to real growth after years of trying to build a fashion retail business in shopping centres, but with limited success.
The big problem was that it didn’t have the supply chain skills to compete with the big retailers like Uniqlo and Adastria.
Buying the supplier that helped grow those same chains means World now has a real chance to enter the big leagues.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Feb 21

Daily Brief Japan: Proto Corp, Sotetsu Holdings, Tsumura & Co, Softbank Group, TSE Tokyo Price Index TOPIX, D.Western Therapeutics Institute Inc., Asaka Industrial and more

In today’s briefing:

Proto Corp (4298) – Large Active Holders Going Activish-Y
Proto Corp (4298 JP): Kaname Capital Throws a Spanner in the Works
Sotetsu Holdings (9003) – Crossholders Sell Down – Big ADV Multiple, Low Earnings Multiple, Boring
Tsumura (4540 JP) Equity Offering – Easy To Swallow, and Not Expensive
Softbank (9984) Is Trading Cheap, And That Could Be An Opportunity
Sotetsu Placement: Low Valuation and Share Buyback Should Aid Deal Performance
M&As Due to Restructuring of Business Portfolios Have Finally Begun to Increase
4576 JP – Notice of Approval of Ophthalmic Surgical Aid “DW-1002” in China
Asaka Industrial (TYO 5962): A 350-Year-Old Profitable Nanocap Net-Net Trading at 0.4x P/B, 7x P…

Proto Corp (4298) – Large Active Holders Going Activish-Y

When the deal was announced, I wrote that the MBO for Proto Corp (4298 JP) was opportunistic and was possibly “vulnerable” to activist attentions (original insight here).
On the 17th, one large active holder Ancient Arts LP filed an amendment to their Large Shareholder Filing showing a change in Reason for Investment.
On the 18th of Feb, top independent shareholder Kaname Capital reported an increase in stake and sent Open Letters which appear only now to be circulating. It’s worth a look.

Proto Corp (4298 JP): Kaname Capital Throws a Spanner in the Works

Kaname Capital, the second-largest shareholder of Proto Corp (4298 JP), has issued an open letter stating that the JPY2,100 MBO tender offer is a bad conclusion at the wrong price.
Some assertions are valid, while others do not stand up to scrutiny. Kaname claims that Proto is worth JPY3,778, which will make it hard to reach a compromise.
Maintaining terms is increasingly not viable. The Chairman is likely to respond by lowering the minimum acceptance condition and/or bumping to secure the support of minorities (excluding Kaname).

Sotetsu Holdings (9003) – Crossholders Sell Down – Big ADV Multiple, Low Earnings Multiple, Boring

Sotetsu Holdings (9003 JP) today announced a large-ish secondary equity offering – 10% of shares out and 20% of Max Real World Float.
This is crossholders selling down roughly 30% of what they own. Sotetsu announced a buyback for a quarter of the offering over the next six months.
The shareholder structure and distribution within Max Real World Float tells you all you need to know.

Tsumura (4540 JP) Equity Offering – Easy To Swallow, and Not Expensive

Tsumura & Co (4540 JP) shocked everyone a year ago when they announced an immediate large price hike across the board for its kampo medicines. The stock was +35% immediately.
It did not fall back. Now the stock is up 60% from a year ago and earnings are too. It’s still <10x PER. Now we get a ¥10bn secondary offering.
It’s 12 days of ADV but not super heavy, and there is a buyback on the back end.

Softbank (9984) Is Trading Cheap, And That Could Be An Opportunity

By Finimize Research

Softbank’s investment in Arm, valued at around USD 148 billion, is its new NAV driver, after its 300% rally post its IPO.
Despite an ongoing share buyback and an LTV near 12.9%, Softbank is still trading around a 59% discount to its net asset value.
Softbank looks like a good proxy for investing in Arm and being long Softbank and Short Arm looks like reasonable risk/reward at current levels.

Sotetsu Placement: Low Valuation and Share Buyback Should Aid Deal Performance

By Nicholas Tan

A group of shareholders are looking to raise US$135m from selling their respective stakes in Sotetsu Holdings (9003 JP) .
While the deal shouldn’t come as a surprise, given the ongoing cross-shareholding unwind narrative in Japan, the timing of such a selldown isn’t always certain.
In this note, we will talk about the placement and run the deal through our ECM framework.

M&As Due to Restructuring of Business Portfolios Have Finally Begun to Increase

Listed subsidiaries and affiliates are now required by the TSE to disclose their basic thoughts on their business portfolio strategy and the rationale for being listed.
M&A is expected because Japanese companies have not taken effective steps to expand their corporate value as cash on hand is building up and ROE is sluggish.
M&A is likely to be mostly conducted by domestic companies or investment funds as a result of industry restructuring and business portfolio restructuring in Japan.

4576 JP – Notice of Approval of Ophthalmic Surgical Aid “DW-1002” in China

By Sessa Investment Research

DWTI announced that ophthalmic surgical aid product “DW-1002” has been approved by the National Medical Products Administration (NMPA) in China for the indication of staining of the internal limiting membrane (ILM) during vitreous surgery, as reported by the Company’s sublicensee Dutch Ophthalmic Research Center International B.V. (DORC).
This drug is already being sold in 76 countries and regions around the world, including Europe and the United States, and sales are progressing favorably.
The graph below shows the annual trend of DW-1002 royalty income to DWTI from DORC. In China, it is scheduled to be launched under the product name ILM-BlueⓇ

Asaka Industrial (TYO 5962): A 350-Year-Old Profitable Nanocap Net-Net Trading at 0.4x P/B, 7x P…

By Altay Capital

Asaka Industrial Products. Check out their web store here .
Asaka Industrial is a dirt-cheap manufacturer of shovels, gardening tools, and logistics equipment.
According to its annual report, the company was “the first in Japan to produce and commercialize shovels and scoops” back in 1893.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Feb 20

Daily Brief Japan: JX Advanced Metals, Terumo Corp, Poper and more

In today’s briefing:

JX Advanced Metals (5016 JP) IPO: The Bear Case
Terumo Corp (4543 JP): Strong Demand Drives Q3FY25 Performance; FY25 Guidance Reiterated
Poper (5134 JP)

JX Advanced Metals (5016 JP) IPO: The Bear Case

JX Advanced Metals (5016 JP) is a global leader in the semiconductor and ICT materials sector. It is seeking to raise up to US$2.6 billion.
In JX Advanced Metals (5016 JP) IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
The bear case rests on extensive proforma adjustments, the non-focus business remaining the largest profit contributor, margin pressure on the non-focus business and medium-to-long-term targets will likely disappoint.

Terumo Corp (4543 JP): Strong Demand Drives Q3FY25 Performance; FY25 Guidance Reiterated

By Tina Banerjee

Terumo Corp (4543 JP) reported record high revenue, operating profit, and net profit for both Q3FY25 and Q3 YTD. Global demand continues to expand, driven by the U.S.
In terms of segments, TIS and blood center business drove the growth. Steady progress in pricing measures and profit improvement measures led the bottomline outperforming topline, thereby improving profitability.
FY25 guidance implies Q4FY25 revenue of ¥238B, flat YoY and down 10% QoQ. Mainstay C&V business revenue is expected to decline 6% YoY to ¥139B due to seasonality.

Poper (5134 JP)

By Michael Fritzell

An emerging leader in online software for the Japanese private education industry, run by a young founder-CEO with skin in the game
Cheap at just 1.7x EV/Sales with a 20% target operating margin and 20-30% sustainable growth
Question marks include outsourcing of coding to third-party firms in the PRC, the potential impact of generative AI tools and less-than-ideal capital allocation

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Feb 19

Daily Brief Japan: JX Advanced Metals, Japan Eyewear Holdings , Duskin Co Ltd, Japan Elevator Service Holding, Mixi Inc, MARUKA FURUSATO and more

In today’s briefing:

JX Advanced Metals (5016 JP) IPO: The Bull Case
Japan Eyewear Holdings: A Short-Term Setback, Long-Term Opportunity?
JX Advance Metals Pre-IPO – The Negatives – Isn’t There Yet
Duskin (4665 JP) – Entering a Critical Phase
Japan Elevator Service Holdings (6544 JP) – Sustainable Margin Expansion
MIXI Inc. (2121 JP) – Sustaining Higher Returns Looks Realistic
MARUKA FURUSATO (7128 JP): Full-year FY12/24 flash update

JX Advanced Metals (5016 JP) IPO: The Bull Case

JX Advanced Metals (5016 JP) is a global leader in the semiconductor and ICT materials sector. It is seeking to raise up to US$2.6 billion.
JXAM is a wholly owned subsidiary of ENEOS Holdings (5020 JP). After the listing, it is expected to become an equity-method affiliate of ENEOS.
The bull case rests on its leading market position, focus businesses’ improving performance, improving profitability, shift to cash generation, and low leverage.

Japan Eyewear Holdings: A Short-Term Setback, Long-Term Opportunity?

By Oshadhi Kumarasiri

On February 14, 2025, JEH announced the cancellation of its planned share offering and withdrew its Prime Market listing application due to a potential insider trading violation involving an executive.
While the news may trigger a sharp correction in the stock, JEH’s core business remains strong, driven by pricing power, expansion opportunities, and growing inbound demand.
If governance concerns are effectively addressed, the stock could offer a compelling buy-and-hold opportunity once market sentiment stabilizes.

JX Advance Metals Pre-IPO – The Negatives – Isn’t There Yet

By Sumeet Singh

JX Advance Metal’s (JXAM) parent, ENEOS Holdings (5020 JP), is looking to raise around US$2.6bn 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.
In this note, we talk about the not-so-positive aspects of the deal.

Duskin (4665 JP) – Entering a Critical Phase

Outperformance at the Food Group – Q1-3 FY3/25 results demonstrated the ongoing strength and outperformance at the Food Group, with the Mister Donut franchise maintaining high growth and sustaining margin expansion.
The Direct Selling Group delivered a recovery in profitability YoY, which is a positive optic but derived from one-time events; with flat sales growth YoY, the underlying trend denotes a business making limited headway in delivering growth.
With unchanged FY3/25 guidance, we expect no major surprises in Q4 FY3/25 but will pay close attention to the release of the new medium-term plan covering FY3/26-FY3/29, which will be a key event.

Japan Elevator Service Holdings (6544 JP) – Sustainable Margin Expansion

Solid execution and high earnings visibility – The key takeaway from Q1-3 FY3/25 results is that JES is a robust business with strong fundamentals, with double-digit sales (+16.6% YoY) and OP growth (+28.2% YoY).
Quarterly Q3 FY3/25 OPM reached a historic high of 17.9%, driven by operating leverage with recurring revenue volume from growing maintenance contracts and improving the productivity of its in-house engineers while not introducing any price hikes.
The resultant gains in market share from OEMs and sustainable margin expansion position the company to continue generating value, especially in an inflationary environment that drives demand for cost-effective and high-quality service.

MIXI Inc. (2121 JP) – Sustaining Higher Returns Looks Realistic

Stronger than expected performance – Q1-3 FY3/25 results were a positive surprise, with larger than expected OPM expansion YoY driven by effective advertising cost control in both the Digital Entertainment and Lifestyle segments and strong sales growth in the Sports segment driven by the Spectator Sports business.
The company has upwardly revised FY3/25 guidance, denoting a strong finish for Q4 FY3/25 and indicating that profitability will remain higher than expected for the medium term.
We have revised our earnings estimates for FY3/26, which denotes flat reported earnings growth YoY; the underlying trend, excluding the sale of Timee (215A) shares in FY3/25, shows OP growth of approximately 10% YoY.

MARUKA FURUSATO (7128 JP): Full-year FY12/24 flash update

FY12/24 revenue declined 6.5% YoY, with operating profit down 32.3% and recurring profit down 30.0% YoY.
FY12/25 forecasts show revenue at JPY170.0bn (+5.1% YoY) and operating profit at JPY4.5bn (+16.6% YoY).
FY12/26 targets revised to JPY180.0bn revenue, JPY5.8bn operating profit, and 5.7% ROE due to market challenges.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Feb 18

Daily Brief Japan: Shinko Electric Industries, SRE Holdings Corp, Macromill, Inc, Base Food, JX Advanced Metals, TSE Tokyo Price Index TOPIX, Peptidream Inc, Sakata Inx Corp, Integrated Design & Engineering Holdings, CELSYS and more

In today’s briefing:

JIC Launches Shinko (6967) Deal At ¥5,920/Share
Sony To Sell Down SRE Holdings (2980 JP) Block – AI-Related Growth Stock Should See Support
CVC Extends Macromill (3978) Bid and Invites Two Funds To Reinvest – More Interesting Than You Think
Base Food (2936 JP): Partial Tender Offer at JPY688
JX Advance Metals Pre-IPO – The Positives – Transforming
Going Private Is Not a Problem for a Special Company, but a Common Problem for All Listed Companies
Peptidream (4587 JP): 2024 Result Beats Guidance; Positive Outlook for 2025
Sakata Inx Corp (4633 JP): Full-year FY12/24 flash update
Integrated Design & Engineering Holdings (9161 JP): 1H FY06/25 flash update
CELSYS (3663 JP): Full-year FY12/24 flash update

JIC Launches Shinko (6967) Deal At ¥5,920/Share

Today quite late, the JIC Consortium announced the launch of the Shinko Electric Industries (6967 JP) Tender Offer expected “mid-February”. Price is still ¥5,920/share.
This is basically going to be all arbs and passive now. And arbs gonna arb.
Congrats if you bought the lows in late November early December. Great trade. Congrats if you bought the last delay dip. Now we can all go home.

Sony To Sell Down SRE Holdings (2980 JP) Block – AI-Related Growth Stock Should See Support

SRE Holdings Corp (2980 JP) does a business in AI Cloud&Consulting for the real estate, finance, and Life & Healthcare business. Sony Corp (6758 JP) is selling a stake.
The offering is for about US$50mm assuming a 10% discount today’s close. It is not clear how much this was expected but there is a decent-sized short position.
The stock has its ups and downs, and recently decided it liked Q3 earnings and guidance. That bodes well for the offering.

CVC Extends Macromill (3978) Bid and Invites Two Funds To Reinvest – More Interesting Than You Think

Today, the closing date of the Tender Offer for Macromill, Inc (3978 JP) by CVC saw the tender offer extended by an extra 10 days with new news.
Price had been declared final. One very large shareholder had said they would not tender. Two more were negotiating. Those two will now tender and reinvest in the back end.
This does not mean the tender offer is a done deal, but it is worth examining.

Base Food (2936 JP): Partial Tender Offer at JPY688

Base Food (2936 JP) announced a partial tender offer from MBF Acceleration, the largest shareholder.
The offer is for a maximum of 3.7 million shares (6.97% ownership ratio) at JPY688 per share, a 23.3% premium to the last close price.
The offer has no minimum acceptance condition, and the price is reasonable. The estimated minimum proration is 21.43%.

JX Advance Metals Pre-IPO – The Positives – Transforming

By Sumeet Singh

JX Advance Metal’s (JXAM) parent, ENEOS Holdings (5020 JP), is looking to raise around US$2.6bn 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.
In this note, we talk about the positive aspects of the deal.

Going Private Is Not a Problem for a Special Company, but a Common Problem for All Listed Companies

While the homework imposed on companies has been increasing year by year, TSE’s market restructuring and “request to raise P/B” have made companies directly aware of the cost of listing.
MBO is a company’s choice to go private as a result of the cost of maintaining a public listing. Many companies have yet to reach this conclusion.
The conversion of listed subsidiaries into wholly owned subsidiaries is a conclusion that has finally been reached; 230 listed subsidiaries will have to come to some conclusion eventually.

Peptidream (4587 JP): 2024 Result Beats Guidance; Positive Outlook for 2025

By Tina Banerjee

Peptidream Inc (4587 JP) reported better-than-expected 2024 result, with all key parameters beating upwardly revised guidance. Both revenue and net profit hit record high.
Larger than anticipated upfront associated with the expanded Novartis collaboration and increased milestone revenue contributed to the stellar performance of 2024.
The company expects 2025 revenue to increase 5% YoY to ¥49B. Both core operating and operating profits are expected to increase 2% YoY and net profit by 1%.

Sakata Inx Corp (4633 JP): Full-year FY12/24 flash update

FY12/24 revenue was JPY245.6bn (+7.5% YoY), with operating profit at JPY13.2bn (+15.0% YoY) and net income JPY9.0bn (+20.6% YoY).
Segment revenue and operating profit showed mixed results, with notable increases in packaging inks and digital printing materials sales.
FY12/25 forecasts project revenue of JPY268.0bn (+9.1% YoY), with operating profit at JPY15.5bn (+17.8% YoY) and net income JPY10.8bn (+19.9% YoY).

Integrated Design & Engineering Holdings (9161 JP): 1H FY06/25 flash update

Revenue increased 6.2% YoY, driven by strong Consulting and Urban & Spatial Development segments, despite a 50.9% YoY decline in operating profit due to valuation losses from an investee company’s IPO.
Consulting segment saw a 27.7% YoY increase in orders and a 6.1% YoY revenue rise, with operating profit up 79.1% YoY.
Energy segment experienced a 48.5% YoY rise in orders and a 70.9% YoY increase in operating profit, despite a 2.1% YoY revenue decline.

CELSYS (3663 JP): Full-year FY12/24 flash update

FY12/24 results: Sales JPY8.2bn (+1.4% YoY), operating profit JPY2.1bn (+58.7% YoY), net income JPY1.4bn (+123.5% YoY).
FY12/25 forecast: Sales JPY9.1bn (+10.7% YoY), operating profit JPY2.6bn (+19.0% YoY), net income JPY1.7bn (+24.6% YoY).
FY12/27 targets: Sales JPY10.7bn (+30.4% from FY12/24), operating profit JPY3.3bn (+53.8%), ROE 30% (23.6% in FY12/24).

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Feb 17

Daily Brief Japan: Shift Inc, Zenhoren , Trend Micro Inc, Kokusai Electric , Freee KK, Nikkei 225, Soliton Systems Kk, Kokuyo Co Ltd, J Trust Co Ltd and more

In today’s briefing:

Nikkei 225 Index Rebalance: Performance of Potential Adds/Deletes & Positioning
MUFG Partial Offer by MUFG to Buy ~50% of Small Cap Zenhoren (5845) – Watch the Back End
Weekly Deals Digest (16 Feb) – Trend Micro, Zenhoren, HKBN, Fosun Tourism, Paragon REIT, CATL
[Quiddity Index Feb25] Nikkei 225 Mar Rebal: 2 or 3 IN, 2 or 3 OUT, ~$3bn 1-Way, 1 Squeeze.
High Conviction 2025 – Freee: Earnings Beat with Upward Revision to Profit Guidance
EQD | Nikkei Index Options Weekly (February 10 – 14): Mired in Sideways Range
Soliton Systems Kk (3040 JP): Full-year FY12/24 flash update
Kokuyo Co Ltd (7984 JP): Full-year FY12/24 flash update
J Trust Co Ltd (8508 JP): Full-year FY12/24 flash update

Nikkei 225 Index Rebalance: Performance of Potential Adds/Deletes & Positioning

By Brian Freitas

The changes to the Nikkei 225 (NKY INDEX) as part of the March rebalance should be announced in just over 2 weeks. We expect 2-3 changes at the review.
The forecast adds have massively outperformed the forecast deletes and the Nikkei225 Index over every time period going back 3 months with the largest outperformance in the last month.
Positioning appears to be stretched in one forecast add while there appears to be under positioning in a couple of the forecast deletes.

MUFG Partial Offer by MUFG to Buy ~50% of Small Cap Zenhoren (5845) – Watch the Back End

Friday after the close, Mitsubishi UFJ Financial (MUFG) (8306 JP) announced a partial offer to buy up to 13.026385mm shares (minimum 11.661185mm shs) of rent guarantor Zenhoren (5845 JP).
That is 49.6% but an MUFJ sub already owns 1.46%. The offer comes at a 32% premium to last. Two holders with 33.59% of the register have agreed to tender.
This will turn the company into a consolidated subsidiary of MUFG under MUFJ Nicos, the group’s consumer credit subsidiary. Shareholder structure matters. Watch the back end.

Weekly Deals Digest (16 Feb) – Trend Micro, Zenhoren, HKBN, Fosun Tourism, Paragon REIT, CATL

A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
ECM developments: Contemporary Amperex Technology (CATL) (300750 CH) filed for an H Share listing to raise US$5 billion, and Hexaware Technologies (HEXW IN) seeks to raise US$1 billion.
Event-Driven developments: Trend Micro Inc (4704 JP), Kaonavi Inc (4435 JP), Zenhoren (5845 JP), HKBN Ltd (1310 HK), Fosun Tourism (1992 HK), Paragon REIT (PGNREIT SP).

[Quiddity Index Feb25] Nikkei 225 Mar Rebal: 2 or 3 IN, 2 or 3 OUT, ~$3bn 1-Way, 1 Squeeze.

By Shifara Samsudeen, ACMA, CGMA

The data observation period is done. No rank changes in the top candidates since mid-Jan. Capping for Fast Retailing (9983 JP) is confirmed.
For me, it is 2 or 3 ADDs, depending. Kokusai Electric (6525 JP) is still tops. BayCurrent Consulting (6532 JP) second. Shift Inc (3697 JP) third.
Kokusai is +26.7% in 5 weeks since I wrote bullishly, despite news/confirmation of getting the boot from a global index at end-Feb. Baycurrent is +39.7% (link). Now we count flows.

High Conviction 2025 – Freee: Earnings Beat with Upward Revision to Profit Guidance

Freee KK (4478 JP) reported 2QFY06/2025 results on Friday which beat consensus estimates. The company also reported a second consecutive quarter of operating profits in 2Q.
Despite cutting down significantly on selling and marketing, freee has managed to maintain growth. The company also has revised upwards its OP guidance and expects positive adj. free cashflows.
Though freee’s share price has moved up 35% YTD, strengthening profitability and its solid business model vs Money Forward (3994 JP) should further drive share price up.

EQD | Nikkei Index Options Weekly (February 10 – 14): Mired in Sideways Range

By John Ley

USD/JPY more volatile relative to Nikkei, trading in a 2.3% range on the week and historic vol continuing to climb compressing the hv spread.
Nikkei is trading at the mid-point of the sideways range it’s been in since the end of September.
Most heavily traded strikes were at the top and bottom of the sideways range.

Soliton Systems Kk (3040 JP): Full-year FY12/24 flash update

In FY12/24, Soliton’s revenue was JPY18.6bn (-2.4% YoY), with operating profit at JPY2.0bn (-21.7% YoY).
Soliton forecasts FY12/25 revenue of JPY19.5bn (+4.8% YoY) and operating profit of JPY2.2bn (+7.7% YoY).
Personnel expenses are expected to rise, with JPY50mn planned for office improvements, including SG&A and fixed assets.

Kokuyo Co Ltd (7984 JP): Full-year FY12/24 flash update

Revenue increased by 2.9% YoY to JPY338.2bn, with net income rising 14.3% YoY to JPY21.8bn.
The FY12/25 forecast predicts revenue of JPY366.0bn (+8.2% YoY) and operating profit of JPY24.0bn (+9.0% YoY).
The company plans an annual dividend per share of JPY91.0, targeting a consolidated payout ratio of 50.1%.

J Trust Co Ltd (8508 JP): Full-year FY12/24 flash update

Operating revenue reached JPY128.2bn, a 12.2% YoY increase, driven by growth in financial and real estate businesses.
Profit attributable to owners decreased 63.0% YoY to JPY6.0bn, impacted by deferred tax liabilities reversal from a merger.
FY12/25 forecasts JPY135.1bn operating revenue, JPY11.1bn operating profit, and JPY6.5bn profit attributable to owners.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Feb 16

Daily Brief Japan: Japan Eyewear Holdings , Seven & I Holdings, Zenhoren , Trend Micro Inc, Otsuka Holdings, TSE Tokyo Price Index TOPIX and more

In today’s briefing:

Japan Eyewear Cancels Offering and TSE Prime Application on Internal Controls Problem – OFF
(Mostly) Asia-Pac M&A: Paragon REIT, Kaonavi, Arcadium Lithium, Sun Art Retail, HKBN, and Seven & I
Zenhoren (5845 JP): MUFG (8306 JP)’s Partial Tender Offer
Last Week in Event SPACE: Trend Micro, Furukawa, Melco, Ingenia/Lifestyle
Otsuka Holdings (4578 JP): Soft Guidance for 2025; Reduction of Investment Units
Companies Should Consider All Options, Not Just Maintaining Their Listing

Japan Eyewear Cancels Offering and TSE Prime Application on Internal Controls Problem – OFF

On Friday after the close, Japan Eyewear Holdings (5889 JP) made a short announcement that it would cancel its equity offering and TSE Prime application announced 10 Feb, discussed here.
I had suggested that the offering price, or a large dip would be a buy. I rescind that recommendation immediately.
The reason for the cancellation? “Matters that need to be confirmed in relation to our internal control system have been discovered and that will take time.”

(Mostly) Asia-Pac M&A: Paragon REIT, Kaonavi, Arcadium Lithium, Sun Art Retail, HKBN, and Seven & I

By David Blennerhassett

I tally 59 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma.
Two new deals discussed this week: Paragon REIT (PGNREIT SP) and Kaonavi Inc (4435 JP).
Key updates/news took place on: Arcadium Lithium (LTM AU), Sun Art Retail (6808 HK), HKBN Ltd (1310 HK), and Seven & I Holdings (3382 JP).

Zenhoren (5845 JP): MUFG (8306 JP)’s Partial Tender Offer

Zenhoren (5845 JP) announced a partial tender offer and capital and business agreement from Mitsubishi UFJ Financial (MUFG) (8306 JP). MUFG aims to make Zenhoren a consolidated subsidiary.
The offer is for a minimum of 11.7m shares (44.36% ownership ratio) and a maximum of 13.0m shares (49.55% ownership ratio) at JPY1,000, a 31.9% premium to the last close.
Due to the irrevocable, the minimum acceptance condition requires a minority acceptance rate of 16.6%. This threshold is achievable, as the offer is reasonable.

Last Week in Event SPACE: Trend Micro, Furukawa, Melco, Ingenia/Lifestyle

By David Blennerhassett

Reportedly buyout firms are “vying for” Trend Micro Inc (4704 JP). The stock went limit up today. Again. The stock is now getting to the expensive side.
Furukawa (5715 JP) has changed their capital allocation policy for the third time. The company is a cyclical, and will likely always suffer the indignity of a cyclical multiple.
While it often pays to follows where the family invests when assessing holdco structures, Melco International (200 HK)‘s NAV discount is simply too narrow for a simple holding company structure.

Otsuka Holdings (4578 JP): Soft Guidance for 2025; Reduction of Investment Units

By Tina Banerjee

For 2025, Otsuka Holdings (4578 JP) is looking for 2% YoY revenue growth to ¥2,380B. However, net profit is expected to decline 20% YoY to ¥275B.
Even upon a massive impact from LoE of Jinarc/Jynarque, total revenue will grow in 2025. Excluding one-time of impact of the tax adjustments, 2025 net profit guidance implies 6% growth.
Otsuka intends to reduce buyback to create a more investable environment, encourage individual investors to participate in the market, and revitalize the stock market.

Companies Should Consider All Options, Not Just Maintaining Their Listing

Besides not showing concrete measures to increase corporate value, the feasibility of the plan and the valuation at that time are often not verified, so disclosures that don’t add up.
Listed subsidiaries and equity method affiliates account for 31.8% of all listed companies. The company is still in the process of restructuring its business portfolio.
The growth of each company’s corporate value and stock market capitalization will be determined by how quickly issues that have not been initiated so far are resolved.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Feb 15

Daily Brief Japan: Hankyu Hanshin REIT, Inc., JX Advanced Metals, GENOVA , JTEC Corp/Osaka, MarketEnterprise Co Ltd, en Japan Inc, Elecom Co Ltd, Core Concept Technologies Inc, Earth Chemical, Epco Co Ltd and more

In today’s briefing:

3D Launches Partial Tender Offer on Hankyu Hanshin REIT (8977)
JX Advanced Metals (5016 JP) IPO: TPX Add in April; Global Idx: One in August; One in March or Sep
GENOVA (9341 JP): Q3 FY03/25 flash update
JTEC Corp (3446 JP) – Reaffirming Long-Term Vision
MarketEnterprise Co Ltd (3135 JP): 1H FY06/25 flash update
en Japan Inc (4849 JP): Q3 FY03/25 flash update
Elecom Co Ltd (6750 JP): Q3 FY03/25 flash update
Core Concept Technologies Inc (4371 JP): Full-year FY12/24 flash update
Earth Chemical (4985 JP): Full-year FY12/24 flash update
Epco Co Ltd (2311 JP): Full-year FY12/24 flash update and the medium-term business plan

3D Launches Partial Tender Offer on Hankyu Hanshin REIT (8977)

For the second time in 3 weeks, 3D Investment Partners has launched, unannounced, a Partial Tender Offer for pure investment purposes, for a 10-15% stake in a REIT.
Last time it was NTT UD REIT Investment Corporation (8956 JP). This time it is Hankyu Hanshin REIT, Inc. (8977 JP).
The trade last time was to sell NTT UD on the pop and replace with peers. That has worked. The trade is probably the same here.

JX Advanced Metals (5016 JP) IPO: TPX Add in April; Global Idx: One in August; One in March or Sep

By Brian Freitas

JX Advanced Metals (5016 JP)‘s listing has been approved by the JPX and the stock is expected to start trading on the Prime Market from 19 March.
At the indicative IPO price of JPY 862/share, JX Advanced Metals (5016 JP) will be valued at JPY 800bn (US$5.25bn).
The stock should be added to the TOPIX INDEX at the close on 28 April while timing of inclusion in global indices will depend on domestic/overseas allocations and price moves.

GENOVA (9341 JP): Q3 FY03/25 flash update

Revenue increased by 24.7% YoY to JPY7.6bn, with operating profit rising 10.6% YoY to JPY1.6bn.
Medical Platform business achieved 18.9% YoY revenue growth, with average contract unit price at JPY1.4mn (-0.2% YoY).
Smart Clinic business saw 45.1% YoY revenue growth, with hardware and software services contributing 64.0% and 36.0% respectively.

JTEC Corp (3446 JP) – Reaffirming Long-Term Vision

Q1-2 FY6/25 results showed the core Optical business experienced sales growth and generated segmental profits, which was positive.
Focusing on developing the Life Science & Equipment segment involving upfront investment resulted in flattish operating losses YoY overall.
FY company guidance has been maintained, implying an earnings recovery HoH driven by the Optical segment experiencing order visibility and new customer acquisition.

MarketEnterprise Co Ltd (3135 JP): 1H FY06/25 flash update

Revenue reached JPY11.5bn (+34.6% YoY), with significant growth in Second-hand Online and Mobile & Telecommunications segments.
Operating profit turned positive at JPY249mn, with a 2.2% margin, despite JPY68mn relocation expenses.
Revenue in the Media business declined by 19.4% YoY, impacted by changes in Google’s search algorithm.

en Japan Inc (4849 JP): Q3 FY03/25 flash update

en Japan’s FY03/25 sales declined to JPY48.4bn (-2.6% YoY), with operating profit at JPY3.8bn (+48.6% YoY).
HR-Tech engage segment sales rose to JPY6.9bn (+40.7% YoY), but incurred an operating loss of JPY2.0bn.
en Japan revised its FY03/25 forecast, projecting sales of JPY65.8bn and operating profit of JPY5.2bn.

Elecom Co Ltd (6750 JP): Q3 FY03/25 flash update

Sales increased to JPY87.3bn (+7.7% YoY), with strong demand for power supplies and I/O devices, and Tescom Denki Group’s contribution.
Operating profit rose to JPY9.4bn (+1.4% YoY), driven by a JPY2.2bn increase in gross profit despite higher SG&A expenses.
B2C sales grew to JPY59.1bn (+14.9% YoY), while B2B sales decreased to JPY28.2bn (-4.9% YoY).

Core Concept Technologies Inc (4371 JP): Full-year FY12/24 flash update

FY12/23 revenue increased 20.4% YoY to JPY19.2bn, with gross profit rising 16.3% YoY to JPY5.0bn.
CCT acquired three companies to enhance DX support services and signed a partnership with SAP Japan.
FY12/25 forecast: revenue JPY21.8bn (+13.7% YoY), operating profit JPY2.3bn (+14.6% YoY), net income JPY1.6bn (+9.5% YoY).

Earth Chemical (4985 JP): Full-year FY12/24 flash update

Sales were JPY169.3bn (+6.9% YoY), operating profit JPY6.4bn (+0.9% YoY), net income JPY3.5bn (-15.3% YoY).
FY12/25 forecast: sales JPY175.0bn (+3.4% YoY), operating profit JPY6.5bn (+1.2% YoY), net income JPY4.3bn (+23.7% YoY).
Company plans JPY1.5bn expense for structural reforms, maintaining annual dividend of JPY120 per share for FY12/25.

Epco Co Ltd (2311 JP): Full-year FY12/24 flash update and the medium-term business plan

In FY12/24, revenue increased 10.8% YoY to JPY5.6bn, with operating profit up 106.8% YoY to JPY335mn.
The FY12/25 forecast projects revenue of JPY6.1bn (+9.0% YoY) and net income attributable to owners of JPY455mn (+39.1% YoY).
The new medium-term plan targets FY12/27 revenue of JPY7.5bn (+33.8% from FY12/24) and recurring profit of JPY1.0bn.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Feb 14

Daily Brief Japan: Kaonavi Inc, Trend Micro Inc, Daiichi Sankyo, Takasago Thermal Engineering, Piolax Inc, TSE Tokyo Price Index TOPIX, Sun*, Ichiken Co Ltd and more

In today’s briefing:

Kaonavi (4435 JP) – Small HR Software Co Gets 121% Premium LBO from Carlyle
Trend Micro (4704 JP): Rumoured Buyout Interest Starting to Take Shape
Daiichi Sankyo Placement – Momentum Is Weak but the Deal Is Small
Takasago Thermal Engineering Offering (1969) – Small Start to Larger Unwind
Piolax (5988 JP) – Murakami-San Gets BIG Buyback Tender Offer
Kaonavi (4435 JP): Carlyle’s JPY4,380 Tender Offer (121% Premium)
Takasago Thermal Engineering Placement – Share Buyback Should Aid Deal Performance
Companies with More Cash on Hand Are Expected to Use Cross-Shareholdings to Repurchase Shares
Sun* (4053 JP): Full-year FY12/24 flash update
Ichiken Co Ltd (1847 JP): Q3 FY03/25 flash update and reivision of full-year earnings forecasts

Kaonavi (4435 JP) – Small HR Software Co Gets 121% Premium LBO from Carlyle

Another Japanese smallcap takeover at a huge premium. Must be a day ending in “y.” It is a thing recently.
Interestingly, this is NOT an MBO. It is an LBO. Carlyle is buying out Kaonavi Inc (4435 JP) at ¥4,380/share which is 19x book and 89x EBIT. Nice price.
I expect this gets done easily because the co-CEO with 28.7% and Recruit with 20.6% are putting in. There’s another easy 9.7%. One more holder and this is done.

Trend Micro (4704 JP): Rumoured Buyout Interest Starting to Take Shape

Trend Micro Inc. (4704 JP) shares have hit their daily trade limit, following a Reuters report that Bain, Advent, KKR, and EQT AB are potential bidders.
The lack of a controlling shareholder and increased cybersecurity M&A activity support the buyout interest. In 4Q2024, cybersecurity M&A reached the highest quarterly volume in the past three years.
The valuation is undemanding. If it trades in line with its median peers’ CY2024 EV/Sales and EV/EBITDA multiple, it implies JPY11,500-15,000, a 6%- 38% premium to the current price.

Daiichi Sankyo Placement – Momentum Is Weak but the Deal Is Small

By Akshat Shah

Mizuho Bank is looking to raise US$151m from selling some of its stake in Daiichi Sankyo (4568 JP).
While the deal shouldn’t come as a surprise, given the ongoing cross-shareholding unwind narrative in Japan, the timing of such a selldown isn’t always certain.
In this note, we will talk about the placement and run the deal through our ECM framework.

Takasago Thermal Engineering Offering (1969) – Small Start to Larger Unwind

Takasago Thermal Engineering (1969 JP) reported Q3 earnings today. Revs up tiny yoy over 9m. OP +13%, Net +18.2%. Progression a bit behind guidance for full-year (but guidance unchanged)
Orders received and carried forward a record high. Margins up. DX/etc investments up. Crossholdings down but still HUGE outbound/in-bound. Goal is to shrink from 20% of net assets to 15%.
Today the company announced some crossholders would sell ~5% of shares out, and the company would launch a buyback for half that. Meh…

Piolax (5988 JP) – Murakami-San Gets BIG Buyback Tender Offer

Piolax Inc (5988 JP) is a small, low ROE, over-capitalised autoparts maker mostly making low-moat parts, but they sell A LOT of them. About a gajillion.
They started 100% div payout ratios 3yrs ago, and last year started a new MTMP to pay out 100% and then buy back a lot of stock. Murakami bought 10%.
In November they launched a big buyback. Now they are launching a 23.78% Tender Offer Buyback where Murakami-san will sell. Big accretion on forward expectations downgrades. Hmmm… 🤨

Kaonavi (4435 JP): Carlyle’s JPY4,380 Tender Offer (121% Premium)

Kaonavi Inc (4435 JP) has recommended a tender offer from Carlyle Group / (CG US) at JPY4,380, a 121.2% premium to the last close.
The offer is attractive due to the high takeover premium, being materially above the midpoint of the target IFA’s DCF valuation range and representing a four-year high.
This is a done deal, as the required minority acceptance rate is not onerous. The tender offer is from 14 February to 31 March (30 business days).

Takasago Thermal Engineering Placement – Share Buyback Should Aid Deal Performance

By Nicholas Tan

A group of shareholders are looking to raise US$118m from selling their respective stakes in Takasago Thermal Engineering (1969 JP) .
While the deal shouldn’t come as a surprise, given the ongoing cross-shareholding unwind narrative in Japan, the timing of such a selldown isn’t always certain.
In this note, we will talk about the placement and run the deal through our ECM framework.

Companies with More Cash on Hand Are Expected to Use Cross-Shareholdings to Repurchase Shares

Stock sale allows brokers to pass on to the company the attraction of being able to diversify its shareholders, and the cross-shareholding sales scheme allows them to obtain higher commissions.
One of the solutions that companies have come up with in the absence of improved return on capital is to reduce their policy shareholdings.
The use of share repurchases to buy back cross-shareholdings is a very good way to improve return on capital because it also reduces the amount of cash on hand.

Sun* (4053 JP): Full-year FY12/24 flash update

Revenue reached JPY13.6bn (+8.4% YoY) with operating profit at JPY1.4bn (-18.6% YoY) and recurring profit at JPY1.5bn (-36.2% YoY).
Number of recurring revenue customers totaled 131 (+8.3% YoY), with enterprise customers at 53 (+29.3% YoY) and SMB customers at 78 (-2.5% YoY).
Creative & Engineering service line revenue was JPY11.6bn (+6.9% YoY), while Talent Platform service line revenue was JPY2.0bn (+18.2% YoY).

Ichiken Co Ltd (1847 JP): Q3 FY03/25 flash update and reivision of full-year earnings forecasts

Ichiken’s cumulative Q3 FY03/25 revenue was JPY78.2bn, operating profit JPY5.4bn, and net income JPY3.6bn, with YoY increases.
Orders in the construction business decreased 1.6% YoY to JPY75.8bn, with private sector orders at JPY75.6bn.
Ichiken projects FY03/25 revenue of JPY98.0bn and plans a dividend of JPY140 per share, including a commemorative dividend.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Feb 13

Daily Brief Japan: Japan Eyewear Holdings , Shimano Inc, Recruit Holdings, Impress Holdings, Mitsuba Corp, Nhk Spring, Nippon Denko, Nisshinbo Holdings, Oat Agrio, Seino Holdings and more

In today’s briefing:

Japan Eyewear (5889) – “Second IPO” Equity Offering Creates TOPIX Inclusion
Shimano (7309) | A Slow but Steady Ascent
Recruit 3Q: Strong Set of Results Despite Slowdown in Labour Markets
Impress Holdings (9479 JP): Q3 FY03/25 flash update
Mitsuba Corp (7280 JP): Q3 FY03/25 flash update
Nhk Spring (5991 JP): Q3 FY03/25 flash update
Nippon Denko (5563 JP): Full-year FY12/24 flash update
Nisshinbo Holdings (3105 JP): Full-year FY12/24 flash update
Oat Agrio (4979 JP): Full-year FY12/24 flash update
(9076 JP) New Efficiencies and Modernisation in Consumer Goods Shipping

Japan Eyewear (5889) – “Second IPO” Equity Offering Creates TOPIX Inclusion

By Shifara Samsudeen, ACMA, CGMA

Janaghan Jeyakumar, CFA has had Japan Eyewear Holdings (5889 JP) on his watchlist. He wrote on 6 Feb 2025 in his TOPIX Who Is Ready piece he expected Q1 inclusion.
He also noted that an equity offering might be required. Monday, we got a forecast revision (upward) for the year ended 31 January, an equity offering, and TOPIX inclusion.
The equity offering proposed is large enough one could consider it a “Second IPO”. This matters in terms of absorption and in thinking about the TOPIX Inclusion event.

Shimano (7309) | A Slow but Steady Ascent

By Mark Chadwick

Cautious but Credible – FY25 guidance underwhelms, but Shimano’s realism is justified. The bike market is recovering, even if 2025 will be a grind.
Sitting on a Cash Pile – ¥530 billion in net financial assets, yet capital returns remain restrained. Investors will be watching for bolder moves.
Quality Wins – mid-cycle ROIC north of 20% and end-market inventories normalising – a long-term winner at a fair price.

Recruit 3Q: Strong Set of Results Despite Slowdown in Labour Markets

Recruit Holdings (6098 JP) reported 3QFY03/2025 results today which were in line with estimates. Despite labour markets cooling off, Recruit managed to report a strong set of results.
The company also has provided revised guidance for full-year FY03/2025 with an upward revision to revenues while Adj. EBITDA is forecast to be above the midpoint of the previous range.
Despite the slowdown in labour markets, Recruit’s monetisation efforts have paid off, however, we would not rush to make an entry.

Impress Holdings (9479 JP): Q3 FY03/25 flash update

Revenue decreased YoY in several segments, with notable declines in Content and Platform Businesses due to market trends.
Operating losses were reduced across multiple segments, attributed to improved profitability and lower SG&A expenses despite revenue declines.
Certain segments experienced revenue growth, driven by strong sales in Internet Media services and new platform developments.

Mitsuba Corp (7280 JP): Q3 FY03/25 flash update

Cumulative Q3 revenue rose 0.2% YoY to JPY257.4bn, with notable growth in the Other business segment.
Operating profit increased 8.0% YoY to JPY15.6bn, driven by price improvements and growth in core business segments.
Transportation Equipment-related Operations faced a 23.1% YoY revenue decline in China, despite growth in other regions.

Nhk Spring (5991 JP): Q3 FY03/25 flash update

Revenue increased YoY across most segments, with Automotive Seating declining; operating profit rose, and GPM improved to 13.7%.
Revenue increased YoY, narrowing losses; yen depreciation boosted yen-denominated earnings at overseas subsidiaries.
Semiconductor market recovery increased sales of process components, while high-capacity HDD demand boosted HDD suspensions revenue.

Nippon Denko (5563 JP): Full-year FY12/24 flash update

In Q1 FY12/24, revenue was JPY78.2bn (-0.2% YoY), operating profit JPY6.9bn (+46.0% YoY), recurring profit JPY4.9bn (+100.8% YoY).
The company raised its annual dividend forecast to JPY11.0, targeting a payout ratio of about 40%.
Full-year forecast for FY12/25 remains undecided due to uncertainties in alloy prices and electronic component demand.

Nisshinbo Holdings (3105 JP): Full-year FY12/24 flash update

FY12/24 sales reached 102.0% of forecast; operating profit 110.5%, recurring profit 128.4%, and net income 102.8%.
FY12/25 forecast: sales JPY506.0bn (+2.3% YoY), operating profit JPY19.7bn (+18.8% YoY), net income JPY18.3bn (+78.1% YoY).
Wireless and Communications segment expects increased sales and profit due to demand for disaster prevention systems and defense-related business.

Oat Agrio (4979 JP): Full-year FY12/24 flash update