Japan

In today’s briefing:

Furukawa (5715 JP) – Third Capital Policy Change in a Year Means Big Buyback
Japanese Auto, Tire Firms Sense Opportunity As Trump Clamps Tariffs
Toyota Motors: Is It Really Adapting to China’s Market For Long-Term Growth?
Shimano (7309) | Q4 Preview and Outlook
United Arrows Rising Again
Activist Investors with Increased AUM Will Also Likely Target Larger Companies for Investment
Minato Holdings (6862 JP): Q3 FY03/25 flash update
Wacom (6727 JP) – Laying the Groundwork
Macnica Holdings (3132 JP) – Q3 FY3/25 Results Update
Shofu (7979 JP) – Positive Dynamics Intact

Furukawa (5715 JP) – Third Capital Policy Change in a Year Means Big Buyback

In May 2023, Furukawa Co Ltd (5715 JP) decided it would review cross-holdings as part of its Actions to Implement Management Awareness of Capital Cost and Share Price.
In February 2024, it announced a cross-holding reduction policy, and then accelerated it in May 2024. They’ve been selling. They did a small buyback too.
Monday they announced a LARGE buyback (looks larger than it is) leaving future capital allocation policy better, but still wanting. The question is now the forward-forward bet.

Japanese Auto, Tire Firms Sense Opportunity As Trump Clamps Tariffs

By Vinod Nedumudy

Japanese tire firms mull option of broadening production base in US
May explore low-cost Southeast Asian destinations too
Diversifying supply-chain network to be on top of agenda

Toyota Motors: Is It Really Adapting to China’s Market For Long-Term Growth?

By Baptista Research

Toyota Motor Corporation’s financial results for the second quarter of fiscal year 2025 reveal a period of cautious resilience amidst both internal challenges and external pressures.
The company’s operating income for the first half of the fiscal year was recorded at JPY 2.4642 trillion, closely matching the figures from the same period last year, despite hurdles including production halts due to certification issues and the incremental costs associated with addressing these disruptions.
Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.

Shimano (7309) | Q4 Preview and Outlook

Q4 Risks Remain: Market conditions deteriorated in late 2024, and key data points suggest a potential miss on Q4 earnings expectations.
Focus on 2025 Outlook: Investors should shift attention to Shimano’s guidance, capital allocation strategy, and potential shareholder return initiatives in the coming year.
Long-Term Value: Despite short-term uncertainties, Shimano’s strong fundamentals and disciplined strategy position it well for sustainable growth and high returns.

United Arrows Rising Again

By Michael Causton

United Arrows spent a few years in retreat as a succession of problems around e-commerce, Covid and merchandising hit sales.
Instead, competitors like the unlisted retailers, Baycrews and Mash Holdings, took greater share thanks to innovative ideas and new chains mixing fashion, lifestyle and food.
United Arrows now claims the backend fixes are complete and it is starting to expand again, with new chains and target segments, both at home and overseas. Can it succeed?

Activist Investors with Increased AUM Will Also Likely Target Larger Companies for Investment

Engagement begins only when there is a common understanding that “the management goal is to increase corporate value and shareholder interest.
Because of differences in the level of understanding among listed companies, not all companies are able to smoothly discuss solutions to management issues based on the same common understanding.
While ROA improved moderately, ROE improved slightly, indicating that more and more companies are committed to shareholder returns.

Minato Holdings (6862 JP): Q3 FY03/25 flash update

Revenue increased by 28.8% YoY to JPY18.2bn, driven by strong growth in the Digital Device Business segment.
Operating profit decreased by 43.3% YoY to JPY669mn, with a significant decline in the Digital Engineering Business.
Minato Holdings revised FY03/25 forecast: revenue JPY23.0bn (+20.9% YoY), operating profit JPY735mn (-40.5% YoY).

Wacom (6727 JP) – Laying the Groundwork

With the company close to announcing its new medium-term plan ‘Wacom Chapter 4’ covering FY3/26 to FY3/29, Q1-3 FY3/25 results continue to indicate strength in the Technology Solution Business with OEM partnerships, with the decline in demand from the non-professional sector for the Branded Business.
With the decrease in temporary costs related to inventory and structural business reform, segmental losses are being lowered in the Branded Business which is positive and points to breakeven being achieved in the medium term.
Management has telegraphed additional business restructuring expenses in Q4 FY3/25, underlining the importance of optimizing operations before FY3/26.

Macnica Holdings (3132 JP) – Q3 FY3/25 Results Update

Robust Network and Sales mix improvement – Q3 FY3/25 results showed an uptick in gross profit (+8.0% QoQ), driven by the expansion of the network business, sales mix improvement, and enhanced product mix in the semiconductor business where lower- margin memory weakened whilst relatively higher-margin PLDs grew.
OP margin also improved (Q2 FY3/25 3.9%, Q3 FY3/25 4.1%).
Network maintained a positive segment OP growth trend (Q1-Q3 FY3/25 cumulative +79% YoY), leading to segment OP margin improvement to 8.2%.

Shofu (7979 JP) – Positive Dynamics Intact

Demand for Shofu’s competitive Chemical products continue to drive overseas growth and improve the sales mix, with 58.6% of total Q1-3 FY3/25 sales derived overseas.
Reported quarterly Q3 FY3/25 GPM and OPM have declined QoQ, but these were due to one-time events, resulting in a robust underlying trend indicating that the business is becoming more profitable whilst still investing in business expansion.
The weak yen has been a tailwind, but the company has maintained FY3/25 guidance. With no end-loaded costs expected for Q4 FY3/25, we maintain our earnings estimates.

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Feb 11

Daily Brief Japan: TSE Tokyo Price Index TOPIX, M3 Inc, Urbanet Corp, Nihon Nohyaku, Sinanen Holdings, Systems Engineering Consulta, Nichiban Co Ltd, Neturen Co Ltd and more

In today’s briefing:

The Strategy Is More Important than Whether the Mid-Term Business Plan and the Actual Are Blurred
M3: ELAN Acquisition Drives Top Line Growth; Earnings Growth to Remain Weak
Urbanet Corp (3242 JP): 1H FY06/25 flash update
Nihon Nohyaku (4997 JP): Q3 FY03/25 flash update
Sinanen Holdings (8132 JP): Q3 FY03/25 flash update
Systems Engineering Consulta (3741 JP): Q3 FY03/25 flash update
Nichiban Co Ltd (4218 JP): Q3 FY03/25 flash update
Neturen Co Ltd (5976 JP): Q3 FY03/25 flash update

The Strategy Is More Important than Whether the Mid-Term Business Plan and the Actual Are Blurred

By Shifara Samsudeen, ACMA, CGMA

Investors want to see if management can be entrusted with strategies to increase certainty of achieving plans, to build foundations for growth to expand corporate value, and to manage company.
The problem is that the disclosed contents of the mid-term management plan do not include necessary information, or the goals themselves are not what investors are looking for.
Before disclosing medium-term management plans, companies should estimate how much return on capital can be achieved by the plan and how much the corporate value and stock price will be.

M3: ELAN Acquisition Drives Top Line Growth; Earnings Growth to Remain Weak

M3 Inc (2413 JP) reported 3QFY03/2025 earnings today. Both revenue and OP grew YoY as well as beat consensus estimates. Most of revenue growth came from the ELAN acquisition.
Medical Platform’s earnings have continued to decline as a result of spending cuts by pharmaceutical companies while there has been a slight improvement in Overseas earnings during the quarter.
Though the overall declining trend in m3’s earnings has eased, we expect the earnings growth to remain weak. ELAN’s margins have continued to deteriorate.

Urbanet Corp (3242 JP): 1H FY06/25 flash update

In 1H FY06/25, sales were JPY8.0bn (-30.3% YoY) and operating profit was JPY101mn (-87.9% YoY), with a recurring loss of JPY232mn.
Real Estate business sales were JPY7.8bn (-30.7% YoY) and segment profit was JPY865mn (-37.6% YoY) in 1H FY06/25.
Total assets at end-Q2 FY06/25 were JPY57.2bn, liabilities increased to JPY42.4bn, and net assets were JPY14.8bn.

Nihon Nohyaku (4997 JP): Q3 FY03/25 flash update

Revenue decreased by 3.0% YoY to JPY61.4bn, with agrochemicals revenue at JPY57.2bn, down 3.5% YoY.
Operating profit increased by 42.4% YoY to JPY3.6bn, driven by improved profitability and yen depreciation.
Domestic agrochemical sales rose 6.3% YoY, while overseas revenue fell 5.8% YoY due to weather impacts.

Sinanen Holdings (8132 JP): Q3 FY03/25 flash update

Net sales declined by 11.3% YoY to JPY210.7bn, with improved profitability due to market-linked pricing plans.
Operating profit reached JPY2.8bn, recovering from a loss of JPY711mn, with recurring profit at JPY3.1bn.
Net income attributable to owners was JPY1.8bn, supported by impairment losses and subsidiary share sales.

Systems Engineering Consulta (3741 JP): Q3 FY03/25 flash update

Cumulative Q3 FY03/25 revenue was JPY7.1bn, with gross profit at JPY2.2bn and net income at JPY922mn.
Orders in cumulative Q3 FY03/25 reached JPY7.5bn, and the order backlog was JPY6.2bn, both record highs.
SEC revised its full-year FY03/25 forecast to JPY10.1bn revenue, with a year-end dividend of JPY102 per share.

Nichiban Co Ltd (4218 JP): Q3 FY03/25 flash update

Revenue increased 5.3% YoY to JPY37.4bn, driven by healthcare growth and price revisions in the Tape business.
Operating profit rose 37.4% YoY to JPY2.4bn, with improved profitability from high-margin products and price adjustments.
Overseas revenue grew 43.5% YoY to JPY1.7bn, aided by strong sales in Asia and Europe and a weaker yen.

Neturen Co Ltd (5976 JP): Q3 FY03/25 flash update

Cumulative Q3 FY03/25 revenue was JPY41.9bn, a 2.8% YoY decrease, with operating profit at JPY1.1bn.
Specialty Steel and Wire Products revenue fell 5.2% YoY, while Induction Heating revenue increased 1.6% YoY.
Operating profit margin declined 0.3pp YoY to 2.6%, with net income down 32.1% YoY to JPY888mn.

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Feb 10

Daily Brief Japan: Seven & I Holdings, Brother Industries, SBI Sumishin Net Bank , Toyota Motor, Shibaura Electronics, Appier Group, Nikkei 225, Kyodo Printing, Axell Corp, Forum Engineering Inc and more

In today’s briefing:

7&I (3382) – In Limbo, Dipping, But Stories Coming Together
Japan: Last Look at Potential Passive Selling in February
SBI Sumishin NetBank (7163) – Oops! NTT Docomo May Not Be There As a Buyer
EQD | Toyota (7203 JP // TM US) – Option Opportunities Amid Tariff Tension
Merger Arb Mondays (10 Feb) – Shibaura, Makino, Fuji Soft, Tecnos, Tohto Suisan, Proto, Pentamaster
Appier (4180) | Q4 Preview; Valuation Re-Rating Likely
EQD | Nikkei Index Options Weekly (January 27 – 31): Implied Vol Very Reactive to Spot
Kyodo Printing (7914 JP): Q3 FY03/25 flash update
Axell Corp (6730 JP): Q3 FY03/25 flash update
Forum Engineering Inc (7088 JP): Q3 FY03/25 flash update

7&I (3382) – In Limbo, Dipping, But Stories Coming Together

In the past month we have seen Seven & I Holdings (3382 JP) earnings, confirmation of the York Holdings timeline, stories about Apollo, KKR, and CP Group providing MBO financing.
We’ve also seen Itochu confirm the financing request from the Ito family, and two American banks tapped to provide LBO financing.
York Holdings itself gets created this month, and a buyer decided “in spring” with a Group Buyer/Outcome possibly decided by the May AGM. Looks skewed to me.

Japan: Last Look at Potential Passive Selling in February

By Brian Freitas

There are 14 Japanese stocks at risk of being deleted from global passive portfolios in February. The number will be smaller depending on the day of the review period chosen.
Selling from passive trackers will range from US$176m-354m and the impact ranges from 3.1-18.4 days of ADV. Short interest has increased in nearly all stocks over the last 4 weeks.
The forecast deletes have underperformed the TSE Tokyo Price Index TOPIX on average over the last 1-3 months, while there has been marginal outperformance over the last week or two.

SBI Sumishin NetBank (7163) – Oops! NTT Docomo May Not Be There As a Buyer

On Friday, SBI Sumishin Net Bank (7163 JP) fell 12.5% in the last 90 minutes of trading. This was not due to their Q3 earnings release (out 30 January).
It seemed due to investor disappointment in the content of the NTT earnings call. As discussed in the forked insight, there had been speculation NTT would buy SBI Sumishin.
Investors had thought NTT would pay more than 28x earnings and a ¥600bn premium to book to buy the business. At 23.7x Mar25e EPS and 4.1x book, it’s still expensive.

EQD | Toyota (7203 JP // TM US) – Option Opportunities Amid Tariff Tension

By Gaudenz Schneider

Japanese Prime Minister Shigeru Ishiba’s meeting with US President Trump shines the spotlight on potential US tariffs on Japanese cars. Toyota Motor’s (7203 JP) high implied volatility expresses elevated risk.
Risk analysis suggests a range of option strategies. Implementation is challenging due to low liquidity in the Japanese market.
Option liquidity is higher in the US traded Toyota Motor Corp Spon ADR (TM US) which is the preferred route of implementation.

Merger Arb Mondays (10 Feb) – Shibaura, Makino, Fuji Soft, Tecnos, Tohto Suisan, Proto, Pentamaster

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: Lifestyle China (2136 HK), Seven & I Holdings (3382 JP), Dada Nexus (DADA US), Smart Share Global (EM US), ESR Group (1821 HK), Get Nice Financial.
Lowest spreads: Makino Milling Machine Co (6135 JP), Shibaura Electronics (6957 JP), Avjennings Ltd (AVJ AU), Fuji Soft Inc (9749 JP), Macromill, Inc (3978 JP), Proto Corp (4298 JP).

Appier (4180) | Q4 Preview; Valuation Re-Rating Likely

We forecast Q4 consolidated revenue of ¥9.7bn (+27% YoY); Operating profit (OP) is expected to grow +129% YoY to ¥1.0bn in Q4
For FY25, we expect the company to guide for +25% revenue growth and OP +160% to ¥5.7bn, significantly ahead of the street estimate of ¥4.8bn.
Appier’s AI-powered solutions operate on top of generative AI models, utilizing proprietary data and analytics to enhance corporate online advertising efficiency.

EQD | Nikkei Index Options Weekly (January 27 – 31): Implied Vol Very Reactive to Spot

By John Ley

Nikkei down 2.66% on Monday with Implied vol very reactive to the move jumping almost 3 points.
USD/JPY dropped 2.35% for the week, Nikkei fared better only losing 1.96%.
Open interest in the Nikkei dominated by Puts with 2 outstanding for every 1 Call.

Kyodo Printing (7914 JP): Q3 FY03/25 flash update

Revenue increased by 4.4% YoY to JPY75.1bn; net income rose 86.3% YoY due to investment gains.
Publishing printing revenue declined YoY; operating loss narrowed by JPY138mn YoY, but price pass-through was slower than expected.
Revenue from business forms rose 8.8% YoY; operating profit exceeded expectations due to cost reductions despite weak BPO performance.

Axell Corp (6730 JP): Q3 FY03/25 flash update

Sales decreased by 13.6% YoY to JPY11.9bn, with operating profit and recurring profit declining by 38.7% and 37.5% respectively.
Pachinko and pachislot machine market showed deceleration; company focused on AI business expansion and graphics LSI sales.
New Businesses segment reported an operating loss of JPY377mn, with sales declining by 8.1% YoY to JPY340mn.

Forum Engineering Inc (7088 JP): Q3 FY03/25 flash update

Revenue increased by 10.9% YoY to JPY26.1bn, driven by higher demand for temporary engineers and staffing rates.
Cumulative Q3 pre-tax profit rose 43.3% YoY to JPY3.5bn, with significant contributions from Cognavi Staffing and staffing rate increases.
Cognavi India recorded JPY15mn revenue and JPY279mn operating loss in cumulative Q3 FY03/25 due to upfront investments.

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Feb 09

Daily Brief Japan: Fuji Soft Inc, TSE Tokyo Price Index TOPIX, Kyocera Corp and more

In today’s briefing:

(Mostly) Asia-Pac M&A: Shibaura, Tecnos, Insignia Fin., Fosun Tourism, Fuji Soft, Shin Kong/Taishin
Investors Are Disappointed that ROE Is Not Improving, yet Companies Can’t Disclose to Improve It
Last Week in Event SPACE: Kyocera, WH Group/Smithfield, CNBM, Japan Eyewear, Core Concept Tech

(Mostly) Asia-Pac M&A: Shibaura, Tecnos, Insignia Fin., Fosun Tourism, Fuji Soft, Shin Kong/Taishin

By David Blennerhassett

I tally 61 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma.
Six new deals! Australia’s SelfWealth (SWF AU), and Japan’s Shibaura Electronics (6957 JP), Tohto Suisan (8038 JP), Tecnos Japan (3666 JP), Proto (4298 JP), & Toyo Sugar Refining (2107 JP).
Key updates/news took place on: Insignia Financial (IFL AU) , Fosun Tourism (1992 HK) , Fuji Soft (9749 JP), Suntec REIT (SUN SP), and Shin Kong (2888 TT)/Taishin (2887 TT).

Investors Are Disappointed that ROE Is Not Improving, yet Companies Can’t Disclose to Improve It

Companies with high stock price valuations are often characterized by high foreign shareholdings and high return on capital, and valuations cannot be raised simply by disclosure without improving profitability.
Companies that proactively disclosed to TSE requests were those with large market capitalization and high foreign ownership. They usually try to use their cash effectively for investment and shareholder returns.
Raising profit margin is the best way to improve capital profitability. It’s clear that challenge lies in restructuring the business portfolio and reorganizing the industry, which few companies could do.

Last Week in Event SPACE: Kyocera, WH Group/Smithfield, CNBM, Japan Eyewear, Core Concept Tech

By David Blennerhassett

You could label Kyocera Corp (6971 JP)“BULLISH” because the stock goes up rather than down; but you could easily label this BEARISH because the prospects aren’t exciting.
WH Group (288 HK)spins off Smithfield Foods (SFD US) – below the prior expected price range. Pricing looks full here.
As China National Building Material (3323 HK)‘s Partial Offer heads towards the pointy end, do you buy, and/or borrow, and tender; short outright; or short tender?

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Feb 08

Daily Brief Japan: Jaccs Co Ltd, Astellas Pharma, Charm Care Corp, Hosokawa Micron, IPS Inc, Japan Investment Adviser Co, Kanematsu Corp, Kohsoku Corp, Marubun Corp, Mitsuboshi Belting and more

In today’s briefing:

Jaccs Co Ltd (8584 JP): Q3 FY03/25 flash update
Astellas Pharma (4503 JP): 9MFY25 Result- Strategic Brands Strong; Margins Expand; Guidance Raised
Charm Care Corp (6062 JP): 1H FY06/25 flash update
Hosokawa Micron (6277 JP): Q1 FY09/25 flash Update
IPS Inc (4390 JP): Q3 FY03/25 flash update
Japan Investment Adviser Co (7172 JP): Full-year FY12/24 flash update
Kanematsu Corp (8020 JP): Q3 FY03/25 flash update
Kohsoku Corp (7504 JP): Q3 FY03/25 flash update
Marubun Corp (7537 JP): Q3 FY03/25 flash update
Mitsuboshi Belting (5192 JP): Q3 FY03/25 flash update

Jaccs Co Ltd (8584 JP): Q3 FY03/25 flash update

Operating revenue increased by JPY4.3bn YoY, driven by deferred installment income, despite a decline in transaction volume.
Consolidated operating expenses rose JPY8.4bn YoY due to higher bad-debt expenses and finance costs amid interest rate hikes.
Overseas business saw a segment loss of JPY2.5bn, with increased bad debt expenses and declining transaction volumes in Vietnam and Indonesia.

Astellas Pharma (4503 JP): 9MFY25 Result- Strategic Brands Strong; Margins Expand; Guidance Raised

By Tina Banerjee

Astellas Pharma (4503 JP) reported a 22% YoY (6% from favourable Fx rates) revenue growth to ¥1,453B in 9MFY25. The U.S. market continue to be key, contributing 46% of revenue.
Operating profit rose 44% YoY to ¥297.5B, with operating margin expanding 310bps to 20.5%. Core profit increased 35% YoY to ¥223B, with margins improving 150bps to 15.4% in 9MFY25.
Guidance revised upward, with revenue now expected at ¥1,900B on robust XTANDI performance and favorable forex movement.

Charm Care Corp (6062 JP): 1H FY06/25 flash update

In 1H FY06/25, revenue increased by 7.9% YoY, operating profit grew 11.7% YoY, maintaining high occupancy rates.
As of end-Q2, 104 assisted-living facilities operated with 7,086 rooms, maintaining high occupancy despite increased resident departures.
Good Partners’ revenue and profit were strong; Charm Senior Living’s referral business contributed to occupancy growth at facilities.

Hosokawa Micron (6277 JP): Q1 FY09/25 flash Update

The company recorded orders of JPY20.2bn, sales of JPY18.1bn, and an order backlog of JPY48.6bn, all declining YoY.
FY09/25 forecasts include sales of JPY83.0bn, operating profit of JPY6.5bn, and recurring profit of JPY6.9bn, all decreasing YoY.
Capital expenditures for FY09/25 are planned at JPY5.0bn, with R&D expenses at JPY1.2bn, both increasing YoY.

IPS Inc (4390 JP): Q3 FY03/25 flash update

Revenue increased to JPY11.2bn (+34.5% YoY) with growth in Global Telecommunications, but declines in Domestic Telecommunications and Medical & Healthcare.
Operating profit rose to JPY3.2bn (+120.8% YoY), driven by cost ratio reduction and Global Telecommunications segment performance.
Global Telecommunications business achieved JPY7.8bn revenue (+97.8% YoY) and JPY2.9bn operating profit (+347.5% YoY).

Japan Investment Adviser Co (7172 JP): Full-year FY12/24 flash update

FY12/24 revenue increased 42.7% YoY, with operating profit up 120.5% and recurring profit up 217.2%.
Operating Lease business revenue rose 47.5% YoY, contributing 90.8% of total revenue, with equity sales at JPY113.1bn.
FY12/25 forecast includes revenue of JPY36.9bn, operating profit of JPY18.1bn, and a 50% dividend payout ratio.

Kanematsu Corp (8020 JP): Q3 FY03/25 flash update

Companywide revenue rose to JPY781.7bn (+7.7% YoY), driven by mobile and aerospace business sales, with operating profit at JPY33.4bn (+0.9% YoY).
Segment reclassification in FY03/25 affected revenue and profit figures, with notable increases in mobile, semiconductor, and aerospace businesses.
Declines in operating profit were observed in the meat products, feedstuff, iron, steel, and energy businesses, impacting overall profitability.

Kohsoku Corp (7504 JP): Q3 FY03/25 flash update

Revenue for cumulative Q3 FY03/25 increased by 8.5% YoY, reaching JPY88.4bn, with a gross profit of JPY17.4bn.
Operating profit and recurring profit both rose by 8.5% and 8.2% YoY, respectively, with net income up 8.9%.
SG&A expenses increased by JPY1.22bn, primarily due to higher salaries, freight, packaging, and bonus provisions.

Marubun Corp (7537 JP): Q3 FY03/25 flash update

Net sales decreased by 15.4% YoY, with significant declines in the Electronic Devices business due to weak demand.
Operating income fell by 33.9% YoY, impacted by lower net sales and increased SG&A expenses, with forex losses of JPY1.2bn.
Electronic Systems business saw an 8.9% YoY sales increase, driven by medical equipment and defense market expansion.

Mitsuboshi Belting (5192 JP): Q3 FY03/25 flash update

Mitsuboshi’s Q4 revenue is typically lower due to decreased demand for agricultural machinery and snowmobile belts in the US.
Revenue increased 7.7% YoY to JPY67.9bn, with operating profit up 4.8% YoY to JPY6.5bn.
Automotive and industrial belts saw YoY revenue growth, with strong demand for repair parts and new products.

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Feb 07

Daily Brief Japan: Japan Eyewear Holdings , Toyo Sugar Refining, Yamaha Corp, Crooz Inc, Tokyo Electron, Mercari , Allegro MicroSystems , Gamecard Joyco Holdings, GMO Pepabo Inc and more

In today’s briefing:

TOPIX Inclusions: Who Is Ready (Feb 2025)
WellNeo Sugar (2117) To Buy Toyo Sugar (2107) – Too Cheap, No Synergies Paid, but Too Small
Yamaha Corp (7951) BIG Buyback May Be Followed By More Later
Crooz Sells Online Mall Business to Korea’s Nugu
Tokyo Electron (TEL): Maintains Its FY25 Guidance and Provides a Cautious 2025 Outlook
Mercari (4385) | Profitability on the Rise with More Levers to Pull
Allegro MicroSystems: The E-Mobility, ADAS Integration & Other Major Growth Drivers
Gamecard Joyco Holdings (6249 JP): Q3 FY03/25 flash update
Tokyo Electron (8035 JP): Q3 FY03/25 flash update
GMO Pepabo Inc (3633 JP): Full-year FY12/24 flash update

TOPIX Inclusions: Who Is Ready (Feb 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.
Japan Eyewear Holdings (5889 JP) and Core Concept Technologies Inc (4371 JP) continue to be in our watchlist of pre-event candidates for TOPIX Inclusions.
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.

WellNeo Sugar (2117) To Buy Toyo Sugar (2107) – Too Cheap, No Synergies Paid, but Too Small

WellNeo Sugar (2117) today announced a deal to buy Toyo Sugar Refining (2107 JP) at a 27% premium. This is a small ¥11bn deal where insiders own 45%.
Normally I wouldn’t even talk about a deal this small but this one has something going for it. Two things actually.
And readers will have to read all the way down to the conclusions to find out the key one, but the setup is that it is too cheap.

Yamaha Corp (7951) BIG Buyback May Be Followed By More Later

Yesterday, Yamaha Corp (7951 JP) announced Q3 earnings (results, presentation, metrics), a change in full-year guidance (revs unch’d, OP -10.8%, NP -25%), and a large buyback.
9M Revenue up yoy but China sales slower OP up yoy (audio business, SG&A cuts), but FY revised lower due to restructuring (impairment, retirement expenses). Looks worse than it is.
The buyback is interesting, and large. And investors should be aware of the modalities.

Crooz Sells Online Mall Business to Korea’s Nugu

By Michael Causton

Crooz’s Shop-list.com used to be one of the fastest growing online fashion malls in Japan but, just before Covid, it hit a wall and hasn’t recovered since.
Now it will be merged with Korean fashion mall, Nugu, and its real value as a database of young female consumers will become clear.
This should help Nugu grow to GTVs of ¥100 billion from Japan alone but will leave Crooz as a small bit player in digital services.

Tokyo Electron (TEL): Maintains Its FY25 Guidance and Provides a Cautious 2025 Outlook

By Nicolas Baratte

Cautious 2025 outlook: SEAJ and other Japanese SPE firms have toned down 2025 expectations. TEL mentions a flat total end-demand.
In 2024, spending was concentrated in leading edge (AI) and China. In 2025, Intel and Samsung Logic Capex declines, China should decline. The bright spots are TSMC and HBM Capex.
Consensus expectations are low, but rightly so. The stock is at average PEx. Neutral territory.

Mercari (4385) | Profitability on the Rise with More Levers to Pull

Record Margins: Q2 OP surged 82% YoY to ¥7.1b, with Japan profitability up and losses narrowing in Fintech and the US.
US Breakeven Play: Aggressive cost-cutting led to 12ppt margin improvement; if growth stalls, a sale or exit could boost margins by 200bps.
Fintech Upside: Losses peaked last year, with 16ppt OPM improvement; breaking even could add 400bps to group margins.

Allegro MicroSystems: The E-Mobility, ADAS Integration & Other Major Growth Drivers

By Baptista Research

Allegro MicroSystems reported third-quarter fiscal year 2025 revenues of $178 million, exceeding the midpoint of its guidance.
The company posted a non-GAAP earnings per share of $0.07, also above the anticipated outlook.
Despite these accomplishments, the company’s quarterly sales declined 5% sequentially and 30% year-over year.

Gamecard Joyco Holdings (6249 JP): Q3 FY03/25 flash update

Sales increased by 11.0% year-on-year, reaching JPY31.9 billion, according to Shared Research based on company data.
Operating profit decreased by 7.8% year-on-year to JPY8.4 billion, with recurring profit also down by 6.4%.
Net income attributable to owners of the parent fell by 3.9% year-on-year, totaling JPY6.1 billion.

Tokyo Electron (8035 JP): Q3 FY03/25 flash update

Cumulative Q3 FY03/25 revenue was JPY1.78tn (+38.4% YoY), with operating profit at JPY513.5bn (+65.1% YoY).
Full-year forecast for FY03/25 revised: revenue JPY2.40tn, operating profit JPY680.0bn, net income JPY526.0bn.
New SPE sales forecast: JPY1.83tn, with logic foundry JPY1.17tn, non-volatile memory JPY119.6bn, DRAM JPY545.1bn.

GMO Pepabo Inc (3633 JP): Full-year FY12/24 flash update

Full-year FY12/24 revenue increased YoY, driven by price revisions in recurring revenue businesses and reduced bad debt expenses.
FY12/25 forecast expects revenue growth from price revisions and high-priced plans, with a dividend increase to JPY67.0/share.
New medium-term policy targets FY12/27 revenue of JPY12.6bn and operating profit of JPY1.26bn, with increased payout ratio.

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Feb 06

Daily Brief Japan: Shibaura Electronics, MS&AD Insurance, ID Holdings , Chugoku Marine Paints, Shinmaywa Industries, Dream Incubator, Taiyo Holdings, Tocalo Co Ltd, Almedio Inc and more

In today’s briefing:

Taiwan’s Yageo (2327 TT) Announces Hostile Tender on Shibaura Electronics (6957 JP) – I Have 🍿🍿
Shibaura Electronics (6957 JP): Yageo’s (2327 TT) Hostile Preconditional Tender Offer at JPY4,300
Japan CorpGovReports: TSE “Mgmt Conscious of Capital Cost/Stock Price” Details (Feb25), TSE Updates
ID Holdings (4709 JP) – All-Round Positive Performance
Chugoku Marine Paints (4617 JP): Q3 FY03/25 flash update
Shinmaywa Industries (7224 JP): Q3 FY03/25 flash update
Dream Incubator (4310 JP): Q3 FY03/25 flash update
Taiyo Holdings (4626 JP): Q3 FY03/25 flash update
Tocalo Co Ltd (3433 JP): Q3 FY03/25 flash update
Almedio Inc (7859 JP): Q3 FY03/25 flash update

Taiwan’s Yageo (2327 TT) Announces Hostile Tender on Shibaura Electronics (6957 JP) – I Have 🍿🍿

Today, Taiwanese passive components maker Yageo Corporation (2327 TT) announced its Board had approved the launching of a Tender on Shibaura Electronics (6957 JP).
It turns out YAGEO approached them in October, Shibaura stonewalled for 3mos, required an NDA to meet, and refused to budge. METI Corporate Takeover Guidelines were likely ignored.
This could set off a flurry of activity including competition, an auction, promises of dividends, and who knows what. It will be exciting but it’s not C&F.

Shibaura Electronics (6957 JP): Yageo’s (2327 TT) Hostile Preconditional Tender Offer at JPY4,300

Yageo Corporation (2327 TT) announced a hostile preconditional tender offer for Shibaura Electronics (6957 JP) at JPY4,300 per share, a 37.2% premium to the last close.
The offer is preconditional on regulatory approvals (Japan, Taiwan) and Board recommendation (can be waived). The offer is scheduled to start on 7 May.
The offer represents an all-time high. The Board has three options: facilitate a friendly offer, find a white knight bidder or launch an ambitious MTM plan to thwart the offer.

Japan CorpGovReports: TSE “Mgmt Conscious of Capital Cost/Stock Price” Details (Feb25), TSE Updates

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.
171 new CGRs were filed since 31-Dec-2024. Our tools show every report, links to every document, and now a new diff file tool. Input a name, see the changes.
A surprising number of smaller companies have yet to file a MCoCC/SP Awareness report. As cross-holdings get sold down, I expect they will become activists targets in 2025.

ID Holdings (4709 JP) – All-Round Positive Performance

OP growth re-acceleration – ID Holdings is executing its growth strategy and generating positive returns, with Q1-3 FY3/25 results showing OP growth re-accelerating 30.3% YoY.
Performance has been robust across all business segments, and there has been definitively high growth in IT Infrastructure and Cybersecurity, Consulting, and Training, with the underlying theme being high demand for the company’s DX transformation services.
The market environment remains robust, and the company continues to allocate capital to strengthen IT security services with the 21.39% acquisition of Broadband Security (4398) in January 2025, which we view as a positive driver for future growth.

Chugoku Marine Paints (4617 JP): Q3 FY03/25 flash update

CMP’s cumulative Q3 FY03/25 sales reached JPY96.1bn, driven by marine and industrial paints, despite container paint declines.
Operating profit increased to JPY11.6bn, with improved GPM, despite higher raw material and transportation costs.
CMP revised its FY03/25 forecast upwards, expecting JPY130.0bn sales and JPY13.5bn net income, citing foreign exchange gains.

Shinmaywa Industries (7224 JP): Q3 FY03/25 flash update

Revenue increased YoY due to growth in Special Purpose Truck and Parking Systems, despite Industrial Machinery decline.
Operating profit rose YoY, driven by revenue growth, selling price revisions, and yen depreciation benefits.
Full-year FY03/25 forecast revised with a JPY5.0bn revenue decrease, maintaining profit projections despite market challenges.

Dream Incubator (4310 JP): Q3 FY03/25 flash update

In Q3 FY03/25, consolidated sales were JPY4.5bn (+19.8% YoY), with operating profit of JPY173mn and net income of JPY97mn.
Business Production segment sales reached JPY3.8bn (+10.3% YoY), with operating profit of JPY568mn (+15.2% YoY).
Venture Capital segment sales were JPY726mn (+117.4% YoY), with operating profit of JPY405mn, reversing prior losses.

Taiyo Holdings (4626 JP): Q3 FY03/25 flash update

Cumulative Q3 FY03/25 sales increased 16.2% YoY, with Electronics segment sales at JPY62.7bn and Medical segment at JPY24.6bn.
Electronics segment profit rose 37.4% YoY to JPY17.0bn, driven by yen depreciation and high-value-added product sales.
Taiyo Holdings revised FY03/25 forecasts, raising Electronics segment sales to JPY81.2bn and profit to JPY21.4bn.

Tocalo Co Ltd (3433 JP): Q3 FY03/25 flash update

Q3 FY03/25 sales reached JPY39.9bn (+14.7% YoY), driven by a 16.8% YoY increase in Thermal Spraying.
Consolidated recurring profit for Q3 FY03/25 rose 30.3% YoY to JPY8.8bn, with RPM improving 2.7pp to 22.0%.
FY03/25 earnings forecast revised upwards: sales JPY54.0bn, recurring profit JPY11.8bn, annual dividend JPY65.0 per share.

Almedio Inc (7859 JP): Q3 FY03/25 flash update

Almedio’s FY03/25 forecast revised down due to lower-than-expected orders and project delays, impacting revenue and profits.
Insulation Materials business faces revenue decline from postponed orders and competition, affecting FY03/25 financial projections.
Nanomaterials business experiences revenue and profit declines due to project evaluation delays and reduced selling prices.

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Feb 05

Daily Brief Japan: Fuji Soft Inc, Proto Corp, Tecnos Japan, Tohto Suisan, Toc Co Ltd, Nintendo and more

In today’s briefing:

Fuji Soft (9749 JP): Nearing the Endgame as KKR Bumps to JPY9,850
Proto Corp (4298) – MBO After Restatement Scandal Is Opportunistic at ¥2,100 (+64%)
Tecnos Japan (3666 JP): Ant Capital’s JPY1,155 Tender Offer
Tohto Suisan (8038 JP): Aso’s Unusual Tender Offer
Tecnos Japan (3666 JP) – Small Cap IT Consultant Goes Private – Activist Pitches In
TOC (8841) Buyback Makes One Wonder When The Takeout Comes
Proto Corp (4298 JP): MBO Tender Offer Represents an All-Time High
Fuji Soft (9749) – KKR Bumps Bigly In Bain Boyg; Buyers Bully a Bagarre
Nintendo (7974)| Nintendo: Switch 2 Can’t Come Soon Enough
Tohto Suisan (8038 JP) – Aso Corp To Launch Tender Offer at ¥7,500/Share

Fuji Soft (9749 JP): Nearing the Endgame as KKR Bumps to JPY9,850

KKR & Co (KKR US) has increased its Fuji Soft Inc (9749 JP) offer to JPY9,850, a 4.2% premium to the previous JPY9,451 offer and a 2.6% premium to Bain’s JPY9,600 offer.
A bump from KKR was expected and necessary, as the shares have consistently traded above its previous offer. Bain is scheduled to launch its competing offer this week.
Expect a final round of bids, as KKR’s offer is not final. The shares closed above KKR’s offer, which remains below the high end of the IFA DCF valuation range.

Proto Corp (4298) – MBO After Restatement Scandal Is Opportunistic at ¥2,100 (+64%)

Proto Corp (4298 JP) is not the name on people’s lips, but everyone who knows cars in Japan knows this company. They have run car mags for decades.
Now they do other things too but car magazines, websites, and associated data provision are worth 90% of OP. And they are ubiquitous, and growth has been good.
Management forecasts for growth are a damp squib. This is opportunistic.

Tecnos Japan (3666 JP): Ant Capital’s JPY1,155 Tender Offer

Tecnos Japan (3666 JP) has recommended a tender offer from Ant Capital at JPY1,155, a 38.7% premium to the last close.
The offer is reasonable as it is above the midpoint of the target IFA’s DCF valuation range and represents a seven-year high.
Ant has secured irrevocables from the top three shareholders. However, the largest shareholder’s irrevocable has a counteroffer and share price clause, which could result in a competing bid.

Tohto Suisan (8038 JP): Aso’s Unusual Tender Offer

Tohto Suisan (8038 JP)‘s tender offer from Aso Corp is JPY7,500, a 39.1% premium to the last close. Tohto Suisan is currently in breach of the tradable share ratio.
Unusually, the offer has no lower or upper limit. If the required ownership ratio is secured, Aso will implement squeeze-out procedures.
While supportive, the Board has left the decision to accept or reject the offer at the shareholders’ discretion. The offer is attractive and represents an all-time high.

Tecnos Japan (3666 JP) – Small Cap IT Consultant Goes Private – Activist Pitches In

Tecnos Japan (3666 JP) decided it wanted to go private. It has a bunch of large shareholders and a lot of retail, and was getting kicked out of TOPIX.
An activist bought 6% last spring, Tecnos conducted a bidding process last fall. Ant Capital won. The activist has 10+% now. They and two others with 25% agreed to tender.
This should get done easily. It is not expensive, but an auction is good process and should be a model for deals done in future.

TOC (8841) Buyback Makes One Wonder When The Takeout Comes

7 years ago I wrote a big piece titled TOC’s BIGLY Buyback Makes It a Takeout Target. I thought the shareholder structure and buyback plans looked like a creeping takeover.
In December 2017, Effissimo had sold a very large stake back to the company. I wrote in March 2018. 10mos later they did another and I wrote again.
Since then they’ve bought back a bit more. Today they are buying back another 5%. It still looks like a potential takeover.

Proto Corp (4298 JP): MBO Tender Offer Represents an All-Time High

Proto Corp (4298 JP) has recommended an MBO tender offer at JPY2,100, a 64.1% premium to the last close.
The offer is attractive as it is above the midpoint of the target IFA’s DCF valuation range and 25% above the all-time high.
Despite the presence of two substantial shareholders, an attractive offer suggests that this is a done deal. The tender offer ends on 21 March, with payment on 28 March

Fuji Soft (9749) – KKR Bumps Bigly In Bain Boyg; Buyers Bully a Bagarre

In Dec 2024, Bain announced it would overbid KKR’s bid without requiring Fuji Soft’s approval, backed by the founding family. In early Jan 2025, we got an anticipated start date.
That anticipated start date is upon us. KKR’s deal to close 7 Feb is now bumped to ¥9,800 and extended 7 days, suggesting Bain’s bid beacons.
I think they’ll have to go to ¥10,000 and from here there may not be much upside. I’d rather stay away.

Nintendo (7974)| Nintendo: Switch 2 Can’t Come Soon Enough

Switch slowdown: Nintendo’s Q3 revenue and profit fell sharply as the ageing console nears the end of its cycle, missing hardware sales expectations.
Guidance cut: Full-year revenue and profit forecasts were lowered, but investors remain focused on the upcoming Switch 2 launch.
Muted upside: Switch 2 is an incremental upgrade, unlikely to expand the market significantly or boost Nintendo’s valuation beyond its current fair value of ¥9,000 per share.

Tohto Suisan (8038 JP) – Aso Corp To Launch Tender Offer at ¥7,500/Share

4+ years ago Aso Corp launched a Tender Offer to buy 33.4% or up to 100% of marine products wholesaler Tohto Suisan (8038 JP). They got just over a third.
Then it became a zombie as I warned Tohto Suisan Partial Tender Offer – A Weird Tender Which Leads To Listed Zombie-Ism. But it moved around.
Today, Aso announces a tender to take out minorities, almost all of whom are other corporate holders. It’s at a 39% premium and 1.2x book. It should get done.

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Feb 04

Daily Brief Japan: Kyocera Corp, Nikkei 225, SGX Rubber Future TSR20, Lasertec Corp, Sumitomo Pharma, Daiichi Sankyo, AS ONE Corporation, TSE Tokyo Price Index TOPIX, Sms Co Ltd, Srg Takamiya and more

In today’s briefing:

Kyocera (6971) – Changes Policies – Will Sell KDDI Faster and Buy Back Shares
EQD | Nikkei Index Options Weekly (January 27 – 31): USD/JPY and Nikkei at a Stalemate
La Nina-triggered Floods Make Serious Dent In Thai Rubber Production
Lasertec: FY25 Guidance Isn’t Revised up Despite a Blockbuster 2Q25. The Stock Is Attractive.
Sumitomo Pharma (4506 JP): Robust 9MFY25 Revenues; Back in Black; Guidance Revised
Daiichi Sankyo (4568 JP): Mixed Q3FY25 Result; FY25 Net Profit Guidance Raised; New CEO Appointed
AS ONE Corporation (7476 JP): Q3 FY03/25 flash update
Seeing Disappointing Disclosures Raises Question of What Was the Skill Matrix of Board Directors?
Sms Co Ltd (2175 JP): Q3 FY03/25 flash update
Takamiya (2445 JP) – Business Model Transition Leads to a Phase of Slower Profit Growth…

Kyocera (6971) – Changes Policies – Will Sell KDDI Faster and Buy Back Shares

Today, in conjunction with the release of Q3 earnings, Kyocera Corp (6971 JP) announced a change in its Corporate Governance Code doc, a change in Cross-holding Policy, and Buyback Policy.
Full-Year earnings guidance revision was non-salutary. Revs -1%, OP -69%, Net Profit -72% vs previous predictions from 30 October (those were -1.5%, -38.2%, -36.6% vs April guidance at the time).
Based on this disappointment, they announced they would speed up the sale of crossholdings and buy back shares this year and over the following three years.

EQD | Nikkei Index Options Weekly (January 27 – 31): USD/JPY and Nikkei at a Stalemate

By John Ley

This week we add in some additional graphs and commentary highlighting USD/JPY vs Nikkei 225.
Implied vols were very reactive to spot to open the week with Nikkei dropping almost 1% on Monday.
Heavier volume on the down days with Puts making up 57.8% of the total weekly volume.

La Nina-triggered Floods Make Serious Dent In Thai Rubber Production

By Vinod Nedumudy

Rubber production in December suffers a loss of 30%
Yokohama Rubber plays Good Samaritan in hour of crisis
CMO enabling FSC Certification for Thai rubber for EUDR

Lasertec: FY25 Guidance Isn’t Revised up Despite a Blockbuster 2Q25. The Stock Is Attractive.

By Nicolas Baratte

After 2 very poor quarters (revenue decline YoY), 2Q25 revenue increase 93% YoY, net income 137%. The painfully high volatility will not go away.
But Lasertec maintains its FY25 guidance which means that the blowout 2Q25 does not indicate higher growth
The expectation bubble should have completely deflated (SiC for EV, Intel, Samsung). The stock is trading at 18x, at the bottom of its trading range and valuations. Attractive.

Sumitomo Pharma (4506 JP): Robust 9MFY25 Revenues; Back in Black; Guidance Revised

By Tina Banerjee

Sumitomo Pharma (4506 JP) reported 25% YoY revenue growth during 9MFY25, driven by North America.
Restructuring and streamlining efforts help curb expenses and post a core operating profit of ¥21B during 9MFY25 compared to an operating loss of ¥96B in same period last year.
Sumitomo is now expecting FY25 revenue to be ¥381B, up by ¥43B from the previous forecast and a core net profit of ¥16B.

Daiichi Sankyo (4568 JP): Mixed Q3FY25 Result; FY25 Net Profit Guidance Raised; New CEO Appointed

By Tina Banerjee

Daiichi Sankyo (4568 JP) reported mixed Q3FY25 result, with revenue increasing 8% YoY to ¥484.8M and net profit decreasing 7% YoY to ¥61.9M. Enhertu revenue increased 39% YoY to ¥143B.
The company has raised FY25 net profit guidance by 7% to ¥240B (up 20% YoY), to reflect an increase in financial income due to an improvement in foreign exchange gains.
As Daiichi Sankyo enters the final year of its current five-year business plan, the company has appointed Hiroyuki Okuzawa as Chief Executive Officer effective April 1, 2025.

AS ONE Corporation (7476 JP): Q3 FY03/25 flash update

Cumulative Q3 FY03/25 sales were JPY75.4bn (+9.8% YoY), operating profit JPY8.4bn (+11.5% YoY), net income JPY6.0bn (+10.2% YoY).
Research and Industrial Instruments sales reached JPY62.4bn (+11.0% YoY), with Scientific and Industrial sales at JPY46.1bn and JPY16.3bn respectively.
E-commerce sales rose to JPY24.7bn (+23.8% YoY), overseas business sales were JPY4.1bn (+8.9% YoY), driven by online expansion.

Seeing Disappointing Disclosures Raises Question of What Was the Skill Matrix of Board Directors?

With about 40% of companies having a P/B of less than 1x, the problem is that many disclosures do not understand management to create value and increase the stock price.
It’s difficult for investors’ voices to reach small cap companies and companies with still high defensive walls of cross-held shares, which are not easily targeted for investment by institutional investors.
Independent directors should be appointed with skillset to participate in developing management plans and scrutinize them for reasonableness and whether the projected corporate value is gapped from that of investors.

Sms Co Ltd (2175 JP): Q3 FY03/25 flash update

Sales increased 14.0% YoY to JPY44.9bn, while operating profit decreased 27.4% YoY to JPY3.6bn.
Revised FY03/25 forecast: sales JPY61.1bn (+13.1% YoY), operating profit JPY6.3bn (-23.8% YoY), net income JPY6.1bn (-16.3% YoY).
Kaipoke member locations increased by 9.5% YoY, with 31,150 locations and 54,350 elderly care facilities.

Takamiya (2445 JP) – Business Model Transition Leads to a Phase of Slower Profit Growth…

By Sessa Investment Research

H1 FY2025/3 Earnings results summary: Takamiya (hereafter, the Company) reported sales of JPY 21,236 mn (+2.1% YoY), operating profit of JPY 802 mn (-33.5% YoY), ordinary profit of JPY 640 mn (-56.9% YoY), and profit attributable to owners of parent (hereafter, net profit) of JPY 498 mn (-50.5% YoY), falling short of initial forecasts.
Sales fell 6.0% short of the initial forecast due to delays in the delivery of certain projects which have been pushed back to Q3 and beyond.
FY2025/3 Company earnings forecast: The full-year forecasts for FY2025/3: net sales of JPY 49,500 mn (+12.2% YoY), operating profit of JPY 3,600 mn (+5.7% YoY), ordinary profit of JPY 3,220 mn (-10.1% YoY), net profit of JPY 2,000 mn (+5.9%).

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Feb 03

Daily Brief Japan: Osaka Steel, Lasertec Corp, Chuoh Pack Industry, NTT UD REIT Investment Corporation, SCREEN Holdings, TSE Tokyo Price Index TOPIX, Seria Co Ltd, Yellow Hat Ltd and more

In today’s briefing:

Osaka Steel (5449) Large Buyback At a Discount Ruins Fun For Activists
Unloved Japan Round-Up: Some Massive Results Surprises
Chuoh Pack Industry (3952 JP): NIKKON (9072 JP) Offer’s 273% Premium Results from an Auction
Weekly Deals Digest (02 Feb) – NTT UD REIT, Sanyo, Ascot, Giga Prize, Lifestyle China, Dada, LG CNS
SCREEN: Moderate ~teens Growth Outlook but the Stock Is Cheap
Easier to Raise Listing Criteria, but More Difficult to Encourage Growth of Companies Already Listed
Seria Co Ltd (2782 JP): Q3 FY03/25 flash update
Yellow Hat Ltd (9882 JP): Q3 FY03/25 flash update

Osaka Steel (5449) Large Buyback At a Discount Ruins Fun For Activists

Osaka Steel (5449 JP) is 65% owned by Nippon Steel Corporation (5401 JP). They make a relatively simple set of steel products used by shipbuilders, construction companies, and warehouse builders.
Activist Effissimo Capital went over 5% in October 2016 and is still a top holder. Activist Strategic Capital went over 5% in December 2023 and now owns 10+% of votes.
The “hope” had been that Nippon Steel buy out minorities and Osaka Steel would be rescued from mediocre capital returns. That was not to be. Activists are disappointed.

Unloved Japan Round-Up: Some Massive Results Surprises

By Michael Allen

Lixil increased operating profit by 15.7% YoY, to ¥20.6bn, compared to consensus estimates for an 18% decline. The stock trades at 80% of book value.
TEPCO earned ¥112bn compared to a consensus forecast of a ¥3bn loss. It trades at 35% of book value.
Lasertec increased EBIT by 122% to ¥47.7bn compared to consensus estimates for ¥27bn, and the stock trading at the lowest multiples relative to Topix in seven years.

Chuoh Pack Industry (3952 JP): NIKKON (9072 JP) Offer’s 273% Premium Results from an Auction

Chuoh Pack Industry (3952 JP) has recommended Nikkon Holdings (9072 JP)’s tender offer at JPY5,034, a 273.2% premium to the last close.
The extraordinary premium resulted from a competitive auction, enabling Toyota Motor (7203 JP), the largest shareholder, to sell most of its stake.
The offer is well above the target IFA’s DCF valuation range and more than double the all-time high. Stating the obvious, this is a done deal.

Weekly Deals Digest (02 Feb) – NTT UD REIT, Sanyo, Ascot, Giga Prize, Lifestyle China, Dada, LG CNS

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: LG CNS (LGCNSZ KS) seeks to raise up to US$837 million, and Guming Holdings (GUM HK) seeks to raise US$300 million.
Event-Driven developments: NTT UD REIT Investment Corporation (8956 JP), Ascot Corp (3264 JP), Giga Prize (3830 JP), Sanyo Special Steel (5481 JP), Lifestyle China (2136 HK), Dada Nexus (DADA US).

SCREEN: Moderate ~teens Growth Outlook but the Stock Is Cheap

By Nicolas Baratte

Big Dec-24 due to China. Mar-25 will be weaker. FY26 growth will come only from TSMC and HBM. After a strong FY25 (~30% growth), FY26 should see growth at 10-15%.
Accounting concerns should be over after the publication of the audit report on Jan 14 2025. The stock has started appreciating since early Jan 2025.
Valuations are low. The stock is trading at ~11x FY26 EPS. A muted Mar-25 could limit the upside short-term, let’s wait.

Easier to Raise Listing Criteria, but More Difficult to Encourage Growth of Companies Already Listed

There is a need to change the mindset of company managers who consider IPO as a goal and not a way to grow after the listing.
The listing criteria for TSE Growth Market will be raised as early as April 2026. It’s clear that the current listing criteria are far from liquid enough to invest in.
For companies that are already listed, some rule should be established to either de-list them because they cannot bear the listing cost or to increase their market capitalization through M&As.

Seria Co Ltd (2782 JP): Q3 FY03/25 flash update

Sales reached JPY178.0bn, a 7.0% YoY increase, with directly managed stores contributing 98.9% of total sales.
Operating profit rose 16.9% YoY to JPY13.2bn, while net income increased 18.3% YoY to JPY8.9bn.
The company opened 84 directly managed stores and closed 49, totaling 2,056 stores by end-Q3 FY03/25.

Yellow Hat Ltd (9882 JP): Q3 FY03/25 flash update