Japan

In today’s briefing:

Sanyo Special Steel (5481 JP): Nippon Steel (5401 JP)’s Light Tender Offer Begs for Activism
(Mostly) Asia M&A, Jan 2025: Sun Art, Sanyo Special Steel, Jamco, Ascot, Dropsuite, Smart Share
Giga Prize (3830 JP): FreeBit (3843 JP)’s Tender Offer Is a Done Deal
Last Week in Event SPACE: Fast Retailing, Sigma, Takeda Pharmaceutical, WH Group

Sanyo Special Steel (5481 JP): Nippon Steel (5401 JP)’s Light Tender Offer Begs for Activism

Sanyo Special Steel (5481 JP) has recommended Nippon Steel Corporation (5401 JP)’s tender offer at JPY2,750, a 37.4% premium to the last close.
The offer is light, implying a P/B of 0.67x, below the midpoint of the IFA DCF range, below the Board’s requested price, and unattractive compared to peer multiples.
The lack of an irrevocable and unattractive offer suggests that satisfying the minimum acceptance condition is likely challenging. This situation requires activism to force a bump.

(Mostly) Asia M&A, Jan 2025: Sun Art, Sanyo Special Steel, Jamco, Ascot, Dropsuite, Smart Share

For the month of January 2025, 14 new transactions (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$6bn.
The average premium for the new transactions announced (or first discussed) in January was ~57%, excluding Sun Art Retail (6808 HK)‘s massive takeunder.
The average premiums for transactions in 2024 (129 transactions), (2023 (117), 2022 (106), 2021 (165), 2020 (158), and 2019 (145 ) were 43%, 39%, 41%, 33%, 31%, and 31% .

Giga Prize (3830 JP): FreeBit (3843 JP)’s Tender Offer Is a Done Deal

Giga Prize (3830 JP) has recommended Freebit Co Ltd (3843 JP)’s tender offer at JPY2,500, a 48.5% premium to the last close.
While the offer is below the midpoint of the target IFA’s DCF valuation range, it represents an all-time high and aligns with the Board’s requested price.
The required minority acceptance rate is modest, and tendering by the third-largest shareholder is enough to close the deal.

Last Week in Event SPACE: Fast Retailing, Sigma, Takeda Pharmaceutical, WH Group

It was confirmed on Friday afternoon Fast Retailing (9983 JP) was a single cap move, NOT a double-capping in a single Review. That limits the sell down.
Chemist Warehouse’s reverse buyout of pharmacy wholesaler Sigma Healthcare (SIG AU) is now all-but complete.
Takeda Pharmaceutical (4502 JP) announced decent results, decently upgraded guidance in both IFRS/GAAP terms and in Core/Adjusted terms (less impressive uplift in Adjusted/Analysed terms). They also announced a ¥100bn buyback.

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Feb 01

Daily Brief Japan: Sanyo Special Steel, Ascot Corp, Chuoh Pack Industry, Avant Corp, Resona Holdings, Giga Prize, Orient Corp, Itochu Enex, Cota Co Ltd and more

In today’s briefing:

Nippon Steal! Again. Parent Takes Out Sanyo Special Steel (5481) At Well Below Book
Daito Trust Buys Out Listed Private Co Ascot (3264 JP) – Small Done Deal at ¥260
Ascot Corp (3264 JP): Daito Trust Construction (1878 JP)’s Tender Offer a Done Deal
Nikkon Pays 273% Premium for Chuoh Pack (3952 JP) In Takeover
Avant Corp (3836 JP): 1H FY06/25 flash update
Resona Holdings (8308 JP) – Positive 3QFY24 Results
Freebit (3843) Buys Out Minorities in Giga Prize (3830) – Light, But Tough to Block
Orient Corp (8585 JP): Q3 FY03/25 flash update
Itochu Enex (8133 JP): Q3 FY03/25 flash update
Cota Co Ltd (4923 JP): Q3 FY03/25 flash update

Nippon Steal! Again. Parent Takes Out Sanyo Special Steel (5481) At Well Below Book

6-7 years ago Sanyo Special Steel (5481 JP) bought out a large foreign specialty steel company, and funded it by getting Nippon Steel to inject capital at below book.
Now Nippon Steel is buying the rest of Sanyo Special Steel in a Tender Offer at 0.66x book, where most of book is Net Receivables, Inventory, WIP, and Materials.
This is the second time in a decade where the Board has decided to sell control of itself at far below book value. They should be ashamed of themselves.

Daito Trust Buys Out Listed Private Co Ascot (3264 JP) – Small Done Deal at ¥260

Ping An Insurance bought into a small Tokyo-based condo developer in 2017 at ¥255/share. In 2020, it reinvested on the dip with SBI at ¥155/share.
Ping An and SBI started with zero shares. By 2020 they had 80+% of shares. Now they are selling out to Daito Trust Construct (1878 JP).
This is a done deal at a slight premium to book value. Daito Trust buys Real Estate Available for Sale and assumes debt. That’s it. Easy peasy done deal.

Ascot Corp (3264 JP): Daito Trust Construction (1878 JP)’s Tender Offer a Done Deal

Ascot Corp (3264 JP) announced a tender offer from Daito Trust Construct (1878 JP) at JPY260 per share, a 20.4% premium to the last close.
Ascot currently does not meet the 25% tradeable share ratio criterion. The offer is attractive compared to historical trading ranges but below the mid-point of the IFA DCF valuation range.
This is a done deal, as irrevocables represent an 82.78% ownership ratio, well above the minimum acceptance condition (67.86% ownership ratio).

Nikkon Pays 273% Premium for Chuoh Pack (3952 JP) In Takeover

Today, Nikkon Holdings (9072 JP) announced it would take over Chuoh Pack Industry (3952 JP) for ¥5,034/share. It closed today at ¥1,349. This is a HUGE win for governance.
The 273% premium is not the big win here. For holders it is, of course, but for Japan Inc shareholders everywhere, the win was the auction process.
This could have come out at 100% premium and that might have been OK. As it is, cross-holders and one big holder together get this deal done. Congrats!

Avant Corp (3836 JP): 1H FY06/25 flash update

Revenue rose to JPY14.0bn (+19.3% YoY), with operating profit margin increasing to 18.1% (+2.0pp YoY).
Outsourcing and software businesses drove revenue growth, with order backlog in Q2 FY06/25 at JPY4.8bn (+24.0% YoY).
Consolidated employees increased to 1,567, with substantial profit growth in Corporate Management Solutions Business in 1H FY06/25.

Resona Holdings (8308 JP) – Positive 3QFY24 Results

By Victor Galliano

Resona’s 3QFY24 results confirm that it is well geared to higher interest rates in Japan, with its high floating rate loan exposure, low LDR and high BoJ cash balance
In addition, management is executing effectively to deliver revenue growth well ahead of opex growth, and NPL trends continue to improve, resulting in sharply lower cost of risk
Resona’s equity holdings value to market cap ratio is 36%, the highest of the six biggest Japanese banks by market cap; management is actively divesting holdings to free up capital

Freebit (3843) Buys Out Minorities in Giga Prize (3830) – Light, But Tough to Block

Today, Freebit Co Ltd (3843 JP) announced it would launch a Tender Offer next Monday to buy out minorities in 60.9%-owned Giga Prize (3830 JP).
The multiple is not terribly impressive. It could be better. But they only need 5.8% of the 39.1% they do not own to get this over the hump.
Synergies are clear. They are expected. They are not priced in the valuation. This is disappointing. Again.

Orient Corp (8585 JP): Q3 FY03/25 flash update

Operating revenue rose by JPY13.9bn (+8.2% YoY) to JPY182.5bn, driven by core business growth and new subsidiaries.
Operating expenses increased JPY15.4bn (+9.7% YoY) to JPY174.0bn, mainly due to higher SG&A and financing expenses.
Recurring profit decreased JPY1.6bn (-15.8% YoY) to JPY8.5bn, with net income impacted by income tax adjustments.

Itochu Enex (8133 JP): Q3 FY03/25 flash update

Cumulative Q3 FY03/25 sales revenue was JPY678.3bn (-4.4% YoY), with operating profit at JPY23.0bn (+2.2% YoY).
Home-Life Division sales revenue rose to JPY52.5bn (+5.7% YoY), driven by higher LP gas import prices.
Power and Utility Division sales revenue declined to JPY58.3bn (-36.0% YoY) due to decreased market transactions.

Cota Co Ltd (4923 JP): Q3 FY03/25 flash update

Sales reached JPY7.4bn (+1.7% YoY), with strong performance from new hair styling products, despite a decline in toiletries.
Operating profit was JPY1.7bn (-6.2% YoY), impacted by increased costs in talent acquisition, development, and capital expenditures.
Revised FY03/25 forecasts: Sales JPY9.3bn, operating profit JPY1.8bn, due to lower sales expectations and higher expenses.

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Jan 31

Daily Brief Japan: Global Food Creators, Takeda Pharmaceutical, Namura Shipbuilding, Hagihara Industries, Anritsu Corp, TSE Tokyo Price Index TOPIX, Financial Products Group Co, M&A Capital Partners, Okinawa Cellular Telephone and more

In today’s briefing:

Global Foods Creators (7559) – Another Stupidly Cheap MBO With Rigged DCF
Takeda Pharma (4502) – Strong Results
Quiddity JPX-Nikkei 400 Rebal 2025: End-Jan 2025 Ranks
Takeda Pharmaceutical (4502 JP): Strong Q3 Result Triggers Guidance Raise; ¥100B Buyback Announced
Hagihara Industries Inc. (7856 JP) Research update
Anritsu Corp (6754 JP): Q3 FY03/25 flash update
Is the Decline in Number of Listed Companies the Beginning of a Shift to Value-Creating Management?
Financial Products Group Co (7148 JP): Q1 FY09/25 flash update
M&A Capital Partners (6080 JP): Q1 FY09/25 flash update
Okinawa Cellular Telephone: Q3 FY03/25 flash update, revision of full-year earnings forecasts

Global Foods Creators (7559) – Another Stupidly Cheap MBO With Rigged DCF

Today after the close, Global Food Creators (7559 JP) announced that the CEO would sell his 1.23% of the company into an MBO by a company he set up.
The family company which owns 27%, and he would fund the takeover of the other 73% with 1% equity taken from his share sale, and 99% bank loans.
The TOB is at 0.65x book for a cash-rich company. Liquidate the cash and the rest is being taken over at 0.33x book. Aaaaargh.

Takeda Pharma (4502) – Strong Results

By Nippon Investment Bespoke Research UK

Today Takeda Pharmaceutical (4502 JP) announced earnings which will mean last year was the trough, not this year. The pipeline looks OK too.
The company also announced a ¥100bn buyback and a change of CEO. The buyback has a big number, but it isn’t particularly exciting.
All in all, there’s positive news here, but it is all much of a muchness, but as it is a nine-figure buyback in 3mos, we take a look.

Quiddity JPX-Nikkei 400 Rebal 2025: End-Jan 2025 Ranks

By Janaghan Jeyakumar, CFA

JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted capped index composed of 400 constituents.
The annual index review takes place in August every year. We look at the latest rankings of potential ADDs/DELs every month.
Below is a look at the rankings of potential ADDs/DELs for the JPX-Nikkei 400 August 2025 rebalance based on trading data as of end-January 2025.

Takeda Pharmaceutical (4502 JP): Strong Q3 Result Triggers Guidance Raise; ¥100B Buyback Announced

By Tina Banerjee

Takeda Pharmaceutical (4502 JP) reported better-than-expected performance in Q3FY25, with 3% revenue growth to ¥1,144B, driven by continued strong momentum from Growth and Launch Products. All key parameters beat estimates.
Takeda has upgraded its full year outlook for growth, reflecting strong year-to-date product performance and OPEX efficiencies, as well as revised foreign exchange assumptions. Takeda has also announced ¥100B buyback.
Continued strong performance of its Growth and Launch product portfolio, ripe late-stage pipeline, and expected margin improvement from FY26 envisage long-term growth prospect of the company.

Hagihara Industries Inc. (7856 JP) Research update

Hagihara Industries reported FY24 (Oct year-end) earnings results on 10 December with FY24 operating profit [OP] of ¥2,097mil (+6.0% YoY) on sales of ¥33,118mil (+6.0% YoY) versus an OP target of ¥2,200mil (+11.2% YoY) on sales of ¥32,000mil (+2.4% YoY).
While sales overshot the firm’s guidance, OP fell short due to costs associated with a core system renewal and real estate acquisition tax incurred on the Kasaoka Factory.
Management is guiding for FY25 1H OP of ¥1,160mil (-8.8% YoY) on sales of ¥16,780mil (+2.5% YoY), and FY25 OP of ¥2,400mil (+14.4% YoY) on sales of ¥34,000mil (+2.7% YoY).

Anritsu Corp (6754 JP): Q3 FY03/25 flash update

Orders reached JPY81.9bn (+2.3% YoY), revenue JPY80.8bn (+3.9% YoY), with operating profit at JPY6.4bn (+24.4% YoY).
Strong demand in the food industry increased segment operating profit by 126.3% YoY, with OPM rising 4.0pp YoY.
Full-year FY03/25 forecast remains unchanged; progress stands at 70.3% for revenue and 58.4% for operating profit.

Is the Decline in Number of Listed Companies the Beginning of a Shift to Value-Creating Management?

While the number of listed companies worldwide has been on a declining trend, the TSE has experienced growth in market capitalization, but growth in market capitalization has been slow.
TSE requested companies to raise their P/B, but admits that many companies have yet to reach this goal and that it’ll take considerable time to change to such management style.
Shareholder proposals are increasing. This could hasten the shift to value-creating management, or companies that find it burdensome as a cost of listing may choose to go private.

Financial Products Group Co (7148 JP): Q1 FY09/25 flash update

In Q1 FY09/25, revenues increased by 14.6% YoY, while operating and recurring profits decreased by 7.7% and 7.4% respectively.
The Leasing Fund Business reported a 26.5% YoY revenue decline, with a segment profit margin of 87.7%, down 1.2pp YoY.
The International Real Estate Fund Business achieved a 356.6% YoY revenue increase, with a gross profit margin of 90.6%, up 8.5pp YoY.

M&A Capital Partners (6080 JP): Q1 FY09/25 flash update

Revenue in Q1 FY09/25 reached JPY7.3bn, a 131.8% YoY increase, driven by higher average fees per deal.
Operating profit and recurring profit both increased by 465.1% YoY to JPY3.3bn, with net income rising 465.7% YoY.
The company revised its dividend policy, increasing the payout ratio target to 30%, raising FY09/25 dividends to JPY51.84.

Okinawa Cellular Telephone: Q3 FY03/25 flash update, revision of full-year earnings forecasts

For Q3 FY03/24, operating revenue was JPY62.4bn (+6.8% YoY), with net income JPY9.5bn (-1.0% YoY).
Capex for Q3 FY03/25 was JPY4.2bn, a 34.4% YoY decrease, with 66.3% progress against the full-year plan.
FY03/25 forecast revised: revenue JPY83.0bn (+6.4% YoY), operating expenses JPY65.5bn (+7.4% YoY), dividend JPY120/share.

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Jan 30

Daily Brief Japan: Daihatsu Diesel Mfg, CyberAgent Inc, Makita Corp, Jafco Co Ltd, Canon Marketing Japan, Matsui Securities, Pca Corp, Carta Holdings, Inc., Entrust Inc and more

In today’s briefing:

Daihatsu Diesel’s (6023) Big Buyback and Quasi Change of Control
CyberAgent 1Q: Media Business Continues to Show Solid Growth
Makita (6586) | Powering Up
Jafco Co Ltd (8595 JP): Q3 FY03/25 flash update
Jafco- Continues to Perform
Canon Marketing Japan (8060 JP): Full-year FY12/24 flash update
Matsui Securities (8628 JP): Q3 FY03/25 flash update
Pca Corp (9629 JP): Q3 FY03/25 flash update
Carta Holdings (3688 JP) – Q3 FOLLOW-UP
Entrust Inc (7191 JP): Q3 FY03/25 flash update

Daihatsu Diesel’s (6023) Big Buyback and Quasi Change of Control

By Shifara Samsudeen, ACMA, CGMA

Yesterday, Daihatsu Diesel Mfg (6023 JP) announced that it would buy back shares in a Tender Offer and that its controlling “parent” would also sell shares to a private company.
The accretion is significant, and the shareholder structure changes significantly. It is not quite an Exedy-like situation though. The register changes but it doesn’t clear.
But the backdrop is considerably different than the MTMP, and that means this smallcap is worth a closer look.

CyberAgent 1Q: Media Business Continues to Show Solid Growth

CyberAgent Inc (4751 JP) reported 1QFY09/2025 results today. 1Q revenues beat consensus but reported OP fell below consensus due to weak gaming margins.
The key highlight of the quarter was the strong results of the Media business whose revenues saw strong growth with strengthened profitability.
Though game earnings were slightly weak during 1Q, we would not be too worried as app analysis data reveals that the segment is off to a strong start in 2QFY09/2025.

Makita (6586) | Powering Up

By Mark Chadwick

Margin recovery drives stock higher – Operating profit beat estimates, margins rebounded to 13.6%, and forex gains provided a boost despite weak sales.
European rebound offers upside – Makita, with 20% market share, is set to benefit from a forecasted 2025 construction sector recovery after two years of contraction.
Valuation remains attractive – With improving ROIC, inventory normalisation, and steady growth prospects, a DCF model suggests an 18% upside for the stock.

Jafco Co Ltd (8595 JP): Q3 FY03/25 flash update

Revenue increased by 73.9% YoY to JPY25.4bn, with operating profit rising 149.6% YoY to JPY11.2bn.
Capital gains reached JPY10.9bn, with JPY7.6bn from IPO-related share sales and JPY3.4bn from unlisted shares.
Total investment executed in cumulative Q3 FY03/25 was JPY30.6bn, with JPY14.5bn for domestic VC investments.

Jafco- Continues to Perform

By Rikki Malik

The company has had good 2024 absolute and relative to Topix performance.
Will Jafco continue this winning streak into 2025 and beyond?
Results for the quarter ending December 2024 are encouraging with exit multiples increasing

Canon Marketing Japan (8060 JP): Full-year FY12/24 flash update

Sales increased by 7.3% YoY to JPY653.9bn, driven by IT solutions and maintenance/operations services.
FY12/25 forecasts: Sales JPY680.0bn (+4.0% YoY), Operating profit JPY56.0bn (+5.4% YoY), Net income JPY39.5bn (+0.5% YoY).
IT solutions sales expected to grow YoY, with a 7% increase in SI services and 10% in outsourcing.

Matsui Securities (8628 JP): Q3 FY03/25 flash update

Net operating revenue was JPY9.0bn, with a YoY increase of 4.5% and a QoQ decrease of 9.8%.
SG&A expenses rose to JPY5.4bn, up 6.8% YoY and 2.2% QoQ, with personnel expenses at JPY999mn.
Net trading profit reached JPY1.1bn, up 3.6% YoY and down 8.3% QoQ, primarily from FX transactions.

Pca Corp (9629 JP): Q3 FY03/25 flash update

In Q3 FY03/25, the company reported revenue of JPY12.1bn, operating profit of JPY2.1bn, and net income of JPY1.4bn.
Revenue by product category showed cloud services increased 28.2% YoY, while conventional software decreased 53.3% YoY.
FY03/25 forecasts include revenue of JPY16.5bn, operating profit of JPY2.4bn, and a dividend of JPY83.00/share.

Carta Holdings (3688 JP) – Q3 FOLLOW-UP

By Sessa Investment Research

CARTA HOLDINGS (hereafter, the Company) announced its Q3 FY2024/12 results on November 13, 2024, which were in line with its upwardly revised forecasts disclosed with Q2 results.
The Company positioned FY2024/12 as the first year toward its sharp recovery following aggressive cost structure reforms in FY2023/12, and expects full- year operating profit to rise 53.7% YoY to JPY 2,000 mn as a signal to the start of its comeback.
Q4 is the Company’s busy season, and investors likely have a certain level of interest in where actual results come in.

Entrust Inc (7191 JP): Q3 FY03/25 flash update

Revenue increased 17.9% YoY to JPY7.8bn, driven by growth in rent guarantee services; operating profit rose 11.0% YoY.
Total contracts in force reached 475,000 (+4.0% YoY), with Guarantee business contracts increasing 20.7% YoY to 349,000.
Solution business revenue declined 14.5% YoY as customers switched to guarantee contracts, reducing contracts in force by 24.7% YoY.

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Jan 29

Daily Brief Japan: NTT UD REIT Investment Corporation, Fast Retailing, Japan Pure Chemical, TSE Tokyo Price Index TOPIX and more

In today’s briefing:

3D Launches Partial Tender Offer on NTT UD REIT (8956)
NTT UD REIT (8956 JP): 3D’s Unsolicited Partial Tender Offer
Fast Retailing (9983 JP): Double Capping & The Reverse Funding Trade
Japan Pure Chemical (4973 JP): Q3 FY03/25 flash update
Improved Governance Tends to Raise Reason to Buy Japanese Stocks when Corporate Profit Is Lackluster

3D Launches Partial Tender Offer on NTT UD REIT (8956)

Seemingly out of the blue, Singapore-based activist investment fund 3D Investment Partners has launched a partial tender offer at a small premium on NTT UD REIT Investment Corporation (8956 JP).
3DIP currently owns 2.2% and at maximum, will own 15.00% of the REIT units outstanding less treasury units. It intends to own the units for “pure investment purposes.”
“Shareholder” structure is different for J-REITs vs companies. And this J-REIT has an interesting future possibility. But…

NTT UD REIT (8956 JP): 3D’s Unsolicited Partial Tender Offer

3D has announced an unsolicited partial tender offer for NTT UD REIT Investment Corporation (8956 JP) at JPY131,890 per unit, a 10.0% premium to the undisturbed price.
The minimum number of units to be purchased is 115,279 (7.80% ownership ratio), and the maximum number of units to be purchased is 189,128 (12.80% ownership ratio).
The modest premium and an implied P/NAV <1x suggest a lightish offer. 3D will have to rethink terms as shares are trading through terms.

Fast Retailing (9983 JP): Double Capping & The Reverse Funding Trade

By Brian Freitas

With 3 days left in the review period, Fast Retailing (9983 JP) has a 11.29% weight in the Nikkei 225 (NKY INDEX). That means double capping in March.
If Fast Retailing (9983 JP) underperforms the other index stocks by 1.8% from now to the close on 31 January, there will only be a single level of capping.
Double capping will result in big selling on Fast Retailing (9983 JP) and big inflows into the other index constituents. Smaller impact for single level capping.

Japan Pure Chemical (4973 JP): Q3 FY03/25 flash update

Revenue reached JPY10.1bn, a 15.4% YoY increase, with operating profit at JPY417mn, up 46.4% YoY.
Net income surged 259.1% YoY, mainly due to gains from the sale of company-held shares.
Sales of plating chemicals for AI servers and data centers remained strong, while industrial equipment demand was sluggish.

Improved Governance Tends to Raise Reason to Buy Japanese Stocks when Corporate Profit Is Lackluster

Overseas investors have sold off heavily in Japanese equities since July, and it’ll interesting to see the trading trends in January, which will reflect their asset allocation for the year.
Overseas investors buy Japanese equities when they expect the management of Japanese companies to change and improve their profitability and growth potential.
Benchmark investors who have reduced their investment weighting in Japanese equities may return to their investment weighting if they expect a relative improvement in Japanese equity investment performance in 3Q.

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Jan 28

Daily Brief Japan: Fast Retailing, Tokyo Metro, Fanuc Corp, Nikkei 225, Japan Business Systems , Startia Holdings and more

In today’s briefing:

Fast Retailing (9983) Capping Decision This Week – Single or Double Dose?
TOPIX Index Upweights: An Early Preview Of “The Big April Basket” 2025
Fanuc (6594) | Robots in Reverse
EQD | Nikkei Index Options Weekly (January 20 – 24): Looking for an Assist
Japan Business Systems (5036 JP) – Aiming to Be Japan’s No.1 Cloud Integrator
Startia Holdings (3393 JP) – Cheerleading Company for the Digital Shift of SMEs in Japan

Fast Retailing (9983) Capping Decision This Week – Single or Double Dose?

Unless Fast Retailing (9983) underperforms Nikkei 225 by 10% by Friday close, there will be a capping exercise at the next Nikkei 225 Rebalance at the end of March 2025.
The evolution of tech stock movement in Japan in the next day or three is important to watch. There will be effects.
The setup very near-term could be pretty interesting, and worth watching.

TOPIX Index Upweights: An Early Preview Of “The Big April Basket” 2025

By Janaghan Jeyakumar, CFA

The Tokyo Stock Exchange (TSE) calculates Free-Float Weight (FFW) for each listed company and uses this value as a key component of TOPIX Index Calculation.
For companies with “low liquidity” the FFW will be multiplied by a fixed liquidity factor of 0.75 to derive the final FFW used for index calculation.
Every April, the application of this liquidity factor is reviewed by the TSE. In this insight, we take an early look at what could happen in April 2025.

Fanuc (6594) | Robots in Reverse

By Mark Chadwick

Consolidated net sales slipped 0.4% to ¥197 billion, while operating income slipped 14.6%, hitting ¥34.9 billion
The yen’s Q3 weakness erased ¥11 billion in unrealised inventory profits, dragging reported operating profit below expectations
Recovery in order book is key positive. However, given the stock’s outperformance over the past 3 months, there is less upside.

EQD | Nikkei Index Options Weekly (January 20 – 24): Looking for an Assist

By John Ley

Nikkei back at the top of the price range rising 3.85%. Gains may be more limited from here without an assist from the currency.
Implied vols softened on the week from a combination of factors includes low realized volatility on the week.
Active trade in Put and Call strikes at the edge of the recent trading range.

Japan Business Systems (5036 JP) – Aiming to Be Japan’s No.1 Cloud Integrator

By Sessa Investment Research

In the Company’s stated goal aiming to become the No.1 cloud integrator in Japan, the importance of its close relationship with Microsoft cannot be overstated.
JBS became certified as a Microsoft Partner in 1995, and it was awarded Microsoft Japan Partner of the Year for the first time in 2007.
JBS has been recognized as Microsoft Japan Partner of the Year for 12 consecutive years from 2013 – 2024, reflecting its business strategy to focus on cloud migration/integration during that period.

Startia Holdings (3393 JP) – Cheerleading Company for the Digital Shift of SMEs in Japan

By Sessa Investment Research

Startia Holdings, Inc. (hereafter, the Company) is a corporate group providing IT solutions mainly to SMEs.
Its core businesses consist of its IT infrastructure segment and its digital marketing segment which provides the Cloud CIRCUS digital marketing tool as a SaaS offering.
The IT infrastructure segment promotes “defensive DX” providing one-stop solutions and DX to IT-related issues for customer companies through merchandises such as office automation equipment and network services, while the digital marketing segment promotes “offensive DX” with the aim of helping them acquire new customers and expand sales. By conducting

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Jan 27

Daily Brief Japan: Seven & I Holdings, ROHM Co Ltd, Nidec Corp, TSE Tokyo Price Index TOPIX and more

In today’s briefing:

Weekly Deals Digest (26 Jan) – Seven & I, Shinko, Canvest, GAPack, Get Nice, Japfa, LG CNS, Guming
Unloved Japan Roundup: Don’t Panic Ahead of Q3 Results Rush
Nidec (6594 JP): Growth Prospects Improving
Is Slower Management Decision Making of Japanese Companies Relate to Slower Growth of Market Cap?

Weekly Deals Digest (26 Jan) – Seven & I, Shinko, Canvest, GAPack, Get Nice, Japfa, LG CNS, Guming

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: Seven & I Holdings (3382 JP), Shinko Electric Industries (6967 JP), Fuji Soft Inc (9749 JP), Japfa Ltd (JAP SP), Get Nice Financial Group Ltd (1469 HK).

Unloved Japan Roundup: Don’t Panic Ahead of Q3 Results Rush

By Michael Allen

More than 40 potential turnaround stocks will report Q3 results in the coming weeks.
The average spread between the lowest and highest street estimate for the stocks on our target list is a gaping 45%. This doesn’t mean what most people think it means.
Rohm, Taiyo Yuden, Yamato, Hamamatsu, JFE, Tsuruha look nice, but we pass on Shiseido and Mazda.

Nidec (6594 JP): Growth Prospects Improving

By Scott Foster

Outlook improving with rising demand for energy storage systems and near-line HDDs and water cooling modules for AI servers.
3Q results point to FY sales above and profits in line with management’s guidance. Proceeding toward acquisition of Makino Milling next fiscal year.
At 17.5x projected earnings and 10x cash flow, the shares are at the bottom of their 10-year valuation range. Buy for the medium- to long term.

Is Slower Management Decision Making of Japanese Companies Relate to Slower Growth of Market Cap?

Declining components from MSCI indexes will lead to less inflows from active as well as passive funds, and less transmission from the sell-side to global investors.
Based on the assumption that the world’s top companies have grown in response to changes in the environment, Japanese companies may be relatively slow in making management decisions for growth.
As benchmark adopters reduce their investments in Japanese equities, investors adopting investment strategies that are less concerned with benchmarks will have a greater presence than ever before.

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Jan 26

Daily Brief Japan: Makino Milling Machine Co, Shinko Electric Industries and more

In today’s briefing:

(Mostly) Asia-Pac M&A:Millennium & Copthorne, Insignia, AVJennings, Henlius, Canvest, Makino Milling
Last Week in Event SPACE: Shinko Elec, Tsuruha/Welcia, Macromill, Sun Corp/Cellebrite, MicroStrategy

(Mostly) Asia-Pac M&A:Millennium & Copthorne, Insignia, AVJennings, Henlius, Canvest, Makino Milling

I tally 48 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma.
One new deal was discussed this week: City Developments (CIT SP)‘s Offer for Millennium & Copthorne Hotels Nz (MCK NZ).
Key updates/news took place on: Insignia Financial (IFL AU), AVJennings (AVJ AU), Shanghai Henlius Biotech (2696 HK), Canvest (1381 HK), Greatview Aseptic Packaging (468 HK), and Makino Milling Machine (6135 JP).

Last Week in Event SPACE: Shinko Elec, Tsuruha/Welcia, Macromill, Sun Corp/Cellebrite, MicroStrategy

JIC announced a “mid-February” start date for Shinko Electric (6967 JP)‘s Tender Offer. That’s a trifle disappointing based on when SAMR approved, but there are lots of people involved here.
What has been the long-term trend and the trend of the last two years is different. Be long Tsuruha (3391 JP), short Welcia (3141 JP) until above 4.5x, maybe 4.8x.
Macromill, Inc (3978 JP)‘s reward/risk ratio over the next year of buying at ¥1,250 and seeing what happens is quite good, especially if the deal breaks.

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Jan 25

Daily Brief Japan: Tsuruha Holdings, Resona Holdings, SGX Rubber Future TSR20, TSE Tokyo Price Index TOPIX, Astellas Pharma and more

In today’s briefing:

Tsuruha (3391) – Welcia (3141) Future Merger Ratio – Pounding the Table
Japanese Big Cap Banks – Revisiting Interest Rate Sensitivities
Goodyear Tire To Divest Dunlop In Favor Of Sumitomo Rubber
ETF Sale Won’t Be Concluded Soon, but as Long as BOJ Keeps Holding Them, the Problems Will Persist
Astellas Pharma (4503 JP): Xtandi & Forex Lead To Guidance Revision, Impairment Losses One Off Burnt

Tsuruha (3391) – Welcia (3141) Future Merger Ratio – Pounding the Table

In late December, a Jiji article said Tsuruha & Welcia would look to integrate by end-2025, now that they no longer need SEC approval. Odd language, but we’ll take it.
That means we look to what might happen between here and there. The companies will hire Legal and Financial Advisors, wait until both report FY, then start negotiating.
What has been the long-term trend and the trend of the last two years is different. It’s worthwhile looking at valuations and expectations to decide how to trade. It’s good.

Japanese Big Cap Banks – Revisiting Interest Rate Sensitivities

By Victor Galliano

BoJ raised rates to 0.5% at its January policy meeting and BoJ Governor Kazuo Ueda hinted at more rate hikes; BoJ’s new Outlook Report forecasts higher core inflation in 2025
We reiterate our core recommendations Resona and Mizuho for their leverage to higher interest rates, their low LDRs, their high levels of cash at the BoJ and their modest valuation
We also keep our buys on Concordia and Shizuoka, for their leverage to higher interest rates and LDRs below 90%, along with their attractive valuations highlighted by low PEGs

Goodyear Tire To Divest Dunlop In Favor Of Sumitomo Rubber

By Vinod Nedumudy

Transaction valued at around US$701 million in cash proceeds
Goodyear to hold ground in Europe until the end of 2025
Goodyear joins Dutch research body TNO for crash mitigation

ETF Sale Won’t Be Concluded Soon, but as Long as BOJ Keeps Holding Them, the Problems Will Persist

Since dividend income and unrealized gains on ETFs have significant impact on BOJ’s finances, the sales of ETF will be discussed, considering BOJ’s overall balance sheet and income/expenses as well.
There’re unexamined issues, whether the central bank’s purchase of stocks was really good thing, whether it distorted the secondary market, and whether management reforms were delayed by underpinning the stocks.
BOJ can move on to the issue of ETF disposition when the impact of policy rate hikes is recognized and the market stabilizes, but until then the problems will persist.

Astellas Pharma (4503 JP): Xtandi & Forex Lead To Guidance Revision, Impairment Losses One Off Burnt

By Tina Banerjee

Astellas Pharma (4503 JP) revised FY25 revenue guidance upward to ¥1900B on robust Xtandi performance and favourable forex movement. Core profits and margins will also see upward revisions and expansions.
The company will record an impairment charge of ¥176B for intangible assets this fiscal. As a result, FY25 operating profit on reported basis will come down to ¥11B from ¥80B.
Recently, Astellas has received approval for Vyloy and label expansion approval for Padcev in China. Label expansion application for Izervay in the U.S. has been accepted by the FDA.

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Jan 24

Daily Brief Japan: Nidec Corp, Chiba Bank, Hogy Medical, TSE Tokyo Price Index TOPIX and more

In today’s briefing:

Nidec | Pragmatism Shines; Q3 Results
Chiba Bank – Net Interest Income Up, Expect More with BOJ Hike, Credit Metrics Allow Flow Through
Hogy Medical (3593 JP): Results Reflect Macro Slackness, Not Much Recovery In Sight In Near Term
Hopefully, CSDDD Mandates Will Advance Human Rights Efforts, the Weakest Area for Japanese Companies

Nidec | Pragmatism Shines; Q3 Results

By Mark Chadwick

Q3 net sales reached ¥652,153 million, up 1.0% quarter-on-quarter, driven by strong demand for power generators and battery energy storage systems. Operating profit of ¥54,536 million (-10.1% QoQ) missed expectations.
There has been a notable vibe-shift since Kishida took over as CEO – more focus on operational improvements and hopefully margin accretion.
Strategic M&A remains a driver and the Makino Milling deal makes sense. At 14x EV / EBIT, the stock should be on the radar of value or GARP investors

Chiba Bank – Net Interest Income Up, Expect More with BOJ Hike, Credit Metrics Allow Flow Through

By Daniel Tabbush

Chiba Bank shows good gains in net interest income through 1H25 YoY
There should be more of this with rising BOJ rates during 2H25.
Flow through to net profit can be strong, given credit metrics.

Hogy Medical (3593 JP): Results Reflect Macro Slackness, Not Much Recovery In Sight In Near Term

By Tina Banerjee

Hogy Medical (3593 JP) reported flat sales of ¥30B in 9MFY25. Sales of surgical kit products rose 3.2%, to ¥20B, of which Premium Kit sales climbed 7.8%, to ¥13.2B.
Higher costs dented operating margin by 40 bps while net profit rose 5% YoY to ¥2.7B due to an extraordinary gain from sale of investment.
The company reiterated guidance for FY25 of a rise in sales of 5% to ¥40.9B, with profits also witnessing double digit growth.

Hopefully, CSDDD Mandates Will Advance Human Rights Efforts, the Weakest Area for Japanese Companies