Japan

In today’s briefing:

Macromill (3978 JP): CVC Bumping Its Offer Is Inevitable
Quiddity JPX-Nikkei 400 Rebal 2025: End-Dec 2024 Ranks
Can TSE’s “Examples of Bad Disclosures” Help Companies Shift to Shareholder-Oriented Management?

Macromill (3978 JP): CVC Bumping Its Offer Is Inevitable

By Arun George

On 26 December, CVC extended its Macromill, Inc. (3978 JP) offer period by 10 business days to 17 January. The offer price remained unchanged, but it was not declared final.
The extension is unsurprising as the shares have traded above terms for 30 out of 32 trading days. The emergence of Oasis as the largest shareholder is an added complication.
Lowering the minimum acceptance condition is not a viable option. A bump is increasingly likely. Trading patterns suggest a minimum required revised offer of around JPY1,200.

Quiddity JPX-Nikkei 400 Rebal 2025: End-Dec 2024 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-December 2024.

Can TSE’s “Examples of Bad Disclosures” Help Companies Shift to Shareholder-Oriented Management?

The most common example of poor disclosure is “Disclosure is merely a list of initiatives. The timing of achievement, numerical targets, necessary resources, etc. should be explained.
Poor disclosure examples that “do not analyze issues or consider additional actions in a flexible manner” may not have a well-reasoned plan to disclose at this stage.
It is clear that many companies are not sufficiently considering the reduction or withdrawal of unprofitable businesses, as evidenced by their low return on sales and return on capital.

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Jan 01

Daily Brief Japan: MS&AD Insurance and more

In today’s briefing:

Japan CorpGovReports: TSE “Mgmt Conscious of Capital Cost/Stock Price” Details (Jan25), TSE Updates

Japan CorpGovReports: TSE “Mgmt Conscious of Capital Cost/Stock Price” Details (Jan25), 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.
609 new CGRs were filed since 31-Nov-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.

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Dec 31

Daily Brief Japan: TSE Tokyo Price Index TOPIX and more

In today’s briefing:

Financial Disclosures During Trading Hours Was Disappointing in 2Q, but Will Increase Gradually

Financial Disclosures During Trading Hours Was Disappointing in 2Q, but Will Increase Gradually

Comparing the disclosure time of 2Q financial statements to a year ago, the extension of trading hours has had an impact on the disclosure time of companies.
After November 5, when trading hours were extended, 31.6% of companies disclosed by 3:29 p.m. The remaining 68.4% moved down their disclosure time.
The 2Q results didn’t include companies that were proactive about early disclosure, and it is expected that some of the more cautious companies will switch to disclosure during trading hours.

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Dec 30

Daily Brief Japan: Tsuruha Holdings, Nikkei 225 and more

In today’s briefing:

Tsuruha (3391) And Welcia (3141) To Move UP Merger to End-2025; Makes It TWO Trades in 18mos?
EQD | Nikkei Index Options Weekly – December 23 – 27

Tsuruha (3391) And Welcia (3141) To Move UP Merger to End-2025; Makes It TWO Trades in 18mos?

In Feb-24, Aeon (8267) agreed with Oasis Management to buy its stake in Tsuruha Holdings (3391) and Tsuruha and Welcia Holdings (3141) would discuss a merger, details decided by end-2027.
On Saturday 27 December, a Jiji article said the two would look to integrate by end-2025, now that they no longer need SEC approval. That reason sounds wrong.
The language of the articles is odd but we have to take it at face value. That means we look to what might happen between here and there.

EQD | Nikkei Index Options Weekly – December 23 – 27

By John Ley

NKY looks to be playing catch-up with USD/JPY, rising 4.03% on the week and breaking out of recent range after not moving much in the first half of the month.
Implied volatility continues to slide lower with 1M implied vol down 2.5 points on the week.
Call volumes larger than Put volumes for the first time in a while on Fridays 1.80% price surge.

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Dec 29

Daily Brief Japan: TSE Tokyo Price Index TOPIX, Nec Networks & System Integr, Honda Motor and more

In today’s briefing:

There Are Still Very Many Companies with High Cash on Hand Relative to Sales
(Mostly) Asia-Pac M&A: Makino, Henlius, GAPack, Nec Networks, Suntec REIT, VCredit, Pentamaster
Last Week in Event SPACE: Honda, Shanghai Henlius, Exedy, Arcadium Lithium

There Are Still Very Many Companies with High Cash on Hand Relative to Sales

Of course, it’s desirable to be able to use cash to find effective investments, but it is important to return cash on hand with an immediate impact on ROE improvement.
Looking at all listed companies, there are a great many companies that have a large amount of cash on hand relative to sales.
Denso’s measures to reduce policy shareholdings plus share buybacks will directly improve ROE, even if the background was a desire to stem the rise in foreign shareholdings.

(Mostly) Asia-Pac M&A: Makino, Henlius, GAPack, Nec Networks, Suntec REIT, VCredit, Pentamaster

By David Blennerhassett

I tally 51 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Four new deals this week: Makino Milling Machine Co (6135 JP)‘s hostile Offer; VCredit Holdings Ltd (2003 HK)‘s takeunder; Vesync (2148 HK)‘s Scheme, and Pentamaster International (1665 HK)‘s Scheme.
Key updates/news took place on: Shanghai Henlius Biotech (2696 HK), Greatview Aseptic Packaging (468 HK), Nec Networks & System Integr (1973 JP), and Suntec REIT (SUN SP).

Last Week in Event SPACE: Honda, Shanghai Henlius, Exedy, Arcadium Lithium

By David Blennerhassett

Honda (7267 JP) announced a HUGE ¥1.1trln buyback. At ~¥1500/share, this would increase EPS by 17+%. Buy the shares in the low ¥1,400s. Expect this to be a range trade.
Shanghai Henlius Biotech (2696 HK)‘s Circular is now out. Hoome straight and done deal.
Murakami-San has started selling Exedy Corp (7278 JP), earlier than expected. Best to get out first, ask questions later.

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Dec 28

Daily Brief Japan: Makino Milling Machine Co, Nippon Shinyaku, Nidec Corp and more

In today’s briefing:

Nidec Goes Hostile On Makino Milling at ¥11,000/Share
Makino Milling Machine (6135 JP): Nidec’s (6594 JP) Hostile Preconditional Tender Offer at JPY11,000
Nippon Shinyaku (4516 JP): Unfavorable Patent Verdict; Company Vows to Fight Back
Nidec (6594 JP): Acquisition of Makino Milling Would Add Value

Nidec Goes Hostile On Makino Milling at ¥11,000/Share

This morning, Nidec Corp (6594 JP)announced that it intended to launch a Tender Offer on Makino Milling Machine Co (6135 JP) without the support of Makino management.
The same pattern as Takisawa Machine Tool (6121 JP). Nidec decides, relying on the METI Guidelines for Corporate Takeovers for procedure, announces, and puts the onus on the Target to accept.
But shareholders should hope Makino Milling takes a page from the example provided by Chilled & Frozen Logistics Holdings (9099 JP) back in spring 2024. This could get funky.

Makino Milling Machine (6135 JP): Nidec’s (6594 JP) Hostile Preconditional Tender Offer at JPY11,000

By Arun George

Nidec Corp (6594 JP) announced a hostile preconditional tender offer for Makino Milling Machine Co (6135 JP) at JPY11,000 per share, an 18.9% premium to the last close.
The offer is preconditioned on several regulatory approvals. It is scheduled to start on 4 April, even if the Board does not recommend it.
The Board has three options: engage to facilitate a friendly offer, find a white knight bidder and launch an ambitious MTM plan to thwart the offer.

Nippon Shinyaku (4516 JP): Unfavorable Patent Verdict; Company Vows to Fight Back

By Tina Banerjee

A US court found Nippon Shinyaku (4516 JP) guilty of patent infringement related to competitor Sarepta Therapeutics (SRPT US)‘s DMD drug Vyondys 53 and asked to pay $115M as compensation.
The jury verdict will have no bearing on Viltepso sales. Nippon Shinyaku disagreed with the verdict, and is considering all options including post jury motions and appeals.
An additional expense to the tune of $115M would surely be a huge drag on the profitability of the company which is already under pressure because of rising costs.

Nidec (6594 JP): Acquisition of Makino Milling Would Add Value

By Scott Foster

Nidec has announced its intention to acquire Makino Milling Machine (6135 JP) for ¥11,000 per share, a 42% premium over Thursday’s closing price.
The stock market liked the idea. Nidec’s share price rose 4% on Friday. Makino’s jumped 19%. The pice looks high, but at 17.7x Makino’s EPS guidance, it is not unreasonable.
The acquisition would be accretive to earnings and bring greater scale and competitiveness to Nidec’s machine tool business. It should support our Buy recommendation.

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Dec 27

Daily Brief Japan: Macromill, Inc, Hamamatsu Photonics Kk, TSE Tokyo Price Index TOPIX, Ono Pharmaceutical, Kurotani Corp, Tsubakimoto Kogyo, Pci Holdings Inc/Jp, COPRO-HOLDINGS Co Ltd and more

In today’s briefing:

Macromill (3978 JP) – Five Major Investors Have 50+%; CVC Extends and Will Need to Bump Or Walk
Hamamatsu Photonics (6965 JP): Rebound Ahead
Will the Timing of the BOJ ETF Exit Be Revealed in December?
Ono Pharmaceutical (4528 JP): Struggle Continues with Opdivo; Competition and Price Cuts Loom Large
Kurotani Corp (3168 JP): Coverage Initiation
Q2 Follow-Up – TSUBAKIMOTO KOGYO (8052 JP)
PCI Holdings (3918 JP) – What Restar Corporation’s Tender Offer Will Bring
Q2 Follow Up – COPRO-HOLDINGS (7059 JP)

Macromill (3978 JP) – Five Major Investors Have 50+%; CVC Extends and Will Need to Bump Or Walk

Three pre-existing Large Shareholders have not sold down. Two new 5+% shareholders have appeared since Tender Launch. Together, their reports give them 51.7% of shares out.
That provides them with a significantly strong implied negotiating hand. Given the midpoint of the Target Company’s Advisor’s DCF Range, I expect a bump.
Today the Bidder extended for 10 more days. They didn’t have the shares to close. I expect they won’t unless they bump a lot.

Hamamatsu Photonics (6965 JP): Rebound Ahead

By Scott Foster

Profits and share price stabilizing after steep declines, although margins still under pressure from rising R&D and depreciation, and costs associated with recent acquisitions.
Sales of medical equipment to recover from post-COVID decline. Semiconductor equipment driven by advanced logic and high-bandwidth memory. Lasers to become fourth major product division.
Buy for the long-term. Risks include Trump tariffs, weak European economies, emergence of Chinese competition.

Will the Timing of the BOJ ETF Exit Be Revealed in December?

The actual ratio of tradable shares, excluding ETFs held by BoJ, is low, as a result, the number of Japanese equities available for investment by large institutional investors is limited.
ETFs owned by BoJ may be treated as being in favor of company-proposed proposals and against shareholder-proposed proposals, thus BOJ-owned ETFs are hindering the improvement of corporate governance.
It is good that BoJ has begun to consider an exit from ETFs, but with several variables and unknowns, it is not easy for investors to predict the timing.

Ono Pharmaceutical (4528 JP): Struggle Continues with Opdivo; Competition and Price Cuts Loom Large

By Tina Banerjee

Ono Pharmaceutical (4528 JP) is reporting decelerating revenue from its flagship drug, Opdivo. During H1FY25, domestic revenue from Opdivo decreased 17% YoY to ¥62.6B.
Opdivo will start to lose patent protection starting from 2028. Prolific commercialization of these new drugs will remain crucial for Ono riding the patent cliff successfully.
Ono shares plunged 36% over the last one year to trade at attractive valuation. In absence of any near-term growth catalyst, the shares are not expected to see much upside.

Kurotani Corp (3168 JP): Coverage Initiation

By Shared Research

In FY08/24, revenue was JPY82.1bn (-3.0% YoY), operating profit was JPY1.5bn (+172.2% YoY), recurring profit was JPY1.0bn (+355.9% YoY), and net income attributable to owners of the parent was JPY533mn (+212.8% YoY). The initial company forecast at the beginning of the fiscal year was revenue of JPY72.9bn, operating profit of JPY634mn, recurring profit of JPY454mn, and net income attributable to owners of the parent of JPY320mn. The initial assumptions were an exchange rate of JPY135/USD and an LME copper price of USD8,500/ton.
The USD remained above JPY150 until end-Q3 and LME copper prices exceeded USD9,000/ton since April 2024. The company thus revised its performance forecast upward at its Q3 results briefing to revenue of JPY82.1bn, operating profit of JPY2.3bn, recurring profit of JPY1.9bn, and net income attributable to owners of the parent of JPY1.1bn.
However, due to a decline in LME copper prices in Q4, the actual results for FY08/24 fell below the revised forecast.

Q2 Follow-Up – TSUBAKIMOTO KOGYO (8052 JP)

By Sessa Investment Research

Tsubakimoto Kogyo Co., Ltd., (hereafter, the Company) announced its H1 FY2025/3 results on October 31, 2024. Net sales rose but profit fell during H1 FY2025/3.
Net sales were firm due to the substantial order backlog.
However, profits at the operating profit level and below fell year on year as SG&A costs rose for various reasons, including stronger sales activities following the end of the COVID-19 pandemic and revisions to personnel expenses. Orders remained firm and hit a record high.

PCI Holdings (3918 JP) – What Restar Corporation’s Tender Offer Will Bring

By Sessa Investment Research

PCI Holdings, Inc. (hereafter, the Company) reported generally grim results for FY2024/9.
Net sales fell 12.0% YoY to JPY 25,084 mn, while dropping 3.3% YoY when excluding the sale of subsidiary leafnet.
Operating profit fell 38.3% YoY to JPY 1,054 mn, while effectively dropping 17.4% excluding the sale of leafnet.

Q2 Follow Up – COPRO-HOLDINGS (7059 JP)

By Sessa Investment Research

COPRO-HOLDINGS (hereafter the Company) key consolidated figures increased sharply, including net sales of JPY 14,227 mn (+27.7% YoY), operating profit of JPY 1,237 mn (+67.9% YoY), Non-GAAP operating profit of JPY 1,439 mn (+67.0% YoY), ordinary profit of JPY 1,257 mn (+55.1% YoY), and profit attributable to owners of parent (hereafter, net profit) of JPY 797 mn (+56.4% YoY).
Higher sales at COPRO Construction, the Company’s core construction technician dispatching business, led to higher gross profit and a lower fixed cost ratio.
As a result, operating profit at COPRO Construction rose by 42.5% YoY, contributing significantly to the Company’s earnings growth.

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Dec 26

Daily Brief Japan: Takashimaya, Zuiko Corp and more

In today’s briefing:

Takashimaya (8233 JP): Q3 FY02/25 flash update
Zuiko Corp (6279 JP): Q3 FY02/25 flash update

Takashimaya (8233 JP): Q3 FY02/25 flash update

By Shared Research

Operating revenue increased YoY across segments, driven by domestic and overseas department stores, and commercial property development.
Operating profit rose YoY, with significant growth in Domestic Department Store, Overseas Commercial Property Development, and Finance segments.
Takashimaya Financial Partners Co., Ltd. saw increased revenue and profit due to higher transaction volumes and credit card income.

Zuiko Corp (6279 JP): Q3 FY02/25 flash update

By Shared Research

Revenue decreased to JPY13.9bn, a 17.6% YoY decline, with significant drops in Japan and China sales.
Operating loss of JPY303mn and recurring loss of JPY176mn were reported, with a net loss of JPY734mn.
FY02/25 revenue forecast revised to JPY20.0bn, with expected operating profit and recurring profit declines.

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Dec 25

Daily Brief Japan: Matsuya Co Ltd and more

In today’s briefing:

Matsuya Targets ¥20 Billion Online

Matsuya Targets ¥20 Billion Online

By Michael Causton

Department store sales to locals plummeted in October, resulting in the first decline in 32 months.
While sluggish clothing sales was one factor, another was crowded luxury concessions putting off locals from visiting.
Matsuya thinks it has the answer: keeping locals and tourists separate using a new online store.

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Dec 24

Daily Brief Japan: Honda Motor, Exedy Corp, Nikkei 225, Isetan Mitsukoshi Holdings Ltd, TSE Tokyo Price Index TOPIX and more

In today’s briefing:

Honda (7267 JP) – MAMMOTH New ¥1.1Trln Stock Buyback
[Japan Activism] Exedy (7278) – Murakami-San Selling into the Buyback
EQD | Nikkei Index Options Weekly – December 16 – 20
Isetan Shinjuku to Hit ¥424 Billion
Is the High Volatility of Japanese Equities Only Due to Their Small Market Capitalization?

Honda (7267 JP) – MAMMOTH New ¥1.1Trln Stock Buyback

Today, along with the announcement of Memorandum of Understanding between Honda Motor (7267 JP), and Nissan Motor (7201 JP) to work towards negotiating a Joint Holding Company by June 2025…
Honda cancelled their existing ¥100bn buyback, and initiated a truly mammoth NEW Buyback – up to 1.1 billion shares (23.7% of TSO), spending up to ¥1.1trln on market through Dec-2025.
Assuming the stock pops, it is probably “only” worth 15-18%, but that’s still a LOT. At that rate it boosts BVPS by 8+% on its own, and EPS by 17%.

[Japan Activism] Exedy (7278) – Murakami-San Selling into the Buyback

Exedy Corp (7278 JP) announced a big buyback. Murakami-san did not sell the first pop. The shares fell. Exedy started buying back and the shares went up. Now Murakami’s selling.
Today after the close, Murakami Group companies announced that City Index Elevens had started selling. They sold 1.25% of shares out in 6 trading days to 16 December.
I expect they sold another 2% in the past week through today. Shares tanked today. This is not a good signal. And it comes earlier than I expected.

EQD | Nikkei Index Options Weekly – December 16 – 20

By John Ley

All 5 trading days of the past week saw non-volatile price declines but with implied vols still ticking higher leaving historic vol and implied vol moving in opposite directions.
Trading activity focused on Puts, 59.5% of all options trades were Puts last week
Postions being covered into market weakness as seen from large decrease in open interest (60% of the decline was Puts).

Isetan Shinjuku to Hit ¥424 Billion

By Michael Causton

Isetan-Mitsukoshi has gone from being the most cautious forecaster among the big department store retailers to the most optimistic.
This is largely on the back of previously unimaginable sales records at its main stores, especially Isetan Shinjuku.
All of which is bringing in piles of profit, with projections of exceeding its previous average profit by four times.

Is the High Volatility of Japanese Equities Only Due to Their Small Market Capitalization?