Japan

• 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. 
• Two new deals this week: Goldlion Holdings (533 HK)‘s Scheme, and Beenos Inc (3328 JP)‘s Tender Offer.
• Key updates/news took place on: Insignia Financial (IFL AU), Shanghai Henlius Biotech (2696 HK), GAPack (468 HK), Fuji Soft (9749 JP), Macromill (3978 JP) and Malaysia Airports Holdings (MAHB MK).

• The new article on Seven & I Holdings (3382 JP) from TV Tokyo is causing a dip on top of last week’s weakness. This is a dip to buy.
• CPMC Holdings (906 HK)‘s Offer is now open for tendering. Ignore the rumours. Zhang Wei will tender. Expect payment before Chinese New Year. 
• Accounting solely for the pre-IPO investors, 164.6m shares (US$1.9bn) in UBTech Robotics (9880 HK) will be unlocked, ~39.2% of the firm’s total shares outstanding, and 91 days of three-month ADV.

• Operating income and depreciation, the components of operating cash flow, have been sluggish. This has undeniably dampened expectations for expanding corporate value.
• Many companies have begun to be aware of cash flow, but have yet to see results. They are at the stage of producing results by selecting business to invest cash.
• In terms of “not being conscious of cash flow,” shareholder returns are still strongly net income oriented and not cash flow oriented.

• Seven & I Holdings (3382 JP) shares are in a lull here. Winter doldrums without news as the Ito consortium gets its ducks in a row and 7&i sells York.
• Alimentation Couche-Tard (ATD CN) is waiting patiently. They have the ability to wait, and to fund, and pay up. 
• An article/show is causing a dip today on top of last week’s weakness. This is a dip to buy.

• The automotive world is abuzz with speculation following reports that Honda Motor Co. and Nissan Motor Co. are exploring a potential merger.
• This development comes amid mounting industry pressures, including surging competition from Chinese electric vehicle (EV) makers and the relentless expansion of Tesla.
• The possibility of a Honda-Nissan tie-up has sparked market reactions, with Nissan’s shares skyrocketing while Honda’s stock faced a decline.

• Today, Kadokawa (9468 JP) announced it would sell ¥50bn of shares to Sony (6758 JP) in a 3rd Party Allotment to cement a Strategic/Capital Alliance. Sony will own 10% at ¥4,146/share.
• 40% of proceeds is to “create and develop new IP”, 60% is to “enhance global IP distribution”; both over 5yrs. Given ¥108bn of net cash/securities, this is a garbage reason. 
• Kadokawa shares have gained 44% in a month since Reuters carried an “Exclusive” article saying Sony was in talks to acquire Kadokawa. This is defensive entrenchment. The result will disappoint.

• Shimano, the Japanese maker of bicycle components and fishing equipment, is in need of a strategic gear change
• A significant -25% decline in FY23 net sales highlights Shimano’s struggles. Revenues dropped a further -11% in the first nine months of 2024
• For investors seeking opportunity at the bottom of the cycle, Shimano presents a compelling case. The stock is trading at 2.3x book value

• Early today, the Nikkei had an article saying LY (4689 JP) would launch a takeover of Beenos Inc (3328 JP). The stock went limit up. Shorts are many times ADV. 
• Post-Close, we get a deal much as implied by the Nikkei article. It seems light to me but the top three holders have agreed to the deal.
• Regulatory will take a couple of months. This will likely fall tomorrow. If you are a long-only fund holder, think about the alternatives (read the conclusions here).

• Nextage is a prominent player in Japan’s fragmented used car dealer market
• The company is looking to grow through suburban superstores, similar to CarMax in the US
• Despite recent scandal involving competitors, Nextage is positioned for growth with potential for expansion in Japan’s used vehicle market

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

• For investors, it is a step forward to lower the hurdles for collaborative engagement, and for institutional investors, it is a step forward to reduce costs. 
• It is hoped that passive funds, which have been reluctant to engage in engagement due to cost, will take a more positive approach.
• Rule amendments to make it easier to identify substantial shareholders are expected to be negotiated in advance with substantial shareholders prior to voting.

• FY24 OP WAS REVISED DOWN GIVEN SURGING VARIOUS COSTS.
• NO CHANGE IN MEDIUM-TERM PLAN TARGETS.
• IINO revised its FY24 guidance from OP of ¥19,200mil (+0.7% YoY) on sales of ¥145,000mil (+5.1% YoY) to OP of ¥17,400mil (-8.7% YoY) on sales of ¥146,000mil (+5.8%YoY).

• FY 2024-25 H1 witnesses 12% YoY growth in tire exports value 
• Motorcycle tire exports volume up by 37%; Columbia largest importer 
• Bridgestone to invest US$85 million for India expansion 

• ODK Solutions Company, Ltd. is an IT services company headquartered in Osaka that provides information processing services in the education, financial, and other general fields.
• Its strength lies in the accurate processing of large volumes of highly sensitive data, and the Company boasts a leading share in Japan’s university entrance exam-related education field.
• The Company was founded in 1963 as Osaka Denshi Keisan K.K., providing computing services for the Osaka Securities Finance (now Japan Securities Finance [8511]) Group. 

• Heiwa Corp (6412 JP) got 99% of its revenue as a pachinko/pachislot machinery maker. In 2011, it bought one of Japan’s largest golf course operators, PGM Holdings, from Lone Star. 
• Golf course revenue is up 30% in 10yrs. Pachinko/Pachislot revenue is down by 60+% in the same period. Golf is the bulk of revenue and OP now.
• Today, the company announced a stunning, even monumental acquisition to become the largest golf course operator in the world. 

• CAUTIOUS VIEW ON THE EV MARKET CONTINUES BUT THE FIRM COMMITS TO MID-TERM SHAREHOLDERS RETURN POLICY.
• Hirano Tecseed maintained FY24 full-year guidance despite shortfall in FY24 1H operating profit vs the firm’s forecast.

• Today post-close, activist/engagement investor Oasis Management filed a new LSR on Macromill, Inc (3978 JP) owning 7.12% of shares as of 13-Dec-2024. Reason: Defend shareholder value, propose measures to management.
• That is 7.56-7.65% of effective voting/tender rights. It’s big enough to matter. Of course, the stock has not traded below terms once since full trading started post-announcement. 
• And this was warned in CVC Offers ¥1150 for Macromill (3978) – Wrong Price, Wrong Register – Expect Activism or An Overbid. Shareholder structure REALLY matters. 

• Today, Shin Etsu Chemical (4063 JP) announced a second buyback this year (first ¥100bn was announced in May, buying back 16.695mm shs (0.83%). This time, ~¥94bn via Own-Share Tender Offer.
• Three non-life insurers and two banks who together hold 6+% will sell a total of ~1.01% at ~10% below last. They will then sell the rest of their shares later.
• Cute, but not enough. Shin-Etsu is cash-rich, securities-rich, receivables and inventory-rich. And nearly ¥1trln of EBITDA. They are a key part of the tech infrastructure. They can borrow.

• The disparity between the leading footwear retailers continues to widen.
• ABC Mart is pulling so far ahead that it has the market almost to itself. 
• Chiyoda may have finally turned the corner but G-Foot may need further financial support from Aeon.

• Shareholder activism approaches include those seeking to resolve balance sheet issues, those targeting governance practices, those seeking to restructure business portfolios, and those seeking to improve business profitability.
• In approaches that call for business strategy reform, shareholders may require the company to establish a special committee, including outside directors and outside experts, to discuss solutions to issues.
• The discussions of “Strategy Committee” can significantly alter the shape of a company. Since few managers manage to evolve with changes in business environment, shareholder activism plays a significant role.

• A bid for out-of-the-money puts combined with positive change in Put open interest and Put volume totals argues that Puts and being bought.
• 70% of NKY open interest is below 38,000 with only 20% of the open interest above 40,000.
• NKY nearing top of range while registering quiet historic volatility levels 4-5 points below implied vols. 

• Exhibiting a robust growth profile – Solid topline growth and a marked improvement in profitability YoY were the key highlights of Q1 FY7/24 results, demonstrating that INTLOOP’s growth strategy encompassing M&A and business investment is beginning to yield positive outcomes.
• Sales growth of 63.3% YoY was driven primarily by the acquisitive impact of DICS Holdings, and margin enhancement YoY was said to be driven by obtaining high-margin projects, which we believe also stems from raised pricing and improving consultant productivity.
• Management continues to invest in the business primarily via recruitment and building business alliances that should strengthen its network and selling activities.

• There’s been something of a reversal of fortunes in online shopping malls, as Yahoo Shopping regains some of the losses of the past 18 months while Rakuten suffers a setback.
• Much of Yahoo Shopping’s bounce back has come on the back of marketing through loyalty point programmes.
• Both companies expect further gains going forward from more cross-use and expansion of categories, including a new tie-up between Rakuten and Nihon L’Oreal.

• Kioxia Holdings (285A JP) raised around US$800m (including over-allocation) in its Japan IPO, after pricing its IPO in the middle of its range.
• It was the world’s largest pure-play NAND flash memory supplier, in terms of both revenue and unit shipments in 2023, according to TechInsights.
• We have looked at the company’s past performance and valuations in our previous notes. In this note, we will talk about the trading dynamics.

• In cumulative Q3 FY01/25, SanBio reported no operating revenue, with an operating loss of JPY2.5bn, narrowing YoY.
• Non-operating income was JPY504mn, primarily from foreign-exchange gains; recurring loss was JPY2.0bn, increasing YoY.
• Net loss attributable to owners was JPY2.2bn; deferred tax liabilities and extraordinary gains impacted financial results.

• In today’s Morning Views publication we comment on developments of the following high yield issuers: Softbank Group
• On Friday, US Treasuries concluded the week with another sell-off, marking the worst week in months. US equities were flat.
• In the US, the import price index unexpectedly rose 0.1% m-o-m in November (-0.2% e / +0.1% p).

• Shipping the first water-based cooling systems for servers equipped with Nvidia’s new Blackwell GPUs and building two new motor factories in India.
• Moving beyond excessive dependence on China while restructuring operations to reduce costs. Sales short of 1H guidnce, but operating profit up. 
• Share price down 30% since May and close to its 52-week low. Selling at 17.5x this fiscal year’s EPS guidance, the lowest P/E multiple in a decade. 

• In 1H FY04/25, revenue, operating profit, and net income declined YoY, while recurring profit increased 2.1% YoY.
• Excluding fiscal year-end changes, 1H FY04/25 revenue and operating profit grew 8.0% and 15.5% YoY, respectively.
• Revenue and operating profit for 5G Homestyle services increased 5.8% and 25.7% YoY, excluding fiscal year-end impact.

• Repurchasing investment units, increasing dividends through property sales, and increasing EPS through negative goodwill of M&A seem to be the share price raising measures necessary for capital increase for growth.
• When increasing capital amid stagnated REIT stock prices, it’s questionable whether the picture that is drawn after capital increase is reasonable in the face of rising required returns by investors.
• When the profitability of REIT investment companies is in question, it is not surprising that activist investors will focus on management issues, including cost of capital or corporate governance.

• Nec Networks (1973 JP)‘s own FA didn’t include any measure of transaction synergies to be created about which NEC and NESIC were so sure. This is not being done right.
• Singapore Post (SPOST SP)‘s muted price action after announcing the ~S$900mn FMH sale is illustrative. But expect more value to be unlocked from divesting non-core ops going forward. 
• The FTC’ blocking the giant grocery merger of Kroger Co (KR US) and Albertsons Cos (ACI US) spells trouble for ACT and Seven & I Holdings (3382 JP).

• 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.
• Five new deals this week: Insignia Financial (IFL AU), Fosun Tourism (1992 HK), and Lifestyle China (2136 HK). VCredit Holdings (2003 HK) and Vesync (2148 HK) also in the crosshairs. 
• Key updates/news took place on: Guotai Junan Securities (2611 HK)/Haitong Securities Co Ltd (H) (6837 HK), Fuji Soft Inc (9749 JP), CPMC Holdings (906 HK), and Dexus Property (DXS AU) 

• Exedy Corp (7278 JP) announced an offering of 36% of its shares at end-May. Long-time “owner” Aisin (7259 JP) was getting out. Since then, the company has bought back shares.
• Activist Murakami Group has bought 27% of the company. Between Murakami and the buyback, the public has net sold 5% of the company since end-March. Kinda shocking.
• There is another 35% of Max Real World Float to buy back, and at current pace, they’ll be done by mid-March 2025. Then what? That’s the really big question.

• ~4 weeks ago, Fuji Soft Inc (9749 JP) responded to Bain’s Proposal to take over the company but got KKR to bid ¥1 more, then said that covered it.
• The Special Committee then asked the FSI Board to halt further negotiations with Bain, and to ask Bain to destroy all confidential documentation. 
• Bain rejected saying it contravened METI Guidelines on Corporate Takeovers and reappeared 2 days ago with a ¥9,600 bid. The structure/details of Bain’s bid was probably a strategy mistake.

• We update our views on ten Japanese midcap banks targeting attractively valued beneficiaries of the realization of big strategic shareholdings, as well as beneficiaries of the improving interest rate outlook
• We re-iterate our buys on Hachijuni Bank and Hokuhoku Financial; there is potential to realize their large strategic holdings relative to their market capitalizations combined with their attractive PTBV ratios
• We take Gunma Bank off the buy list, replacing it with Iyogin; Iyogin has a constructive mix of large strategic holdings, attractive valuations and healthy gearing to higher interest rates

• Operating revenue increased by 78.3% YoY to JPY3.3bn, driven by sales of TDM-621 across multiple regions.
• Operating loss narrowed to JPY532mn, with a recurring loss of JPY798mn and a net loss of JPY806mn.
• US sales grew 151.4% YoY, achieving profitability; Europe and Japan also reported significant YoY sales growth.

• From FY3/2027, companies with market capitalization of over 3 trillion yen will be required to disclose GHG sequentially. 76% of companies with market capitalization of over 500 billion yen disclose.
• A guarantee program is scheduled to be introduced in FY3/2028, but only 21% of companies with market capitalization of over 500 billion yen have disclosed their guarantees.
• The guarantee program will begin in Scope 1 and 2 with limited guarantees. Disclosure of guarantees will increase once the discussion on qualification system for guarantee service providers is finalized.

• Revenue for FY10/24 was JPY4.4bn, a 3.4% YoY decrease, with operating profit down 89.4% YoY to JPY129mn.
• FY10/25 forecasts include revenue of JPY4.5bn (+3.4% YoY) and operating profit of JPY370mn (+186.5% YoY).
• Contract processing services revenue declined 12.8% YoY in FY10/24, with orders decreasing by 13.9% YoY.

• In Q1 FY07/25, the company reported sales of JPY11.5bn and business profit of JPY1.2bn, showing YoY growth.
• Logistics Investment business saw increased leasing income, with sales of JPY5.9bn and segment profit of JPY820mn, up 70.5% YoY.
• The company sold LogiSquare Narita, resulting in sales of JPY4.5bn and segment profit of JPY583mn, reversing previous losses.

• Paper manufacturer Oji Holdings (3861 JP) has spent 25 years not going anywhere. Their current MTMP isn’t exciting. And it looks like they will fail worse than last time.
• But an activist put their head above the parapet recently, and now the company has announced larger new cross-holding selldown targets, and a big 9% buyback, with a ToSTNeT-3 tomorrow. 
• The stock is at 0.47x book. They have nearly ¥400bn of financial assets which are non-core. They have land and property holdings. And they have lots of cross-holdings to repurchase.

• Yesterday, NEC Corp (6701 JP) extended its Tender Offer to buy controlled subsidiary Nec Networks & System Integr (1973 JP) for another 10 days. It did not have enough shares.
• As discussed here 4wks ago, then here yesterday, NEC might not get enough shares unless it offers a higher price. There’s a reason. It is not a high enough price. 
• METI Fair M&A Guidelines and Guidelines for Corporate Takeovers define fair. Guarantees of a floor price and a fair allocation of synergies. One is questionable. The other is not there.

• FY10/24 revenue reached JPY189.9bn (+29.5% YoY), with business profit at JPY4.1bn (+86.6% YoY), exceeding forecasts.
• RENOSY Marketplace expanded market share, becoming top in pre-owned condominium investments for five consecutive years.
• ITANDI business saw increased ARR, customer numbers, and product adoption, aided by M&A activities in 2024.

• Revenue increased to JPY17.7bn (+5.2% YoY) due to subscriber growth in D2C and BPO services expansion.
• Extraordinary losses included JPY829mn in impairment losses and JPY140mn for financial statement correction costs.
• FY05/25 forecast: Revenue JPY21.0bn (+18.5% YoY), EBITDA JPY500mn, net loss JPY490mn to JPY290mn.