Japan

• Mitsubishi Logisnext Co., Ltd. (7105 JP) announced a pre-conditional tender offer from Japan Industrial Partners (JIP) at JPY1,537 per share, representing a 15.3% discount to the last close price.
• The offer resulted from an auction process. The offer is light in comparison to peer multiples and is below the midpoint of the target IFA DCF valuation.
• While Mitsubishi Heavy Industries (7011 JP) irrevocable has a competing proposal clause, it is unlikely that a bidding war will transpire. The low required tendering rate suggests a done deal. 

• Today we saw the culmination of the ridiculously wrong-way Nikkei 225 Sep25 rebalance. Shift Inc (3697 JP) looked like a classic deletion, not addition.
• 93.3% of the observation period has now passed, which means we can look at the March 2026 Periodic Review with a fair bit of accuracy.
• It is likely to be the runner-ups in the Sep25 review from the Consumer Goods sector, though the second-runner-up ADD needs a stock split to have any chance. More below.

• Tekscend Photomask (429A JP)‘s listing has been approved by the JPX and the stock is expected to start trading on the Prime Market from 16 October.
• At the top end of the IPO range at JPY 3000/share, Tekscend Photomask (429A JP) will be valued at JPY 298bn (US$2bn).
• The stock should be added to the TOPIX INDEX at the close on 27 November while inclusion in global indices should take place in February and June.

• Exchange holidays: Early October holidays in China (Golden Week) and South Korea (Chuseok) may dampen market activity, while India’s Diwali on 21–22 October brings the traditional Muhurat trading session.
• Earnings season begins in the final third of October across India, Japan, China/Hong Kong, and South Korea, alongside key central bank meetings and the TOPIX rebalance on 30 October.
• Why Read: Plan ahead and take into account known market events when making investment and trading decision.

• Dominant Market Position with Strong Growth Engine: KeePer Technical Laboratory is a market leader in Japan’s car coating industry, demonstrating a robust growth trajectory. This is driven by the continuous expansion of its dual-format network: company-owned ‘KeePer LABO’ stores and franchised ‘KeePer PROSHOP’ locations. The company has a proven track record of double-digit revenue and profit growth, supported by strong same-store sales and new openings.
• Vertically Integrated Business Model Creates Synergies: The company’s integrated model, which spans from the development and manufacturing of proprietary coating chemicals to the direct provision of services, creates significant competitive advantages. This ensures high-quality, standardized service across its network, reinforces its brand, and allows the KeePer LABO (B2C) stores to provide direct market feedback for the Products (B2B) segment.
• Attractive Financial Profile with Shareholder Returns: KeePer exhibits a strong financial profile characterized by high margins, robust cash flow generation, and a solid balance sheet with low leverage. The company has a consistent history of impressive earnings growth, which has translated into a rapidly growing dividend, signaling a commitment to shareholder returns.

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• Even in parent-subsidiary listings, which form the core of business portfolio restructuring, some large companies have begun taking action, raising expectations for further improvements in capital profitability.
• Companies that have businesses with low capital profitability often lack clear criteria for exiting those businesses, or even if they have established exit criteria, they aren’t actually applied in practice.
• Some companies still believe they cannot withdraw because establishing clear criteria would create inconsistencies with their current low-return capital business, forcing someone to clarify where responsibility lies.

Key points (machine generated)

• And Do Holdings announced a five-year management plan to restructure its business and improve profitability.
• For the fiscal year ending June 2025, the company reported a 4.2% decline in revenues to 64.735 billion yen and a 27% drop in operating profit to 2.62 billion yen.
• The declines were mainly due to lower-than-expected transfers to the HLB fund, affected by reduced purchase contracts in the house leaseback business.

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• Shares up 18% since Q2; short-term correction likely as valuation nears fair value (~6x EV/Revenue); ValueAct holds 5.6% stake.
• Q3 sales forecast +24% YoY to ¥12.1bn; adjusted EBITDA margin rising to 7% amid strong ARR growth from mid-sized corporates.
• Money Forward sharpened focus on core business, divesting non-core assets and forming a ¥3bn JV with SMFG to expand digital banking services.

Key points (machine generated)

• F-Code, listed as 9211 on the Tokyo Stock Exchange, has completed 19 M&A transactions since going public.
• The company projects a 15-fold sales growth and a 14-fold increase in operating profit and EBITDA over the next four years.
• F-Code operates as a holding entity for 15 companies, focusing on AI and digitalization in marketing while maintaining a federal system for subsidiary independence.

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Key points (machine generated)

• FunPep, established in 2013, develops pharmaceuticals based on functional peptides as alternatives to antibody drugs.
• The company is conducting a Phase 1 clinical trial for its hay fever vaccine ‘FPP004X’ with 93 subjects, starting in March 2025.
• The trial evaluates safety, tolerability, and immunogenicity, with results expected in the second half of 2026.

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• Tekscend Photomask (429A JP) is a global leader in semiconductor photomasks. It is seeking to raise up to JPY123 billion (US$828 million). Pricing is on 30 September.
• I previously discussed the IPO in Tekscend Photomask (429A JP) IPO: The Bull Case and Tekscend Photomask (429A JP) IPO: The Bear Case. 
• In this note, I present my forecasts and discuss valuation. My analysis suggests that Tekscend is attractively valued at the IPO price range compared to peer multiples.

• Migalo Holdings (5535 JP) is one of the rare TSE Prime-listed companies which got the boot from TOPIX, stayed in Prime, and is clawing its way back. 
• As of end-March-25, it met all the criteria to stay in Prime and rejoin TOPIX. Now they are launching a primary offering, and this may presage an effort to rejoin. 
• They are adding float and 10% of shares to the pile, in this ¥4.4-5.0bn offering. But instos are net short this stock. 

• In our previous Fast Retailing (9983 JP) insight we identified a potential BUY opportunity ahead of the September 25 rebalance, but the rally failed to materialize. 
• The stock at the moment is oversold, according to our quantitative model, so we would like to review its tactical outlook in this insight.
• Right now, the stock is the most oversold of all the Asian stocks we track, probability of WEEKLY reversal stands at 72%, after last week’s Close.

• Tekscend Photomask (429A JP), a manufacturer and distributor of semiconductor photomasks, aims to raise around US$830m in its Japan IPO.
• TP is a global provider of photomasks and related support services. It has been the leader in the merchant photomask market in terms of sales since 2016.
• We have looked at the company’s past performance in our previous note. In this note, we will  undertake a peer comparison.

• This week, I published a deep dive into Sony’s upcoming spin-off of Sony Financial (SFGI/8729).
• I will be watching the spin-off closely and hoping for selling pressure.
• KBR, Inc. (KBR) announced on September 24, 2025 that it plans to spin off its Mission Technology Solutions (MTS) segment into a separate publicly traded company.

• The shift toward management that creates value through dialogue with overseas investors is evident in the relationship between foreign shareholding ratios, capital profitability, and stock price valuations.
• There is significant correlation between cash reserves and ROA. ROA, which reflects the cash flow returns generated by a business, is considered to be closely related to stock price valuation.
• Companies with high cash generation capabilities and large amounts of cash on hand are expected to invest in generating more cash flow and return cash to shareholders.

Key points (machine generated)

• Mugen Estate reported record-high sales and profits for the fiscal year ending December 2025.
• The company specializes in investment and residential properties across Japan, managing a diverse portfolio.
• Established in 2014, Mugen Estate transitioned from the Tokyo Stock Exchange Mothers market to the Prime market by 2022.

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• Tekscend Photomask (429A JP)  (429A JP), a manufacturer and distributor of semiconductor photomasks, aims to raise around US$830m in its Japan IPO.
• TP is a global provider of photomasks and related support services. It has been the leader in the merchant photomask market in terms of sales since 2016.
• We have looked at the company’s past performance in our previous note. In this note, we talk about valuations.

Key points (machine generated)

• Basis Corporation, listed as 4068 on the Tokyo Stock Exchange, aims for growth by balancing investments and cost control.
• The company has expanded from mobile engineering to IoT device installation, enhancing living infrastructure.
• Innovations like project management tools and AI have improved efficiency, reducing administrative work time by over 90%.

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• Welcome to Curator’s Cut, a fortnightly roundup of standout themes from the 1,000+ Insights published over the past two weeks on Smartkarma
• In this cut, we review strategies to hedge Alibaba (9988 HK) exposure, examine signficant Asian spin-offs, and explore engaging activist situations in Japan 
• Want to dig deeper? Comment or message with the themes you’d like to see highlighted next

• I 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: Mayne Pharma (MYX AU), Smart Share Global (EM US), ENN Energy (2688 HK), Dongfeng Motor (489 HK), Soft99 Corp (4464 JP), Joy City Property (207 HK).
• Lowest spreads: Bright Smart Securities (1428 HK), Pacific Industrial (7250 JP), Humm Group (HUM AU), Mandom Corp (4917 JP), Paramount Bed Holdings Co Lt (7817 JP). 

• IPO catalyst already priced in – Tekscend Photomask IPO (¥300 bn base case) crystallizes hidden value, but with TOPPAN at ~¥3,900, the upside to bull case (~¥4,100) is limited.
• Core execution the swing factor – Information & Communication (~54% sales) and BPO/Digital DX must expand margins (target 10% by FY2030 vs. ~5% today) for further re-rating.
• Balanced risk–reward – Strong balance sheet and shareholder returns (2.5% equity cancelled FY25) support valuation, but high capex and legacy print drag keep FCF and ROE volatile.

• NAV crystallization from Tekscend IPO – ~¥108 bn cash proceeds plus a ~14% residual stake; base NAV ~¥150–160 bn vs. ¥129 bn market cap (15–20% discount).
• Upside capped without payout shift – modest base case (¥3,900–4,100/share, flat to +7%); bull case (¥4,400, +15–20%) requires high-end IPO pricing and explicit return policy.
• Persistent structural discount – low dividend (~0.9% yield), no buyback track record, and opaque residual portfolio (e.g., Golf Digest) keep holdco discount entrenched.

• Scarce exposure to EUV photomasks – one of only three global leaders (with Hoya, DNP) in a concentrated oligopoly.
• IPO at ¥250–400 bn (Oct 16, 2025) implies ~12–16× EV/EBITDA, offering rare pure-play access.
• Execution risks – capex intensity turns FCF negative; overhang from Integral (~14% post-IPO) may weigh.

• Multi-Week forecasts for the Asian indices and stocks we track, based on our proprietary probability model.
• OVERBOUGHT: Samsung Electronics (005930 KS) , Softbank Group (9984 JP) , Toyota Motor (7203 JP) , Nikkei 225 (NKY INDEX) 
• OVERSOLD: China Mobile (941 HK) , Fast Retailing (9983 JP)

• Amidst very modest improvements in corporate governance over the past few years, the percentage of female board members has steadily increased.
• Even if the %of female board members rises, there’re concerns that it will be a repeat of governance reforms that have’t achieved to transform management into one that creates value.
• Whether companies that step forward with diversity-conscious boards of directors can use this as a catalyst for management change, and promote female executive directors within companies, will be closely watched.

• Genky Drugstores is one of three hybrid food & drug chains, all of which target the discount end of the market. 
• Unlike rivals, Genky’s blends in-house control of both store and product development, and logistics.
• This level of control and discipline is making Genky a growing threat to competitors in central Japan.

• The reason why IPOs tend to become the goal is that many IPOs are conducted for purposes other than company growth after IPOs.
• In order to correct the notion that “IPO is the goal,” there are expectations for the revitalization of the market for trading unlisted shares and M&A of unlisted companies.
• With the entry of unlisted stock funds, trading in privately-held stocks will become active, and if M&A for growth and management changes take place, the quality of IPOs will improve.

• Trading in Sony Corp (6758 JP) with Sony Financial Group (8729 JP) spin-off rights has passed. SFGI starts trading separately on 29 Sep. ¥150/share is good. ¥130-140/share is even better.
• Naspers (NPN SJ)‘s NAV is edging towards the low-end on a 12-month basis, However, the implied stub is out of whack as Prosus NV (PRX NA) outperforms.
• The Shandong Hi-Speed Holdings (412 HK) bubble has finally popped. Now what?

• I tally 39 – mostly firm, mostly Asia-Pac – arb transactions currently being discussed and analysed on Smartkarma.
• One new deal was discussed on Smartkarma this week: Paramount Bed Holdings Co Lt (7817 JP).
• Key updates/news took place on PointsBet (PBH AU), Oneconnect (6638 HK), Kangji Medical Instrument (9997 HK), Jinke Smart Services (9666 HK), Soft99 Corp (4464 JP), and Mandom Corp (4917 JP).

• Laser wireless power transmission technology opens new defense, dual-use and civilian market opportunities. 
• Japanese politicians inclined to spend more on defense, but worried about the national budget. Likely to split the difference between 2% of GDP and Trump’s demands. 
• Aircraft, Defense & Space to drive sales and profit growth through 2030. Buy on dips for the long term.

• Today is the last day of trading for Sony Corp (6758 JP) with Sony Financial Group (8729 JP) spin-off rights. SFGI starts trading separately on Monday 29 Sep.
• The reference price is ¥150/share. It will likely stay in all major indices except Nikkei 225, and it likely needs low ¥160s to stay in M _ _ _. 
• The estimated Div Yield is higher on SFGI than peers by a fair ways, and looks to grow, and there is a big buyback to come. I like it.

• Spin-Off unlocks scale: Sony Financial (~¥23 tn assets) carved out from Sony, with ~¥250 bn market cap and ~¥200 bn free float.
• Balance-Sheet heavy, rate-sensitive: Core life insurance business (~80–85% of profits) supported by strong solvency (ESR 189%).
• Catalysts: Forced selling post-listing, earnings delivery, 40–50% payout policy, and likely TOPIX inclusion within 6–12 months.

Key points (machine generated)

• Project Holdings is a trading company listed on the Tokyo Stock Exchange Growth Market, focusing on a project-based society in the digital transformation era.
• The company anticipates a return to profit growth by the fiscal year ending December 2025, supported by its three main business segments.
• Project Holdings is implementing a growth strategy with a performance outlook extending to December 2027.

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Key points (machine generated)

• Qualtec reported record highs in sales, operating profit, and ordinary profit for the fiscal year ending June 2025.
• Sales reached 4,025 million yen, an 11.1% year-on-year increase, with operating profit and ordinary profit at 384 million yen.
• The company’s growth is driven by increased orders for power semiconductor testing and bio-related services, enhancing its reputation in quality technology.

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Key points (machine generated)

• FISCO Ltd. projects a profit decline for Daiko Pharmaceutical in fiscal year 2025 despite a slight sales increase.
• Forecasted sales are 6,300 million yen (up 0.1%), with significant drops in operating profit (down 65.9%) and net profit (down 66.6%).
• The profit decrease is linked to rising costs for stabilizing the supply system, with the pharmaceutical segment expected to decline slightly in sales.

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• On August 14, 2025, Tokyo Communications Group, Inc. (hereafter, the “Company”) announced its H1 FY2025/12 results.
• For the first six months, net sales rose 14.6% YoY to JPY 3,176 mn, EBITDA improved from a JPY 16 mn loss a year earlier to a JPY 320 mn profit, and operating profit moved from a JPY 211 mn loss to a JPY 140 mn profit.
• The streamlining of unprofitable businesses launched in November 2024 marked a turning point, setting off a sharp rebound in results from Q4 of the previous fiscal year as the earnings of core existing businesses steadily recovered. 

Key points (machine generated)

• Dream Arts reported strong interim performance with double-digit revenue growth and increased profits for the period ending December 2025.
• The company aims to exceed 10 billion yen in sales by December 2028, focusing on SaaS products like the no-code tool ‘SmartDB®.’
• With dual headquarters in Tokyo and Hiroshima, Dream Arts promotes co-creation and digitalization, targeting operational personnel without IT expertise.

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Key points (machine generated)

• Ymir Link, listed on the Tokyo Stock Exchange, is expected to achieve record revenue and profit growth by December 2025.
• The company specializes in cloud-based messaging solutions, particularly through its ‘Cuenote’ platform for various sectors.
• With over 90% of revenue from SaaS, Ymir Link benefits from proprietary technology and a strong data analysis team, enhancing its market share.

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Key points (machine generated)

• Logizard, listed on the Tokyo Stock Exchange under ticker 4391, is thriving due to its cloud services for various sectors.
• The company provides inventory management systems like ‘Logizard ZERO’ and ‘Logizard OCE’ aimed at improving efficiency for SMEs.
• With a subscription-based revenue model, cloud services make up 79.2% of sales, projected to grow by 10% for the fiscal year ending June 2025.

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• Shift Inc (3697 JP) runs a software quality assurance testing business. 400% revenue growth in 5 years, but this year to Aug25 is “only” 17.5% according to Q3 results guidance.
• It was a “growth stock” for a long while, and large long-only growth investors flocked to the name. In the past several months many have exited. 
• The stock will be included in the Nikkei 225 Average next Tuesday. The supply/demand dynamics here to there are interesting. Afterwards they may be more interesting.

• Today after the close, the Soft99 Corp (4464 JP) Board of Directors came out AGAINST the Effissimo ¥4,100/share counterbid to the original ¥2,465/share MBO.
• “The Special Committee advised that the Tender Offer would not contribute to the enhancement of the Company Group’s corporate value, nor would it be fair to the Company’s general shareholders.”
• ¥2,465 is fair. ¥4,100 is not fair. Absolute hogwash. Unmitigated blatherskite. Pure trumpery. Codswallop, buncombe, taradiddle, balderdash, and nincompoopery too. I expound below.

• On 10 September, CVC announced a family-led MBO of well-known Japanese hair-care/cosmetics firm Mandom Corp (4917 JP). Agreed, supported, recommended, for a start date end-September. It was also too light.
• I suggested the open-ish register could trigger activists. The stock opened just above terms post-announcement and then traded higher. Shares fell today but it is still 15% through terms. 
• Hibiki Path Advisors wrote a strong letter. Murakami announced a 6.67% stake yesterday, 8.39% today. But that’s 5 days old. Today, the company announced the TOB starts tomorrow. Still fun. 

• The Soft99 Corp (4464 JP) Board has, unsurprisingly, opposed the Effissimo offer for several reasons. Notably, they do address the huge price disparity between the two offers. 
• While most of the reasons to justify the opposition are weak, the Board unexpectedly notes that as of 24 September, the MBO retained acceptances to satisfy its minimum tendering condition. 
• Despite the significant premium of the Effissimo offer, this development suggests that the current acceptances for the MBO are sticky, thereby increasing the likelihood that Effissimo’s offer will fail. 

• Tekscend Photomask (429A JP) (TP), a manufacturer and distributor of semiconductor photomasks, aims to raise around US$830m in its Japan IPO.
• TP is a global provider of photomasks and related support services. It has been the leader in the merchant photomask market in terms of sales since 2016.
• In this note, we talk about the not-so-positive aspects of the deal.

• Tekscend Photomask (429A JP) is a global leader in semiconductor photomasks. It is seeking to raise up to JPY123 billion (US$832 million). Pricing is on 30 September.
• In Tekscend Photomask (429A JP) IPO: The Bull Case, I highlighted the key elements of the bull case. In this note, I outline the bear case.
• The bear case rests on its worrisome revenue growth trends, weakening lead revenue indicators, cash burn, and large post-IPO share overhang. 

• Sony Group Corporation (6758) is planning to spin off 80% of its stake in Sony Financial Group Inc. (8729) on September 29, 2025.
• Sony Financial Group Inc. is the financial services arm of Sony, comprised of three main businesses
• The spin-off will generate ~ ¥100BN in the current fiscal year and pay a ¥50BN annual dividend.

• Earnings Growth: Non-resource engines (Food, FamilyMart, ICT, Textiles) compounding at double-digit rates; mid- to high-single-digit EPS growth outlook.
• Valuation: Trades at ~13× FY2026E P/E, in line with peers, offering steady TSR without a valuation premium.
• Capital Returns: ¥200/share dividend + ¥150 bn buybacks underpin 40–50% payout; EPS uplift from share reduction.

• Companies that responded that they disclosed their annual securities reports prior to the AGM in response to investor needs are considering postponing the timing of their shareholders’ meetings.
• Annual securities reports are legal documents, and false statements are punishable by law, so the level of authenticity differs from other documents. It takes time to read them for AGM.
• There needs to be an increase in the number of investors who carefully read annual securities reports and use them to make investment decisions.

• As can be seen from the graph below, the major JPY 12.6bn capex initiative to secure production capacity to enable consolidated net sales to increase by 1.5x (announced in May-2022) peaked in FY24/3 and depreciation peaked in FY25/3.
• With confirmation of the upturn in the silicon cycle, earnings have entered a full-fledged recovery, with Q1 OP posting a high 41% progress ratio relative to the 4-year historical average of 27%. The key takeaway from the graph below is the strong recovery in EBITDA.
• The current high P/E is a common feature at the start of cyclical recoveries, while EV/EBITDA has only just returned to its long-term historical average (see P21). 

• In a fairly common pattern, the founding family (38% ownership) of Paramount Bed Holdings Co Lt (7817 JP) have launched an MBO. 
• It is too cheap at 4.2x adjusted EV/EBITDA (one could argue it is 5.0x but they also have net receivables) for such a ubiquitous brand and growth. 
• Soft99 Corp (4464 JP) may have been a one-off. Maybe not. People may look at this situation through that lens. It deserves that look. 

• Paramount Bed Holdings Co Lt (7817 JP) has recommended an MBO at JPY3,530, a 32.2% premium to the last close price. The offer represents a ten-year high. 
• The offer is below the midpoint of the special committee IFA’s DCF valuation range and its requested price. Hibiki has previously suggested an intrinsic value of JPY4,929.  
• The setup shares several traits with the Mandom MBO, and has the potential for a bump, particularly if an activist emerges as a substantial shareholder or agitates for better terms.   

• Tekscend Photomask (429A JP) is a global leader in semiconductor photomasks. It is seeking to raise up to JPY123 billion (US$832 million). Pricing is on 30 September.   
• Tekscend, which was carved out of Toppan Printing (7911 JP) in 2022, is owned by Toppan (with a 50.1% stake) and Integral (5842 JP) (with a 49.9% stake).   
• The bull case rests on its leading market position, attractive market opportunity, stable underlying margins, net cash position, and attractive dividend policy. 

• Murakami reported a 7.14% ownership ratio in Mandom Corp (4917 JP). The average buy-in price of JPY2,070.73 per share is 5.6% above the JPY1,960 CVC-sponsored MBO.
• Murakami undoubtedly shares Hibiki’s concerns. On 15 September, Hibiki issued an open letter questioning the rationale behind the Board’s recommendation of a CVC-sponsored preconditional MBO. 
• With the emergence of Murakami, CVC and the founding family’s options narrow. The need for satisfaction of the precondition buys time, but a bump seems inevitable. 

• Copper earnings leverage: Equity-method stakes in Collahuasi and Anglo Sur mean every +10% copper move adds ~¥25–30 bn net income (~3% EPS), giving Mitsui underappreciated upside torque.
• LNG stability & cash flows: Long-term contracts in Mozambique, Cameron, Qatar, and Sakhalin underpin resilient earnings and support ¥400 bn annual buybacks (~5% equity).
• Valuation: P/B discount vs Itochu has closed (~1.1× each), but Berkshire’s ≥10% stake enforces capital discipline; TSR outlook is 6–9% CAGR through FY28, with copper strength providing double-digit upside.

• Tekscend Photomask (429A JP) (TP), a manufacturer and distributor of semiconductor photomasks, aims to raise around US$830m in its Japan IPO.
• TP is a global provider of photomasks and related support services. It has been the leader in the merchant photomask market in terms of sales since 2016.
• In this note, we talk about the positive aspects of the deal.

• Shiga Bank is well-leveraged to Japan’s rate hike cycle and regional revitalization strategy, with higher market-rate loan exposure than peers, enabling stronger earnings sensitivity to rising rates.
• Core profitability is improving, driven by double-digit NII growth and rising NIMs. A CET1 ratio of 14.0% supports capital returns, selective M&A, and ¥700bn in planned loan growth through 2029.
• Despite a +63% YTD rally, shares remain undervalued at 0.7x P/B. Our target of ¥7,850/share implies ~+20% upside, supported by improving RoE, operational efficiencies, and capital deployment.

• Cycle turning: Q1 FY25 marked the trough; Q2 guidance implies +30% revenue and +46% OP rebound, with Q3 set to extend the recovery.
• Enterprise SSDs anchor profits: ~70–75% of EBITDA tied to AI/cloud workloads, cushioning volatility in PCs and smartphones.
• Even after a ~50% rally since September, Kioxia trades at ~5–6× EV/EBITDA vs. peers at 9–12×; sponsor selldowns and NAND ASP volatility could test the rally.

• POSCO Holdings (005490 KS) is looking to raise up to US$169m via selling some of its stake in Nippon Steel Corporation (5401 JP).
• This deal represents 1.5 days of ADV representing around 0.7% of shares outstanding.
• In this note, we will talk about the placement and run the deal through our ECM framework.

• Context: The Toyota Motor (7203 JP) vs. Suzuki Motor (7269 JP) price-ratio has deviated more than two standard deviations from its one-year average, presenting a potential relative value opportunity.
• Highlights: Going long Suzuki and short Toyota targets a 9% return.
• Why Read: Essential for quantitative traders seeking mean-reversion opportunities, with detailed execution framework, risk management protocols, and historical simulation showing the statistical basis for this relative value play.

• Leading Market Position with Diversified Operations: Kajima is one of Japan’s ‘Big Five’ general contractors, possessing a dominant position in the domestic construction market. The company is well-diversified across civil engineering, building construction, and a growing real estate development business, which provides a buffer against the cyclicality of the construction sector.
• Favorable Industry Tailwinds: The Japanese construction market is supported by robust public and private investment. Key drivers include large-scale urban redevelopment projects, government spending on national resilience and infrastructure renewal, and growing demand for advanced facilities like data centers and logistics centers.
• Shareholder-Focused Capital Allocation: Kajima has demonstrated a strong commitment to shareholder returns, evidenced by a 3-year dividend CAGR of over 21%. This is supported by a strategy to enhance profitability by focusing on high-margin projects and improving investment efficiency in its real estate development arm.

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• SBI Holdings is a major Japanese financial services conglomerate with a diversified business portfolio spanning Financial Services, Asset Management, Private Equity Investment, Crypto-assets, and Next Generation Business. The company is aggressively pursuing a growth strategy centered on digital transformation, strategic acquisitions, and expansion into new technological frontiers like Web3, AI, and semiconductors.
• The company has demonstrated strong top-line growth, with revenue surpassing ¥1 trillion for the first time in fiscal year 2023. Profitability is also on an upward trend, driven by its core financial services segment, particularly SBI Shinsei Bank, and a significant turnaround in its private equity investment business.
• SBI’s forward-looking strategy involves significant investments in high-growth areas, both domestically and internationally, with a particular focus on Southeast Asia and the Middle East. The company aims to generate 20-30% of its consolidated profit from overseas businesses in the medium term.

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• Privatization Marks New Chapter: After 74 years as a publicly traded entity, Toshiba was delisted in December 2023 following a successful $13.5 billion buyout by a consortium led by Japan Industrial Partners (JIP). This move ends a tumultuous period marked by accounting scandals, corporate governance crises, and battles with activist investors, allowing management to focus on a long-term revitalization strategy away from public market pressures.
• Strategic Refocus on Core Operations: Having divested numerous non-core businesses such as laptops, medical equipment, and home appliances, the new strategy centers on higher-margin and critical technology sectors. Key focus areas include energy systems, infrastructure, power semiconductors, and data-driven digital solutions, aiming to leverage the company’s technological strengths in areas critical to national security and global trends like decarbonization and digitalization.
• Path to Recovery Fraught with Challenges: Despite the potential benefits of privatization, Toshiba faces significant hurdles. The company is still recovering from a legacy of financial mismanagement and reputational damage. It operates in highly competitive global markets and must execute a complex turnaround plan to streamline operations, manage its debt, and regain its position as an innovative leader.

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• Technopro Holdings is the subject of a tender offer from private equity firm Blackstone at ¥4,870/share, which represents a significant premium but is considered potentially undervalued by some market observers.
• As a leading technology-focused staffing firm in Japan, the company is well-positioned to benefit from the country’s structural shortage of skilled engineers and increasing demand for digital transformation.
• Significant uncertainty surrounds the success of the Blackstone acquisition due to a high tender threshold of 66.67% and a large passive shareholder base, creating a key risk for investors at the current price.

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• ASIRO is a high-growth player in the burgeoning Japanese legal tech market, primarily operating online media platforms that connect consumers with legal professionals. The company is capitalizing on the digitization of Japan’s legal industry.
• The company has demonstrated impressive revenue growth, with a 3-year CAGR of 45.66%. However, this top-line growth has been accompanied by significant earnings volatility, including a net loss in the fiscal year ending January 2023, and a sharp decline in net income and EPS over the past 3 and 5 years.
• While the company’s growth and momentum scores are high, its value and profitability metrics warrant caution. The business model is sensitive to changes in online marketing costs and competition, which represents a key risk for investors.

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• Rakuten is at a strategic inflection point, with its established and profitable FinTech and E-commerce segments providing a stable foundation while the high-investment Mobile segment continues its protracted journey toward profitability. The core “Rakuten Ecosystem”strategy, which fosters user loyalty and cross-selling, remains a key competitive advantage.
• The Mobile segment’s persistent losses are the primary drag on group profitability and the main source of investor concern. However, the segment has shown signs of improvement, reaching monthly EBITDA profitability for the first time in December 2024 and targeting full-year EBITDA profitability in 2025.
• Future growth hinges on three key factors: (1) achieving sustained profitability in the Mobile segment to alleviate financial pressure on the group, (2) continued strong growth and margin expansion in the high-margin FinTech division, and (3) maintaining market leadership in the domestic e-commerce space against formidable competitors like Amazon.

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• Dominant Market Position with Strong Cloud Growth: Oracle Corp Japan is a leading player in the Japanese enterprise software market, particularly in database management systems where it holds a significant market share. The company is successfully leveraging its large installed base to drive strong growth in its cloud services, including Oracle Cloud Infrastructure (OCI) and Fusion Cloud applications, which are key drivers of future revenue.
• Robust Financials and Shareholder Returns: The company exhibits a strong financial profile with consistent revenue growth, high profitability margins, and a debt-free balance sheet. This financial strength allows for stable dividend payments and positions the company to invest in future growth opportunities, such as AI and multi-cloud strategies.
• Intensifying Competition and Slower Overall Growth: While cloud revenue is growing, the overall revenue growth rate lags the broader software industry. The company faces intense competition from hyperscale cloud providers like AWS, Microsoft Azure, and Google Cloud in the Japanese market. A deceleration in the cloud services growth rate has been noted as a potential risk to its competitive momentum.

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• Ibiden stands as a dominant force in the high-performance IC substrate market, strategically positioned to capitalize on the secular growth in AI and data centers through its key relationship with Nvidia.
• Recent financial performance has been robust, with Q1 FY25 results showing significant year-over-year growth, prompting management to upgrade the earnings outlook for FY25-27.
• Despite strong growth prospects and a leading market position, the company trades at a valuation discount to high-growth AI peers, presenting a compelling Growth at a Reasonable Price (GARP) opportunity, albeit with risks related to customer concentration and competitive pressures.

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• Profitability Surge Driven by Nuclear Restarts: Kansai Electric Power (KEPCO) has seen a dramatic recovery in profitability over the past two fiscal years, primarily due to the progressive restart of its nuclear power plants. This has significantly reduced its reliance on expensive imported fossil fuels, leading to substantial margin improvement and record net income.
• Strategic Focus on Decarbonization and Growth: Management is pursuing a dual-pronged strategy of ensuring a stable energy supply through its nuclear assets while aggressively expanding its renewable energy portfolio. The company has laid out a “Zero Carbon Vision 2050″and plans significant investments in offshore wind and other renewables to drive future growth.
• Persistent Corporate Governance and Regulatory Risks: Despite efforts to reform, KEPCO has a history of significant corporate governance and compliance issues, which remain a key concern for investors. The company operates in a highly regulated industry, making its earnings susceptible to changes in government energy policy, tariff structures, and stringent safety standards for its nuclear operations.

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• Diversified Business Model Mitigates Cyclicality: Daiwa House Industry‘s strength lies in its multifaceted business portfolio, spanning single-family houses, rental housing, condominiums, commercial and business facilities, and environmental energy. This diversification helps to cushion the company against downturns in any single segment of the construction and real estate market.
• Strong Foothold in a Mature Market with Pockets of Growth: While Japan’s overall population is declining, Daiwa House is well-positioned to capitalize on key growth areas. These include the rising demand for logistics facilities driven by e-commerce, the need for modern healthcare and nursing facilities for an aging population, and urban redevelopment projects. The company is also expanding its overseas operations to tap into global growth.
• Commitment to Sustainability and Innovation: Daiwa House has placed a strong emphasis on environmental initiatives, such as developing zero-energy consumption housing and investing in renewable energy. This focus on sustainability not only addresses societal needs but also enhances the company’s brand image and long-term competitiveness. Their use of precast concrete technology also allows for reduced construction times and costs.

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• In Friday’s Monetary Policy Statement, the BOJ announced it would start selling down its holdings in ETFs and J-REITs at the pace of ¥620bn and ¥5.5bn/year, respectively. BIG NEWS!
• That is US$17mm of ETFs and US$150k of J-REITs per day. The BOJ suggests it is 0.05% of volume per day. That’s close. SMALL EFFECT. 
• Given ¥15trln of buybacks and ¥5trln+ of dividend reinvestment + NISA account buys, plus ¥trlns of cross-holding selldowns/year, this is a total nothingburger, even if they up the pace.

• Effissimo has steadily increased its Pacific Industrial (7250 JP) stake to 7.0 million shares or a 12.17% ownership ratio. The most recent purchases were at an average price of JPY2,616.08. 
• Effissimo is taking contrasting approaches to low-ball MBOs. For Soft99 Corp (4464 JP), Effissimo has launched a hostile offer, while for Pacific, Effissimo has chosen to agitate for better terms.
• The offer closes on 24 September. While a bump is the most likely scenario, the share price is 30% higher than the offer price, suggesting limited upside. Take profits. 

• Softbank Group (9984 JP) performed a strong 1-week rally 2 weeks ago, then went marginally higher. The stock is OVERBOUGHT according to our models, but the pattern is bullish. 
• We see two possible scenarios: a) the stock stalls and pulls back this week or b) it keeps rallying towards 20850.
• The current pattern had rallies lasting up to 5 weeks in the past, so Softbank Group (9984 JP) could rally 2 more weeks, and get closer to 20850.

• Aeon, Japan’s largest retail group, is accelerating business reforms across supermarkets, drugstores, private brands, apparel, e-commerce, and mall facilities.
• It is also investing heavily in customer experience and operational efficiency.
• All of which is in contrast to the beleaguered rival, Seven & I, which has fought off a bid but at the expense of significant market share.

• The ex-date for Sony Financial Group (8729 JP)‘s spinoff from Sony Corp (6758 JP) is 29 September. There will be passive flows at the close on the day.
• There will be no selling from the TOPIX Index and Fglobal trackers. There will be selling from Nikkei 225 (NKY INDEX) trackers and potentially from Mglobal trackers.
• Sony Financial Group (8729 JP) has announced a buyback of up to 1bn shares (13.99% of shares out) over the next year and that will support the stock.

• I 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: Mayne Pharma (MYX AU), Smart Share Global (EM US), ENN Energy (2688 HK), Dongfeng Motor (489 HK), Oneconnect Financial Technology (6638 HK), Joy City Property (207 HK).
• Lowest spreads: Bright Smart Securities (1428 HK), Pacific Industrial (7250 JP), PointsBet Holdings (PBH AU), Mandom Corp (4917 JP), Humm Group (HUM AU), Fuji Oil Co Ltd (5017 JP).

• Ibiden is transitioning from a cyclical electronics supplier to a core AI infrastructure enabler, with Nvidia-linked package substrates at the heart of its growth strategy.
• Management expects AI substrate demand to nearly double in FY25 and is targeting a 150% production increase by 2027, underpinned by the Ono plant ramp from next month.
• Despite ~18–19% EPS/EBITDA CAGR through FY27 and margins comparable to high-premium peers, Ibiden still trades at mid-tier multiples (21× forward P/E, ~6× EV/EBITDA), leaving scope for re-rating.

• Hamee reported earnings on September 12, and the stock traded down ~6%.
• The headline earnings looked awful but they included many one time and/or non cash expenses.
• To me, the underlying business looks strong. The spin-off is on track for early November, and I expect it to serve as a hard catalyst to drive shares higher.

• SanBio Co Ltd (4592 JP) incurred ¥1.3B R&D expenses (+31% YoY) in H1FY26 related to receiving approval of partial changes to the items approved for manufacture and marketing for Akuugo.
• Operating loss went up to ¥1.9B in H1FY26 from ¥1.6B in H1FY25. SanBio revised FY26 guidance of operating loss to ¥3.9B (vs ¥3.5B) and net loss to ¥4.0B (vs ¥3.6B).
• Partial change application already filed and the approval is expected in H2FY26. Plans to negotiate with regulatory authorities in Japan and US toward new clinical trials for chronic ischemic stroke.