Daily Brief Japan: Makino Milling Machine Co, MS&AD Insurance, SBI Shinsei Bank, Mitsubishi Heavy Industries, Freee, Money Forward , Nippon Shinyaku, TSE Tokyo Price Index TOPIX and more

• 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: Smart Share Global (EM US), Dongfeng Motor (489 HK), Qube Holdings (QUB AU), Jinke Smart Services (9666 HK), Makino Milling Machine Co (6135 JP), ENN Energy (2688 HK). 
• Lowest spreads: Bright Smart Securities (1428 HK), Toyota Industries (6201 JP), Pacific Industrial (7250 JP), Low Keng Huat Singapore (LKH SP), Ainsworth Game Technology (AGI AU).

• 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.
• This report skipped two months as there were no real developments until the 13 November Council meeting. 262 companies filed CGRs in November, 243 in October, 230 in September.
• The most recent set of documents has some really disappointing comments and questions from companies and their executives. It makes one wonder…

• Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
• On the IPO front, busy season remains in full swing going into the year end.
• On the placements front, there were a few large deals and looked at some of the upcoming likely deals.

• MHI benefits from two long-term supercycles—AI-driven power generation and global defense rearmament—with a recent pullback offering an appealing re-entry point. 
• A global gas-turbine supercycle is boosting orders, pricing power, and margins as demand from hyperscalers and utilities exceeds manufacturing capacity. 
• Markets have yet to fully price in structurally higher earnings and valuations driven by AI-linked power demand and persistent turbine supply constraints.

• freee (44778 JP — US$1.1 billion) is a Japanese developer of cloud accounting software.
• It was founded by a former Google executive called Daisuke (“Dice”) Sasaki, who had also run a start-up.
• Sasaki was shocked at how inefficient accounting processes were at his previous firm and other small- and medium-sized enterprises.

• Money Forward is a leading Japanese fintech company capitalizing on the nation’s push for digitalization through its dual-engine model: a popular personal financial management (PFM) app for individuals and a comprehensive suite of cloud-based SaaS solutions for businesses.
• The company is demonstrating a strategic shift towards profitability, evidenced by improving EBITDA margins and a focus on core business operations, including strategic divestitures and a joint venture with Sumitomo Mitsui Financial Group (SMFG).
• While revenue growth remains robust, driven by a strong position in the expanding Japanese SaaS market, the company faces challenges related to achieving consistent net profitability, high valuation multiples, and intense competition.

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• Freee K.K. is a dominant player in Japan’s burgeoning cloud-based software market for small and medium-sized enterprises (SMEs), offering integrated accounting and HR solutions.
• The company has recently achieved a significant turnaround to profitability after years of prioritizing growth, demonstrating the viability of its subscription-based business model.
• Strong secular tailwinds, including a government-led push for digitalization and the introduction of a new e-invoicing system, provide a long runway for sustained growth in a largely underpenetrated market.

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• Nippon Shinyaku (4516 JP) and Capricor Therapeutics (CAPR US) announced positive topline results from its pivotal Phase 3 HOPE-3 trial evaluating Deramiocel.  
• Capricor plans to submit its response to the Complete Response Letter incorporating HOPE-3 data, following prior alignment with FDA.
• The next big trigger for the stock would be the approval of Deramiocel and RGX-121 by FDA followed by their commercialization.

• The most common reason companies fail to meet listing maintenance standards is insufficient tradable shares market capitalization for Prime and Standard Markets, and insufficient market capitalization growth for Growth Market.
• Many companies failing to meet listing maintenance standards on Prime/Growth Market will transition to Standard Market. Those failing to meet Standard market’s criteria will seek to transition to regional exchanges.
• Most companies failing to meet the listing maintenance standards on the Standard Market can transfer to regional exchanges, but 14 companies face difficulties even in transferring to regional exchanges.