Daily Brief Japan: Tsuruha Holdings, United Urban Investment, Nikkei 225, Sakata Inx Corp, Daiichi Sankyo, CELSYS, Canon Electronics, Allegro MicroSystems , CYND, Izumi Co Ltd and more

• A month ago I wrote [Japan Activism/M&A] – Closing In On the Tsuruha Partial Tender – Likely Needs To Be Higher. Now we are <2wks to the deal.  
• At the time, I said the Partial Tender Offer Price needed to be higher than the mooted ¥2,280. Tsuruha Holdings (3391 JP) shares are up 10.0% in that month. 
• The three largest peers are -2.0% on average in that period. The average of 8 peers is +0.5%. I still expect the partial offer price needs to be near ¥3,100

• United Urban Investment (8960 JP) is looking to raise US$155m in a primary placement.
• The purpose is for financing of its medium-term growth strategy plan which includes the acquisition of new assets.
• In this note, we will talk about the placement and run the deal through our ECM framework.

• Japan’s Q3 GDP shrank 1.8% vs forecast 2.5% (annualised), while consumption slowed to 0.1%. This is the first contraction in six quarter.
• The cause is the drop in exports in the face of U.S. tariffs, automakers in particular plummeted, following a period of hiking exports before tariffs came into effect.
• We’ve consistently flagged the Nikkei 225 (NKY INDEX) as overbought. This tactical short-term analysis pinpoints critical support (and resistance, but we think the index may fall).

• Yesterday post-close, Sakata Inx Corp (4633 JP) announced a ¥6bn+ selldown offering by financial crossholders. There may be others to come, but not clear how much.
• The company has had a good couple of years, the stock has reached book value. Optimised balance sheet ROE now clears 10%.
• Index impact is limited in all respects. Low vol, low multiple, decent dividend, high earnings progression on decent business growth are all positive factors. 

• We were correct not buying at a 51 FPE (at the top), despite our bullish view on their oncology portfolio of drugs.
• With hindsight, we were early at the end Oct 2024 at 39 FPE – numbers disappointed and the counter derated significantly.
• At a 16.5 FPE, expectations are very different. Enhertu has moved from strength to strength and has just achieved its first billion dollar quarter.

• Celsys reported cumulative Q3 FY12/25 sales of JPY7.0bn (+15.9% YoY), operating profit of JPY2.2bn (+39.0% YoY).
• Celsys revised FY12/25 forecast: sales JPY9.3bn, operating profit JPY2.9bn, net income JPY1.4bn, citing strong subscription growth.
• Creator Support segment sales JPY6.0bn (+19.4% YoY), driven by CLIP STUDIO PAINT upgrades and global expansion efforts.

• Canon Electronics is strategically pivoting towards high-growth sectors, including satellite technology and medical components, leveraging its core competencies in precision optics and electronics to diversify revenue streams beyond its traditional markets.
• The company demonstrates a solid financial position with consistent revenue growth, improving profitability, and a strong operating cash flow generation, enabling investments in R&D and strategic initiatives.
• While the company shows promising growth in new ventures, it faces challenges from intense competition in the electronics industry and potential margin pressures from fluctuating raw material costs and supply chain dynamics.

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• Allegro MicroSystems reported its second quarter fiscal 2026 earnings, showcasing robust financial performance and strategic gains, particularly in the automotive and data center markets.
• The company achieved net sales of $214 million, depicting a 5% sequential increase and a 14% year-over-year growth.
• The gross margin was recorded at 49.6%, with a non-GAAP earnings per share of $0.13, both exceeding the company’s guided ranges.

• CYND is a dominant, founder-led Vertical Market Software (VMS) provider for Japan’s beauty salon industry, capitalizing on the nationwide push for digital transformation.
• The company exhibits a strong growth profile, evidenced by a 3-year revenue CAGR of 27.2%, but has faced significant net income volatility and margin compression in recent years.
• While the stock appears inexpensive on some metrics and operates in a secularly growing niche, its small size, limited liquidity, and lack of sell-side coverage present notable risks for institutional investors.

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• Izumi is joining the race to buy up more of Japan’s food and FMCG retail share. 
• Currently one of the dominant players in Kyushu, Izumi says it will use M&A to increase store numbers over the next decade.
• This will also mean pivoting more towards food rather than its traditional GMS format just like its competitors.