Daily Brief Japan: Yakult Honsha, Pacific Industrial, Japan Infrastructure Fund Investment Corporation, Northsand, Nippon Steel Corporation, oRo Co Ltd, Daiwabo Holdings, Kohnan Shoji, Nippon Denko, Dream Incubator and more

• A major global index provider announced its quarterly review on 5th November 2025. The rebalance will take place on 24th November 2025.
• There were 133 changes announced. We got 115 of these 133 changes – around 86%.
• In this insight, we have presented our final flow expectations for the confirmed index changes and provide a few comments on specific situations.

• On 23 October, the MBO price for Pacific Industrial (7250 JP) was increased by 42.4% to JPY2,919 per share. The offer closes on 7 November. 
• Today, Effissimo further increased its stake to 8.6 million shares, representing 13.97% of outstanding shares and a 14.82% ownership ratio. The implication is that Effissimo remains unsupportive.  
• The shares trade above terms, and the close is likely to be extended. Another bump is possible, but likely, the Ogawas will first try to lower the minimum acceptance condition. 

• Japan Infrastructure Fund Investment Corporation (9287 JP) has recommended a tender offer from Mizuho Leasing (8425 JP) at JPY65,000, a 21.5% premium to the last close price.
• The offer is light, as it is below book value (implying a P/NAV of 0.82x) and is below the midpoint of the IFA-adjusted book valuation range.
• However, a dispersed shareholder register with no substantial shareholders suggests that it is an uphill struggle for an activist to agitate for a bump. This is likely a done deal. 

• Northsand (446A JP) aims to raise around US$121m in its Japan IPO.
• Northsand is a consulting firm that provides both IT and business consulting services. Established in 2015, it helps organizations improve efficiency, modernize operations, and achieve sustainable growth.
• In our previous note, we looked at its past performance. In this note, we will talk about valuations.

• Guidance cut (Business Profit ¥500 bn → ¥450 bn) as U.S. Steel delivers no profit contribution, overseas spreads weaken, and one-off losses weigh on earnings; domestic operations remain resilient.
• Integration drag : $11 bn U.S. Steel modernization plan and rigid U.S. labor terms keep margins diluted and free cash flow negative; deleveraging and ROCE recovery deferred to FY27+.
• Valuation rich, patience warranted: Trading at ~19× EV/EBITDA (vs peer median ~10×) with ROCE < 8%; maintain Hold / Underweight until synergy visibility and free-cash-flow inflection emerge post-FY26.

• oRo is a specialized provider of cloud-based ERP and digital marketing solutions, well-positioned to capitalize on Japan’s accelerated digital transformation.
• The company operates through two core segments: a high-growth, high-margin Cloud Solutions business centered on its proprietary ‘ZAC’ ERP for knowledge-based industries, and a Marketing Communication business offering digital strategy services.
• Sustained double-digit revenue and net income growth, coupled with a strong balance sheet, is balanced by intense competition in the IT services sector and recent performance headwinds in the marketing segment.

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• Revenue reached JPY656.8bn (+27.0% YoY), with IT Infrastructure Distribution segment revenue at JPY649.7bn (+27.1% YoY).
• Operating profit was JPY22.4bn (+65.9% YoY), with IT Infrastructure Distribution segment profit at JPY21.8bn (+65.9% YoY).
• Industrial Machinery segment revenue increased 12.8% YoY to JPY7.1bn, with operating profit at JPY585mn (+68.1% YoY).

• Kohnan Shoji is a leading home improvement retailer in Japan, demonstrating resilient growth through strategic store network expansion, particularly its successful ‘KOHNAN PRO’ format catering to professional customers.
• The company’s focus on developing high-margin Private Brand (PB) products is a key pillar of its strategy to enhance profitability and differentiate itself in a competitive market.
• While facing challenges from a mature domestic market and intense competition, Kohnan’s active M&A strategy and consistent dividend growth present a compelling case for long-term value creation.

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• Cumulative Q3 FY12/25 revenue was JPY57.9bn (+2.5% YoY), with operating profit at JPY3.2bn (-13.6% YoY).
• Domestic Ferroalloys business saw a JPY400mn YoY decline in underlying recurring profit, reaching JPY500mn in cumulative Q3.
• Functional Materials business reported a JPY200mn YoY increase in underlying recurring profit, reaching JPY1.2bn in cumulative Q3.

• For 1H FY03/26, the company reported sales of JPY3.7bn (+30.2% YoY) and net income of JPY735mn.
• Business Production segment sales reached JPY2.9bn (+31.0% YoY), with operating profit of JPY310mn, showing smooth progress toward forecasts.
• Venture Capital segment sales were JPY795mn (+27.6% YoY), with operating profit of JPY459mn, including capital gains and valuation losses.