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Delivering Sustainable EPS Growth and PER Expansion
Through Disciplined Capital Allocation and Integrity
MSV as the sole basis for judgment: the beginning of our MSV Journey
Maximization of Shareholder Value (MSV) is not a slogan: it is our sole mission and the standard against which every decision is made. Whether in capital allocation, finance strategy, operations, or governance, we evaluate all actions through one lens: do they contribute to MSV? This discipline underpins our management approach.
Our commitment to MSV leaves no room for personal ego or ambition of management. Growth for its own sake, or pursuit of transactions that merely appear attractive, holds no value unless it strengthens MSV. Ultimately, the quality of management is defined not by high-profile decisions, but by the consistent ability to act rationally with clarity and discipline.
What sustains this rationality is Integrity, as I define it. Integrity is not merely a matter of ethics. It is the discipline to face inconvenient facts without turning a blind eye, to observe reality with clarity, and to think through—honestly—what is most rational in light of MSV. In management, the greater risk lies not in uncertainty itself, but in flawed judgment shaped by complacency and preconceived views. For this reason, we place the highest priority on surfacing negative information early, addressing issues without concealment, and engaging in candid discussion. A corporate culture grounded in such Integrity is what enables MSV to serve as our sole basis for decision-making. Indeed, one of our core strengths lies in leaders who embody this principle, coming together to engage in open and substantive dialogue, consistently placing substance above form.
Our MSV Journey is guided by this same philosophy. We respect the capabilities of each partner company—the strength of its management and the resilience of its business foundation. By unlocking their full potential, we drive organic growth and reinvest the cash generated into the next avenue for expansion. This disciplined cycle of growth enables us to steadily compound EPS, deepen the confidence of the capital markets, and ultimately realize MSV. It is the responsibility of management to ensure that each step in this journey is deliberate, consistent, and firmly grounded.
Addressing market concerns directly and elevating expectations for our MSV Journey
We define MSV as the combination of two elements: sustainable EPS compounding and the expansion of PER. While EPS is generated through our own execution, PER is not something we determine on our own. It is formed by the capital markets’ assessment of the quality and consistency of our growth, and by their expectations for what lies ahead. In essence, PER reflects the market’s confidence in our MSV Journey.
For this reason, the essence of PER expansion does not lie in additional explanation alone. It lies in consistently delivering on what we have communicated and demonstrating that commitment through a clear and credible track record. Trust from the capital markets is not secured through a single message; it is built through the steady accumulation of results. Ultimately, it is the ability to translate our medium- to long-term commitments into consistent day-to-day performance that leads to a sustained improvement in PER.
Against this backdrop, we regard our current share price and valuation as a candid reflection of the capital markets’ perspective. Management’s responsibility is not to dismiss this assessment, but to understand with precision the concerns and perception gaps that shape it, and to respond with clarity and decisive action.
I recognize three primary factors underlying investor caution regarding our future prospects. The first is the residual perception of our past reliance on the China business. While our portfolio is becoming increasingly diversified—supported by the acquisition of AOC and growth across Asia beyond China—and our earnings profile is steadily evolving, alongside our continued profitability growth in China under difficult market conditions, full market recognition of this shift requires continued clarity in communication and consistent delivery of results. The second is concern over the organic growth of our partner companies. The question is whether businesses that have joined our Group, including AOC, can sustain autonomous growth even in a challenging environment. Internally, our conviction is strong. For the market, however, confidence will be established only through the steady accumulation of results over time. The third is broader skepticism toward M&A. By its nature, M&A entails risk, and an approach centered simply on the number or scale of transactions can invite doubt from the capital markets. Our approach is different. We pursue disciplined, rational M&A grounded in sound risk-taking, and we remain committed to building a consistent and credible track record.
We do not seek reassurance from the capital markets through words alone. The most reliable way to strengthen investor conviction is through the consistent delivery of results, accompanied by clear accountability. It is this combination that elevates expectations for our MSV Journey and, in turn, supports a sustained improvement in PER.
The core of our Asset Assembler model
The essence of our Asset Assembler model lies not in the simple accumulation of high-quality assets. Rather, it is a capital allocation framework that enables strong partner companies to further create value autonomously, while systematically redeploying the cash they generate into the next opportunity for growth. We generate cash by driving organic growth within our existing businesses and redeploy that cash into disciplined M&A, thereby enabling sustainable EPS compounding. In large, headquarters-led asset assembly transactions, we place primary emphasis on the intrinsic quality of the business at the time of acquisition and its ability to create value on a standalone basis. While we pursue synergies post-acquisition, they are not treated as a basis for justifying elevated valuations. In contrast, for partner company-led bolt-on acquisitions, management teams closest to the market assess the strategic rationale themselves and take direct responsibility for capturing synergies and realizing growth opportunities.
Most importantly, we evaluate M&A not by the completion of a transaction, but by its contribution to MSV. The number of deals, their scale, or their headline appeal is not the measure of success. Our criteria are clear: first-year EPS accretion, strong cash generation, disciplined valuation, sound leverage, and returns that exceed the cost of capital. If a transaction does not meet these standards, we decline it without hesitation. It is this discipline that underpins our Asset Assembler model.
One advantage of our inorganic strategy lies in our ability to access relatively low-cost funding in Japanese yen. What matters, however, is not the financing itself, but how effectively it is combined with disciplined investment decisions and deployed in ways that contribute to MSV. In the current environment of rising interest rates and a higher cost of capital, we place even greater emphasis on capital efficiency, cash conversion, and financial soundness. In managing leverage, we focus on maintaining the appropriate balance between preserving flexibility for the next growth opportunity and safeguarding financial strength. Sustaining debt capacity for future growth, while maintaining a capital structure that reinforces the confidence of the capital markets, is essential to realizing MSV over the long term.
Autonomous, decentralized management and a lean headquarters
The source of our Group’s competitiveness lies in the strength of the management teams leading each region and business. The CEOs and leadership teams of our partner companies possess the deepest understanding of their local markets and operate closest to their customers. It is therefore neither practical nor rational for the headquarters to intervene unnecessarily in day-to-day operations. By consistently upholding an autonomous, decentralized management model, we entrust significant authority to local management.
That said, decentralization does not imply an absence of oversight. Authority must be matched by accountability, and in this regard, our role as the holding company is essential. Through structured frameworks for the nomination, evaluation, and compensation of each partner company’s CEO, we ensure that incentives are appropriately aligned and accountability remains clear.
A lean headquarters does not operate the business in place of local management. Its role is to support the realization of MSV across the Group through disciplined capital allocation, robust governance, and effective risk management. A defining feature of our governance is the spirit with which we engage our partner companies—asking, “What can we do for you?”. By reinforcing their inherent strengths, we ensure that these strengths translate into the consistent realization of MSV.
Results across organic and inorganic growth, and the evolution of acquisition discipline
Since the release of our Medium-Term Strategy in 2024, we have delivered steady progress despite a challenging market environment. On the organic side, we have focused on improving profitability and expanding market share across regions and businesses, including in China. On the inorganic side, partner companies that have joined our Group continue to generate cash and contribute to EPS in line with our expectations. What matters is not to treat these as isolated outcomes, but to demonstrate that our Asset Assembler model can deliver such results consistently and on a replicable basis.
For example, we are seeing a growing number of cases in which partner companies unlock their full potential by leveraging the Group’s capital strength and expertise. This is not simply a reflection of PMI outcomes; it is clear evidence of the effectiveness of our platform itself. The same applies to operational improvement initiatives, including the use of AI. Our strength lies in ensuring that such efforts do not remain isolated optimizations, but are shared as best practices across the Group and deployed horizontally. We also expect each partner company to learn proactively from AOC’s highly effective business systems, thereby contributing to value creation across the Group.
In addition, we continue to refine our acquisition criteria in response to changes in the market environment. As interest rates and the cost of capital rise, we have shifted more decisively toward transactions that place greater emphasis on capital efficiency. We have also become more selective in the opportunities we pursue and will make no compromise where risk and return are not appropriately aligned. This disciplined approach to acquisitions will further strengthen the certainty of our MSV Journey in the years ahead.
An unending pursuit of shareholder value through the advancement of our MSV Journey
As we advance the MSV Journey, our role as a holding company is not to create value directly, but to unlock the full potential of each partner company and support its value creation. Across the Group, we are supported by outstanding management teams, powerful brands, abundant growth opportunities, and a distinctive platform that connects them. By aligning these elements under the common language of MSV, and by consistently upholding disciplined capital allocation and management grounded in Integrity, we will continue to pursue the creation of shareholder value without limit.
We will demonstrate through our track record—rather than words—that the MSV Journey is as compelling to investors as it is to us. By deepening our dialogue with investors, we will pursue MSV through both sustained EPS compounding and continued improvement in PER. I look forward to your continued support as we move forward.
