HS Holdings trades at 0.37× book — its 49.77% Khan Bank stake alone is worth ¥56.7B against an HS market cap of ¥34.5B.
Improve HS is an ongoing campaign to restore capital discipline at TSE: 8699. At the company's June 2026 Annual General Meeting, we are filing a binding amendment to the Articles of Incorporation requiring HS to formulate and disclose a three-year medium-term management plan that internalises cost of capital, articulates capital allocation policy, and confirms the rationale for continued listing.
Each figure points to the underlying exhibit and the specific board decision that produced it.
At the June 2026 AGM, we are filing a single, focused proposal: a binding amendment to the Articles of Incorporation that requires HS Holdings to formulate a three-year medium-term management plan, disclose the assumptions and capital-allocation policies behind it, and reassess — annually — the rationale for continued listing.
- A three-year medium-term management plan formulated each fiscal year on a rolling basis
- Annual disclosure of achievement against the numerical targets for the final fiscal year
- Disclosure of ROE targets and the equity capital base used to compute them
- Disclosure of the cost of equity and the assumptions underlying that figure
- Disclosure of the three-year aggregate capital allocation policy
- Disclosure of segment-level ROE or ROIC — actuals against targets
- Disclosure of whether the company should remain listed, and the rationale for that judgement
These are the questions an external investor cannot answer using current HS Holdings disclosure — and that the proposed Articles amendment is designed to make answerable.
Capital twist
HS's market cap (¥34.5B) is materially below the market value of the Khan Bank stake it holds (¥56.7B). The structural gap has widened, not narrowed, in the past 12 months.
Equity valuation
A 0.37× P/B is the market's verdict that future returns from HS's retained capital will fall below the cost of equity — even though current ROE clears the company's stated 10% target.
Related-party governance
Cumulative related-party transactions of approximately ¥19B — across loans, preferred equity, and acquisitions — involving entities operated by directors and the controlling shareholder's fund manager.
Plan-anchored discipline
HS publishes no medium-term management plan. The cost of equity it recognises has not been disclosed. Without these inputs, capital-allocation discipline cannot be externally verified — by investors or by the board itself.
HS Holdings holds 49.77% of Khan Bank (a Mongolian listed bank). The market value of that stake alone exceeds the entire market capitalisation of HS Holdings. We call this gap the capital twist. Over the past 12 months, the twist has widened — not narrowed — even as Khan Bank itself has performed strongly.
Share price ¥1,145 against book value per share of ¥3,091. Khan Bank stake market value: ¥56.7B. HS market cap: ¥34.5B.
A year ago, HS's market cap fell short of the Khan Bank stake by ¥14.3B. Today, the gap is ¥22.2B — a 55% widening.
Khan Bank accounts for over 80% of HS's recurring profit, making the treatment of this stake central to HS's capital allocation. Khan Bank's ROE is consistently above HS's stated 10% medium-term target.
The implication is direct: HS's role is to allocate Khan Bank's earnings either into investments that exceed the cost of equity, or into shareholder returns. It has done neither at adequate scale.
High current ROE alone does not produce a P/B above 1×. What matters is whether retained capital is reinvested at returns that exceed the cost of equity. The market's current view: HS will not.
P/B is determined by the spread between realised ROE and the cost of equity, and by the expected return on reinvestment.
When ROE = cost of equity = 10%:
P/B = 1 + (10% − 10%) / 10% = 1.0×
Under the equity-spread framework, P/B exceeds 1× only when the firm reinvests retained earnings at a return materially above the cost of equity. The framework therefore captures the marginal reinvestment expectation — not just the current ROE.
For a 10% ROE company with a 10% cost of equity that reinvests at, say, 12%, the market will price the equity above book. The same company that reinvests below 10% will be priced below book — even though the realised ROE has not changed.
The market's pricing implies an expectation that future reinvestment returns will fall below cost of equity, dragging future ROE down.
HS's 27% treasury stock position compounds the issue: at the current depressed valuation, using treasury stock as M&A consideration would result in severe dilution. Prompt cancellation, alongside disciplined capital allocation, would address both the supply overhang and the reinvestment expectation embedded in the share price.
- Recognise an appropriate cost of equity / WACC and pursue investments that exceed it — or, failing that, returns to shareholders calibrated at DOE 10%.
- Cancel the 27% treasury stock and confirm that treasury stock will not be used as M&A consideration.
Even where transaction terms appear reasonable in isolation, a transaction whose existence lacks business necessity — i.e. one that the company would not enter into with an unrelated party — is treated by the Tokyo Stock Exchange as a provision of benefits to the related party. Management-originated transactions, in particular, attract heightened scrutiny.
Transactions with related parties and similar persons or entities are transactions with counterparties that have a special relationship with the corporate group of the applicant company. As such, there is a concern that the applicant company may be compelled to enter into transactions that are not inherently necessary, or that the terms of such transactions may be distorted. These are therefore transactions that require a particularly high degree of caution on the part of the applicant company.
(...) Even if the transaction terms are found to be reasonable when compared with transactions with third parties, if the transaction itself lacks rationality — that is, a business necessity — it will be regarded as a provision of benefits in this context.
(...) With respect to transactions involving management — such as matters obtained through sales activities conducted by management themselves, matters planned by management, or matters that are exceptionally subject to approval by management — internal checks and balances generally tend to be less effective, and there is also a concern that such transactions may lead to misconduct. Accordingly, the Exchange will confirm whether an appropriate framework has been established to ensure that such transactions are reviewed organisationally and that checking functions are properly exercised, and whether the transactions actually conducted were inappropriate.
Capital-allocation discipline requires every management decision to be assessable against the cost of capital. HS's pattern of opaque related-party transactions cannot be assessed externally — and may not be assessable internally either, given the role of management-side originators in the very transactions that require board independence to review.
Japan's Corporate Governance Code recognises the medium-term plan as a commitment to shareholders. HS Holdings has not published one. Until it does — and until the cost of capital it recognises is disclosed — there is no externally-verifiable basis on which the board's capital decisions can be assessed.
Recognizing that a mid-term business plan (chuuki keiei keikaku) is a commitment to shareholders, the board and the senior management should do their best to achieve the plan. Should the company fail to deliver on its mid-term business plan, the reasons underlying the failure of achievement as well as the company's actions should be fully analyzed, an appropriate explanation should be given to shareholders, and analytic findings should be reflected in a plan for the ensuing years.
Across seven KPIs, the largest investor-versus-company emphasis gaps are precisely those HS does not disclose.
The four largest emphasis gaps — cost of capital, ROIC, FCF, and total payout ratio — sit at the centre of the proposed Articles amendment's disclosure requirements. Beyond mere disclosure, the TSE has, since January 2024, been publishing the list of companies that have responded to its "management conscious of cost of capital and stock price" initiative. HS has not yet been listed.
- Formulate and disclose a medium-term plan with concrete measures for delivering capital efficiency above the cost of capital.
- For the Khan Bank stake, the Solid Bank stake (Russia), and the reuse business, disclose the framework under which each is positioned in the portfolio under cost-of-capital discipline, and the basis for any decision to retain or restructure.
- For each portfolio holding, disclose not only the risk-management view (cost of capital) but also concrete measures for return improvement (capital efficiency).
The directors of a joint-stock company exist to reward the shareholders who appoint them — through capital appreciation and dividends. We expect HS Holdings' directors to operate the company with shareholder value as their objective. If that is not achievable, taking the company private is a legitimate alternative — provided shareholders' interests are secured. If neither is possible, the appropriate course is for directors who can advance shareholder value to be invited, and for incumbents to step aside.
Since current management took office, the share price has been broadly flat — but TSR has substantially underperformed TOPIX Net Total Return.
Unless otherwise noted, share-price and market-capitalization data on this site are based on the April 28, 2026 closing price of ¥1,145 (¥34.5B), and all financial data are as of December 2025.
We have engaged the company's representatives, board, and counsel multiple times since 2025.
Each ask below corresponds to a disclosure, capital-allocation, or governance gap documented above.
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Resolve the capital twist
Resolve the structural condition in which the HS market cap (¥34.5B) is below the market value of the Khan Bank stake it holds (¥56.7B). The proceeds of any restructuring should be deployed into investments that exceed the cost of equity, or returned to shareholders at DOE 10%.
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Cancel the 27% treasury stock and rule out treasury-stock-funded M&A
The 27% treasury position is a supply overhang. Should it be deployed as M&A consideration at the current depressed valuation, severe dilution would result. Prompt cancellation, alongside an explicit policy that treasury stock will not be used as M&A consideration, is appropriate.
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Consider an in-kind distribution of Khan Bank shares
An in-kind distribution of Khan Bank shares to HS shareholders is one mechanism by which the capital twist can be unwound while preserving the underlying economic exposure for the public float.
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Cease all opaque related-party transactions
Cease related-party transactions whose business necessity cannot be externally verified. Adopt a framework in which all related-party transactions are reviewed organisationally, and disclose the framework alongside each material transaction.
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Adopt a medium-term management plan and disclose cost of capital
Articulate, externally, the cost of equity and cost of capital that management recognises. Translate that into a three-year medium-term management plan with capital-allocation policy, segment-level ROE/ROIC, and an annual judgement on continued listing.
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If the board cannot — invite directors who can
If the board cannot pursue shareholder-value-oriented management or cannot pursue a fairly priced delisting, the appropriate course is to invite directors who can, and for incumbents to step aside.
We expect HS Holdings' directors to operate the company with shareholder value as their objective. If that is not achievable, taking the company private is a legitimate alternative — provided that the price fairly reflects HS's enterprise value, including the Khan Bank stake that today depresses its public-market valuation.
If neither shareholder-value-oriented management nor a fairly priced delisting is possible, then directors who can lead such a course should be invited, and the incumbent board should step aside.
The discount is structural. With the Khan Bank stake alone exceeding the HS market cap, the market is assigning little, if any, positive value to HS's assets and businesses other than the Khan Bank stake.