As shown in Annexe 1, the Price-to-Book Ratio (PBR), calculated by dividing the share price by book value per share (BVPS), stands at 0.35x, which indicates a significantly undervalued level.
Khan Bank, where HS holds 49.77% of voting rights, is a listed bank in the Mongolian market.
Meanwhile, HS’s market capitalisation (JPY 38.7 billion) is lower than the market value of its shareholding in Khan Bank (JPY 41.1 billion).
This situation, where the value of owned assets exceeds the company’s market capitalisation, is referred to as capital distortion.

As shown in Annexe 2, Khan Bank accounts for approximately 90% of HS’s operating profit.
Although HS has declared that its medium-term management target is to "stably maintain a consolidated ROE of over 10%", Khan Bank itself continues to maintain a high level of ROE that exceeds this target.
Therefore, it is expected that HS either reinvest profits derived from Khan Bank into businesses with even higher returns or distribute them to shareholders.

As shown in Annexe 3, one method of evaluating share prices based on the relationship between Return on Equity (ROE) and shareholders' cost of capital is the concept of the equity spread.
There are various forms of the equity spread concept; however, in Annexe 3, it is based on the assumption that “profits generated at a certain level of capital efficiency (hereinafter referred to as 'actual ROE') are reinvested into businesses achieving the same level of return.”

Therefore, if the profits are reinvested into businesses expected to achieve higher returns than the actual ROE, the Price-to-Book Ratio (PBR) will exceed 1.0x.

As shown in Annexe 4, HS Holdings Co., Ltd.’s ROE has been maintained at over 10%, which is the medium- to long-term management target, and is not considered a low level in general terms.
If we assume that HS’s shareholders' cost of capital is 10%, the PBR should normally be above 1.0x.
However, the stock market currently values HS at a PBR of 0.35x, significantly below 1.0x.

This suggests that the market expects HS to undertake investments in the future that yield returns lower than the actual ROE, leading to a decline in future ROE and, consequently, justifying a PBR below 1.0x.

Furthermore, HS holds treasury shares equivalent to 27% of its total issued shares.
Under such circumstances, if HS were to use these treasury shares as consideration for acquisitions while the share price remains undervalued, it would result in significant dilution and adversely affect the share price.
Therefore, it is desirable to promptly cancel the treasury shares.

As shown in Annexe 5, in the fiscal year ending March 2024, HS Holdings Co., Ltd. extended a loan of 2 billion yen to Sigma Investment Business Limited Partnership (hereinafter referred to as "Sigma"), managed by META Capital Co., Ltd. (hereinafter referred to as "META Capital").
The annual interest income earned from this loan was approximately 28 million yen, implying a yield of about 1.4%.
This yield is significantly below the cost of capital, raising serious concerns regarding the appropriateness of the transaction.

As shown in Annexe 6, in the fiscal year ending March 2023, HS Holdings Co., Ltd. made a preferred equity investment of 500 million yen into WAYO-EARTH Co., Ltd. (hereinafter referred to as "WAYO-EARTH"), where Mr. Junichi Hattori, a director of HS, serves as President.
However, WAYO-EARTH was already in a state of insolvency at the time, facing severe financial difficulties.
Moreover, Mr. Hattori is reported to have provided funding during the acquisition of HS’s predecessor company by META Capital (Upsilon Investment Business Limited Partnership).
On Mr. Hattori’s personal website, it is stated that “As of 2022, HS Holdings Co., Ltd. is a holding company primarily owned by Junichi Hattori, the Chairman of WAYO-EARTH Co., Ltd.”
(Although Upsilon Investment Business Limited Partnership is listed as the largest shareholder in the shareholder register.)
Given these circumstances, it is highly questionable that HS Holdings Co., Ltd. would make a substantial investment into a financially distressed company led by such an individual.

As shown in Annexe 7, in the fiscal year ending March 2023, HS Holdings Co., Ltd. acquired StayGold Co., Ltd. (hereinafter referred to as "StayGold") for a total of 13 billion yen from parties associated with META Capital.
However, immediately prior to the acquisition, StayGold’s net assets were approximately 1 billion yen, meaning the acquisition price was more than 13 times its net asset value.
Moreover, before the acquisition, HS had already extended a loan of 3 billion yen to StayGold.
Following the acquisition, StayGold’s business performance deteriorated, resulting in operating losses on a consolidated basis, raising serious concerns from a cost of capital perspective about the appropriateness of the transaction.

Further, Mr. Saisho acquired the remaining 51% of StayGold’s shares as an individual from a different company after HS Holdings Co., Ltd. had acquired 49%, and then sold the entire 51% stake to HS Holdings Co., Ltd. approximately one month later.
Given these circumstances, the transaction itself appears unnatural and raises significant concerns regarding its fairness.

As shown in Annexe 8, in April 2025, HS Holdings Co., Ltd. acquired Pricing Data Co., Ltd. (hereinafter referred to as "Pricing Data") for 3.5 billion yen from Phi Investment Business Limited Partnership, also managed by META Capital.
At that time, Pricing Data had net assets of approximately 400 million yen and was operating at a loss.
This acquisition took place just one month after the announcement of a business alliance between Pricing Data and StayGold on 10 March 2025.
The acquisition price was about nine times its net asset value, and the significant gap between the expected future profitability and the current performance further raises serious concerns from the perspective of capital cost about the appropriateness of this transaction.