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Tsutsumi trades at 0.65× book with
¥31B of cash idling on a ¥44B market cap.
Polishing Tsutsumi is an ongoing campaign to restore capital discipline at TSE: 7937. At the company's June 25, 2026 Annual General Meeting, we are filing two interlocking proposals: an Articles amendment requiring a medium-term plan, and the election of a non-independent outside director with activist credentials.
Each figure links to the underlying exhibit and the specific board decision that produced it.
Together, the two proposals address both the absence of measurable capital discipline and the absence of a board voice that can advance shareholder interests. Each is binding if approved by shareholders.
- Disclosure of ROIC targets and the calculation basis behind them
- Treatment of the disclosed cost of equity (3.6–5.6%) as the binding hurdle rate, with consistent application across capital allocation decisions
- Adoption of a DOE (dividend-on-equity) target
- Disclosure of the rationale for continued listing and the criteria for that judgement
- Activist investor at Nanahoshi Management
- Previously at Nippon Life Insurance and Strategic Capital
- Background spans equity research, fund management, activist investing, and start-up investment in Japan and Western markets
These are the questions an external investor cannot answer using current Tsutsumi disclosure — and that the proposed Articles amendment is designed to make answerable.
Capital structure
A 95% equity ratio is anomalous for a listed jeweller. ¥31B of cash exceeds half of the entire market capitalization.
Equity valuation
A 0.65× P/B is a market verdict that returns are not clearing the cost of equity. The price reflects the structure, not just the operating result.
Implied value of operations
Strip out non-operating assets and the operating business is implicitly valued at only ¥16.4B — 37% of enterprise value.
Plan-anchored discipline
Cost of equity has been disclosed (3.6–5.6%); with zero interest-bearing debt, this is effectively the company's WACC. What is missing is a medium-term plan that translates this hurdle into measurable ROIC, capital allocation, and segment commitments.
Each exhibit is sourced directly from Tsutsumi disclosure or from independently reproducible market data. Originals — and the Japanese-language commentary — remain available for inspection.
Against a ¥44.4B market cap, the company holds ¥31B in cash and almost no interest-bearing debt — and 95% of the right-hand side of the balance sheet is shareholders' equity.
Share price ¥2,840 against book value per share of ¥4,391 — a 35% discount to book.
The discount reflects two compounding factors: a balance sheet structure that depresses asset turnover, and the absence of a credible plan to raise the return on equity above its cost.
Strip out non-operating assets from enterprise value and the operating business is worth just 37% of EV.
For the operating business to deserve such a low implicit valuation, the market must believe either that future cash flows are very weak, or that retained capital will not be deployed at returns above cost — or both. The proposed Articles amendment forces management to address the second concern directly.
Even on the most recent data point (FY3/25), ROE of 2.9% sits below the disclosed cost of equity of 3.6–5.6%, and well below the broader Japanese institutional reference band.
The shaded band represents the 7–8% reference range that Japanese institutional investors typically apply to listed companies of Tsutsumi's size. Tsutsumi's ROE has not entered that band over the eleven years shown. Even against the company's own disclosed cost of equity (3.6–5.6%, June 2025) — which, given zero interest-bearing debt, is also Tsutsumi's effective WACC — the FY3/25 reading of 2.9% remains below the lower bound. The proposal is to translate this into an ROE-improvement plan, not to relitigate the disclosed hurdle rate.
A medium-term plan is not a forecasting exercise. It is, in the words of the TSE Code itself, a commitment to shareholders.
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 nine standard KPIs, the largest investor-versus-company emphasis gaps are precisely those that Tsutsumi does not disclose.
The four largest emphasis gaps — cost of capital, ROIC, FCF, and total payout ratio — sit at the centre of Proposal 1's disclosure requirements.
Companies that responded to the TSE's "cost of capital and stock-price-conscious management" call have outperformed; Tsutsumi has not.
Unless otherwise noted, share-price and market-capitalization data are based on the May 1, 2026 closing price of ¥2,840 (¥44.4B), and all financial data are as of December 2025.
For a listed jeweller sourcing from regions including Russia and Southern Africa, origin traceability and labour-practice transparency are not optional ESG disclosures. They are core to the cost of capital that Tsutsumi seeks to lower.
Why this matters
- Russian-origin diamonds face increasing import restrictions in major end-markets. Even where third-country processing is invoked, downstream buyers are demanding voluntary disclosure beyond Kimberley Process baselines.
- Sales of diamonds from sanctioned regions can be channelled into financing armed conflict — a risk recognised by financial regulators globally.
- Mining-region labour conditions — including child labour and below-living-wage employment — are not adequately captured by current industry-wide certification schemes alone.
- Environmental impact of extraction in source regions is a recurring concern for ESG-mandated funds.
What industry leaders disclose
- RJC (Responsible Jewellery Council) certification at Code-of-Practices and Chain-of-Custody levels.
- Annual third-party audits against the Kimberley Process Certification Scheme baseline.
- Origin-by-country breakdowns of polished and rough stones, with audit-supported chain-of-custody documentation.
- Site visits and supplier audits in producing regions, with publicly disclosed methodology and frequency.
Russia leads at 26% of value, with Southern African producers comprising the bulk of the remainder.
| № | Country | Net export share | |
|---|---|---|---|
| 1 | Russia | 26% | |
| 2 | United Arab Emirates | 18% | |
| 3 | Botswana | 16% | |
| 4 | Angola | 11% | |
| 5 | Canada | 11% | |
| 6 | Namibia | 7% | |
| 7 | South Africa | 4% | |
| 8 | Zimbabwe | 2% | |
| 9 | Lesotho | 2% | |
| 10 | Sierra Leone | 1% |
The Ministry of Economy, Trade and Industry has published indicators for businesses handling diamonds — a regulatory baseline.
In April 2024, METI published — and has since revised — guidance for businesses handling diamond imports.
As part of the gradual restrictions on imports of Russian-origin diamonds, the indicators ask domestic diamond importers to make a self-declaration to exclude imports of Russian-origin diamonds processed in third countries and to conduct due-diligence trading practices. The guidance presents practical steps that operators are expected to take. It is not legally binding, but is designed in anticipation of future regulation; operators are expected to give it due regard and adhere voluntarily.
Industry peers — domestic and global — articulate clear sourcing standards and audit frameworks. Tsutsumi's website states only that buyers visit suppliers monthly across 25 countries.
Peer 1
Did you know that 4°C is RJC-certified? Many global jewellery companies including Cartier and Tiffany are RJC-certified worldwide, but only three Japanese firms had achieved this as of July 2019. (Note: as of April 28, 2026, ten Japanese firms — of which two have extended certification to sourcing and distribution levels.)
Going forward, alongside conflict-free diamonds and clean sourcing free of child labour and respectful of human rights, the company is committed to selling diamonds with verified origins of provenance and to addressing environmental issues. (...) Beyond product quality, by maintaining high ethical, environmental, and social standards, 4°C pledges to deliver jewellery that customers can wear with peace of mind for years to come.
Peer 2
A maison of the LVMH group, Chaumet adheres to the Responsible Jewellery Council (RJC) Code of Practices and to LVMH-wide due-diligence requirements, with periodic third-party audits across the value chain.
Chaumet's responsible-sourcing framework covers traceability of diamonds and coloured gemstones, conflict-free certification under the Kimberley Process, and human-rights and environmental due diligence on suppliers — disclosed in LVMH's annual Social and Environmental Responsibility reporting.
Where founder-family shareholders own a controlling block, the outside director function is the principal mechanism by which minority shareholders are represented in board deliberations. The TSE Corporate Governance Code is explicit on this.
Outside directors must reflect the views of stakeholders other than the controlling shareholder — particularly minority shareholders — into board decisions.
Companies should make effective use of independent directors, taking into consideration the expectations listed below with respect to their roles and responsibilities:
- i. Provision of advice on business policies and business improvement based on their knowledge and experience with the aim to promote sustainable corporate growth and increase corporate value over the mid- to long-term;
- ii. Monitoring of the management through important decision-making at the board including the appointment and dismissal of the senior management;
- iii. Monitoring of conflicts of interest between the company and the management or controlling shareholders; and
- iv. Appropriately representing the views of minority shareholders and other stakeholders in the boardroom from a standpoint independent of the management and controlling shareholders.
At Tsutsumi, where the founding family is the dominant shareholder, the independent outside director is the structural counterweight protecting the interests of the public float. Yet the current outside director has held the role for over ten years and is set to step down in 2025. The valuation in Exhibit 2 is the market's verdict on whether minority interests have been adequately represented.
Proposal 2 — the election of Satoru Matsuhashi, CFA, CESGA — is not a routine board refresh. It is the addition of a director with explicit capital-markets and shareholder perspective, capable of constructively challenging board decisions on cost-of-capital, capital allocation, and conflicts of interest. By design, the proposed nominee does not satisfy the TSE's full independence definition; this is intentional. Activist board representation, openly disclosed, is more useful to minority shareholders than independence achieved at the cost of meaningful engagement.
We have engaged the company's board, its representative directors, and outside directors on multiple occasions since January 2025.
Each ask below maps directly to one of the disclosure or governance gaps documented above. None of them require us to be elected — they require only that the board adopt them.
-
Cease the current cash-hoarding capital policy and deploy excess capital
Excess cash held in size beyond rational working-capital and strategic-reserve requirements should be deployed into investments that exceed the cost of capital, or returned to shareholders.
-
Properly understand expected returns and pursue the capital efficiency required of a listed company
Internalize cost of equity and cost of capital into management decision-making. Articulate, externally, how each business and each capital deployment is expected to clear these hurdles.
-
Adopt a medium-term management plan to achieve capital efficiency above cost of capital
Disclose ROIC, WACC, DOE, and the rationale for continued listing — embedded in the Articles of Incorporation so that future boards remain bound to the discipline.
-
Disclose specific measures aimed at lifting ROE materially above the disclosed cost of equity
Disclosure of cost of equity in mid-2025 (3.6%–5.6%) was a welcome step. The next is a credible plan that translates that disclosure into ROE outcomes.
-
Reduce business risk through climate, labour, and origin-traceability transparency in diamond sourcing
Move from narrative ("we visit suppliers in 25 countries") to audited frameworks: origin-by-country disclosure, labour-condition standards, environmental indicators, and third-party verification.
-
Appoint outside directors who can act on shareholder value
Where founder-family shareholders are dominant, board independence and capital-markets perspective are the structural protections for minority shareholders. Proposal 2 addresses this directly.
We expect Tsutsumi's directors to operate the company with shareholder value as their objective. If that is not achievable, taking the company private is a legitimate alternative — but only at a price that fairly reflects the company's enterprise value, including the non-operating assets that today depress 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 cost-of-capital discipline says: assets exist to generate returns above what their providers — shareholders and creditors — expect. Tsutsumi's balance sheet, in which cash exceeds half of market value, cannot be reconciled with that discipline.