Our Shareholder Proposals for Kyokuto Boeki
Strategic Capital and our fund are shareholders of KYOKUTO BOEKI KAISHA, LTD. (hereinafter referred to as “Kyokuto”).
We have executed our shareholders’ right to make proposals at the AGM held in the coming June as followings.
- Disclosure of WACC and its basis of calculation for more effective dialogues. ……… Proposal.1(#4 on the convocation notice)
- Dissolution of shares it holds without rational purposes. ……… Proposal.2(#5 on the convocation notice)
- Increase of dividend to achieve 100% payout ratio. ……… Proposal.3(#6 on the convocation notice
The challenges and our solutions are followings.
- Cheap valuation left by the management
Kyokuto’s ROIC / ROE is far lower than its WACC / cost of equity capital respectively. This resulted in its extreme low valuation. The managements should be more aware of the gap between capital efficiencies and funding costs. Through the effective dialogue with shareholders, Kyokuto can increase its shareholders’ value. Therefore, we would like Kyokuto to improve its valuation by disclosing WACC and its basis of calculation.
- Managements ignoring its shareholders’ value allowing Kyokuto to hold other listed companies’ share without rational purposes
A listed company is required to disclose its cross-shareholdings and the purpose behind them. Nevertheless, there is doubt that Kyokuto categorises its majority of listed shares as held for pure investment in order to avoid the disclosure above. Also from the viewpoint of shareholders’ value, we cannot accept an investee company holding any other companies’ shares. We would like Kyokuto to dispose the shares it holds and utilize the proceeds as dividend to increase shareholders’ value.
- Accumulated equity capital due to its low payout ratio
Kyokuto does not disclose its dividend policy. However, its payout ratio has been <30% and if this trend continues, equity capital will be accumulated more and it leads to decline of ROE. To prevent this, we would like Kyokuto to achieve 100% payout ratio.
Please find the details of our proposals here
About shareholder proposal