Our proposals in recent dialogues
The reasons for low valuation of Kyokuto are low financial leverage, accumulating equity capital, high capital-to-asset ratio and etc.
Kyokuto’s capital-to-asset ratio is higher than the average of the same sector. Kyokuto belongs to wholesale trade sector and other companies in that sector utilize higher leverage in their business. Kyokuto needs to increase its low financial leverage.
Comparison of capital-to-asset ratio with sector average
（Source：：QUICK ASTRA MANAGER、Tokyo Stock Exchange）
In our dialogues with Kyokuto, we proposed to increase financial leverage and enhance shareholders’ return. Specifically, Kyokuto can borrow debt to increase its financial leverage. Also, share buybacks or drastic increase in dividend to shareholders will lead to decrease in its excessive equity and improvement of its valuation.
This is the final year of the current 3 years medium-term management plan and investors anticipate a new 3 years plan. We have explained what is the desirable content of a new medium-term management plan for investors.
Specifically, our proposal contains >10% ROE, 100% total return ratio and etc.