Regarding this year’s Formal Shareholder Proposal
List of Strategic Capital’s 2020 formal shareholder proposal. Press release here.
Proposal 1. Disclosure of WACC and its basis of calculation for more effective dialogue.
Proposal 2. Sale of cross-shareholdings and shares held for investment purposes
Proposal 3. Increase of dividend to achieve 100% payout ratio
⇒Proposal 3 was withdrawn. Please find the detail here.
Stock price assuming proposal for 100% dividend payout in favor
Accounting for the extraordinary impact of damages from a typhoon and the COVID-19 pandemic to the 2020 earnings by using the 3-year average of 154 yen and a 5% yield, the stock price would be 3,080 yen.
Based on a price of 1,449 yen (price as of May 25, 2020), 3,080 yen would equal a gain of 113%.
Our view on cost of equity
Assumptions: g= 3.0%, ROE = 5.4%, PBR = 0.40(*)
Result: 9.0%
*ROE is calculated by dividing the forecasted net income as of the beginning of FY19 due to no company guidance which includes no impact of the typhoon and COVID-19 by equity capital of Mar 2020. PBR is as of May 25 2020.
Comment: Cost of Equity calculated based on the average share price YTD as of May 25 is 8.4%
（Source：Extraordinary report）
TOPIC：Sparse Board Minutes
In March 2020, Strategic Capital inspected the minutes of Kyokuto’s Board of Directors meeting. The purpose was to see how the Company was responding to the situation where more than 30% of the votes were in favor for our shareholder proposals in 2019 and what was being considered to improve shareholder value.
However, while we were able to confirm the board examined whether to continue its cross-shareholding or not, the board only referred to the convocation notice, etc. and no substantial discussion was recorded regarding other issues than cross-shareholding. For example, there was no discussions recorded regarding the large number of shares held by the Company as pure investment purposes.
We have been consistent informing about the importance of improving shareholder value through capital efficiency. We hope Kyokuto management will take our proposals seriously and achieve improvement of shareholders value.
The ratio of favour votes to our proposals
Below chart shows the ratio of favour votes to our proposals in 2020 and 2019. Please find the details
here
regarding 2020 and
here
regarding 2019.
The brief minutes of the AGMs in 2020 and 2019 are
here
and
here
, respectively (Links are in Japanese only).
