Managements lack in the sense of cost of capital and leave the cheap valuation | 淺沼組への株主提案に関する特集サイト
If our proposals are approved and Asanuma continues 100% payout ratio, the estimated share price is;
>JPY 10,000(*)
*Calculation based on dividend yield. Please find the detail of calculation in “our shareholder proposals”.

Managements lack in the sense of cost of capital and leave the cheap valuation

Asanuma’s PBR sometimes rose to around 1x but recently has been declining to less than 1x.
Based on the concept of equity spread (*), PBR below 1x means the return on equity (hereinafter referred to as “ROE”) falls below the cost of equity (hereinafter referred to as “CoE”) which equals to shareholders’ expectation for return.
* When ROE is lower than CoE, it leads to low PBR which is below 1x.

Asanuma’s PBR in 5 years

(Source:QUICK ASTRA MANAGER, as of end of March 2019)

From the viewpoint of Enterprise Value (hereinafter referred to as “EV”), Asanuma’s EV is negative. If the acquisition of Asanuma is taken place at the current share price, the acquirer will not need any payback period because the acquirer will already gain more profits than investment at the time of acquisition. Please note that Asanuma’s EV turned positive based on the latest data on 22 May 2019. However, EV is still lower than its market capitalisation.
This means that, as a result of not using its invested capital effectively, its Return on Invested Capital (hereinafter referred to as “ROIC”) falls below Weighted Average of Cost of Capital (hereinafter referred to as “WACC”)(**).
**based on the concept that the lower ROIC which falls below WACC, the lower EV which falls below invested capital.

EV/EBITDA Comparison

(Source:QUICK ASTRA MANAGER, as of end of March 2019)
(Note:Construction industry is the arithmetic average of 51 companies which NIKKEI NEEDS defines as general contractors)

One of the reasons for this poor valuation is that Asanuma lacks awareness of cost of capital.
Listed companies’ mission is to increase shareholders’ value. To achieve this, managements need to focus on making capital efficiency higher than CoE / WACC.
It is also important for Asanuma to disclose information regarding how it calculates, in what level, its CoE / WACC to increase shareholder’s value through effective dialogue with shareholders.

Present state Assessment To be

PBR remains <1x for a long time(ROE<CoE)

Extreme low EV/EBITDA (ROIC<WACC)

Capital efficiency continues to decline

Invested capital has not been used efficiently

Managements need to be aware of their low capital efficiency.
Managements need to dialogue with shareholders using CoE / WACC

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