Dialogues between Asanuma and Strategic Capital
We have done numerous activities to increase the Asanuma’s shareholders’ value. Please find followings regarding dialogues at AGMs.
AGM in June 2018
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Regarding the equity financing in 2017
Though Asanuma held 32 bil cash in December 2016, the company carried out a share issue at market price in March 2017 to increase its capital by ca. 2.4 bil increasing 10% of its total number of issued shares. We doubt such an equity financing by which only 2.4 bil was increased while leading to 10 % of dilution was meaningless.
Asanuma holds ca. 40 bil cash equivalent after deduction of debt on its balance sheet. Is it necessary to hold such amount of cash equivalent?
In terms of the equity financing, we posted 12 bil loss for FY 2011 and FY 2012 in total. We aimed to improve our financial basis as much as possible.
It is true that there is 39.9 bil cash on our balance sheet in FY 2017 and Asanuma is cash-rich now. In practice, there is a seasonality in the construction industry to affect on cash position and our cash get smaller during December to January. We held only 29 bil cash as of the end of December 2017.
We also admit Asanuma holds much deposit, too. But, in the new Medium-Term Plan, we plan to invest 20 bil funded by current cash equivalent and earnings after deduction of dividend during coming 3 years. We aim to gain profit and increase shareholders’ return through this investment as we planned.
What I asked the meaning of the equity financing, I was talking about last year, not FY 2011 and FY2012. My point is why Asanuma needed to carry out a 2.4 bil share issue, even though Asanuma held more than 30 bil cash.
Please be conscious that Asanuma’s financial basis is already splendidly solid. The lowest capital-to-asset ratio was 8% but now the ratio became 36% on a non-consolidated basis. As Asanuma is a listed company, you should consider how to improve the capital efficiency.
Regarding cross shareholdings Asanuma holds
Asanuma held ca. 8.5 bil cross shareholdings as of the end of March 2017. Also, Asanuma held ca. 9.2 bil securities as of the end of March 2018 and almost all of them are cross shareholdings. Japan’s Corporate Governance Code was revised and the code requires to disclose the policy regarding the reduction of cross shareholdings.
Please tell us Asanuma’s policy regarding the reduction of cross shareholdings.
We judge whether the benefits from holding shares such as profits of construction projects, dividends and etc. exceed its cost of capital. Such judgement is made in the board meeting in every April.
Almost all of our cross shareholdings are pledged as collateral and held by a bank, and we are negotiating the return of them.
Regarding an optional nomination and remuneration committee
Asanuma established an optional nomination and remuneration committee in March. The establishment was great as Asanuma took the revision of the corporate governance code in advance.
The revised Code recommends to establish an optional nomination committee because it is effective for corporate governance to enable the committee to dismiss CEO in a certain condition. And it is also important for corporate governance to eliminate the influence of ex. CEO by prohibiting ex. CEO from appointing new CEO.
We expect Asanuma to set a procedure for dismissal of CEO in advance in case the committee considers CEO does not perform his duty. Also, more than half of the members of the committee should be independent outside directors. We would request Asanuma to increase independent outside directors because there are only 2 of such directors now.
（Note）Asanuma reported there are 2 inside directors and 2 independent outside directors as the member of the committee in the Corporeate Governance Report submitted on 9th November 2018.
Regarding shareholders’ return
In the Medium-Term Plan, the payout ratio target is 30%. This is not enough. Asanuma should execute share buyback reaching up to the increment of the equity financing last year or even more.
Regarding Asanuma’s share price
Asanuma holds ca. 40 bil cash equivalent. The market capitalisation should be equal to the business value plus net-cash.
However, the current market capitalisation is equal to the cash Asanuma holds and its business value is not considered as valuable. The intrinsic share price should be double of the current price. Board members, please think about how such share price can be achieved.
One of the solutions to double the share price is to set 100% payout ratio. Applying 5% dividend yield, the estimated share price is ca. JPY 7,500 (*).
It is not impossible if Asanuma changes its mind and recognise there’s no need to accumulate cash any more.
Please consider and take any measures how to increase the share price including 100% payout ratio. Please don’t leave the current share price. Let me have your thoughts on the current share price?
*Adjusted according to the effect of the stock consolidation in October 2018. Please note that JPY 7,500 was approximate figure.
It is a company’s mission to increase the shareholders’ value in mid-to-long term. There are many options to increase shareholders’ value. At this stage, we expect to increase the value by gaining profits through 20 bil investment in accordance with Medium-Term Plan funded by cash we hold now and earnings during coming 3 years.
It is shameful that our PBR is less than 1x. We would like to increase the shareholders’ value as much as possible by this measure I mentioned now.
Our voting at the AGM in 2018
At the 2018 AGM we voted against the election of an outside auditor whose period in office was already 8 years at the time of AGM because, according to our voting policy, we judge an outside auditor whose period in office is longer than 8 years is not secured his “independency”. Many institutional investors other than us also voted against and the favour votes were only 69.3%.