Continuous accumulation of equity capital and lowering of ROE | 世紀東急への株主提案に関する特集サイト
If our proposals are approved and Seikitokyu continues 100% payout ratio, the estimated share price is;
>JPY 1,800(*)
*Calculation based on dividend yield. Please find the detail of calculation in “our shareholder proposals”.

Continuous accumulation of equity capital and lowering of ROE

Seikitokyu’s equity capital has more than doubled for 6 years from FY2013 to FY2018. Moreover, Seikitokyu developed its medium-term management plan that intends to accumulate equity capital up to 37,500 mil in FY2020. Such accumulation of equity capital results in lowering of ROE. In the management plan above, Seikitokyu sets a target to achieve 11.7% of ROE in FY2020. However, as shown below, ROE of Seikitokyu used to be more than 20% in the past and it continues to decline. Seikitokyu has benefited from its tax loss carry forward and the positive effect continues until the end of FY2020. We indicate adjusted ROE based on net profit after tax calculated by estimated effective tax rate of 30% (hereinafter referred to as “adjusted ROE”). In FY2017 and FY2018, Seikitokyu reported extraordinary loss due to the loss provision for antitrust violation, a price cartel of asphalt mixture, and ROE declined significantly.

Change of Seikitokyu’s equity capital, ROE and adj. ROE


The current capital-to-asset ratio reached 45% which is the highest for 30 years. This even overwhelms 32% in FY1991, which was the highest in 90’s, so called bubble economy period. Business condition of Seikitokyu worsened before FY2012, however, the financial basis has been back in normal since FY2013.

Seikitokyu’s capital-to-asset ratio in 30 years


One of the reasons for accumulated equity capital is low shareholders return. Seikitokyu takes a policy for the shareholders return in which the target of total return ratio is 30%. This policy aims to accumulate the majority of profits as equity capital and to increase the capital-to-asset ratio even more than the record high rate now.


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