Our shareholders proposals

Please find followings. The details are in the link below.

No.1 Disclosure of WACC and its basis of calculation for more effective dialogues.
No.2 Increase of dividend to achieve 100% payout ratio.
No.3 Establishment of Independent Investigation Committee to reduce cost of capital

Link

The ratio of favour votes to our proposals

The ratio of favour votes for “Establishment of Independent Investigation Committee in the event of scandals” was lower than other two proposals. We guess this is because Seikitokyu announced to establish an investigation committee. However, remaining two proposals gained ca. one third of ratio. The management should sincerely consider this result and analyze why the large portion of shareholders supported our proposal. We truly expect the management change their hostile attitude toward shareholders and make use of this result in making management policy. We feel Seikitokyu decided to reject our proposals from the beginning just because they are shareholder proposals.

Estimation of how much the share price will be if our proposal is passed and 100 % payout ratio continues.

＜Assumption: at 5% of dividend yield and stabilized DPS(*) is JPY 92＞
Our proposal aims to distribute the same as EPS (100% payout ratio).
Assuming that dividend yield is 5%, share price under such assumption would be JPY 1,840, which means +201% of rate of increase compared to the price on 22nd May 2019 (JPY 612).

*Based on the assumption that the same level of profitability as FY2019 continues, the number is calculated by excluding benefits from its tax loss carry forward.
As EPS in FY2018 is JPY 86, the total DPS will be JPY 86, sum of proposal by Seikitokyu (JPY 27) and our proposal (JPY 59).

Our calculation on Seikitokyu’s cost of equity capital

Assumption：g=3％、ROE11.8％（*）、PBR=0.78x
Result： 14.2%
*Ordinary profit (forecasted by Seikitokyu) after the deduction of 30% effective tax rate divided by Equity capital in FY2018).

Supplemental explanation on our proposal regarding dividend

Our proposal does not plan to distribute so much dividend that Seikitokyu is forced to pursue short-term profits, because the maximum DPS equals to EPS as following charts.

As described above, our proposal is to prevent Seikitokyu from accumulating further equity capital and lowering ROE. Therefore, we propose 100% payout ratio.

A part of our original shareholders proposal

The amount obtained by deducting the amount of dividend payment from surplus per common share of the Company which will be proposed by the Board of Directors of the Company at the 70th Annual General Meeting of Shareholders and approved thereat, from JPY74.
In case Earnings Per Share rounded down to the nearest integer in 70th fiscal period (hereinafter referred to as “actual EPS”) is different form JPY74, JPY74 in the previous paragraph shall be replaced with actual EPS.