By Makiko Yamazaki and Ritsuko Shimizu
TOKYO, May 1 (Reuters) - A group of investors led by
prominent activist shareholder Yoshiaki Murakami said a push by
the Tokyo bourse for better capital efficiency will strengthen
their crusade to reduce Japan's unusually high number of
chronically undervalued stocks.
Japan is almost unique among major economies in the number
of companies whose shares are worth less than their assets -
almost half of those listed on the TOPIX500 index of big
companies, compared with about 3% for the S&P 500 in the U.S.
To address the matter, the Tokyo Stock Exchange made a rare
call a month ago for firms to disclose plans to improve capital
efficiency, especially if their shares are trading below book
value, triggering a wave of share buy-backs and dividend hikes.
The move is a testament that firms can no longer brush aside
stock underperformance and must end the decades-long practice of
asset-hoarding, said Hironao Fukushima, representative director
of City Index Eleventh, who works closely with Murakami.
"It gives us a tailwind," Fukushima told Reuters in an
interview, referring to value investors' goal of boosting a
company's price-to-book ratio (PBR) or return on equity.
"Previously, management at listed companies didn't have any
incentives to increase PBRs," he said.
Fukushima works alongside former bureaucrat Murakami who
rose to prominence two decades ago pushing for higher
shareholder returns - something unheard of domestically at the
time - until he was convicted of insider trading in 2007.
He returned to the public eye about a decade later,
resurfacing as an investor working with others including
Fukushima and daughter Aya Murakami as an informal group.
The group, which has led a number of high-profile campaigns,
holds stakes in roughly 50 companies, including about 10 where
their ownership exceeds 5%, although the number is constantly
changing, Aya Murakami said in the same interview.
"The PBR is a big factor in our selection of target
companies," she said. "We've been trying to engage with
management so that their shares would come out of a value trap."
Many target companies have accused the group as simply being
focused on short-term profit at the expense of long-term growth.
For instance, Cosmo Energy Holdings Co Ltd - 20%
owned by group members - has questioned whether the group's push
since late last year for a share buy-back program was only for
the sake of quick profit. Aya Murakami denied that was the case.
"We plan to hold onto our investment because we believe
Cosmo shares are worth about book value," she said.
(Reporting by Makiko Yamazaki and Ritsuko Shimizu; Additional
reporting by Yuka Obayashi; Editing by Christopher Cushing)
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