Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

On 21 January 2019, my favorite manufacturer of garbage trucks, vertical carousel parking infrastructure, sea planes, and jetways - <a href="https://www.smartkarma.com/entities/18738" target="_blank" data-smartkarma-citation="entities:18738:1">Shinmaywa Industries (7224 JP)</a> - announced a share buyback. This was not unusual. The company bought back shares last year and indicated earlier this year it would seek a relatively high return of capital to shareholders.  In the last five months of 2018, the company bought back 3.6% of shares outstanding, and cancelled those shares at the end of December 2018). Indeed, the company on January 9th this year announced a revised dividend forecast for the year ending March 2019. The dividend was lifted by 1 yen. The company also announced a new policy of shareholder returns for the year starting April 1. <blockquote>While taking into consideration strategic business investment for the future and the internal reserves required for maintaining and expanding the Company’s management foundation, we are aware that appropriate return of profit to shareholders is an important management issue. In that regard, in our Medium-term Management Plan for the three years to the end of the fiscal year ending March 31, 2021, “Change for Growing, 2020,” (the “Medium-term Management Plan”), which was announced in May 2018, we set up a basic payout ratio on a consolidated basis of 40-50% and carrying out flexible acquisition of treasury shares with a focus on improvement of capital efficiency as basic shareholder return policies.</blockquote>The company acknowledged the above and announced it would seek to add a commemorative (70th anniversary of incorporation and 100th anniversary of being in business) special dividend of ¥45/share, on top of the normal interim dividend (which is likely to be ¥18-19/share) paid to shareholders as of the end of September 2019.That was nice, but that was little preparation for the news of 21 January.<ul>
<li>On that day, the company announced yet another increase in dividend forecast for the current fiscal year, raising the H2 dividend - which had just been raised from ¥18/share to ¥19/share less than two weeks ago - to ¥27/share.</li>
<li>The company also announced a Tender Offer to buy back 26.666mm its own shares at a roughly 10.5% premium to last trade.  </li>
</ul>That's a big tender offer. It is ¥40bn and 29.0% of shares outstanding. Regular readers of Smartkarma will know that I will have comments on situations like these.

On 21 January 2019, my favorite manufacturer of garbage trucks, vertical carousel parking infrastructure, sea planes, and jetways - Shinmaywa Industries (7224 JP) - announced a share buyback. This was not unusual. The company bought back shares last year and indicated earlier this year it would seek a relatively high return of capital to shareholders.  In the last five months of 2018, the company bought back 3.6% of shares outstanding, and cancelled those shares at the end of December 2018). Indeed, the company on January 9th this year announced a revised dividend forecast for the year ending March 2019. The dividend was lifted by 1 yen. The company also announced a new policy of shareholder returns for the year starting April 1. While taking into consideration strategic business investment for the future and the internal reserves required for maintaining and expanding the Company’s management foundation, we are aware that appropriate return of profit to shareholders is an important management issue. In that regard, in our Medium-term Management Plan for the three years to the end of the fiscal year ending March 31, 2021, “Change for Growing, 2020,” (the “Medium-term Management Plan”), which was announced in May 2018, we set up a basic payout ratio on a consolidated basis of 40-50% and carrying out flexible acquisition of treasury shares with a focus on improvement of capital efficiency as basic shareholder return policies.The company acknowledged the above and announced it would seek to add a commemorative (70th anniversary of incorporation and 100th anniversary of being in business) special dividend of ¥45/share, on top of the normal interim dividend (which is likely to be ¥18-19/share) paid to shareholders as of the end of September 2019.That was nice, but that was little preparation for the news of 21 January.
On that day, the company announced yet another increase in dividend forecast for the current fiscal year, raising the H2 dividend - which had just been raised from ¥18/share to ¥19/share less than two weeks ago - to ¥27/share.
The company also announced a Tender Offer to buy back 26.666mm its own shares at a roughly 10.5% premium to last trade.  
That's a big tender offer. It is ¥40bn and 29.0% of shares outstanding. Regular readers of Smartkarma will know that I will have comments on situations like these. 

Shinmaywa Own Share Tender Offer at Premium

Director, Pearl Hill Advisors

Nicholas Tanner

Director

Pearl Hill Advisors

Equity Bottom-Up

This makes special duty vehicles (44% of sales), aircraft parts (20%), industrial machinery (15%) and parking systems (15%). To 3/02 operating profit was Y2bn. Since then it has steadily recovered to Y15.3bn to 3/16 but is now starting to slip. Last year it fell to Y13.1bn and this year Y11bn is forecast.We believe at best operating profits will be flat next year. The issue is falling profitability in the aircraft business at a time when demand for specialty vehicles, strong for a few years now…

This makes special duty vehicles (44% of sales), aircraft parts (20%), industrial machinery (15%) and parking systems (15%). To 3/02 operating profit was Y2bn. Since then it has steadily recovered to Y15.3bn to 3/16 but is now starting to slip. Last year it fell to Y13.1bn and this year Y11bn is forecast.We believe at best operating profits will be flat next year. The issue is falling profitability in the aircraft business at a time when demand for specialty vehicles, strong for a few years now…

Shinmaywa (7224) Very Cheap but Profits Drifting

Japan

ShinMaywa Industries, Ltd. manufactures special duty vehicles such as dump trucks and cranes.  The Company also produces aircraft parts, industrial machinery, sky-parking systems, and environmental systems such as underwater kitchen refuse decomposers.

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Shinmaywa Own Share Tender Offer at Premium

On 21 January 2019, my favorite manufacturer of garbage trucks, vertical carousel parking infrastructure, sea planes, and jetways - Shinmaywa...

Travis Lundy

Shinmaywa (7224) Very Cheap but Profits Drifting

This makes special duty vehicles (44% of sales), aircraft parts (20%), industrial machinery (15%) and parking systems (15%). To 3/02 operating...

Pearl Hill Advisors