In today’s briefing:
- Shift: Is It a Good Time to Buy?
- Patience Is Often Needed for Small- And Mid-Cap Company Engagements
Shift: Is It a Good Time to Buy?
- Shift Inc (3697 JP) s share price has been down 65% YTD as the company’s aggressive investment on HR and system reinforcement led to fall in margins which concerned the market.
- However, the company has adopted several measures to improve its margins, and we expect the investment in HR and others to generate results going forward.
- Though share price has moved up slightly, valuation multiples are at a steep discount, and we would look for building a position.
Patience Is Often Needed for Small- And Mid-Cap Company Engagements
- The speed of management reform in Japanese companies is usually slower than investors and shareholders expect. In case of small- to mid-cap stocks, the speed is much slower.
- In small-to-mid-cap stocks, foreign ownerships are often lower than the average for listed companies, and older companies are often protected by cross-shareholdings. Therefore, engagement should be prepared for sluggish response.
- The way to resolve this situation is for the company to break the silent shareholder structure or increase shareholders who can exercise their voting rights based on rational decisions.
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