Japan Specialist

Mark Chadwick

Over 20 years experience in equities and asset management in Asia and Japan. Qualified CFA with experience analyzing companies as a buy-side analyst. In-depth knowledge of company fundamental analysis, corporate governance and valuations.

Ricoh Buyback Redux - It's On, It's Big. Crossholders Vs Activist Vs Public. Who Sells?

Ricoh (Reductively) - Reduced Bullishness So Take Off the Trade

Equity Bottom-Up

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<p><span xml:lang="EN-US" data-contrast="auto">Last week, <a href="https://www.smartkarma.com/entities/ricoh-company-ltd" target="_blank" data-smartkarma-citation="entities:15359:1" rel="noopener">Ricoh Company Ltd (7752 JP)</a>  announced a new business strategy. It is worth a <a href="https://www.ricoh.com/-/Media/Ricoh/Sites/com/IR/data/pre/pdf/ir_pre2020.pdf" target="_blank" rel="noopener">read</a>. </span></p>
<p><span xml:lang="EN-US" data-contrast="auto">Ricoh will be moving away from its core office equipment business to focus on digital services. The market </span><span xml:lang="EN-US" data-contrast="auto">liked</span><span xml:lang="EN-US" data-contrast="auto"> this, or more likely, investors were cheering the ¥100b capital return. Regarding the buyback, Travis Lundy has written a must-read:</span><span data-ccp-props='{"201341983":0,"335559739":200,"335559740":276}'> <a href="https://www.smartkarma.com/insights/ricoh-buyback-redux-it-s-on-it-s-big-crossholders-vs-activist-vs-public-who-sells" target="_blank" data-smartkarma-citation="insights:48787" rel="noopener">Ricoh Buyback Redux - It's On, It's Big. Crossholders Vs Activist Vs Public. Who Sells?</a> </span></p>
</div><div><p><span xml:lang="EN-US" data-contrast="auto">The new strategy makes perfect sense. Prime Minister Suga is waging a war against the old ways of doing business, which have been stunting Japan’s growth potential. Ricoh, one of the chief paper pushers, simply had to change. <a href="https://www.smartkarma.com/entities/konica-minolta-inc" target="_blank" data-smartkarma-citation="entities:17287:1" rel="noopener">Konica Minolta (4902 JP)</a>  also announced a similar strategic shift. </span><span data-ccp-props='{"201341983":0,"335559739":200,"335559740":276}'> </span></p></div><div>
<p><span xml:lang="EN-US" data-contrast="auto">CEO Yamashita had enjoyed some success with a cost-cutting strategy since coming to power in 2017. Unfortunately, COVID put an end any further margin improvement. </span><span data-ccp-props='{"201341983":0,"335551550":1,"335551620":1,"335559739":200,"335559740":276}'> </span></p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/194/216/original/smartkarma_download.png?1615686431" class="editor-image img-responsive" data-smartkarma-image-id="194216"></figure></section><p><span xml:lang="EN-US" data-contrast="auto">The share buyback </span><span xml:lang="EN-US" data-contrast="auto">provides</span><span xml:lang="EN-US" data-contrast="auto"> management with time to execute the shift to digital services. That is good news for investors. It will be a difficult transition as Ricoh’s competitive landscape becomes increasingly fierce. Rather than competing against a handful of sleepy Japanese </span><span xml:lang="EN-US" data-contrast="auto">copier</span><span xml:lang="EN-US" data-contrast="auto"> makers, they are now entering a global arena, battling with some of the biggest names in global tech. </span><span data-ccp-props='{"201341983":0,"335551550":1,"335551620":1,"335559739":200,"335559740":276}'> </span></p>
</div><div><p><span xml:lang="EN-US" data-contrast="auto"><strong>Does the Board have the requisite skills to navigate this brave new world?</strong> In our Board evaluation, where we rate and rank all companies in the Topix 500 on the quality of their board structure, Ricoh ranks just below average. It is ok, but Japanese boards are on average, much lower quality than global peers. </span></p></div>


Last week, Ricoh Company Ltd (7752 JP)  announced a new business strategy. It is worth a read. 
Ricoh will be moving away from its core office equipment business to focus on digital services. The market liked this, or more likely, investors were cheering the ¥100b capital return. Regarding the buyback, Travis Lundy has written a must-read: Ricoh Buyback Redux - It's On, It's Big. Crossholders Vs Activist Vs Public. Who Sells? 
The new strategy makes perfect sense. Prime Minister Suga is waging a war against the old ways of doing business, which have been stunting Japan’s growth potential. Ricoh, one of the chief paper pushers, simply had to change. Konica Minolta (4902 JP)  also announced a similar strategic shift.  
CEO Yamashita had enjoyed some success with a cost-cutting strategy since coming to power in 2017. Unfortunately, COVID put an end any further margin improvement.  
The share buyback provides management with time to execute the shift to digital services. That is good news for investors. It will be a difficult transition as Ricoh’s competitive landscape becomes increasingly fierce. Rather than competing against a handful of sleepy Japanese copier makers, they are now entering a global arena, battling with some of the biggest names in global tech.  
Does the Board have the requisite skills to navigate this brave new world? In our Board evaluation, where we rate and rank all companies in the Topix 500 on the quality of their board structure, Ricoh ranks just below average. It is ok, but Japanese boards are on average, much lower quality than global peers. 

Japan Corporate Governance - Ricoh - Lacking Board Skills?