Audio Archives
Client Letters
OID Features Online
OID.com Exclusive
Features
Indexes:
Investors
Funds et al.
Companies &
Investments
Contact Us
About Your
User Name
& Password
Free Reprint
Online Excerpts
Investors in
Our Latest Edition
Companies &
Investments in
Our Latest Edition
About OID
Subscribe
Online Advertising
Online Classifieds
Employment
Opportunities
Portfolio Reports
Home Page
CUNDILL INVESTMENT CONFERENCE
PETER CUNDILL, SETH KLARMAN ET AL.
(continued from preceding page)
And using GAAP, the P/Es are lower than they appear....
Cundill: Tokyo Style's return on equity of only 2.6% is characteristic of almost all the Japanese companies. They have very low rates of return on shareholders' equity - partly because they take lots of depreciation. But even if you were to adjust depreciation to American levels, that would still probably only raise their return on equity from 2% or thereabouts to 3-1/2% or 4%. So it would still be very low.
Tokyo Style's P/E is up near 34. But if you adjust the accounting to U.S. GAAP, the P/Es aren't very high. Many Japanese companies sell at 8-9 times cash flow and, again, generate lots of free cash.
And current dividend yields generally aren't so high, but they're a lot higher than a whole lot of U.S. companies.
IS MUCH NEARER THAN MOST REALIZE.
Not even a word for corporate governance - at least yet....
Cundill: When we look at the ownership of Tokyo Style, we see that their major shareholders include Sanwa Bank with 4.6%, Sumitomo Trust with 4.5% and Tokai Bank with 4.5%. That's pretty standard stuff.... But one of the interesting things about Tokyo Style is that although foreign shareholders own 24.1%± of its shares, it won't meet with them.
And now you start to get into the huge cultural divide [between the practice in Japan and that in the U.S.]. There's been a lot of talk about corporate governance.... In fact, some guys - including a number of senior Japanese officials - have had to leave their jobs somewhat involuntarily ... for paying people not to go to shareholders' meetings and ask embarrassing questions.
One of the things they do to prevent shareholders from asking questions is that almost all Japanese annual meetings are held on the same day to make sure that these harassers are spread a little thin. And there's not even a Japanese word as yet for corporate governance....
But these companies are more vulnerable than they know.
Cundill: On the other hand, there is a provision in the Japanese commercial code enabling shareholders of 3% or more of outstanding shares for six months or longer to call an extraordinary general meeting whenever they want. So foreign shareholders owning 24% of a company's shares could get together, call a meeting and vote in someone new as chairman.... And so foreign shareholders de facto, if not de jure, control some Japanese companies already.
Morgan Stanley's Alex Kinmont wrote a piece - and there have been a number of other pieces - talking about how Japanese companies don't yet realize how vulnerable they are to all sorts of corporate pressures.
Page 9 of 12
|
(Return to Table of Contents) |
(continue to the next page) |
©Copyright 1996-2008 Outstanding Investor Digest, Inc. All rights reserved.
295 Greenwich St., Box 282, New York, NY 10007 (212) 925-3885