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Business Wire
03-06-2025
- Business
- Business Wire
Ascender Capital Calls for Improved Capital Allocation Policy at Cresco Ltd (4674)
TOKYO--(BUSINESS WIRE)--Ascender Capital Limited ('Ascender Capital'), a Hong Kong-based investment firm focused on high-quality businesses across Asia, is a long-term investor in the Japanese software and system integration sector, where it has allocated over half of its assets in recent years. The firm actively follows more than 100 publicly listed companies in the space and has met with management teams at over 50 of them since 2015. Ascender Capital calls for improved capital allocation policy at Cresco Ltd Share Ascender Capital has a strong track record of constructive engagement with companies to enhance long-term corporate value. In line with the objectives of the Japan Stewardship Code and global best practices, we have been engaging with Cresco Ltd. ('Cresco' or 'the Company') management and Board since November 2023, urging improvements in capital allocation and corporate governance. Ascender Capital is a long-term shareholder of Cresco, currently holding approximately 2.2% of the shares. Strong Operations Undermined by Poor Capital Allocation Since 2015, Cresco's operating margin has increased from 8.0% to 10.2%, driving annual growth in operating income of 12%. Cumulative operating cash flow of ¥28 billion has largely accumulated on the balance sheet. FY3/2025 was another strong year: revenue rose by 11%, operating income increased by 17%, and FY3/2026 guidance targets a further 17% gain in operating profit. We commend management for these strong results, reflecting stable client relationships and operational excellence. However, shareholders have seen limited benefit. The ¥26 billion in cash flow generated over the last decade remains idle. Excluding excess capital (defined as anything beyond three months of SG&A), we estimate the Company's ROE could reach 50% — more than triple the current 15%. The announced increase in the dividend payout from 40% to 50% and the 2.5% share buyback disclosed on 9 May 2025 are welcome, but only partially address the issue. Valuation Disconnect Despite these strong fundamentals, Cresco trades at only 14x P/E — a 26% discount to the System Integrators (SI) sector average of 19x. On an ex-cash/LTI basis, the P/E drops to below 9x. This discount is not a reflection of business quality. It stems from ineffective capital allocation, overcapitalization, and a governance structure in need of reform. Shareholder Proposals Ahead of the upcoming June 2025 AGM, Ascender Capital has submitted the following proposals in the interest of all shareholders: Transfer authority to set dividends to the General Meeting of Shareholders — consistent with best practices across 90% of listed companies in Japan Increase dividends: a. Declare a special dividend of ¥46 per share to normalize the cash balance relative to operational needs b. Distribute a year-end dividend of ¥54 per share for FY3/2025 — resulting in a 75% payout ratio, a sustainable level for Cresco's asset-light model Expand share buybacks to 8.8 million shares (21% of shares outstanding), and immediately cancel all treasury shares Even after implementing these measures, Cresco would still hold over ¥6 billion in cash — well above operational requirements. Moreover, annual operating cash flows exceeding ¥5 billion will continue to replenish reserves and support strategic initiatives. Supporting Analysis Overcapitalization of the Balance Sheet As of March 2025, Cresco's net cash and long-term investments amount to over 4 years' worth of SG&A — far in excess of what is needed to run the business efficiently. This level of capital is excessive for a company with a 15-year track record of uninterrupted positive cash flow, including through the 2008 Global Financial Crisis, the 2011 Tōhoku Earthquake, and the COVID-19 pandemic. Cresco has executed a highly successful M&A program over the last decade with just ¥3 billion. Future transactions of similar scale can be easily financed through operating cash flow or modest leverage. There is no financial justification for maintaining such an overcapitalized balance sheet. Risky Investment Management Cresco incurred derivative losses in FY3/2020 and FY3/2023 through active management of a ¥8 billion financial investment portfolio. This speculative activity is inappropriate for a system integrator and detracts from the Company's core focus in a rapidly consolidating IT services market. We call on the Company to immediately liquidate these investments and redeploy the capital toward shareholder returns. Improving Shareholder Engagement Cresco has no controlling shareholder and should therefore be fully accountable to its public investors. While management has been hospitable and courteous, engagement has lacked depth and substance. The Board's superficial rejection of our shareholder proposals — in its 9 May 2025 response — reflects either a fundamental misunderstanding of capital allocation or a disregard for fiduciary responsibility. Further Information More details are available in the News section of our website or through these direct links: - Shareholder proposals in English Shareholder Proposals – ENG - Shareholder proposals in Japanese Shareholder Proposals – JPN - Improvement Plan for Cresco – ENG This press release does not constitute an offer to purchase or sell shares in Cresco Ltd. About Ascender Capital Founded in December 2012, Ascender Capital is a Hong Kong-based value orientated investment firm concentrated on opportunities in Asia including Japan. The fund focuses on high-quality companies with a track record of profitability and earnings growth. DISCLAIMER Ascender Capital is the investment manager of private funds (the 'Ascender Capitals Funds') that own shares in Cresco. Ascender Capital has created this communication to enable fellow shareholders to carefully monitor how sincerely the board of directors and management of Cresco address our concerns, listen to shareholders' views and endeavor to increase the value of Cresco shares in the best interest of all shareholders. Ascender Capital is not and should not be regarded or deemed in any way whatsoever to be (i) soliciting or requesting other shareholders of Cresco to exercise their shareholders' rights (including, but not limited to, voting rights) jointly or together with Ascender Capital, (ii) making an offer, a solicitation of an offer, or any advice, invitation or inducement to enter into or conclude any transaction or (iii) any advice, invitation or inducement to take or refrain from taking any other course of action (whether on the terms shown therein or otherwise). Further, this communication and information to be found on its Website do not purport to recommend the purchase or sale of any security nor do they contain an offer to sell or a solicitation of an offer to buy any security. Nothing in this communication or on the Website is intended to be, nor should it be construed or used as, investment, tax or legal advice. This communication and the Website exclusively represent the opinions, interpretations, and estimates of Ascender Capital in relation to Cresco' business and governance structure. Ascender Capital is expressing such opinions solely in its capacity as an investment adviser of the Ascender Capital Funds.
Yahoo
18-05-2025
- Business
- Yahoo
Asian Dividend Stocks To Consider Now
Amid a backdrop of easing U.S.-China trade tensions and rising optimism in global markets, Asian stocks have shown resilience with notable gains in major indices. In such an environment, dividend stocks can offer investors a blend of potential income and stability, making them an attractive consideration for those seeking to navigate the current economic landscape. Name Dividend Yield Dividend Rating Wuliangye YibinLtd (SZSE:000858) 4.84% ★★★★★★ Daito Trust ConstructionLtd (TSE:1878) 4.24% ★★★★★★ Chudenko (TSE:1941) 3.98% ★★★★★★ GakkyushaLtd (TSE:9769) 4.08% ★★★★★★ Guangxi LiuYao Group (SHSE:603368) 3.49% ★★★★★★ Yamato Kogyo (TSE:5444) 4.69% ★★★★★★ Nihon Parkerizing (TSE:4095) 4.23% ★★★★★★ E J Holdings (TSE:2153) 4.98% ★★★★★★ HUAYU Automotive Systems (SHSE:600741) 4.32% ★★★★★★ Japan Excellent (TSE:8987) 4.43% ★★★★★★ Click here to see the full list of 1229 stocks from our Top Asian Dividend Stocks screener. We'll examine a selection from our screener results. Simply Wall St Dividend Rating: ★★★★☆☆ Overview: Cresco Ltd., along with its subsidiaries, provides IT services and digital solutions in Japan, with a market cap of ¥61.03 billion. Operations: Cresco Ltd. generates revenue through its IT services and digital solutions offerings in Japan. Dividend Yield: 3.9% Cresco's dividend history is mixed, with recent increases in payouts and a revised policy aiming to distribute 50% of profits. Despite past volatility, dividends are currently well-covered by earnings and cash flows. The company trades below its estimated fair value but has a volatile share price. Recent actions include a share buyback program aimed at enhancing capital efficiency and shareholder returns, reflecting Cresco's focus on balancing growth investments with stable dividends. Click to explore a detailed breakdown of our findings in Cresco's dividend report. Our valuation report here indicates Cresco may be undervalued. Simply Wall St Dividend Rating: ★★★★☆☆ Overview: Hirata Corporation manufactures and sells manufacturing line systems, industrial robots, and logistic equipment in Japan and internationally, with a market cap of ¥55.83 billion. Operations: Hirata Corporation generates revenue from its segments as follows: Automobile Related at ¥43.06 billion, Semiconductor Related at ¥30.19 billion, and Other Automatic Labor-Saving Devices at ¥13.10 billion. Dividend Yield: 3.6% Hirata's dividend history shows volatility, with recent increases followed by a forecasted decrease due to a 3-for-1 share split. Despite this, dividends remain well-covered by earnings and cash flows, supported by low payout ratios. The company's price-to-earnings ratio is favorable compared to the market average. However, the stock's high volatility may concern risk-averse investors. Recent guidance indicates stable financial performance with expected net sales of ¥96 billion and operating profit of ¥8.4 billion for FY2026. Take a closer look at Hirata's potential here in our dividend report. The analysis detailed in our Hirata valuation report hints at an inflated share price compared to its estimated value. Simply Wall St Dividend Rating: ★★★★☆☆ Overview: Yang Ming Marine Transport Corporation, along with its subsidiaries, offers shipping, repair, and chartering services across Taiwan, the Americas, Europe, Asia, and globally with a market cap of NT$293.34 billion. Operations: Yang Ming Marine Transport Corporation's revenue is primarily derived from Containers Transportation, which accounts for NT$216.60 billion, and Bulk Transportation, contributing NT$3.08 billion. Dividend Yield: 8.9% Yang Ming Marine Transport's dividend yield is among the top 25% in Taiwan, supported by a low payout ratio of 41.9%, ensuring dividends are well-covered by earnings and cash flows. However, its short three-year dividend history shows instability and declining payments. The stock's price-to-earnings ratio of 4.7x suggests good value compared to the market average of 19x. Recent Q1 results show decreased net income to TWD 7,776 million from TWD 9,379.5 million year-on-year. Delve into the full analysis dividend report here for a deeper understanding of Yang Ming Marine Transport. Insights from our recent valuation report point to the potential overvaluation of Yang Ming Marine Transport shares in the market. Click here to access our complete index of 1229 Top Asian Dividend Stocks. Already own these companies? Link your portfolio to Simply Wall St and get alerts on any new warning signs to your stocks. Simply Wall St is your key to unlocking global market trends, a free user-friendly app for forward-thinking investors. Explore high-performing small cap companies that haven't yet garnered significant analyst attention. Fuel your portfolio with companies showing strong growth potential, backed by optimistic outlooks both from analysts and management. Find companies with promising cash flow potential yet trading below their fair value. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include TSE:4674 TSE:6258 and TWSE:2609. This article was originally published by Simply Wall St. Have feedback on this article? Concerned about the content? with us directly. 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