NEW YORK and TOKYO, June 06, 2019 (GLOBE NEWSWIRE) — Moab Capital Partners, LLC (“Moab”), a significant shareholder of Kyushu Railway Company (TYO: 9142) (“JR Kyushu” or the “Company”), with ownership of approximately 1% of JR Kyushu’s outstanding shares, announces its support of the shareholder proposals at the upcoming AGM.
Moab intends to vote FOR the shareholder proposals (“Agenda Items 7-12”). Moab strongly supports the proposed share buyback and the addition of three truly independent and exceptionally qualified independent directors.
The Company released its medium-term plan on March 19, 2019, which provided limited detail on 210 billion Yen of proposed capital investments over the next three years. Return on invested capital should be disclosed for investments representing 41% of the Company’s total market capitalization. Further, we believe the contemplated investments should be more evenly balanced with a return of the Company’s excess capital to shareholders. With numerous communications from Moab and other shareholders to this effect, we are disillusioned that our feedback was largely ignored by JR Kyushu’s management and board. It is evident that we are not alone in our disappointment—since the medium-term plan announcement on March 19, JR Kyushu’s total return of negative 15.8% compares unfavorably vs. the JR peers’ average decline of only 3.3%.
Moab is a long-term shareholder of JR Kyushu—our position was established in January 2017. Our substantial investment in JR Kyushu reflects 1) the company’s extraordinary portfolio of assets, particularly its spectacular real estate portfolio, 2) the strong economic and fundamental tailwinds that the company’s businesses are positioned to benefit from, 3) the company’s exceptionally compelling valuation, and 4) the company’s pristine balance sheet, which provides the flexibility to both execute on medium-term plan growth investments while simultaneously capitalizing on the aforementioned discounted valuation and improving the company’s cost of capital and return on equity.
We believe a host of issues are preventing JR Kyushu from reaching its full potential: 1) unbalanced capital allocation priorities, 2) significant uncertainty surrounding underwriting criteria for acquisitions and growth capital expenditures, 3) a capital structure that is inappropriate for an asset heavy business that generates significant and stable cash flows, 4) corporate governance issues ranging from lack of management economic alignment to a shortage of truly independent and exceptionally qualified board members, and 5) inadequate and confusing financial disclosures.
Moab has maintained an active dialogue with the company since establishing our investment, but the company has failed to address our serious concerns with any urgency, which is why we are now going public with our support for change at JR Kyushu and FOR the shareholder proposals (“Agenda Items 7-12”).
About Moab Capital Partners, LLC
Moab is an SEC-registered independent investment advisor founded in 2006 and is located in New York, NY.
Moab Capital Partners, LLC