Legal disclaimer

This website, and the information contained herein, (collectively referred to as “the Website”) is being provided for the shareholders of SK Kaken (4628) for information purposes only.  Asset Value Investors Limited (“AVI”) is the investment manager of two of the shareholders of SK Kaken, namely AVI Global Trust (“AGT”) and AVI Japan Opportunity Trust (“AJOT”).

AVI is authorised and regulated by the UK Financial Conduct Authority (“FCA”) and is also registered as an Investment Advisor with the United States Securities and Exchange Commission (the “SEC”) under the United States Investment Advisors Act of 1940.

The Website is directed only at Professional Clients or Eligible Counterparties as defined by the UK FCA.

The Website was created solely for the purpose mentioned above and is provided for information purposes only.  AVI is by no means soliciting or requesting other shareholders of SK Kaken to jointly exercise their shareholders’ rights with AVI (including, but not limited to, voting rights).

The Website exclusively represents the opinions, interpretations and estimates of AVI in relation to SK Kaken’s business and governance structure.  AVI is expressing such opinions, interpretations and estimates solely in its capacity as an investment manager of AGT and AJOT.

The information contained herein is derived from proprietary and non-proprietary sources deemed by AVI to be reliable.  While AVI believes that reasonable efforts have been made to ensure the accuracy of the information contained in the Website, AVI makes no representation or warranty, expressed or implied, as to the accuracy, completeness or reliability of such information.

免責条項

本ウェブサイトならびにここに含まれるすべての情報(以下、総称して「本ウェブサイト」といいます)は、エスケー化研株式会社(証券コード4628。以下、「エスケー化研」)の株主のために情報を提供するという唯一の目的で開設しております。アセットバリューインベスターズ(以下、「AVI」)は、エスケー化研の株主であるAVIグローバル・オポチュニティー・トラスト(「AGT」)ならびにAVIジャパン・オポチュニティ・トラスト(「AJOT」)の資産運用管理者です。

AVIは英国の金融行為監督機構(「FCA」)の認可および規制を受けており、また米国1940年投資顧問法に基づき投資顧問として米国証券取引委員会(「SEC」)に登録しております。

本ウェブサイトは、英国FCAが定めるプロ顧客ならびに適格取引先のみを対象としています。

本ウェブサイトは、上記の目的のためだけに開設されたものであり、情報の提供のみを目的として掲載しております。AVIは、エスケー化研の他の株主の皆さまに対してAVIと共同で株主権(議決権を含みますがそれに限りません)を行使していただきたいと依頼、または要請しているわけではありません。

本ウェブサイトは、エスケー化研の事業およびガバナンス体制に関するAVIの見解、解釈、評価を掲載したものであり、AVIはあくまでAGTおよびAJOTの資産運用管理者としてのみの立場からこれらの見解、解釈、評価を述べております。

本ウェブサイトに掲載される情報は、AVIが信頼できると判断した専有又は非専有の情報源から得たものです。AVIは本ウェブサイトに掲載する情報の正確性を確保するために合理的な注意を払っておりますが、その正確性、完全性および 信頼性について明示・黙示にかかわらず一切の表明・保証をするものではありません。

Painting a better SK Kaken

Painting a better SK Kaken

SK Kaken limited the length of the reasonings for shareholder proposals to 400 characters so a shortened version was resubmitted to the AGM. We have uploaded the full reasonings to this website to allow shareholders to make a more informed decision.

Dear Fellow shareholders, investors and other market participants,

Asset Value Investors (“AVI”) announced today that it has submitted shareholder proposals to SK Kaken Co., Ltd. (TYO 4628) to address, at no cost to the Company, some of the factors contributing to the company’s poor share performance and low valuation.

Since it became a shareholder in 2017, AVI has offered numerous constructive suggestions to SK Kaken on concrete actions that it can take to improve its underlying operating and financial performance. The SK Kaken board, controlled by the Fuji family, have shown little interest in any of these suggestions.

Over the last 12 months SK Kaken’s share price has underperformed against the TOPIX Index and its peer group of paint and coatings companies by -31% and -33%, respectively. SK Kaken now trades on an EV/EBIT ratio of less than 1x, a price-to-book ratio of 0.9x with net cash covering 93% of its market cap.

There are multiple causes for SK Kaken’s underperformance and undervaluation. Chief among these are poor operating results reflected in low profit growth, inefficient capital allocation, lack of board diversity and independence, woeful shareholder communication, excess treasury shares and a prohibitively high minimum trading lot size. In comparison to more aggressive and dynamic competitors in the industry, SK Kaken is falling behind.

These issues reflect a lack of urgency and weak management discipline, a symptom of a company with a controlling shareholder. Approximately 40% of SK Kaken’s shares are owned by, and key senior executive positions are held by, members of the founding Fujii family.

With this as background, AVI has submitted shareholder proposals to call to the attention of fellow shareholders the company’s stubborn resistance to even the most reasonable proposals.

AVI’s proposals are modest and should be uncontroversial. They address two technical causes for SK Kaken’s low stock price that can be resolved at no cost.

The first is a 10-for-1 stock split to reduce the prohibitively high minimum trading lot from approximately ¥4,000,000 (the sixth highest trading value among TSE-listed companies) to ¥400,000.  This will create greater liquidity and open the company to investment by retail investors who are now effectively excluded.

The second is to cancel 90% of its treasury shares. 14% of outstanding shares are held in treasury, shares that have no business purpose such as possible future M&A or to fund an executive incentive stock plan – SK Kaken has no M&A plans or a stock-based compensation scheme – and serve only to depress the stock price.

These modest and costless proposals to enhance liquidity and SK Kaken’s stock price have been rejected outright by management as have all other proposals offered to date by AVI. AVI are not the only shareholder disappointed with the Company’s treatment of minority shareholders, with only 76% of shareholders supporting the re-election of SK Kaken’s Chairman in 2020, compared to 93% in 2016.

AVI calls on its fellow shareholders to continue to register disapproval of management policies under the influence of a controlling shareholder, who has neglected the interests of minority shareholders for too long, by voting in favour of AVI’s proposals.

We have launched this website to provide information regarding SK Kaken’s neglect of shareholders and welcome dialogue with any stakeholder who would like to discuss our shareholder proposals further.

Yours sincerely,

20th May 2021
Joe Bauernfreund
CEO & CIO

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