Sapphireterra Capital Calls for Enhanced Shareholder Returns and Strategic Review at Sanyo Shokai

CHICAGO, IL, UNITED STATES, July 23, 2025 /EINPresswire.com/ -- Sapphireterra Capital (“Sapphireterra”) is an investment firm based in Chicago, U.S.A, specializing in engagement investing in Japanese equities. Sapphireterra has continuously invested in Sanyo Shokai Ltd. (“Sanyo,” TSE Code: 8011) since 2017 through predecessor funds it took over from Curi RMB. Despite various developments, including the change in management in October 2019, shareholder proposals and a leadership transition in April 2020, and uncertainty during the COVID-19 pandemic, Sapphireterra has consistently supported Sanyo. As our stake in Sanyo has now exceeded 5% of the total shares outstanding, we are disclosing our opinions which we have delivered to the management of Sanyo.

Our Assessment of Sanyo Shokai
• Sanyo’s stock price does not fully reflect its intrinsic business value. With a PBR of approximately 0.8x, the share price falls below its theoretical liquidation value of 1.0x.
• Sapphireterra estimates the intrinsic value of Sanyo stock to be over ¥4,400 per share (about 65% upside from current levels), equating to a PBR of around 1.4x.
• Excess cash reserves, which have accumulated through the sale of real estate and investment securities while reducing inventories, are depressing Sanyo’s capital efficiency and valuation.
• While Sanyo has streamlined operations by reducing inventory in the past, recent initiatives such as new store openings and brand launches have inflated inventory levels again, raising investor concern.

Our Capital Allocation Proposal
Sapphireterra believes that improving capital efficiency through reducing excess capital and disciplined inventory management is key to enhancing the company’s value. Consequently, Sapphireterra proposes that Sanyo should:
• Announce and promptly execute a ¥4 billion share buyback.
• Commit to buyback an additional ¥12 billion over the next three years (¥4 billion annually).
As of May 2025, Sanyo holds approximately ¥21 billion in cash and deposits and ¥6.8 billion in investment securities. While the company is expected to generate ¥3 billion annually in free cash flow, Sapphireterra believes that annual buybacks of ¥4 billion are appropriate to normalize the capital structure.

Our Strategic Proposal
Further, we urge management to reflect on the company’s long-term strategic positioning. We observe that Sanyo’s relatively modest scale makes aggressive ventures into new businesses or brands risky, as evidenced by recent excess inventory issues. As such, we propose the management of Sanyo consider the following strategic options.
• If Sanyo stays independent, it should focus on existing brands, boost profitability, and deliver aggressive shareholder rewards to maximize capital efficiency and corporate value.
• If Sanyo pursues an expansionary strategy, it should consider becoming a wholly owned subsidiary of Mitsui & Co., Ltd. (TSE Code: 8031) and grow existing and new brands, and potentially acquire domestic and international businesses and brands under the larger company.

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Website: https://sapphireterra.com

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