Following the Tokyo Stock Exchange (TSE) new rule on disclosure of improvement plan on capital management for those stocks listed on Prime Market with PBR trading below 1, some companies started to roll out their plan to improve current PBR. Overall, the market seems highly positive on the management move.

One of the most obvious case is DNP (Dai Nippon Printing) , the stock price rose 40% in a month after the company declared their plan to improve PBR to 1.0 during latest meeting. Before the announcement, DNP stock was actually trading at average 0.5x PBR.

If we are just reading on the company name, we could be confused whether the company is mainly a printing or media publishing company. In fact, DNP has a diversified business portfolio, which is included printing and processing, BPO, packaging, electronics, and beverages. In the segment of electronic, DNP also involve in the manufacturing battery pouches, which has been using in the EV industry despite it is still a small contribution to the group.

DNP is a typical traditional Japanese company, such as more than 100 years of history, cash piles on the balance sheet, low growth, holding a large financial assets, and with an aging board of directors. According to the company report, the average age of the director members is currently around 68, which is also reflecting the situation of aging society in Japan.

However, the market is highly positive on the company’s midterm plan to improve its ROE to 10% and PBR to 1.0x. In their midterm plan, the highest record of shares buyback program was highlighted. Despite the final shares buyback amount is still unclear at this time, market reacted positively on its stock price. Based on the latest quarterly financial report, DNP has a net cash of JPY 121 billion and a JPY 359 billion of investment securities on consolidation basis. The company is highly capable to conduct more aggressive shares buyback program.

In my point of view, despite most of the Asian managers like to keep the cash on the book to feel safe, I would say distribute out the unused cash is a way of recycle the wealth to our society. Else, if it is just cannot find any new project in near term, invest in the human capital can also be an option. Keeping the unused cash on the book is not an option. Not just for the Japanese companies but also applied to Malaysia companies.

DNP’s subsidiary in Malaysia, known as DNP Imagingcomm Asia Sdn. Bhd. in Johor.