Palliser targets Japanese rail company Keisei
17/10/2023 21:35
By Svea Herbst-Bayliss
NEW YORK, Oct 17 (Reuters) -
Palliser Capital, which owns a 1.6% stake in Japanese rail
operator Keisei Electric Railway, on Tuesday said the company is
trading at a large discount and has room to release value.
The company, which runs one of the main lines from Narita
airport into the center of Tokyo, currently trades at a "huge
43% discount to intrinsic value," the firm's founder and chief
investment officer James Smith said at the 13D Monitor Active
Passive Investment Summit.
There is a "unique opportunity to release $4.5 billion in
latent value and catalyze future growth," he said.
He will meet with the company's top management next month
and has already held some 12 meetings over the last two years.
Keisei earlier declined to comment.
Palliser's efforts come at a time foreign investors are
taking new stakes in Japan and pushing companies to improve
governance and boost value for shareholders.
Smith said the root cause of Keisei's value gap is its
disproportionate stake in its leisure and tourism subsidiary
Oriental Land Co, the operator of Tokyo Disneyland, which is
worth over $8 billion, accounting for 80% of Keisei's intrinsic
value.
But Smith, who spent years working for Elliott Investment
Management and spent time in Asia, said one of the most
important points of investments in Japan is to be patient and
polite.
Many activist investors hope for speedier improvements but
Smith cautioned that expectations for investments in Japan must
be adjusted.
He said three steps would go a long way to unleashing value.
He suggested right-sizing the OLC business to below 15% and
resolving the OLC accounting distortion. Also he said the
company needs to fix its weak corporate governance.
(Reporting by Svea Herbst-Bayliss; Editing by Josie Kao)
((svea.herbst@thomsonreuters.com; +617 233 2138; Reuters
Messaging: svea.herbst.thomsonreuters.com@reuters.net))