A Better Way for JR Kyushu
Fir Tree Partners has been a shareholder in JR Kyushu since its initial public offering in 2016 and strongly believes in JR Kyushu’s long-term growth potential.
As adoptees of Japan’s Stewardship Code, we have maintained an ongoing dialogue with JR Kyushu over the past two and a half years and made numerous suggestions to management in order to adopt industry best practices common to Japan and enhance the long-term value of the Company. These non-operational suggestions have included: improving disclosure such as returns on real estate, adding outside industry experts, lowering the cost of capital, clarifying the target capital structure, adopting a stock compensation plan for management and hosting a foreign investor day in Kyushu.
As JR Kyushu embarks on its next 3-year Medium Term Business Plan its return on equity (ROE) and operating profit targets are set to decline significantly despite ¥239bln in capex investment over the last 3 years and an additional ¥340bln over the next 3 years. Fir Tree firmly supports targeted growth investment but believes this must be balanced with shareholder returns and best corporate practices in line with Japan’s Corporate Governance Code. These objectives can be achieved without changing the operations of the business.
Fir Tree applauds JR Kyushu’s decision to propose its own stock-linked compensation plan for management, although we were disappointed by the Company’s decision to publicly oppose our other shareholder proposals. As such, we are sharing what we believe to be ‘A Better Way for JRK’ in order to encourage other shareholders to support our reasonable suggestions for the Company.