Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/ricoh-company-ltd" target="_blank" data-smartkarma-citation="entities:15359:1" rel="noopener">Ricoh Company Ltd (7752 JP)</a> announced earnings disappointed, but guidance is above forecast as some Q4 business was pushed back.</li>
<li>The company also announced a buyback. The headline at 7.5% of shares out is big. Reality is lower. </li>
<li>This sets up a somewhat complex dynamic of flows in near space and far space, and relative to peers. But we look at it anyway.</li>
</ul>



Ricoh Company Ltd (7752 JP) announced earnings disappointed, but guidance is above forecast as some Q4 business was pushed back.
The company also announced a buyback. The headline at 7.5% of shares out is big. Reality is lower. 
This sets up a somewhat complex dynamic of flows in near space and far space, and relative to peers. But we look at it anyway.


Ricoh (7752) Buyback - Big, But Not. But Not Small.

<ul>
<li>
<a href="https://www.smartkarma.com/entities/canon-inc" target="_blank" data-smartkarma-citation="entities:1:1" rel="noopener">Canon Inc (7751 JP)</a> on Monday announced a share buyback programme.</li>
<li>It isn't very big. But it bears consideration because of other things going on. </li>
<li>Shareholder structure is of much more importance than many investors appreciate. Here even more so.</li>
</ul>



Canon Inc (7751 JP) on Monday announced a share buyback programme.
It isn't very big. But it bears consideration because of other things going on. 
Shareholder structure is of much more importance than many investors appreciate. Here even more so.


Canon (7751) - Buyback Looks Small But Shareholder Structure Matters

Equity Bottom-Up

<p>Today, Effissimo Capital Management "surprised" the market by filing a Large Shareholder amendment saying they had sold 3.87% of <a href="https://www.smartkarma.com/entities/ricoh-company-ltd" target="_blank" data-smartkarma-citation="entities:15359:1" rel="noopener">Ricoh Company Ltd (7752 JP)</a> at Friday's closing price. </p><p>It isn't quite that simple, and it is a complex set of flows going on. </p><p>That is worth a look. </p>

Today, Effissimo Capital Management "surprised" the market by filing a Large Shareholder amendment saying they had sold 3.87% of Ricoh Company Ltd (7752 JP) at Friday's closing price. It isn't quite that simple, and it is a complex set of flows going on. That is worth a look. 

Japan Specialist

Mark Chadwick

<div>
<p><span xml:lang="EN-US" data-contrast="auto">Last week, <a href="https://www.smartkarma.com/entities/ricoh-company-ltd" target="_blank" data-smartkarma-citation="entities:15359:1" rel="noopener">Ricoh Company Ltd (7752 JP)</a>  announced a new business strategy. It is worth a <a href="https://www.ricoh.com/-/Media/Ricoh/Sites/com/IR/data/pre/pdf/ir_pre2020.pdf" target="_blank" rel="noopener">read</a>. </span></p>
<p><span xml:lang="EN-US" data-contrast="auto">Ricoh will be moving away from its core office equipment business to focus on digital services. The market </span><span xml:lang="EN-US" data-contrast="auto">liked</span><span xml:lang="EN-US" data-contrast="auto"> this, or more likely, investors were cheering the ¥100b capital return. Regarding the buyback, Travis Lundy has written a must-read:</span><span data-ccp-props='{"201341983":0,"335559739":200,"335559740":276}'> <a href="https://www.smartkarma.com/insights/ricoh-buyback-redux-it-s-on-it-s-big-crossholders-vs-activist-vs-public-who-sells" target="_blank" data-smartkarma-citation="insights:48787" rel="noopener">Ricoh Buyback Redux - It's On, It's Big. Crossholders Vs Activist Vs Public. Who Sells?</a> </span></p>
</div><div><p><span xml:lang="EN-US" data-contrast="auto">The new strategy makes perfect sense. Prime Minister Suga is waging a war against the old ways of doing business, which have been stunting Japan’s growth potential. Ricoh, one of the chief paper pushers, simply had to change. <a href="https://www.smartkarma.com/entities/konica-minolta-inc" target="_blank" data-smartkarma-citation="entities:17287:1" rel="noopener">Konica Minolta (4902 JP)</a>  also announced a similar strategic shift. </span><span data-ccp-props='{"201341983":0,"335559739":200,"335559740":276}'> </span></p></div><div>
<p><span xml:lang="EN-US" data-contrast="auto">CEO Yamashita had enjoyed some success with a cost-cutting strategy since coming to power in 2017. Unfortunately, COVID put an end any further margin improvement. </span><span data-ccp-props='{"201341983":0,"335551550":1,"335551620":1,"335559739":200,"335559740":276}'> </span></p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/194/216/original/smartkarma_download.png?1615686431" class="editor-image img-responsive" data-smartkarma-image-id="194216"></figure></section><p><span xml:lang="EN-US" data-contrast="auto">The share buyback </span><span xml:lang="EN-US" data-contrast="auto">provides</span><span xml:lang="EN-US" data-contrast="auto"> management with time to execute the shift to digital services. That is good news for investors. It will be a difficult transition as Ricoh’s competitive landscape becomes increasingly fierce. Rather than competing against a handful of sleepy Japanese </span><span xml:lang="EN-US" data-contrast="auto">copier</span><span xml:lang="EN-US" data-contrast="auto"> makers, they are now entering a global arena, battling with some of the biggest names in global tech. </span><span data-ccp-props='{"201341983":0,"335551550":1,"335551620":1,"335559739":200,"335559740":276}'> </span></p>
</div><div><p><span xml:lang="EN-US" data-contrast="auto"><strong>Does the Board have the requisite skills to navigate this brave new world?</strong> In our Board evaluation, where we rate and rank all companies in the Topix 500 on the quality of their board structure, Ricoh ranks just below average. It is ok, but Japanese boards are on average, much lower quality than global peers. </span></p></div>


Last week, Ricoh Company Ltd (7752 JP)  announced a new business strategy. It is worth a read. 
Ricoh will be moving away from its core office equipment business to focus on digital services. The market liked this, or more likely, investors were cheering the ¥100b capital return. Regarding the buyback, Travis Lundy has written a must-read: Ricoh Buyback Redux - It's On, It's Big. Crossholders Vs Activist Vs Public. Who Sells? 
The new strategy makes perfect sense. Prime Minister Suga is waging a war against the old ways of doing business, which have been stunting Japan’s growth potential. Ricoh, one of the chief paper pushers, simply had to change. Konica Minolta (4902 JP)  also announced a similar strategic shift.  
CEO Yamashita had enjoyed some success with a cost-cutting strategy since coming to power in 2017. Unfortunately, COVID put an end any further margin improvement.  
The share buyback provides management with time to execute the shift to digital services. That is good news for investors. It will be a difficult transition as Ricoh’s competitive landscape becomes increasingly fierce. Rather than competing against a handful of sleepy Japanese copier makers, they are now entering a global arena, battling with some of the biggest names in global tech.  
Does the Board have the requisite skills to navigate this brave new world? In our Board evaluation, where we rate and rank all companies in the Topix 500 on the quality of their board structure, Ricoh ranks just below average. It is ok, but Japanese boards are on average, much lower quality than global peers. 

Japan Corporate Governance - Ricoh - Lacking Board Skills?

<div><p>On the 19th of April 2019, <a href="https://www.smartkarma.com/entities/ricoh-co-ltd" target="_blank" data-smartkarma-citation="entities:15359:1" rel="noopener">Ricoh Co Ltd (7752 JP)</a> held an Investor Day conference discussing the 19th Mid Term Management Plan, and its long-term capital plan to return profits made in the 19th Plan to investors. In mid-2019, activist Effissimo Capital Management - which had been building a large position for 3+ years - announced it had gotten to 19% and would go activist. In late 2019, another Investor Day laid the groundwork for the 20th Mid-Term Management Plan. On the 27th of March 2020 the company held an <a href="https://www.ricoh.com/IR/events/investors_meeting" target="_blank" rel="noopener">Investors Meeting</a>. There was continued discussion of how the company had gone through the pain of realising a few years ago how they were in real trouble, and how they then made significant efforts to change that, and they reiterated the ongoing MTMP goal to pay out a fair chunk of accumulated capital. </p></div><div><p>In the <em>previous</em> two Mid-Term Management Plans (MTMPs), called "Resurgent" and "Ignite", respectively, the company led by CEO "Jake" Yamashita undertook structural reform to create cost savings of ¥100bn (mostly fixing the sales structure in the US, cutting out HQ costs and using RPA ("Robotic Process Automation") everywhere, and streamlining in-house production). They also started cutting businesses which had not delivered margin and revenue improvements. They announced they would stop supporting fraud-hit Ricoh India in late 2017 (a case finally resolved in early 2019), took impairments on Ikon and Mindshift in 2018, deciding to sell their long-held position (tied to Ricoh's founder) in <a href="https://www.smartkarma.com/entities/coca-cola-bottlers-japan" target="_blank" data-smartkarma-citation="entities:20051:1" rel="noopener">Coca Cola Bottlers Japan (2579 JP)</a> that year to help them smooth out the large losses. In May 2018 they sold Ricoh Logistics. That seemed to get them "over the hump" as Yamashita-san said then, and the growth strategy outlined in mid-2018 concentrated on industrial commercial printing and more features in MFPs to create a better "digital services business."</p></div><div><p>In early March 2020, they announced they were going to sell 20% of <a href="https://www.smartkarma.com/entities/ricoh-leasing-co-ltd" target="_blank" data-smartkarma-citation="entities:9144:1" rel="noopener">Ricoh Leasing (8566 JP)</a>to <a href="https://www.smartkarma.com/entities/mizuho-leasing-co-ltd" target="_blank" data-smartkarma-citation="entities:12780:1" rel="noopener">Mizuho Leasing Co (8425 JP)</a>, which would allow them to de-consolidate Ricoh Leasing, completely changing the optics of Ricoh's consolidated debt position. </p></div><p>The company in its March 2020 Investor Day gave a further preview of the next Mid-Term Plan for FY20-22 called "Lift Off" which was supposed to be fully announced in May 2020 (and which Yamashita-san had previously previewed in November 2019). There would be digital services and capital returns, responding to the constant pressure from activist firm Effissimo Capital Management which had lifted its position to 19% in late 2019 and changed the purpose of their holding to "making important recommendations to management" then too. The stock hit a four-year high just before Q3 earnings came out in February, fell in March 2020, but there was hope. </p><p><em><strong>I wrote about the situation originally in <a href="https://www.smartkarma.com/insights/ricoh-s-big-buyback-potential-the-timing-is-right" target="_blank" data-smartkarma-citation="insights:38518" rel="noopener">Ricoh's BIG Buyback Potential - The Timing Is Right</a>. </strong></em></p><p>Unfortunately, when full-year earnings came out, the issues facing office supply and documentation businesses in the US and Europe as covid-19 worsened slightly delayed the execution of the Capital Return Plan at the start of the new MTP. I wrote about the timing and the relative trade in <a href="https://www.smartkarma.com/insights/ricoh-redux-get-long-vs-comps" target="_blank" data-smartkarma-citation="insights:39155" rel="noopener"><em><strong>Ricoh Redux:  Get Long Vs Comps</strong></em></a> in early May 2020.</p><p>By the start of calendar Q4 however, after Ricoh had outperformed by 25+% in 5 months, forward forecasts for Ricoh earnings started to deteriorate much faster than for rivals and I recommended taking off the trade in <a href="https://www.smartkarma.com/insights/ricoh-reductively-reduced-bullishness-so-take-off-the-trade" target="_blank" data-smartkarma-citation="insights:42625" rel="noopener"><em><strong>Ricoh (Reductively) - Reduced Bullishness So Take Off the Trade</strong></em></a>. </p><p>The buyback would come, but the Valley of the Shadow of Covid was deep and wide. </p><h3>The NEW News Today</h3><p>Ricoh today announced it would launch its buyback, of up to 145,000,000 shares (20.02%) spending up to ¥100 billion. Once the buyback is completed, the company will retire the repurchased shares PLUS another 20,000,000 shares. </p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/192/081/original/Screenshot+2021-03-03+at+7.38.47+PM.png?1614771571" class="editor-image img-responsive" data-smartkarma-image-id="192081"></figure><p></p></section><div class="content-highlight"><p>This is big news, and deserves a much closer look.</p></div>

On the 19th of April 2019, Ricoh Co Ltd (7752 JP) held an Investor Day conference discussing the 19th Mid Term Management Plan, and its long-term capital plan to return profits made in the 19th Plan to investors. In mid-2019, activist Effissimo Capital Management - which had been building a large position for 3+ years - announced it had gotten to 19% and would go activist. In late 2019, another Investor Day laid the groundwork for the 20th Mid-Term Management Plan. On the 27th of March 2020 the company held an Investors Meeting. There was continued discussion of how the company had gone through the pain of realising a few years ago how they were in real trouble, and how they then made significant efforts to change that, and they reiterated the ongoing MTMP goal to pay out a fair chunk of accumulated capital. In the previous two Mid-Term Management Plans (MTMPs), called "Resurgent" and "Ignite", respectively, the company led by CEO "Jake" Yamashita undertook structural reform to create cost savings of ¥100bn (mostly fixing the sales structure in the US, cutting out HQ costs and using RPA ("Robotic Process Automation") everywhere, and streamlining in-house production). They also started cutting businesses which had not delivered margin and revenue improvements. They announced they would stop supporting fraud-hit Ricoh India in late 2017 (a case finally resolved in early 2019), took impairments on Ikon and Mindshift in 2018, deciding to sell their long-held position (tied to Ricoh's founder) in Coca Cola Bottlers Japan (2579 JP) that year to help them smooth out the large losses. In May 2018 they sold Ricoh Logistics. That seemed to get them "over the hump" as Yamashita-san said then, and the growth strategy outlined in mid-2018 concentrated on industrial commercial printing and more features in MFPs to create a better "digital services business."In early March 2020, they announced they were going to sell 20% of Ricoh Leasing (8566 JP)to Mizuho Leasing Co (8425 JP), which would allow them to de-consolidate Ricoh Leasing, completely changing the optics of Ricoh's consolidated debt position. The company in its March 2020 Investor Day gave a further preview of the next Mid-Term Plan for FY20-22 called "Lift Off" which was supposed to be fully announced in May 2020 (and which Yamashita-san had previously previewed in November 2019). There would be digital services and capital returns, responding to the constant pressure from activist firm Effissimo Capital Management which had lifted its position to 19% in late 2019 and changed the purpose of their holding to "making important recommendations to management" then too. The stock hit a four-year high just before Q3 earnings came out in February, fell in March 2020, but there was hope. I wrote about the situation originally in Ricoh's BIG Buyback Potential - The Timing Is Right. Unfortunately, when full-year earnings came out, the issues facing office supply and documentation businesses in the US and Europe as covid-19 worsened slightly delayed the execution of the Capital Return Plan at the start of the new MTP. I wrote about the timing and the relative trade in Ricoh Redux:  Get Long Vs Comps in early May 2020.By the start of calendar Q4 however, after Ricoh had outperformed by 25+% in 5 months, forward forecasts for Ricoh earnings started to deteriorate much faster than for rivals and I recommended taking off the trade in Ricoh (Reductively) - Reduced Bullishness So Take Off the Trade. The buyback would come, but the Valley of the Shadow of Covid was deep and wide. The NEW News TodayRicoh today announced it would launch its buyback, of up to 145,000,000 shares (20.02%) spending up to ¥100 billion. Once the buyback is completed, the company will retire the repurchased shares PLUS another 20,000,000 shares. This is big news, and deserves a much closer look.

Ricoh Buyback Redux - It's On, It's Big. Crossholders Vs Activist Vs Public. Who Sells?

Japan

Konica Minolta Inc is mainly engaged in manufacturing office equipment and performance materials. It also operates health care businesses. The Company also makes copiers, personal computer peripherals, optical lenses, and measuring instruments.

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Konica Minolta (4902 JP)

Ricoh (7752) Buyback - Big, But Not. But Not Small.

Ricoh (7752) yesterday announced disappointing results, bte forecasts, and a big buyback headline with less exciting reality. It sets up a complex...

Travis Lundy

Canon (7751) - Buyback Looks Small But Shareholder Structure Matters

Canon's buyback is "small" but it probably matters more than most think in terms of near-term market structure and performance.

Travis Lundy

Ricoh Buyback Runs Into Activist Selling

Today Ricoh (7752) took a hit as Effissimo sold a near 4% stake Friday. It is slightly more complex, but it represents ongoing overhang. But Ricoh...

Travis Lundy

Japan Corporate Governance - Ricoh - Lacking Board Skills?

Ricoh is shifting to become a Digital Services company.....but does it have the Board quality to survive and thrive in an era of Digital...

Mark Chadwick

Ricoh Buyback Redux - It's On, It's Big. Crossholders Vs Activist Vs Public. Who Sells?

Ricoh announced the start of its BIG buyback. 12% of ADV for a year. Forward OP ratios vs peers have stopped falling. The 20th MTP has plans to...

Travis Lundy

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