Hokuetsu Group Holdings, Ltd. (Tokyo Stock Exchange: 3865) (“Hokuetsu” or the “Company”) is a leading company in the paper pulp industry. Under CEO Mr. Kishimoto’s long tenure, Hokuetsu’s earnings have declined, the stock has underperformed, and employee pay has stagnated. We believe now is the time for change.
Under the current leadership, Hokuetsu has remained focused on its declining printing paper business, even as Covid-19 has accelerated a global trend toward a paperless future.
It’s not too late for Hokuetsu to turn things around. As a company with substantial assets and resources, Hokuetsu could successfully pivot its core business, with biomass power plants becoming the key growth driver. The barrier to entry is high, and Hokuetsu has had experience in this area since 2006.
If Hokuetsu successfully invests in the biomass power plant business and restructures its core paper business, we think the company’s valuation would be re-rated and the stock price of Hokuetsu could increase by +322%.
Hokuetsu stakeholders must not allow this situation to continue unchecked and must act now to hold management accountable for improving governance and shareholder return.
To realize its intrinsic value, Oasis proposes that Hokuetsu:
1. Focus on the Biomass Power Plant Business as the Next Growth Driver;
2. Reform the Cost Structure of the Paper Business & Focus on Packaging;
3. Improve ROE & Balance Sheet Efficiency; and
4. Enhance Corporate Governance.
This is an important mission in which all stakeholders should be engaged. We all want the same thing: a better Hokuetsu