When a Buyback is More Than A Buyback
Hazama’s reasons for opposing the Oasis proposal for a buyback are superficial and reveal that the management team has failed to recognize the underlying issues that Oasis is seeking to address.
Hazama claims that the proposal is short-term, will reduce investment for future sustainable growth and will hinder building a stable financial base. This could not be further from the truth. It is Hazama that has a short-term memory, forgetting its past mistakes by making ill-planned investments which will destroy corporate value.
Oasis is proposing the buyback to:
Stop Hazama’s highly destructive investment plan that is more likely to derail the Company, leading to another restructuring;
Encourage management to focus on growing corporate value for all stakeholders rather than destroying it by entering low-return, high-risk businesses; and
Compel management to focus on what the Company knows best and rather than invest in expansion for expansion’s sake.
Hazama’s investment plans are a clear public admission that they have at least ¥100 billion of excess cash, and as such, a 9.98% buyback is easily affordable and leaves the company with plenty of excess cash to invest in its future.
Net cash represents approximately 66% of Hazama’s net assets, however, excess cash per the company stands at 73% of net assets and 77% of their market capitalization, which is far greater than their peers.
Hazama’s excuse in their statement opposing our proposals -- that ¥17 billion is too much to invest in their own company via a buyback -- is absurd.