April 10, 2017 / 9:59 AM / 3 years ago

Japan's Sparx seeks better return from firefighting gear maker Teikoku Sen-i

TOKYO, April 10 (Reuters) - Japan’s Teikoku Sen-i Co , a manufacturer of fire-fighting equipment, must boost its return on equity, asset management firm Sparx Group Co Ltd said on Monday, adding that it had boosted its holdings in the company.

Sparx, which manages about $8.6 billion in assets, asked Teikoku Sen-i to sell its stock holdings and provide information on plans for business investment and returns to shareholders.

“Teikoku Sen-i is cheap, and has a lot of potential to boost its earnings,” said Sparx Chief Executive Shuhei Abe. “This is a rare Japanese company. But the company is not looking at shareholders at all.”

The move comes amid silence by Japanese institutional investors on the issue of corporate management, despite publication of a stewardship code by Japan’s Financial Services Agency in 2014, aiming to improve corporate governance and investment returns.

Tokyo-based Teikoku Sen-i has about 43 billion yen ($386.07 million) in capital, of which its shareholding in a property developer, Hulic, accounts for 13 billion yen, said Abe.

Teikoku Sen-i’s capital is largely affected by the performance of Hulic, said Abe, adding that its return on equity would be boosted if it sold most of its Hulic shares.

Unlike other activist funds that have targeted Japanese firms with shareholder proposals on specific demands made at annual shareholder meetings, Sparx is not planning such action, however.

In 2015, C&I Holdings, a fund affiliated with activist investor Yoshiaki Murakami, called for the election of four new directors at Kuroda Electric Co to achieve its demand for the company to improve investor returns and boost growth.

Others, including major electronics companies Sony Corp and Nintendo Co , have found themselves in the sights of dissident investors in the past.

Sparx will keep talking to Teikoku Sen-i management and also hopes other shareholders will be vocal, Abe said, adding that Sparx wanted to pursue its own strategy to drive change at the company.

An official at Teikoku Sen-i said it holds Hulic shares for historical reasons but reducing its stake in Hulic may not make sense, considering its dividend payments.

The company has been steadily boosting dividend payments to shareholders, added the official who declined to be identified because he was not authorised to speak to the media.

Sparx, which said it has been gradually increasing its stake in Teikoku Sen-i since first investing in 2014, made a filing to a local government authority on Monday as its holdings reached 5.07 percent, crossing a threshold for such a filing. ($1=111.3800 yen) (Reporting by Junko Fujita; Editing by Clarence Fernandez)

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