and its subsidiaries produce and sell food products in Japan and internationally. The company operates through the following segments: Seafood, Overseas Instant Noodles, Domestic Instant Noodles, Frozen and Refrigerated Foods, Processed Foods and Cold Storage. It purchases, processes, and sells seafood, and manufactures and sells a variety of products including instant cup and bag noodles, soup and processed foods.
The ideal plan for Toyo Suisan would be to divest its legacy and non-core businesses and focus its capital and resources on growing its core noodles business. Legacy businesses have generated just 17% of the company's 10-year cumulative earnings before interest, taxes, depreciation and amortization, yet they have been awarded 51% of the capex despite generating sub-5% return on assets.
Becoming a pure-play noodle company with improved capital allocation practices would almost immediately close the roughly 8 times P/E multiple discount that Toyo Suisan trades at versus Nissin Foods. After that, as the dominant player in the North American market, Toyo Suisan would be in a prime position to be a global consolidator in the instant noodle market, a market that is prime for consolidation with two to three players dominating the industry.
A word about shareholder proposals in Japan for those who are not familiar with them: They are like going before Judge Chamberlain Haller in the 1992 movie"My Cousin Vinny.""That is a lucid, intelligent, well thought out objection. Overruled." In other words, they rarely pass. Last year, 3% of corporate governance shareholder proposals were passed and 4% of balance sheet-based shareholder proposals were passed. That is part of an upward trend.