Activist Investor Urges Metro Holding To Return Excess Cash – What Should Investors Know?

Recently, an article in the Straits Times reported that an activist investor, Quartz Capital Management, has called on Metro Holdings Limited (SGX: M01) to return its excess cash to shareholders.

According to a letter written by Quartz, the company said the following:

Metro has the 2nd largest net cash holding among listed companies in the SGX, amounting to SGD 393 million, more than half its current market capitalization of SGD 758 million[3]. This is in addition to the attractive dividend yield of 7.7% the company paid in FY2016. Together with the loans to its JVs of SGD 133 million[4] and listed equity investments of SGD 111 million, Metro’s net cash, loan receivables and liquid investments total SGD 637 million, amounting to more than 80% of its current market capitalization.

Believing that the stock price is “undervalued” due to the huge assets base (cash and others), Quartz has further listed the reasons that they believe have caused Metro’s undervaluation, and proposed ways to remove the undervaluation.

Below are the reasons.


Source Yahoo Finance – Letter To Metro’s Management

And the proposed solutions.


Source Yahoo Finance – Letter To Metro’s Management

In summary, Quartz believes that Metro is highly undervalued because of excessive cash balance, lack of transparent communication with investors and lack of prioritisation of the share price as the management’s Key Performance Indicators.

The proposal that Metro pays $150-200 million of its excess cash, if accepted, is material for a company with a market capitalisation of $852 million.

But whether this will materialise is still speculation. Even if it does, it is highly unlikely that the company will return the excess cash in a one-off payment.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.