Sony Electronics was worth around $8 billion, valued at 8 times FY13 EBIT guidance of around $1 billion. Dan Loeb wrote: “When considering Sony’s strong operating profit recovery, favorable product cycles, export orientation, and relative balance sheet strength, we see a strong re-rating potential to multiples of consumer electronics peers like Sharp Corporation (ADR) (NASDAQOTH: SHCAY) and Panasonic Corporation (ADR) (NASDAQOTH: PCRFY).”
Panasonic was also the big Japanese electronics corporation. Most of its revenue, 17% of the total revenue, were generated from the AVC Networks. Appliances and Eco Solutions both ranked second, each accounting for 15% of the total revenue while Industrial Devices was the third biggest revenue contributor, representing 14% of the total revenue. The business keeps innovating new electronics products. Several days ago, Panasonic Corporation (ADR) (OTCMKTS:PCRFY) announced its new Breakfast Collection, including different kitchen appliances including a Coffee Maker, a Kettle and a Toaster. The NT-ZP1 Toaster has different slots for different bread slices. The NC-ZF1 Coffee Maker, with Aroma Selector could let users adjust the water flow for milder or stronger coffee, whereas the NC-ZK1 Kettle let users boil water quite quickly.
Sharp Corporation (ADR) (NASDAQOTH: SHCAY) has been expanding its business into TVs and mobile handsets as well as LCD related business for the past 13 years. The company has just laid out five main strategies for recovering and growing the business. The five main plans included business portfolio restructuring, LCD business profitability improvement, ASEAN market focus, fixed costs reduction and financial position improvement. The company also pushed for strategic partnership with companies from different industries. Recently, it just signed a basic agreement with Makita Corporation, to broaden the business areas including homes (house/rooftop) to premises (grounds). Sharp Corporation (ADR) (NASDAQOTH: SHCAY) also announced that it was seeking further collaboration in the robotics business. Sharp was expected to generate around generate around ¥216.8 ($2.16) billion in EBITDA in 2014. With ¥946.9 ($9.46) billion in debt, its 2014 EV/EBITDA was 7.12.
The lowest valuation with an additional value of ¥725 per share
Interestingly, Sony has the lowest valuation among the three. Sony Corporation (ADR) (NYSE:SNE) is trading at $20.80 per share, with a total market cap of $21 billion. The market values Sony at only 3.62 times EV/EBITDA. Dan Loeb suggested that there were over ¥525 per share of hidden value that the market had not reflected in Sony’s share price. He also expected that there were over ¥525 per share of hidden value that the market had not reflected in Sony’s share price. He also expected another ¥200 due to “the movement in the EUR/JPY relationship to be reflected in analyst estimates.”
My Foolish take
Dan Loeb has pointed out what the greatest asset that Sony Corporation (ADR) (NYSE:SNE) has, Sony Entertainment. Sony considered the entertainment business was indeed the important source for the company’s growth and it was not for sale. However, Sony’s spokeswoman said that the company “look forward to continuing constructive dialogue with the shareholders as it pursues its strategy.” Sony looks quite interesting with its low valuation compared to its electronics peers, it could also be considered an opportunistic pick upon Dan Loeb’s activism.
The article Sony Is Relatively Cheap, and Opportunistic originally appeared on Fool.com is written by Anh HOANG.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
