Background of the increase in shareholder benefits, which companies are expected to start offering benefits? | Activist Times | Moneyクリ Monex Securities' investment information and media beneficial for money.

DD Group (3073) announced a public buyout through MBO; what is the reason for its many individual shareholders?

DD Group (3073), which operates in the food and beverage industry, announced on July 14 that the current management team would acquire the company in a so-called management buyout (MBO) in collaboration with a fund. Just before the announcement, the stock price was 1,443 yen and the public offering price is 1,700 yen. Although the premium is less than 20%, which is not a particularly large level, it left an impression of a considerable amount since the company's net asset value per share at the end of February 2025 was 331 yen. However, in the fiscal year ending February 2025, the net profit per share was 127 yen, indicating a certain level of profitability.

The DD Group operates a wide range of dining establishments, primarily izakayas such as "Warayaki-ya" and "Kyushu Netsuchuya", and also manages internet cafes and hotels, including the acquired "BAGUS". According to the company's website, they have a presence with 311 domestic locations; however, due to their multi-brand strategy, they do not seem to have a very high level of recognition. Nevertheless, this public buyout would have had a significant impact on individual investors. As of February 2025, the company had 36,765 shareholders, most of whom are individual shareholders, indicating that it has a considerable number of individual shareholders.

This is no surprise, as the company offers shareholder benefits, and the amount of those returns is quite substantial. Specifically, shareholders who hold 100 shares receive benefit tickets worth 3,000 yen twice a year. Considering the stock price of 1,443 yen just before the aforementioned public buyout announcement, this means that an investment of 144,300 yen yields annual benefits of 6,000 yen. This equates to a return of over 4% of the investment amount per year, which can be considered attractive.

However, due to the significant losses the company faced during the so-called COVID-19 pandemic, it has continued to not pay dividends, which makes it less attractive in terms of dividends. Nevertheless, the sheer number of shareholders suggests the remarkable appeal of shareholder benefits.

The trend of increasing shareholder benefits, Aeon (8267) also stated "It's fine to have 100% individual shareholders."

At one point, shareholder benefits were said to be at a standstill due to perspectives such as the "principle of equality among shareholders," but in fact, there is a renewed upward trend. This is partly due to the stricter listing standards of the Tokyo Stock Exchange, which has been discussed in articles such as "Will shareholder benefits be reevaluated in the Tokyo Stock Exchange market reform?" and "The Tokyo Stock Exchange's restructuring, facing harsh evaluations. How should individual investors view this?" There are standards for the number of shareholders and market capitalization, and there was a transitional period for a while, but the transitional period will end in March 2025, and from 2026, companies may also be subject to delisting.

By implementing shareholder benefits, it is likely that this will support the number of shareholders and stock prices, making it possible to meet listing standards. According to the Nikkei, 131 companies introduced new shareholder benefits in 2024, which is the highest number ever. Of course, there is also the discussion about the Tokyo Stock Exchange's listing standards, but the start of the new NISA in 2024 may also have influenced the expansion of individual investors.

In the case of companies targeting individuals, preferential treatments for their own products can also lead to the retention of shareholders and customers. In an interview with Nikkei Business, Aeon (8267) boldly stated that it is fine to have 100% individual shareholders, expressing that they want "Aeon customers to become shareholders" (according to the company's executive). Tokyo Metro (9023), which went public in 2024, also attracted attention with its shareholder benefits, including free topping coupons for tempura from soba shops within the metro, in addition to train tickets.

Focusing on whether shareholder benefits can be utilized in "one's place of residence"

The DD Group mentioned at the beginning will abolish its shareholder benefits due to the public tender offer. In response, someone believed to be a shareholder of the company lamented on social media that "there will be no benefit-issuing companies that can be used in my area."

This is quite an interesting perspective. The DD Group's website indicates the status of their stores, showing that out of 311 locations, nearly 80% (236 stores) are in the Kanto and Koshinetsu regions, with 2 stores in Tohoku and 7 stores in Kyushu and Okinawa. Both stores in Tohoku are located in Sendai, and all 7 stores in Kyushu are in Fukuoka. However, for those living in Tohoku and Kyushu, it may be possible to head to Sendai or Fukuoka at least once every six months, suggesting that it could be said to be a company where "privileges can be used." Additionally, since the company does not operate stores in Hokkaido, it could be said that it is a company where those in Hokkaido cannot use the privileges.

Excluding QUO cards and the company's own products, gift certificates and service vouchers can only be used at stores of that company if they are located in the region. Some companies send certain products by returning gift certificates, but usually, gift certificates tend to be more advantageous. According to Monex Securities' shareholder benefit search, there are 147 companies offering dining vouchers. Let's take a look at whether there are relatively good companies with shareholder benefits that DD Group shareholders might consider switching to. We will also check if there are benefits that cover a wide area only for companies that were profitable in their most recent financial results.

Picking up 9 companies that DD Group shareholders might consider switching to

United & Collective (3557), Ten Allied (8207), Shinwa Holdings (7118), Watami (7522)

United & Collective (3557) (97,600 yen, 10,000 yen * based on the closing price on July 30, 2025, the amount required to obtain benefits, and the face value of the benefit vouchers per year). The company operates "Teketeke" and "the 3rd Burger", but it seems that there are stores only in Tokyo, Kanagawa, Chiba, Saitama (4 prefectures), and Osaka. Ten Allied (8207) (28,400 yen, 2,000 yen) is a company that operates izakayas such as "Tengu", and has locations only in the 4 prefectures and Shizuoka, Aichi, Osaka, and Kyoto. The number of stores in Kyoto and Osaka is also limited.

Shinwa Holdings (7118) (¥303,000, ¥20,000) is a company that just listed on the Sapporo Stock Exchange in October 2024 and operates izakayas called "En" mainly in Hokkaido. While the focus is on cities like Sapporo, Asahikawa, Kushiro, Obihiro, and Hakodate in Hokkaido, some locations can also be found in Tokyo and Saitama, and it seems that "Let's Go Curry" is located in Hirosaki City, Aomori Prefecture. Watami (7522) (¥101,700, ¥8,000) has some points to note regarding its vouchers, as they cannot be used during lunch hours and are not valid at "Subway," with a limit of ¥500 per person per day. However, it has locations nationwide, including Tohoku regions such as Aomori, Akita, Iwate, Miyagi, and Fukushima.

Pepper Food Service (3053), Fujio Food Group Holdings (2752), Osho (9979), Jay Group Holdings (3063), Chimney (3178)

Pepper Food Service (3053) (¥103,500, ¥6,000) was once in significant deficit, leading to store closures making headlines, but in the latest financial results, it has turned profitable. The company operates steak restaurants such as "Ikinari Steak" and has locations in Iwate, Miyagi, Fukushima in Tohoku, as well as in seven prefectures in Kyushu, Tottori, and Shimane, but it seems they do not have stores in Shikoku and Okinawa.

Fuji Food Group Holdings (2752) (113,400 yen, 6,000 yen) is expanding "Maido Okini Shokudo" nationwide, and while there are no stores in some prefectures in the Tohoku region, it can be said that it is usable almost nationwide. Daisho (9979) (118,800 yen, 6,000 yen) is centered around izakayas such as "Shoya" and is expanding stores in several prefectures including Hokkaido, Iwate, Yamagata, Fukushima, and Kyushu. On the other hand, in Hyogo, Kyoto, Nara, and Hiroshima prefectures, there are no stores in Hiroshima City, giving the impression that the store network on the eastern side of Japan is well-developed.

J-Group Holdings (3063) (79,400 yen, 4,000 yen) has expanded in Sendai City, Miyagi Prefecture, and is concentrated in major metropolitan areas such as Chiba Prefecture, Tokyo, Kanagawa Prefecture, Gifu Prefecture, Shizuoka Prefecture, Aichi Prefecture, Shiga Prefecture, Kyoto Prefecture, and Hyogo Prefecture. Chimney (3178) (127,000 yen, 6,000 yen) operates "Hananomai" and "Sakanaya Dojo," with a total of 471 stores, reportedly expanding across 46 prefectures excluding Okinawa Prefecture.

Focus on 6 companies that do not offer "shareholder benefits" in dining; could offering benefits positively impact stock prices?

As mentioned above, many restaurants offer shareholder benefits. Most of these are discount coupons that can be used at their own establishments. Since discount coupons can be included in mailings to shareholders and serve as an incentive for customers to visit the store, it is likely that this is thought to be a limited cost when considering factors such as cost of goods sold.

Saizeriya (7581) is unlikely to resume its benefits.

In the Monex Securities stock scout, you can search by industry, and within the restaurant category, there are 109 restaurant companies. This excludes companies that do not directly engage in food service, such as kitchen equipment and restaurant-related services. Of the 109 companies, only 6 do not offer shareholder benefits: General Oyster (3224), Hikari Food Service (138A), Hori Food Service (3077), Marushige (7524), Friendly (8209), and Saizeriya (7581). As mentioned at the beginning, in a situation where more companies are starting to offer shareholder benefits, it is quite remarkable that restaurant companies, which are well-matched with shareholder benefits, do not provide them.

Conversely, these companies may start (or in some cases, resume) shareholder benefits, which could have a positive impact on their stock prices. Among the six companies mentioned above, Saizeriya has abolished its shareholder benefits that were implemented in July 2024. It is likely that there was a judgment regarding the poor handling of shareholder benefit vouchers in the operation of Saizeriya's stores, and the possibility of resuming them seems slim. The company also does not handle gift certificates.

Hori Food Service (3077) and Marche (7524) may have the possibility of resuming their benefits.

Hori Food Service abolished its shareholder benefit system in 2023. The original benefit was a rice voucher, not a meal voucher. The company experienced management turmoil as its parent company went bankrupt in 2023, and it is speculated that the ongoing losses since the COVID-19 pandemic until the fiscal year ending in March 2023 contributed to this decision. On the other hand, in 2024, a new parent company purchased shares from the bankrupt company, and the performance has turned profitable. There is a possibility of resuming the benefits.

Marche has abolished its shareholder benefits in 2023. This decision was made after thorough discussions aimed at comprehensive cost reduction due to deteriorating performance during the COVID-19 pandemic. On the other hand, a special benefit will be implemented in 2024. Additionally, major shareholder Tempus Holdings (2751) has invested, and the company's performance has turned profitable, indicating a certain degree of recovery. Considering that shareholder benefits were originally provided, there may be a possibility of resuming them.

Is the outlook for the resumption of benefits for Friendly (8209) strict? General Oyster (3224) has potential.

Friendly has also suspended its shareholder benefits in 2023. The reason given is "the current performance situation," similar to Horii Food and Marche. Since the company has stated it is a "suspension" rather than an "abolition," there seems to be a strong intention to resume, but as it continues to incur losses and is in a state of negative equity, the outlook for resumption appears to be difficult.

General Oyster has also abolished its shareholder benefits in 2024. The company's performance had deteriorated due to the COVID-19 pandemic, but it has been operating profitably from the fiscal year ending March 2023 to the fiscal year ending March 2025. Given this context, the abolition and resumption of benefits may suggest a challenging outlook for a return. On the other hand, the announcement of the benefit abolition was made in August 2024, while the stock price, which was 1,788 yen at the end of July 2024, has fallen to 671 yen recently, raising the possibility that they may consider resuming benefits due to this stock price. In fact, Kurazushi (2695) abolished its benefits in December 2024, but faced many requests and opinions from shareholders, and possibly due to the drop in stock price, it resumed benefits in just three months in February 2025.

The food service with the highest potential for starting preferential treatment (138A)

Among those not implementing preferential treatment, the company with the highest likelihood of starting it seems to be Hikari Food Service. This company was just listed in February 2024 and operates standing izakayas primarily in the Tokai region. Its performance appears to be strong, having reported operating profits in every quarter since the listing, and it offers a dividend of 40 yen, resulting in a high dividend yield of 1.85% compared to other izakayas. Given the nature of the industry, it also seems relatively easy to implement preferential treatment.

The company discloses the Q&A content in conjunction with its financial results briefing. The questions from the briefing held on July 18 were disclosed on July 30. The first question was about shareholder benefits, and the company stated, "Our policy is to return surplus to shareholders," and "As we are a restaurant, we recognize that shareholder benefits are a very attractive way of returning value to our shareholders." On the other hand, they mentioned, "We believe it is important to avoid any sense of unfairness for shareholders in regions where we do not have stores, such as Hokkaido, Kansai, and Kyushu, who may say, 'There are no stores in my area.' Therefore, we prioritized dividends first." As seen earlier, there are also examples of providing shareholder benefits even when the regions are limited.

Additionally, following the above response, "We are currently considering actively expanding into areas where we are not yet operating, so I believe it may be worthwhile to engage in more proactive discussions regarding shareholder benefits. Currently, preparations for shareholder benefits are progressing steadily, so I hope you can look forward to that." This gives quite a strong impression. Since it is right after the IPO, there may be expectations for the implementation of shareholder benefits that had not been conducted previously.