Investing in Sony Corporation (ADR) (SNE) With Dan Loeb

Sharp Corporation (ADR) (OTCMKTS:SHCAY) is trading at $4.20 per share, with the total market cap of $4.8 billion. The market values Sharp Corporation (ADR) (OTCMKTS:SHCAY) at as much as 3.1 times its book value. The company is one of the biggest global players in TVs, mobile handsets and LCD related business.

Looking forward, Sharp plans five main strategies for the company including business portfolio restructuring, profitability improvement in the LCD business and cost reduction. It also seeks to enter different industries via strategic partnerships.

Recently, it had a basic agreement with Makita Corporation, the electric power tools maker, to expand its business from homes to premises. For the full fiscal year 2014, Sharp expected to produce $2.16 billion in EBITDA in 2014. Consequently, Sharp’s 2014 EBITDA multiple would stay at 7.12.

Panasonic Corporation (ADR) (OTCMKTS:PCRFY) also had a higher price-to-book value than Sony. At $8.20 per share, Panasonic Corporation (ADR) (OTCMKTS:PCRFY) is worth $18.90 billion. The market values Panasonic at 4.23 times its trailing EBITDA and 1.18 times its book value.

Panasonic is also one of the Japanese powerhouses, operating in several businesses including AVC Networks, Appliances, Eco Solutions, Industrial Devices and Automotive & Industrial Systems.

Looking forward, in 2016, Panasonic intended to generate more than ¥350 ($3.49) billion in operating profit with the operating margin of more than 5%. The total cumulative free cash flow in 2014-2016 period could reach more than ¥600 ($5.98) billion. In order to reach that goal, the company will execute the business restructure, eliminating unprofitable business in the next two years, spending around ¥250 ($2.49) billion.

My Foolish take

Sony, with the highly profitable entertainment business, could unlock potential shareholders’ value by taking Dan Loeb’s two-step advice. Dan Loeb has also recently called for “semi-dependent governance structure,” with a separate board of directors for Sony Entertainment.

Personally, I think Sony is a good stock to hold in a long run, with its global leading position in both electronics and entertainment business, a low valuation and an activism catalyst for potential upside in its share price.

The article Investing in Sony With Dan Loeb originally appeared on Fool.com is written by Anh Hoang.

Anh HOANG has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Anh is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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