GT Capital buying $200-M shares in bullish Toyota

Ty family-led conglomerate GT Capital Holdings is set to invest up to $200 million in shares of Japanese powerhouse Toyota Motor Corp., citing attractive valuation of the world’s largest automotive manufacturer.

This investment is seen timely given Toyota’s recent announcement to buy back shares from the open market as the management deems the company’s shares are undervalued.

The purchase of shares will be made by GT Capital, which is also Toyota’s partner in manufacturing cars in the Philippines for the last three decades, through the Tokyo Stock Exchange based on prevailing rates on the dates of purchase.

The transaction would be funded by debt, GT Capital disclosed to the Philippine Stock Exchange yesterday.

In an interview, GT Capital head of investor relations Jose Crisol Jr. noted that at current prices, Toyota shares were only valued at 1.1 times their book value while stock prices were only at eight to 10 times projected earnings.

“It’s attractive and the consensus among research reports is that there will be 20-percent appreciation down the line,” Crisol said.

He added the dividend yield from Toyota would also give GT Capital “positive carry,” which means the conglomerate expected greater cash inflow from this investment than the cost of servicing the debt incurred.

The $200-million investment would account for less than 0.1 percent of the outstanding shares of Toyota, which has a market capitalization of around $218 billion.

Crisol added that given the group’s valuable partnership in automotive manufacturing over the last three decades, this investment would allow GT Capital to participate in Toyota’s strategic shift in business from making and selling vehicles to addressing transport gaps in urban areas. The shift from “automotive to mobility” means that Toyota is preparing to become a public transport provider, not merely a vehicle manufacturer.

The Ty family’s relationship with Toyota began after the Edsa Revolution of 1986, when Toyota sought GT Capital founder George Ty as partner in local car manufacturing. In 1988, Ty agreed to set up a joint venture company with Toyota, where he owned 60 percent.

Within one year of their automotive venture, Toyota became the number one brand in the Philippines. Ty offered to give back majority control to Toyota, saying he was content with a 49-percent stake but the Japanese partners egged him to keep 51 percent.

These days, Toyota Motor Philippines is among the top 10 Toyota affiliates outside Japan and GT Capital is the only one among offshore partners with a majority stake. About two of every five new cars and commercial vehicles bought by the Philippine market are Toyota units.