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King Street urges Toshiba to take full advantage of this historic opportunity and realize the extraordinary returns that would be generated by an accelerated and increased ¥1.1 trillion share buyback and the successful execution of the Toshiba Next Plan.

Toshiba is Significantly Undervalued

The timing and size of Toshiba’s share buyback are both critical given our belief that Toshiba is severely undervalued. Toshiba’s operating businesses include sizable, high-quality, industrial companies that manufacture well-respected products and generate over ¥2.7 trillion of revenue (see slide 9 of the presentation). Many of these businesses have stable recurring revenue streams and high margins, are leading players in the domestic market and/or possess differentiated technologies. However, based on Toshiba’s September 27, 2018 closing price, the implied value for these operating businesses is ¥107 billion, or less than 5% of their intrinsic value.

While Toshiba has suffered from low operating margins for many years, there are numerous short-term initiatives for various business lines that will enable Toshiba to more than triple its margins to 5% in the next 12 to 24 months. These initiatives, laid out on slides 31-33, would increase the value of Toshiba’s operating businesses to ¥1.2 trillion. We expect the Toshiba Next Plan, once finalized, should further increase their value to ¥2.6 trillion by achieving more globally competitive margins of ~11%. By accelerating and increasing the share buyback as we recommend, Toshiba’s share price could reach ¥11,157 (see slide 22).