Activist fund Palliser Capital has taken a stake in Japanese washlet maker Toto and is pushing the firm to ramp up promotion of its little-known chip parts business in a bid to unlock value from the artificial intelligence boom.
The U.K.-based fund sent a letter to Toto’s board last week calling for more disclosure about its advanced ceramics segment. The segment produces electrostatic chucks used in the manufacturing of NAND memory chips, and Palliser views the toilet maker as “the most undervalued and overlooked AI memory beneficiary,” the documents show.
A representative for Toto declined to comment.
Insatiable demand for AI infrastructure has sent memory prices skyrocketing in recent months, boosting shares of chipmakers such as Kioxia Holdings to record highs. Toto has missed out on much of that upside due to the company’s “lack of transparency” on its chuck business, according to the documents.
Palliser’s campaign comes after Toto’s shares gained 10% in a single day last month following a rating upgrade from Goldman Sachs analysts, who highlighted profit growth potential from the company’s chuck-making business.
Palliser, which is currently among Toto’s top 20 shareholders, believes the company can unlock a further 55% upside on its share price by increasing awareness of its chip materials segment and boosting capital efficiency, according to the documents. Toto, which is known for its heated toilet seats, has seen its shares fall around 17% over the past five years, in contrast to the 93% gain in Japan’s Topix index.
Multi-strategy fund Palliser has been a key player in Japan’s ongoing investor activism boom, taking stakes in firms like Keisei Electric Railway and Japan Post Holdings in recent years. The fund was founded by James Smith, a former executive at Elliott Investment Management, in 2021.