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Sharp Declines to at Least 38-Year Low After Goldman Cut

Oct. 9 (Bloomberg) -- Sharp Corp., the Japanese electronics maker on course to post a second straight full-year loss, dropped to the lowest level in at least 38 years in Tokyo trading after Goldman Sachs Group Inc. cut its rating to sell.

Sharp slumped 15 percent to 151 yen, the lowest since at least 1974. The stock was the biggest loser on the benchmark Nikkei 225 Stock Average, which fell 1.1 percent. Japanese markets were shut yesterday for a public holiday.

The maker of Aquos televisions may need to issue new stock to raise funds, eroding shareholder value, Goldman Sachs analysts led by Takashi Watanabe wrote in a report on Oct. 6. Goldman Sachs, which cut the stock’s rating from neutral, also reduced Sharp’s 12-month price estimate by 31 percent to 120 yen because of expectations that earnings per share will be diluted by about 50 percent with the new stock.

“Even assuming continued financial support from its banks, we are more convinced Sharp will need to issue fresh equity,” Goldman Sachs wrote in the report. Sharp’s equity-to-asset ratio “could deteriorate further if more inventory valuation losses or fixed-asset writedowns emerge,” the brokerage said.

Sharp isn’t in a position to comment on the views of Goldman Sachs, Miyuki Nakayama, a spokeswoman at the Japanese company, said by telephone today.

The company will need to book 106 billion yen ($1.4 billion) of unrecognized pension reserves next fiscal year, trimming the equity ratio to 4 percent at the end of March 2014, Goldman Sachs said. That compares with about 24 percent in the year ended March 31, the report showed.

The brokerage widened its estimate for Sharp’s net loss this fiscal year to 474.5 billion yen from 374.5 billion yen to include 100 billion yen in deferred tax-asset writedowns. Sharp on Aug. 2 forecast a loss of 250 billion yen for the 12 months ending March 31.

To contact the reporter on this story: Naoko Fujimura in Tokyo at nfujimura@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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