Executive Director, Metrical Inc

Aki Matsumoto

Executive Director

Independent Leading Corporate Governance Research

Metrical Inc

METRICAL INC. is an independent leading Corporate Governance research firm in Japan where Corporate Governance is increasingly recognized as an important element on corporate management in these days. Thus, CG research and solutions would become an essential component of global capital markets and play important to contribute to transparency of the markets and maximize shareholders’ value in Japan. 

METRICAL INC. provides Corporate Governance research and analysis including rating services, and  also offers investment research and IR services with solutions and customized profound research on CG and IR issues.

<ul>
<li>In the past, value traps were macro environment that couldn't generate profits in deflationary economy, and micro problem of managers who didn't listen to constructive management improvement proposals from investors.</li>
<li>The introduction of Stewardship Code and Corporate Governance Code, and TSE's request for change in awareness of companies, has reduced the risk of activist investors' investment strategies flailing around in vain.</li>
<li>Management awareness has just begun to change, and few companies generate intrinsic value, as evidenced by the fact that ROE hasn’t begun to improve. Activist investors will continue taking interest.</li>
</ul>


In the past, value traps were macro environment that couldn't generate profits in deflationary economy, and micro problem of managers who didn't listen to constructive management improvement proposals from investors.
The introduction of Stewardship Code and Corporate Governance Code, and TSE's request for change in awareness of companies, has reduced the risk of activist investors' investment strategies flailing around in vain.
Management awareness has just begun to change, and few companies generate intrinsic value, as evidenced by the fact that ROE hasn’t begun to improve. Activist investors will continue taking interest.


A Change in Manager's Mindset that Has Begun Will Lower the Investment Risk for Activist Investors

<ul>
<li>TOPIX-Type passive funds have the challenges of buying stocks that aren't of high quality and of not providing sufficient engagement. JPX Prime 150 is expected to resolve these issues.</li>
<li>Some believe that JPX Prime 150, a market capitalization-weighted index, shows little difference in performance from TOPIX. However, more careful engagement will contribute to value creation in the long run.</li>
<li>The continued creation of passive funds linked to the JPX Prime 150 Index is expected to further highlight high quality companies.</li>
</ul>


TOPIX-Type passive funds have the challenges of buying stocks that aren't of high quality and of not providing sufficient engagement. JPX Prime 150 is expected to resolve these issues.
Some believe that JPX Prime 150, a market capitalization-weighted index, shows little difference in performance from TOPIX. However, more careful engagement will contribute to value creation in the long run.
The continued creation of passive funds linked to the JPX Prime 150 Index is expected to further highlight high quality companies.


Continued Creation of JPX Prime 150-Type Passive Funds Will Help Solve TOPIX Challenges

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

TSE Tokyo Price Index TOPIX / Event-Driven

<ul>
<li>The TSE and Government are pressuring low-PBR companies to DO SOMETHING to raise their PBR to &gt;1.0x. The easiest way to do that is raise ROE.</li>
<li>Raising R requires customers "agree" (buying more, paying a higher price, etc). Lowering E means buying back shares or paying big special dividends. That's easier for a company.</li>
<li>So buybacks have been increasing in number, and breadth, and to some degree in size. This insight describes the mechanics/details of how buybacks work in Japan.</li>
</ul>


The TSE and Government are pressuring low-PBR companies to DO SOMETHING to raise their PBR to &gt;1.0x. The easiest way to do that is raise ROE.
Raising R requires customers "agree" (buying more, paying a higher price, etc). Lowering E means buying back shares or paying big special dividends. That's easier for a company.
So buybacks have been increasing in number, and breadth, and to some degree in size. This insight describes the mechanics/details of how buybacks work in Japan.


<ul>
<li>Most companies with large market capitalization (i.e., those with a high ratio of foreign shareholders) already disclose their financial statements, timely disclosure materials, and convocation notices in English.</li>
<li>Disclosure in English of corporate governance reports and annual securities reports, which have lagged behind, is gradually increasing among companies with large market capitalization.</li>
<li>Similar to the results of the recent disclosure regarding the ”TSE's request", there is also a difference in the disclosure stance between companies with large market capitalization and other companies.</li>
</ul>


Most companies with large market capitalization (i.e., those with a high ratio of foreign shareholders) already disclose their financial statements, timely disclosure materials, and convocation notices in English.
Disclosure in English of corporate governance reports and annual securities reports, which have lagged behind, is gradually increasing among companies with large market capitalization.
Similar to the results of the recent disclosure regarding the ”TSE's request", there is also a difference in the disclosure stance between companies with large market capitalization and other companies.


In the Prime Market, Disclosure in English Also Widens the Gap in the Company's Attitude

<ul>
<li>In mid-January, the TSE announced a "name-and-shame" list where they listed all the companies which had put forth a disclosure about 【資本コストや株価を意識した経営の実現に向けた対応】. But they did not actually shame.</li>
<li>The list shows which companies have disclosed a policy/consideration. But no data/links. We have the links. On Feb 1, the TSE put out a presentation and set of case studies.</li>
<li>We created a tool to name everyone, show their reports, provide links, and now a new tool. Put in a name, see the difference between the Old/New Reports.</li>
</ul>


In mid-January, the TSE announced a "name-and-shame" list where they listed all the companies which had put forth a disclosure about 【資本コストや株価を意識した経営の実現に向けた対応】. But they did not actually shame.
The list shows which companies have disclosed a policy/consideration. But no data/links. We have the links. On Feb 1, the TSE put out a presentation and set of case studies.
We created a tool to name everyone, show their reports, provide links, and now a new tool. Put in a name, see the difference between the Old/New Reports.


Updated Tool and New "Diff File Generator" for TSE "Mgmt Conscious of Capital Cost/Stock Price"

Japan

The TOPIX, also known as the Tokyo Stock Price Index, is a capitalization-weighted index of all companies listed on the First Section of the Tokyo Stock Exchange. The index is supplemented by the subindices of the 33 industry sectors. The index calculation excludes temporary issues and preferred stocks, and has a base value of 100 as of January 4, 1968.

TSE Tokyo Price Index TOPIX (TPX INDEX)

A Change in Manager's Mindset that Has Begun Will Lower the Investment Risk for Activist Investors

I would like to discuss the issues on the January 24 Nikkei article, "Activist Investors Triple in 5 Years, Following Japanese Companies' P/B...

Metrical Inc

Continued Creation of JPX Prime 150-Type Passive Funds Will Help Solve TOPIX Challenges

I would like to discuss the issues on the January 23rd Nikkei article, "TSE to List a ETF of 150 High P/B, High Profitability Companies for Elite...

Metrical Inc

In the Prime Market, Disclosure in English Also Widens the Gap in the Company's Attitude

I would like to discuss the "English Disclosure Implementation Status Survey Summary Report (as of December 31, 2023)" disclosed by the TSE on...

Metrical Inc

Updated Tool and New "Diff File Generator" for TSE "Mgmt Conscious of Capital Cost/Stock Price"

The updated TSE "Management Consciousness of Stock Price and Cost of Capital" list (TSE has to end-Feb, we have to 15-March), with a new tool....

Travis Lundy

A Change in Manager's Mindset that Has Begun Will Lower the Investment Risk for Activist Investors

I would like to discuss the issues on the January 24 Nikkei article, "Activist Investors Triple in 5 Years, Following Japanese Companies' P/B...

Metrical Inc

Continued Creation of JPX Prime 150-Type Passive Funds Will Help Solve TOPIX Challenges

I would like to discuss the issues on the January 23rd Nikkei article, "TSE to List a ETF of 150 High P/B, High Profitability Companies for Elite...

Metrical Inc

Share Buybacks In Japan - A 2023 Primer

This is a primer of Share Buybacks - types and processes - in Japan. As the TSE and Govt try to get PBRs up, it is worth understanding how...

Travis Lundy

In the Prime Market, Disclosure in English Also Widens the Gap in the Company's Attitude

I would like to discuss the "English Disclosure Implementation Status Survey Summary Report (as of December 31, 2023)" disclosed by the TSE on...

Metrical Inc

Updated Tool and New "Diff File Generator" for TSE "Mgmt Conscious of Capital Cost/Stock Price"

The updated TSE "Management Consciousness of Stock Price and Cost of Capital" list (TSE has to end-Feb, we have to 15-March), with a new tool....

Travis Lundy