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.

Following the capital raising by two airlines at the end of last year, several food services companies have announced capital raising measures for companies whose businesses have been severely affected by COVID and whose equity capital has been severely damaged. It is expected that such companies will continue to move capital increases in the future. The last time, there was a rush of equity financing after the economic downturn triggered by GFC. Some companies were able to raise earnings after issuing new shares, while others were not. Issuing new shares imposes a heavy burden on existing shareholders, and the required rate of return on equity is also higher when the issue is made at a low stock price. I will be watching with interest to see how the earnings and the stock price performance of the company that will be increasing its capital will be.

Following the capital raising by two airlines at the end of last year, several food services companies have announced capital raising measures for companies whose businesses have been severely affected by COVID and whose equity capital has been severely damaged. It is expected that such companies will continue to move capital increases in the future. The last time, there was a rush of equity financing after the economic downturn triggered by GFC. Some companies were able to raise earnings after issuing new shares, while others were not. Issuing new shares imposes a heavy burden on existing shareholders, and the required rate of return on equity is also higher when the issue is made at a low stock price. I will be watching with interest to see how the earnings and the stock price performance of the company that will be increasing its capital will be.

Japan's Governance: Raising Capital and Cost of Capital Awareness

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

GigaDevice Semiconductor  / Technical Analysis

Market dynamics remain largely positive which continues to support our constructive outlook, and we view recent weakness as a buying opportunity. Below we highlight notable recent developments and actionable stocks within the Technology, Financials, and Materials Sectors.

Market dynamics remain largely positive which continues to support our constructive outlook, and we view recent weakness as a buying opportunity. Below we highlight notable recent developments and actionable stocks within the Technology, Financials, and Materials Sectors.

China Technology Sector Improving -- Add Exposure

METRICAL has been focusing on the "major shareholder factor" for years. It is not uncommon for a parent company to list its subsidiaries and affiliates while maintaining a certain level of equity stake, including the unique parent-subsidiary listing in Japan. In the case of family companies, it is also possible for the founder's family to maintain a certain level of equity stake in the company, given how the company was formed. As I have shown in my previous article, if we look at the companies in which these large shareholders' equity interests are maintained in terms of the percentage of independent outside directors on the board of directors, it has been confirmed that these companies generally have a low % of independent outside directors. On the other hand, the profitability of these companies is relatively high compared to the average of all listed companies. In this article, we will look at the board practices of these companies.

METRICAL has been focusing on the "major shareholder factor" for years. It is not uncommon for a parent company to list its subsidiaries and affiliates while maintaining a certain level of equity stake, including the unique parent-subsidiary listing in Japan. In the case of family companies, it is also possible for the founder's family to maintain a certain level of equity stake in the company, given how the company was formed. As I have shown in my previous article, if we look at the companies in which these large shareholders' equity interests are maintained in terms of the percentage of independent outside directors on the board of directors, it has been confirmed that these companies generally have a low % of independent outside directors. On the other hand, the profitability of these companies is relatively high compared to the average of all listed companies. In this article, we will look at the board practices of these companies.

Japan's Governance: Major Shareholder Factor

In my previous article, "Tokyo Stock Exchange Reorganization and the Future of Governance," I mentioned that the TSE's market reorganization is expected to have a certain impact on the progress of governance in Japan. On April 4, 2022, the TSE will be reorganized into the "Prime Market", "Standard Market" and "Growth Market" from the previous market segmentation of the 1st Section and three other markets. The Corporate Governance Code is expected to be revised in line with this change, and the draft of the revised Corporate Governance Code was released on April 6, 2021. The proposed revision of the Corporate Governance Code includes a requirement that listed companies in the "Prime Market" have at least 1/3 of all independent outside directors (at least 2 independent outside directors before the revision) as part of their governance structure. The final revision will be made by the Tokyo Stock Exchange, and the revised Corporate Governance Code will be announced by December 2021. Companies wishing to list their shares on the Prime Market are expected to be required to submit a corporate governance report describing matters related to the above-mentioned rules for companies listed on the Prime Market promptly after the general meeting of shareholders of each company to be held after April 2022. I would like to think about this issue.

In my previous article, "Tokyo Stock Exchange Reorganization and the Future of Governance," I mentioned that the TSE's market reorganization is expected to have a certain impact on the progress of governance in Japan. On April 4, 2022, the TSE will be reorganized into the "Prime Market", "Standard Market" and "Growth Market" from the previous market segmentation of the 1st Section and three other markets. The Corporate Governance Code is expected to be revised in line with this change, and the draft of the revised Corporate Governance Code was released on April 6, 2021. The proposed revision of the Corporate Governance Code includes a requirement that listed companies in the "Prime Market" have at least 1/3 of all independent outside directors (at least 2 independent outside directors before the revision) as part of their governance structure. The final revision will be made by the Tokyo Stock Exchange, and the revised Corporate Governance Code will be announced by December 2021. Companies wishing to list their shares on the Prime Market are expected to be required to submit a corporate governance report describing matters related to the above-mentioned rules for companies listed on the Prime Market promptly after the general meeting of shareholders of each company to be held after April 2022. I would like to think about this issue.

Japan's Governance: Revision of Corporate Governance Code and Ratio of Independent Outside Directors

There are two companies whose fiscal year ends in March that have completed their shareholders' meetings at the end of May, and the season for annual shareholders' meetings will finally begin in mid-June. At the AGM, after the business report, the financial statement report and the audit results report, the agenda moves on to the resolutions. In most companies, the appropriation of retained earnings is the first item on the agenda for approval (in companies that do not pay dividends or companies that delegate the appropriation of retained earnings to the board of directors by amending the articles of incorporation, this item is not a resolution of the shareholders' meeting). In most cases, the proposed appropriation of retained earnings is usually approved without any difficulty in the resolution. In recent years, many companies announce dividend increases or share buybacks at the time of their 3Q or 4Q financial results announcement in order to avoid wrangling at the voting stage. However, what shareholders are most interested in is how the company uses its profits and cash flow, and this policy is something that institutional investors always ask the company management to confirm in their engagement. I have discussed capital allocation several times in previous articles, but I would like to consider this issue again from the perspective of exercising voting rights.

There are two companies whose fiscal year ends in March that have completed their shareholders' meetings at the end of May, and the season for annual shareholders' meetings will finally begin in mid-June. At the AGM, after the business report, the financial statement report and the audit results report, the agenda moves on to the resolutions. In most companies, the appropriation of retained earnings is the first item on the agenda for approval (in companies that do not pay dividends or companies that delegate the appropriation of retained earnings to the board of directors by amending the articles of incorporation, this item is not a resolution of the shareholders' meeting). In most cases, the proposed appropriation of retained earnings is usually approved without any difficulty in the resolution. In recent years, many companies announce dividend increases or share buybacks at the time of their 3Q or 4Q financial results announcement in order to avoid wrangling at the voting stage. However, what shareholders are most interested in is how the company uses its profits and cash flow, and this policy is something that institutional investors always ask the company management to confirm in their engagement. I have discussed capital allocation several times in previous articles, but I would like to consider this issue again from the perspective of exercising voting rights.

Japan's Governance: Proposed Appropriation of Surplus at the Annual General Meeting of Shareholders

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)

Japan's Governance: Raising Capital and Cost of Capital Awareness

After the rush of equity financing after GFC, some companies could increase their earnings after issuing new shares, while others couldn’t. The...

Metrical Inc

China Technology Sector Improving -- Add Exposure

Market dynamics remain largely positive which continues to support our constructive outlook, and we view recent weakness as a buying opportunity....

Vermilion Research

Japan's Governance: Major Shareholder Factor

In Japan, it’s common for a parent company to list its subsidiaries and affiliates while maintaining a certain level of equity stake. In this...

Metrical Inc

Japan's Governance: Revision of Corporate Governance Code and Ratio of Independent Outside Directors

In respond to the TSE market reclassification and the change of the composites of TOPIX, more companies will either increase the number of outside...

Metrical Inc

Japan's Governance: Proposed Appropriation of Surplus at the Annual General Meeting of Shareholders

The proposed appropriation of surplus is not simply a matter of considering the dividend payout ratio, but a conclusion that should be reached...

Metrical Inc