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>ROE, ROA, and Tobin's Q are significantly higher for the group of companies with major shareholders (a) and (b) than for the group of companies without major shareholders (c).</li>
<li>Yesterday, Toppan Printing (7911) announced that it will make its listed subsidiary Toppan Forms (7862) a wholly owned subsidiary. </li>
<li>Even if the past profit margin of a subsidiary isn't necessarily higher than that of the parent, TOB may be conducted if it's better to include it in the future.</li>
</ul>


ROE, ROA, and Tobin's Q are significantly higher for the group of companies with major shareholders (a) and (b) than for the group of companies without major shareholders (c).
Yesterday, Toppan Printing (7911) announced that it will make its listed subsidiary Toppan Forms (7862) a wholly owned subsidiary. 
Even if the past profit margin of a subsidiary isn't necessarily higher than that of the parent, TOB may be conducted if it's better to include it in the future.


Japan's Governance: Parent-Subsidiary Listing Investment Strategy Update (2)

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<p>In a parent-sub consolidation which should be no surprise to anyone, today simultaneous to the earnings announcements, <a href="https://www.smartkarma.com/entities/toppan-printing-co-ltd" target="_blank" data-smartkarma-citation="entities:11875:1" rel="noopener">Toppan Printing (7911 JP)</a> announced that it would launch a Tender Offer to buy out minorities in 60%-held subsidiary <a href="https://www.smartkarma.com/entities/toppan-forms-co-ltd" target="_blank" data-smartkarma-citation="entities:5061:1" rel="noopener">Toppan Forms (7862 JP)</a> at ¥1,550/share.</p><p>The deal comes at a 51.7% premium and while not an all-time high, it is a significant jump on recent trading levels, and is reasonably close to book value. </p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/240/850/original/Screenshot+2021-11-10+at+4.25.10+PM.png?1636532861" class="editor-image img-responsive" data-smartkarma-image-id="240850"></figure><p>But that doesn't mean it is the the right price. </p>
<p>There are two trades to do, depending on your market outlook near-term.</p>
<p>More details below the fold. </p>
<p>And this is perhaps the last insight with anything colourful or fun above the fold because Smartkarma appears to have changed the formatting while I am writing. </p>
<p>So here's a strange gif from 'Nosferatu' (1929).</p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/240/881/original/nosferatu+gif.gif?1636540714" class="editor-image img-responsive" data-smartkarma-image-id="240881"></figure></section><p></p>
<p></p></section>

In a parent-sub consolidation which should be no surprise to anyone, today simultaneous to the earnings announcements, Toppan Printing (7911 JP) announced that it would launch a Tender Offer to buy out minorities in 60%-held subsidiary Toppan Forms (7862 JP) at ¥1,550/share.The deal comes at a 51.7% premium and while not an all-time high, it is a significant jump on recent trading levels, and is reasonably close to book value. But that doesn't mean it is the the right price. 
There are two trades to do, depending on your market outlook near-term.
More details below the fold. 
And this is perhaps the last insight with anything colourful or fun above the fold because Smartkarma appears to have changed the formatting while I am writing. 
So here's a strange gif from 'Nosferatu' (1929).



Toppan Printing Takes Out Subsidiary Toppan Forms (7862)

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Thematic (Sector/Industry)

<p style="text-align: center;"><strong>• EARNINGS MOMENTUM TURNS POSITIVE •</strong></p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/188/535/original/2021-02-14_09-01-24.png?1613260898" class="editor-image img-responsive" data-smartkarma-image-id="188535"></figure><div class="content-caption">Source for all charts &amp; tables: Japan Analytics</div></section><p><strong>POSITIVE EARNINGS MOMENTUM</strong> - For the first time in just over one year and driven by a strong recovery in the index-heavy <strong>Auto</strong> Sector, our Market Composite Results &amp; Revision Score - a measure of earnings momentum - has turned positive. Meanwhile, the Cabinet Office Leading Indicator of Business Conditions which is indexed to August 2015, has yet to rise above 100 and declined by 120 basis points for December.</p><section class="figure"><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/188/537/original/2021-02-14_08-23-29.png?1613262285" class="editor-image img-responsive" data-smartkarma-image-id="188537"></figure></section><p><strong>SECTOR BREAKDOWN</strong> - The leading Sectors, as measured by the change in Results &amp; Revision Score, are<strong> Other Commercial Products</strong>, <strong>Autos</strong>, <strong>Metals</strong>, <strong>Building Materials</strong>, and <strong>Other Consumer Products</strong>. The laggards are <strong>Utilities</strong>, <strong>Internet</strong>, <strong>Food</strong>, <strong>Beverages &amp; Tobacco</strong>, <strong>Retail</strong>, and <strong>Commercial Services</strong>. As in other markets, cyclicals leading the recovery, and, as a result, driving Japan's indices to new multi-decade highs.</p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/188/538/original/2021-02-14_08-22-44.png?1613262793" class="editor-image img-responsive" data-smartkarma-image-id="188538"></figure></section><p><strong>FORWARD VALUATIONS</strong> - While the trailing Market Composite PER remain above 30 times,  a ¥7.6 trillion increase in forecast Net Income from the low point if 2020, has reduced the forward multiple to 28.2 times. By the end of May, most March year-end companies will have made forecasts for the year to March 2022 - a decline to below 25 times is likely, assuming Total Market Value is at current levels.</p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/188/539/original/2021-02-14_08-14-17.png?1613262839" class="editor-image img-responsive" data-smartkarma-image-id="188539"></figure></section><p><strong>ALL-TIME US$ HIGH &lt;10% AWAY</strong> - While much is being written about the new thirty-year high for the TOPIX index, many will have missed the proximity of TOPIX in US dollars terms to a new all-time high, which would occur with a combined 9.5% increase in the equity market and the Yen. A 4.3% rise in TOPIX and a USDJPY rate of 100 is all that is required and would be a welcome feather in the cap of the recently beleaguered PM Suga's cap. </p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/188/540/original/2021-02-14_10-05-46.png?1613264814" class="editor-image img-responsive" data-smartkarma-image-id="188540"></figure></section><p><strong>RSI &gt;80</strong> - Tempering the current bullishness are the RSI of over 80 and a Toraku index close to 120. Both suggest near-term caution is warranted.</p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/188/541/original/2021-02-14_10-15-17.png?1613265332" class="editor-image img-responsive" data-smartkarma-image-id="188541"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/188/542/original/2021-02-14_10-20-42.png?1613265721" class="editor-image img-responsive" data-smartkarma-image-id="188542"></figure></section><hr></section><p style="text-align: center;"><br><strong>• RESULTS &amp; REVISIONS SUMMARY - 12th FEBRUARY •</strong></p><div><p>Of Friday's 723 results announcements, 64% scored positively for earnings momentum despite trailing revenues falling by 3% on average and a 3.9 point decline in operating margins. 17% of companies were in the red for the quarter.  63% of the 360 annual forecasts/revision announcements scored positively, and the average Forecast/Revision score was +10.3 points.</p></div><div><p style="text-align: center;"><strong>• BEST &amp; WORST •</strong></p></div><div>
<p>The 'best' larger-cap announcements came from <a href="https://www.smartkarma.com/entities/yamaha-motor-co-ltd" target="_blank" data-smartkarma-citation="entities:7411:1" rel="noopener">Yamaha Motor (7272 JP)</a>,  <a href="https://www.smartkarma.com/entities/japan-post-bank-co-ltd" target="_blank" data-smartkarma-citation="entities:838:1" rel="noopener">Japan Post Bank (7182 JP)</a>, and <a href="https://www.smartkarma.com/entities/toppan-printing-co-ltd" target="_blank" data-smartkarma-citation="entities:11875:1" rel="noopener">Toppan Printing (7911 JP)</a>; the 'worst' were from <a href="https://www.smartkarma.com/entities/otsuka-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:12292:1" rel="noopener">Otsuka Holdings (4578 JP)</a>, <a href="https://www.smartkarma.com/entities/sumitomo-dainippon-pharma-co" target="_blank" data-smartkarma-citation="entities:1935:1" rel="noopener">Sumitomo Dainippon Pharma (4506 JP)</a>, and <a href="https://www.smartkarma.com/entities/lion-corp" target="_blank" data-smartkarma-citation="entities:16576:1" rel="noopener">Lion (4912 JP)</a>.  <a href="https://www.smartkarma.com/entities/pola-orbis-holdings-inc" target="_blank" data-smartkarma-citation="entities:2287:1" rel="noopener">Pola Orbis (4927 JP)</a> and <a href="https://www.smartkarma.com/entities/asahi-group-holdings-ltd" target="_blank" data-smartkarma-citation="entities:10482:1" rel="noopener">Asahi Group (2502 JP)</a> take the prizes for optimism.  For more, see the <strong>DETAIL</strong> section below.</p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/188/605/original/2021-02-15_06-00-48.png?1613336460" class="editor-image img-responsive" data-smartkarma-image-id="188605"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/188/606/original/2021-02-15_06-01-37.png?1613336511" class="editor-image img-responsive" data-smartkarma-image-id="188606"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/188/608/original/2021-02-15_06-05-12.png?1613336726" class="editor-image img-responsive" data-smartkarma-image-id="188608"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/188/610/original/2021-02-15_06-05-57.png?1613336771" class="editor-image img-responsive" data-smartkarma-image-id="188610"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/188/611/original/2021-02-15_06-06-35.png?1613336808" class="editor-image img-responsive" data-smartkarma-image-id="188611"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/188/612/original/2021-02-15_06-07-12.png?1613336846" class="editor-image img-responsive" data-smartkarma-image-id="188612"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/188/613/original/2021-02-15_06-10-36.png?1613337047" class="editor-image img-responsive" data-smartkarma-image-id="188613"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/188/615/original/2021-02-15_06-11-21.png?1613337091" class="editor-image img-responsive" data-smartkarma-image-id="188615"></figure></section><p></p>
</div>

• EARNINGS MOMENTUM TURNS POSITIVE •Source for all charts &amp; tables: Japan AnalyticsPOSITIVE EARNINGS MOMENTUM - For the first time in just over one year and driven by a strong recovery in the index-heavy Auto Sector, our Market Composite Results &amp; Revision Score - a measure of earnings momentum - has turned positive. Meanwhile, the Cabinet Office Leading Indicator of Business Conditions which is indexed to August 2015, has yet to rise above 100 and declined by 120 basis points for December.SECTOR BREAKDOWN - The leading Sectors, as measured by the change in Results &amp; Revision Score, are Other Commercial Products, Autos, Metals, Building Materials, and Other Consumer Products. The laggards are Utilities, Internet, Food, Beverages &amp; Tobacco, Retail, and Commercial Services. As in other markets, cyclicals leading the recovery, and, as a result, driving Japan's indices to new multi-decade highs.
FORWARD VALUATIONS - While the trailing Market Composite PER remain above 30 times,  a ¥7.6 trillion increase in forecast Net Income from the low point if 2020, has reduced the forward multiple to 28.2 times. By the end of May, most March year-end companies will have made forecasts for the year to March 2022 - a decline to below 25 times is likely, assuming Total Market Value is at current levels.
ALL-TIME US$ HIGH &lt;10% AWAY - While much is being written about the new thirty-year high for the TOPIX index, many will have missed the proximity of TOPIX in US dollars terms to a new all-time high, which would occur with a combined 9.5% increase in the equity market and the Yen. A 4.3% rise in TOPIX and a USDJPY rate of 100 is all that is required and would be a welcome feather in the cap of the recently beleaguered PM Suga's cap. 
RSI &gt;80 - Tempering the current bullishness are the RSI of over 80 and a Toraku index close to 120. Both suggest near-term caution is warranted.
 • RESULTS &amp; REVISIONS SUMMARY - 12th FEBRUARY •Of Friday's 723 results announcements, 64% scored positively for earnings momentum despite trailing revenues falling by 3% on average and a 3.9 point decline in operating margins. 17% of companies were in the red for the quarter.  63% of the 360 annual forecasts/revision announcements scored positively, and the average Forecast/Revision score was +10.3 points.• BEST &amp; WORST •
The 'best' larger-cap announcements came from Yamaha Motor (7272 JP),  Japan Post Bank (7182 JP), and Toppan Printing (7911 JP); the 'worst' were from Otsuka Holdings (4578 JP), Sumitomo Dainippon Pharma (4506 JP), and Lion (4912 JP).  Pola Orbis (4927 JP) and Asahi Group (2502 JP) take the prizes for optimism.  For more, see the DETAIL section below.



🇯🇵 JAPAN • Market & Results & Revisions Update 02/12 • Yamaha Motor, J Post Bank, Otsuka & Lion

Equity Capital Markets

Recruit Holdings / Equity Capital Markets

<p>Today (30 Nov 2020) after the close, <a href="https://www.smartkarma.com/entities/recruit-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:15070:1" rel="noopener">Recruit Holdings (6098 JP)</a><a href="https://recruit-holdings.co.jp/ir/ir_news/20201130_01.html" target="_blank" rel="noopener">announced</a> (Japanese only so far) a selldown of shares by eight different companies with a total share sale amounting to 86.111mm shares (plus greenshoe) for an ex-ante expected Offering size of ¥416.8bn or US$4.0 billion. </p><p>This has happened twice before since IPO as corporate shareholders who owned most of Recruit prior to its IPO sell shares down. </p><p>Like in large secondary share sales conducted in previous years, there is a <a href="https://recruit-holdings.co.jp/ir/ir_news/20201130_02.html" target="_blank" rel="noopener">buyback</a> (Japanese only so far) attached where Recruit will buy back a non-negligible portion of the offering, and having learned from the mini-debacle in 2016, in 2019 the company started its buyback post-offering. This year it is the same.</p><p>There are, as always, interesting investor placement dynamics and buyback and index implications, discussed below, along with the history of the prior events.</p><p>The real difference this year is that pricing happens speedily. This week. Probably on Wednesday. That's fast. The last two were 9 and 13 days after announcement. </p>

Today (30 Nov 2020) after the close, Recruit Holdings (6098 JP)announced (Japanese only so far) a selldown of shares by eight different companies with a total share sale amounting to 86.111mm shares (plus greenshoe) for an ex-ante expected Offering size of ¥416.8bn or US$4.0 billion. This has happened twice before since IPO as corporate shareholders who owned most of Recruit prior to its IPO sell shares down. Like in large secondary share sales conducted in previous years, there is a buyback (Japanese only so far) attached where Recruit will buy back a non-negligible portion of the offering, and having learned from the mini-debacle in 2016, in 2019 the company started its buyback post-offering. This year it is the same.There are, as always, interesting investor placement dynamics and buyback and index implications, discussed below, along with the history of the prior events.The real difference this year is that pricing happens speedily. This week. Probably on Wednesday. That's fast. The last two were 9 and 13 days after announcement. 

A Speedy Recruit Offering (And Slower Buyback)

<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/173/867/original/2020-11-25_11-14-58.png?1606270511" class="editor-image img-responsive" data-smartkarma-image-id="173867"></figure></section><div class="content-caption">Source for all charts &amp; tables: Japan Analytics</div><p><strong>FOUR QUADRANTS</strong> - By combining our two scoring methodologies - the Relative Price Score (RPS) and the Results &amp; Revision Score (RRS), we can assign companies into four quadrants:-</p><ul>
<li>
<strong>CONTRARIAN BUYS</strong> - Companies with<strong> low</strong> Results &amp; Revision and Relative Price Scores</li>
<li>
<strong>CONTRARIAN SELLS</strong> - Companies with <strong>high</strong> Results &amp; Revision and Relative Price Scores</li>
<li>
<strong>TURNAROUNDS</strong> - Companies with<strong> high</strong> Results &amp; Revision Scores &amp; <strong>low</strong> Relative Price Scores</li>
<li>
<strong>EX-GROWTH</strong> - Companies with <strong>low</strong> Results &amp; Revision Scores &amp; <strong>high</strong> Relative Price Scores</li>
</ul><p>In the two <strong>Contrarian</strong> quadrants, companies can remain outliers for extended periods, such as <a href="https://www.smartkarma.com/entities/jfe-holdings-inc" target="_blank" data-smartkarma-citation="entities:210:1" rel="noopener">JFE (5411 JP)</a>  in Buys, <a href="https://www.smartkarma.com/entities/lasertec-corp" target="_blank" data-smartkarma-citation="entities:4126:1" rel="noopener">Lasertec (6920 JP)</a> in Sells. The other quadrants see much more 'turnover' and van can offer profitable trading opportunities such as <a href="https://www.smartkarma.com/entities/lixil-group-corp" target="_blank" data-smartkarma-citation="entities:454:1" rel="noopener">Lixil(5938 JP)</a> in <strong>Turnarounds,</strong> and <a href="https://www.smartkarma.com/entities/ariake-japan-co-ltd" target="_blank" data-smartkarma-citation="entities:4908:1" rel="noopener">Ariake Japan (2815 JP)</a> in the <strong>Ex-Growth</strong> quadrant.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/173/896/original/2020-11-25_12-25-57.png?1606274769" class="editor-image img-responsive" data-smartkarma-image-id="173896"></figure><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/173/903/original/2020-11-25_12-56-49.png?1606276623" class="editor-image img-responsive" data-smartkarma-image-id="173903"></figure></section><p><strong><a href="https://www.dropbox.com/s/7b61jl02dh0pzno/2020-11-25_12-43-55.png?dl=0" target="_blank" rel="noopener">CONTRARIAN BUYS</a> -</strong> In the <strong>DETAIL</strong> below, we shall review the current 'crop' of Contrarian Buys for potential opportunities. Subsequent Insights in this mini-series will look into the other three quadrants before concluding with one '<em><strong>2021 High Conviction</strong></em>' recommendation. </p></section>

Source for all charts &amp; tables: Japan AnalyticsFOUR QUADRANTS - By combining our two scoring methodologies - the Relative Price Score (RPS) and the Results &amp; Revision Score (RRS), we can assign companies into four quadrants:-

CONTRARIAN BUYS - Companies with low Results &amp; Revision and Relative Price Scores

CONTRARIAN SELLS - Companies with high Results &amp; Revision and Relative Price Scores

TURNAROUNDS - Companies with high Results &amp; Revision Scores &amp; low Relative Price Scores

EX-GROWTH - Companies with low Results &amp; Revision Scores &amp; high Relative Price Scores
In the two Contrarian quadrants, companies can remain outliers for extended periods, such as JFE (5411 JP)  in Buys, Lasertec (6920 JP) in Sells. The other quadrants see much more 'turnover' and van can offer profitable trading opportunities such as Lixil(5938 JP) in Turnarounds, and Ariake Japan (2815 JP) in the Ex-Growth quadrant.CONTRARIAN BUYS - In the DETAIL below, we shall review the current 'crop' of Contrarian Buys for potential opportunities. Subsequent Insights in this mini-series will look into the other three quadrants before concluding with one '2021 High Conviction' recommendation. 

🇯🇵 JAPAN • Four Quadrants - Contrarian Buys

Japan

Toppan Printing Co., Ltd. is a printing company that provides commercial and publication printing services. The Company also prints securities paper, packaging products, and electronic related products such as photomasks and colorfilters. Toppan Printing also produces inks and operates a text book publication business.

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Toppan Printing (7911 JP)

Japan's Governance: Parent-Subsidiary Listing Investment Strategy Update (2)

Even if the past profit margin of a subsidiary is not necessarily higher than that of the parent company, a TOB may be conducted if it is better to...

Metrical Inc

Toppan Printing Takes Out Subsidiary Toppan Forms (7862)

Toppan Printing (7911) is finally taking out Toppan Forms (7862). It may be a 51% premium to last and the highest price in quite a while, but it...

Travis Lundy

🇯🇵 JAPAN • Market & Results & Revisions Update 02/12 • Yamaha Motor, J Post Bank, Otsuka & Lion

For the first time in just over one year and driven by a strong recovery in the index-heavy Auto Sector, our Market Composite Results & Revision...

Campbell Gunn

A Speedy Recruit Offering (And Slower Buyback)

A Large and Speedily-Executed Secondary Offering by Recruit may test investor appetite. The reaction could be sharp in the next two days, leading...

Travis Lundy

🇯🇵 JAPAN • Four Quadrants - Contrarian Buys

FOUR QUADRANTS - By combining our two scoring methodologies - the Relative Price Score (RPS) and the Results & Revision Score (RRS), we can assign...

Campbell Gunn

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