Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

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.

Event-Driven

With the release of Toshiba’s explosive investigative report, the news is full of speculation regarding board turnover. Toshiba’s response has been relatively limited, only removing the two most egregious board candidates from its slate. We examine the prospects of the 11 remaining board candidates.

With the release of Toshiba’s explosive investigative report, the news is full of speculation regarding board turnover. Toshiba’s response has been relatively limited, only removing the two most egregious board candidates from its slate. We examine the prospects of the 11 remaining board candidates.

Toshiba – Who Should Stay and Who Should Go

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.

Toshiba is again making headlines with a scandal related to corporate governance. As many of you may know, an external report has revealed that "Toshiba and the Ministry of Economy, Trade and Industry (METI) worked together to exert undue pressure on some shareholders over a personnel proposal by the largest shareholder, Effissimo Capital Management, which was rejected at the annual general meeting of shareholders last June. This led to a complicated situation in which the proposal for the election of directors (proposed by the company) at this month's annual shareholders' meeting was later replaced, and the state of management was again called into question. In the wake of the accounting scandal that broke in 2015, Toshiba is believed to have overhauled its governance structure, with 10 of its 11 board directors now independent outside directors and a shift to a company with a statutory 3 committees (including nominating). In January this year, window-dressing of accounting for fictitious transactions was revealed at subsidiary Toshiba IT Services. In addition to Toshiba, Nissan Motor, Mitsubishi Motors and other companies have been repeatedly involved in scandals in the past, such as concealing recalls and fraudulent inspection data. Why are the scandals repeated?

Toshiba is again making headlines with a scandal related to corporate governance. As many of you may know, an external report has revealed that "Toshiba and the Ministry of Economy, Trade and Industry (METI) worked together to exert undue pressure on some shareholders over a personnel proposal by the largest shareholder, Effissimo Capital Management, which was rejected at the annual general meeting of shareholders last June. This led to a complicated situation in which the proposal for the election of directors (proposed by the company) at this month's annual shareholders' meeting was later replaced, and the state of management was again called into question. In the wake of the accounting scandal that broke in 2015, Toshiba is believed to have overhauled its governance structure, with 10 of its 11 board directors now independent outside directors and a shift to a company with a statutory 3 committees (including nominating). In January this year, window-dressing of accounting for fictitious transactions was revealed at subsidiary Toshiba IT Services. In addition to Toshiba, Nissan Motor, Mitsubishi Motors and other companies have been repeatedly involved in scandals in the past, such as concealing recalls and fraudulent inspection data. Why are the scandals repeated?

Chart based progressive global trading strategies, Chart Partners

Thomas Schroeder

Chart based progressive global trading strategies

Chart Partners

Chart Partners objective is to discover medium-term cycle turns and profit opportunities before they unfold, within structural trends while preserving capital with clear degrees of risk. We have real return ideas. 

Markets are dynamic and trading systems must reflect this. It is crucial to determine underlying correlations and lead-lag relationships within global markets and the impact on linked instruments. Our weekly Chartonics product gives you short-term trading strategies that can be applied within the medium and longer term macro trends that are mapped out in our strategy updates. 

Our methodology fuses global market variables and isolates drivers in trends. We specialize in FX, index trade in NY and Asia with a focus on Asian stocks. 

Technical Analysis

<a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1" rel="noopener">Toshiba Corp (6502 JP)</a> shows some clear red flags on the back of the bear wedge in price and RSI amid deteriorating buy volumes on recent strength. Bias for an undershoot of the 4,000 breakout pivot level as the fresh buy zone in July.Short trade outlined within the wedge for a break below wedge and trendline support with a clear and tight risk pivot. Late June seasonality will factor into a pullback as well.Macro directional bet is to buy noise below the 4,000 support.

Toshiba Corp (6502 JP) shows some clear red flags on the back of the bear wedge in price and RSI amid deteriorating buy volumes on recent strength. Bias for an undershoot of the 4,000 breakout pivot level as the fresh buy zone in July.Short trade outlined within the wedge for a break below wedge and trendline support with a clear and tight risk pivot. Late June seasonality will factor into a pullback as well.Macro directional bet is to buy noise below the 4,000 support.

Global Special Situations & Strategy, SR Services Ltd

David Lepper

Global Special Situations & Strategy

SR Services Ltd

SR Services provides Strategic Knowledge and Solutions services for Family Offices and Corporate Business. 

We deliver this via advisory services, strategic planning, opportunity analysis/sourcing, as well as solution implementation. 

Whilst, we create intellectual discipline and operational leverage for your projects or daily activities, our ultimate objective is to empower whilst enhancing your decision making. 

Strategic Knowledge and Solutions

Equity Bottom-Up

<ul>
<li>Activists’ stance on ESG justified In our  <a href="https://www.smartkarma.com/insights/toshiba-corp-6502-jp-chapter-2-company-engages-stakeholders" target="_blank" data-smartkarma-citation="insights:50585" rel="noopener">Toshiba Corp (6502 JP) Chapter 2: Company Engages Stakeholders</a> note, we addressed what was likely to happen next in this saga. In particular, we stated, “ESG” was firmly on the agenda. Specifically, we sided with 3D Investment Partners stating that financial risk and reward issues would likely take a back seat.</li>
<li>
Time is of the essence: The findings of the report highlight that Toshiba needs to act immediately to rectify the serious matters identified. Whilst as of 13th June 2021 two members have withdrawn their 2021 nominations and several resignations have been filed, in our view the full management and board resignation (albeit phased) is required. In addition, private equity bids need to be approved.</li>
<li>We examine the next likely steps, likely ESG rating trends, various corporate and share price risks. We specifically look at what are the required measures to alleviate pressure now likely to be brought by ESG compliant investors for the company. Our conclusion leads us to reason that after a period of share price consolidation the share price is set to move higher.</li>
</ul>


Activists’ stance on ESG justified In our  Toshiba Corp (6502 JP) Chapter 2: Company Engages Stakeholders note, we addressed what was likely to happen next in this saga. In particular, we stated, “ESG” was firmly on the agenda. Specifically, we sided with 3D Investment Partners stating that financial risk and reward issues would likely take a back seat.

Time is of the essence: The findings of the report highlight that Toshiba needs to act immediately to rectify the serious matters identified. Whilst as of 13th June 2021 two members have withdrawn their 2021 nominations and several resignations have been filed, in our view the full management and board resignation (albeit phased) is required. In addition, private equity bids need to be approved.
We examine the next likely steps, likely ESG rating trends, various corporate and share price risks. We specifically look at what are the required measures to alleviate pressure now likely to be brought by ESG compliant investors for the company. Our conclusion leads us to reason that after a period of share price consolidation the share price is set to move higher.


Toshiba Corp (6502 JP) Chapter 4: Dynamics in Activist’s Favour, Due to Investigation Report

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

On Friday 11 June, the TSE published its final revisions to the Corporate Governance Code which had been undergoing review by the Council of Experts Concerning the Follow-up of Japan’s Stewardship Code and Japan’s Corporate Governance Code and subsequently comment for the past many months. The new Code went into effect as of 11 June. The first revision to the Guidelines for Investor and Company Engagement were published as well. The new version of Japan's Corporate Governance Code is <a href="https://www.jpx.co.jp/english/news/1020/b5b4pj0000046kxj-att/b5b4pj0000046l07.pdf" target="_blank" rel="noopener">here</a> with the tracked change version <a href="https://www.jpx.co.jp/english/news/1020/b5b4pj0000046kxj-att/b5b4pj0000046l0c.pdf" target="_blank" rel="noopener">here</a>. This is the second revision of the Code (the first revision was in 2018).The revisions to the JFSA Guidelines for Investor and Company Engagement are <a href="https://www.jpx.co.jp/english/news/1020/b5b4pj0000046kxj-att/b5b4pj0000046l3e.pdf" target="_blank" rel="noopener">here</a>. Tracked changes are <a href="https://www.jpx.co.jp/english/news/1020/b5b4pj0000046kxj-att/b5b4pj0000046l50.pdf" target="_blank" rel="noopener">here</a>.The major changes to the Code recommend enhancements to Board independence, diversity, Sustainability and ESG, and also recommend improvements to investor accessibility and voting and a small change to listed parent-listed subsidiary relationships which unfortunately will not do much to counter abuse by companies of listed sub minority shareholders. Below is more discussion of the changes and what they mean.But I remind investors, these changes are almost all box-ticking exercises. They will not improve governance for shareholders except at the margins. Companies which "get" good governance are still rare. And those which don't get it seem to abuse shareholders on a regular basis. And for that, investors still need more cowbell.

On Friday 11 June, the TSE published its final revisions to the Corporate Governance Code which had been undergoing review by the Council of Experts Concerning the Follow-up of Japan’s Stewardship Code and Japan’s Corporate Governance Code and subsequently comment for the past many months. The new Code went into effect as of 11 June. The first revision to the Guidelines for Investor and Company Engagement were published as well. The new version of Japan's Corporate Governance Code is here with the tracked change version here. This is the second revision of the Code (the first revision was in 2018).The revisions to the JFSA Guidelines for Investor and Company Engagement are here. Tracked changes are here.The major changes to the Code recommend enhancements to Board independence, diversity, Sustainability and ESG, and also recommend improvements to investor accessibility and voting and a small change to listed parent-listed subsidiary relationships which unfortunately will not do much to counter abuse by companies of listed sub minority shareholders. Below is more discussion of the changes and what they mean.But I remind investors, these changes are almost all box-ticking exercises. They will not improve governance for shareholders except at the margins. Companies which "get" good governance are still rare. And those which don't get it seem to abuse shareholders on a regular basis. And for that, investors still need more cowbell.

TSE Prime: Japan's Corporate Governance Code Finalized So Boxes Will Be Furiously Ticked

Japan

Toshiba Corporation manufactures and markets electrical and electronic products. The Company's products include digital products such as PCs and televisions, NAND flash memories, and system LSIs (large-scale integrated), as well as social infrastructures such as power generators, medical equipment, and home appliances.

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Toshiba Corp (6502 JP)

Toshiba – Who Should Stay and Who Should Go

With the release of Toshiba’s explosive investigative report, the news is full of speculation regarding board turnover. We examine the prospects of...

Mio Kato

Japan's Governance: Repeated Scandals

Toshiba is believed to have overhauled its governance, but repeated the scandals. In addition to Toshiba, other companies have been repeatedly...

Metrical Inc

Toshiba to Test the 4,000 Breakout Level

Toshiba Corp (6502 JP) shows some clear red flags on the back of the bear wedge in price and RSI amid deteriorating buy volumes on recent strength....

Thomas Schroeder