Category

ESG

Mar 26
0

Daily Brief ESG: This TOB Does Not Question the Fundamental Issue of REIT Governance and more

By | Daily Briefs, ESG

In today’s briefing:

  • This TOB Does Not Question the Fundamental Issue of REIT Governance, but Will the Tactic Succeed?

This TOB Does Not Question the Fundamental Issue of REIT Governance, but Will the Tactic Succeed?

By Aki Matsumoto

  • Since important decisions on REIT management are made by the sponsor companies, governance isn’t functioning. That’s why REITs have been very careful to strengthen their compliance systems and information disclosure.
  • For REITs that rely heavily on properties contributed by their sponsors, it is unlikely that other investors would support an activist fund’s advocacy for a change of asset manager.
  • The most annoying thing for the sponsor is the change of asset manager. The tactic of this TOB is to extract shareholder returns by addressing what the sponsor company dislike.

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Mar 24
0

Daily Brief ESG: TSE Growth Market Reforms Also Expected to Be Effective in “Request” and more

By | Daily Briefs, ESG

In today’s briefing:

  • TSE Growth Market Reforms Also Expected to Be Effective in “Request”

TSE Growth Market Reforms Also Expected to Be Effective in “Request”

By Aki Matsumoto

  • A drastic shift by the TSE to focus on quality without increasing the number of listed companies by reducing the number of IPO companies is not very promising.
  • TSE will raise the hurdle for listing maintenance criteria slightly, but it will ask companies to make a commitment to post-listing growth during the listing examination process.
  • It’ll take time for quality of market to increase, and we expect that companies that are aware of listing costs with help from investors will naturally move to de-list themselves.

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Mar 22
0

Daily Brief ESG: “TSE’s Request” Catalyzes and Attracts Activist Investors to Invest and more

By | Daily Briefs, ESG

In today’s briefing:

  • “TSE’s Request” Catalyzes and Attracts Activist Investors to Invest

“TSE’s Request” Catalyzes and Attracts Activist Investors to Invest

By Aki Matsumoto

  • When investing in a larger company, one can expect higher liquidity, higher expectations of endorsement of the activist investor’s views because of the large institutional holdings, and smoother communication.
  • As cross-shareholding structures are beginning to break down, there’re many opportunities for activist investors to attack such companies because they couldn’t create value and grow due to underutilization of resources.
  • Activist investors have invested in Japanese companies in the past, but never with such success. This success is largely due to a change in the environment.

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Mar 21
0

Daily Brief ESG: Instilling Expectations Was Positive and more

By | Daily Briefs, ESG

In today’s briefing:

  • Instilling Expectations Was Positive, but Interest Quickly Shifting from Seriousness to Performance

Instilling Expectations Was Positive, but Interest Quickly Shifting from Seriousness to Performance

By Aki Matsumoto

  • The reorganization of Panasonic Holdings was far from restructuring its business portfolio, as it brought highly profitable subsidiaries and affiliates into the parent company while leaving low-profit businesses alone.
  • Although Panasonic’s disclosure was successful as IR in instilling “expectations” in investors by showing targets, a possibility cannot be denied that it’s temporary phenomenon that came at market turning point.
  • Now, 3 years after “TSE’s request,” many investors are looking to improve profitability by restructuring their business portfolios, and will likely demand steady results year after year.

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Mar 18
0

Daily Brief ESG: SATS: Integrating WFS –Key to Acquisition Success and more

By | Daily Briefs, ESG

In today’s briefing:

  • SATS: Integrating WFS –Key to Acquisition Success
  • MBOs Will Rise, Even if Companies and Funds Are Sleeping in the Same Bed but Having Different Dreams

SATS: Integrating WFS –Key to Acquisition Success

By Tan Yee Peng

  • In September 2022, as the world began to rebound from COVID-era travel restrictions, Singapore-listed SATS Ltd. made waves with an audacious move.
  • With a market cap of SGD 4.5 billion, SATS announced plans to acquire global air cargo giant Worldwide Flight Services (“WFS”) for up to €1.3 billion (S$1.9 billion), valuing the deal at an enterprise value (“EV”) of €2.25 billion (S$3.1 billion).
  • The market reacted with skepticism, sending SATS’ share price plummeting by 35% as concerns over equity dilution and debt levels unsettled investors accustomed to steady dividends and strong returns.

MBOs Will Rise, Even if Companies and Funds Are Sleeping in the Same Bed but Having Different Dreams

By Aki Matsumoto

  • Even if a company goes private due to listing costs, it is good for investors to shift to a more share price-conscious management in order to maintain the listing.
  • Many companies want to take over management rights with the founding family, but find it not easy to continue as a publicly traded company and consider going private.
  • New problems lie ahead in the coming years between founding families who chose MBO to inherit the management control of “family business” and MBO funds who have to Exit.

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Mar 16
0

Daily Brief ESG: Translated Materials Differ Between Disclosures in English that Meet Investor Demand and Reluctance and more

By | Daily Briefs, ESG

In today’s briefing:

  • Translated Materials Differ Between Disclosures in English that Meet Investor Demand and Reluctance

Translated Materials Differ Between Disclosures in English that Meet Investor Demand and Reluctance

By Aki Matsumoto

  • In Prime Market where 99% of companies already disclose some material in English, it is a step that is expected to expand the number of disclosure materials disclosed in English.
  • Companies with 10-20% foreign ownership have followed the TSE’s request to disclose information in English. These companies remain reluctant to disclose information-rich materials in English.
  • Companies with over 30% foreign ownership improved more than any other group by foreign ownership in disclosing information-rich materials in English, which is result of responding to overseas investor demand.

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Mar 14
0

Daily Brief ESG: Will the Legal Reform of Substantial Shareholder Disclosure Change the Voting Practices? and more

By | Daily Briefs, ESG

In today’s briefing:

  • Will the Legal Reform of Substantial Shareholder Disclosure Change the Voting Practices?

Will the Legal Reform of Substantial Shareholder Disclosure Change the Voting Practices?

By Aki Matsumoto

  • Following promotion of collaborative engagement, which was demanded by investors, the law will now be amended to allow companies to request disclosure of beneficial shareholders, which was requested by companies.
  • This is due to the fact that the company is wary of overseas investors as the cross-shareholding structure begins to crumble and the foreign ownership remains at a high level.
  • Under the guise of “to activate engagement,” it is expected that SR activities will become more active in order to address proxy voting.

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Mar 13
0

Daily Brief ESG: Stock Splits Meet Many Companies’ Needs to Increase the Shareholdings of Individual Investors and more

By | Daily Briefs, ESG

In today’s briefing:

  • Stock Splits Meet Many Companies’ Needs to Increase the Shareholdings of Individual Investors

Stock Splits Meet Many Companies’ Needs to Increase the Shareholdings of Individual Investors

By Aki Matsumoto

  • The increase in stock splits can be attributed to TSE requesting more effective measures from companies after market restructuring and to more companies whose stock prices have risen.
  • Companies are obsessed with getting individual investors on their side. It seems that the interests of companies and TSE are aligned in conducting stock splits to increase individual investors’ shareholdings.
  • Now that many companies want to increase the number of individual investors, it may be a good time to resolve the cost issue and consider changing the share unit system.

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Mar 10
0

Daily Brief ESG: Significant Share Buybacks Are Key to Improving Profitability of Capital and more

By | Daily Briefs, ESG

In today’s briefing:

  • Significant Share Buybacks Are Key to Improving Profitability of Capital

Significant Share Buybacks Are Key to Improving Profitability of Capital

By Aki Matsumoto

  • While the company’s attitude toward shareholder returns has been positive, the 11% dividend increase is not expected to reduce cash on hand by much.
  • In a condition where so much cash has accumulated, it’s not a bad idea to use DOE as a guide to avoid accumulating cash on hand above a certain level.
  • Since FY3/2025 profits will grow in non-manufacturers, which has relatively low profit margin, the overall profit margin of companies won’t increase. Therefore, unless assets are reduced significantly, ROE will soft.

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Mar 08
0

Daily Brief ESG: Transition to Regional Stock Exchange Means Continued Unhappy History for Shareholders and more

By | Daily Briefs, ESG

In today’s briefing:

  • Transition to Regional Stock Exchange Means Continued Unhappy History for Shareholders

Transition to Regional Stock Exchange Means Continued Unhappy History for Shareholders

By Aki Matsumoto

  • Many companies that cannot meet listing criteria have challenges with their tradable stock market capitalization in Prime markets, both in Standard markets, and tradable share ratios in Growth markets.
  • As a result of the market restructuring, the role of regional securities exchanges became a “receptacle” for ensuring trading of shares of companies that cannot meet the TSE listing criteria.
  • For a company that considers the purpose of a stock listing to be to improve the company’s credibility and name recognition, going private or an MBO isn’t on their mind.

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