Category

ESG

May 14
0

Daily Brief ESG: Raising ROE May Require Raising Proxy Voting Guidelines and more

By | Daily Briefs, ESG

In today’s briefing:

  • Raising ROE May Require Raising Proxy Voting Guidelines

Raising ROE May Require Raising Proxy Voting Guidelines

By Aki Matsumoto

  • Although many institutional investors’ voting criteria apply the rule of “support the proposed appointment of top management director if one female director is nominated,” more in-depth examination should be conducted.
  • Agenda based on TSE’s request isn’t easy to understand for all investors, and the current voting guidelines for domestic institutional investors make it unlikely that they will vote for it.
  • The ISS ROE criteria will be raised next year, and companies may not raise ROE with bold shareholder returns until the voting guidelines for domestic institutional investors are also raised.

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May 12
0

Daily Brief ESG: Since Cash on Hand Will Not Decrease in FY2024 and more

By | Daily Briefs, ESG

In today’s briefing:

  • Since Cash on Hand Will Not Decrease in FY2024, Shareholder Returns Remain a Hot Topic

Since Cash on Hand Will Not Decrease in FY2024, Shareholder Returns Remain a Hot Topic

By Aki Matsumoto

  • Most large companies initially estimate sales and profits conservatively, and CapEx, which is often planned more than a year in advance, isn’t often above plan.
  • Companies have a cautious earnings outlook, but the market consensus still expects profit growth in FY2024. CapEx growth in the BOJ Tankan is expected to be slightly higher than profits.
  • Assuming an 8.5% increase in CapEx for large manufacturing companies and a low single-digit growth in the recurring profit outlook, the level of cash on hand is unlikely to decrease.

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May 10
0

Daily Brief ESG: Any Manager Can Simply Implement Shareholder Returns and more

By | Daily Briefs, ESG

In today’s briefing:

  • Any Manager Can Simply Implement Shareholder Returns

Any Manager Can Simply Implement Shareholder Returns

By Aki Matsumoto

  • Profit margins boosted by cuts in personnel, R&D, CapEx, and corporate tax rates. Much of the improved free cash flow went onto the balance sheet instead of being invested.
  • OP Margin’s sluggish growth indicates that the cost-cutting model is no longer working. Investments are needed to create products with higher gross margins.
  • While the limitations of the cost-cutting model can be seen, ROE, which indicates the achievement of the management goal of increasing medium-to-long-term shareholder returns, is sluggish in many companies.

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May 08
0

Daily Brief ESG: A Common Case of a Company with a Low ROE but with the Founding Family Serving as Successive CEOs and more

By | Daily Briefs, ESG

In today’s briefing:

  • A Common Case of a Company with a Low ROE but with the Founding Family Serving as Successive CEOs

A Common Case of a Company with a Low ROE but with the Founding Family Serving as Successive CEOs

By Aki Matsumoto

  • The reason why the approval for the shareholder proposal on profit appropriation exceeded 40% is that the proposal was easy to understand and easy to get approval from other shareholders.
  • Although domestic institutional investors don’t currently vote against a low ROE when it comes to improvement measures, they may take a more aggressive stance if ISS raises its ROE criteria.
  • The trend of top management being reappointed even with continued low ROE is likely to continue for a while longer, but the time frame is definitely getting smaller.

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May 06
0

Daily Brief ESG: Shareholder Returns Will Increase over June AGM and more

By | Daily Briefs, ESG

In today’s briefing:

  • Shareholder Returns Will Increase over June AGM, but Will Companies Hold up with Sluggish ROE?

Shareholder Returns Will Increase over June AGM, but Will Companies Hold up with Sluggish ROE?

By Aki Matsumoto

  • In addition to too much cash on hand to begin with, ROE is expected to continue to grow at a sluggish pace, as shareholder returns are less than profit growth.
  • Given that we expect more companies to have stock price, P/B, and ROE on the agenda for the June AGM, more companies are expected to announce increases in shareholder returns.
  • However, ROE is unlikely to increase significantly. Shareholder returns are certainly too small, but a more serious problem is the inability to find growth investment opportunities.

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May 04
0

Daily Brief ESG: The Raising of Listing Criteria in the Growth Market Will Lead to Increased Investment Opportunities and more

By | Daily Briefs, ESG

In today’s briefing:

  • The Raising of Listing Criteria in the Growth Market Will Lead to Increased Investment Opportunities

The Raising of Listing Criteria in the Growth Market Will Lead to Increased Investment Opportunities

By Aki Matsumoto

  • Criteria for IPOs aren’t a major issue. TSE is concerned that many companies will be in jeopardy of being delisted if the criteria for maintaining listing are raised.
  • TSE will likely make “request” to Growth Market listed companies to increase their market capitalization if the criteria for maintaining listing are not raised.
  • From 2025, delisting and subsequent re-listing through M&A and MBOs is expected to increase, which will lead to more investment opportunities.

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May 02
0

Daily Brief ESG: TSE’s “Request” Is a Catalyst for a Final Decision on the Foundation of Years of Engagement and more

By | Daily Briefs, ESG

In today’s briefing:

  • TSE’s “Request” Is a Catalyst for a Final Decision on the Foundation of Years of Engagement

TSE’s “Request” Is a Catalyst for a Final Decision on the Foundation of Years of Engagement

By Aki Matsumoto

  • Many companies have low liquidity since listing, with nearly half of companies having major shareholders with over 20% ownership. Raising listing criteria should considered to improve quality of the market.
  • TSE seems to raise the listing criteria for Growth Market in 2025, when the transitional measures expire, but for Prime Market, TSE is likely to respond with a “request.”
  • Although TSE’s “request” may be the catalyst for increasing MBOs and dissolution of parent-subsidiary listings, engagement with overseas investors over years to resolve management issues was foundation of this trend.

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Apr 30
0

Daily Brief ESG: Keisei Electric Railway’s Problems Are Part of a Cross-Shareholding Dissolution Process and more

By | Daily Briefs, ESG

In today’s briefing:

  • Keisei Electric Railway’s Problems Are Part of a Cross-Shareholding Dissolution Process

Keisei Electric Railway’s Problems Are Part of a Cross-Shareholding Dissolution Process

By Aki Matsumoto

  • A solution for Keisei, similar to case of parent-subsidiary listing, is cashing OLC shares to raise profitability and growth potential of its business, to eliminate the distortion in market capitalization.
  • There is a corporate governance issue in that OLC is accepting board members from Keisei, which has below 20% equity and does not clearly explain the synergies of the business.
  • This can be viewed as part of dissolving cross-shareholdings where the company wants to obtain voting advantage without business synergies and cannot find opportunities to spend the cash it sells.

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Apr 28
0

Daily Brief ESG: A Country Without Shareholder Rights (주주 권리가 없는 나라) – A Book Review and more

By | Daily Briefs, ESG

In today’s briefing:

  • A Country Without Shareholder Rights (주주 권리가 없는 나라) – A Book Review
  • Few Companies Have Started to Move Yet, but Can They Raise R & D Investment to Regain Pricing Power?

A Country Without Shareholder Rights (주주 권리가 없는 나라) – A Book Review

By Douglas Kim

  • This insight is a book review of 주주 권리가 없는 나라 (A Country Without Shareholder Rights), which is one of the best books on the corporate governance in Korea.
  • There are so much wisdom that are included in this book. The author really goes into details about numerous corporate governance problems in Korea and ways to fix them.
  • This book was published in January 2024 and it was written by a famous Korean retail investor called Park Young-Ok.

Few Companies Have Started to Move Yet, but Can They Raise R & D Investment to Regain Pricing Power?

By Aki Matsumoto

  • Asset Turnover and ROA deteriorated as a result of accumulating cash on hand rather than investing. There was also insufficient R&D to create products that could have stronger pricing power.
  • Conditions are ripe for investment expansion, as demand for equipment replacement is rising due to long-standing CapEx restraints, and there is no need to accumulate more cash.
  • Companies are now in the stage of raising return on capital to increase reinvested cash flow from the stage of temporarily increasing earnings through price pass-through.

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Apr 26
0

Daily Brief ESG: Challenges in Using Cash and more

By | Daily Briefs, ESG

In today’s briefing:

  • Challenges in Using Cash, Even in Companies with 30%+ Female Board Members, with Excellent Practices

Challenges in Using Cash, Even in Companies with 30%+ Female Board Members, with Excellent Practices

By Aki Matsumoto

  • The two groups with the highest percentages of female board members (companies with over 30% and 20%-30%) are consistent with the characteristics of companies in which overseas investors primarily invest.
  • Companies with over 30% female board members show superior values in many of Board Practices and Key Actions evaluation items. This may be due to improved engagement by overseas investors.
  • Companies with no female board members have the lowest values in most Corporate Governance Practices items. Therefore, percentage of female board members indicates the seriousness of improving corporate governance practices.

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