Category

ESG

Dec 24
0

Daily Brief ESG: Not Sure if Activist Investor’s Agenda Will Be Approved and more

By | Daily Briefs, ESG

In today’s briefing:

  • Not Sure if Activist Investor’s Agenda Will Be Approved, but JSF’s Value May Be Higher than Expected

Not Sure if Activist Investor’s Agenda Will Be Approved, but JSF’s Value May Be Higher than Expected

By Aki Matsumoto

  • Companies wouldn’t accept shareholder proposals, interpreting that they need’t disclose individual executive compensation if it’s below certain amount and that they can continue holding policy-shares if the policy is defined.
  • Even if JSF claims to have enhanced corporate governance practices, it is reasonable  for shareholders to demand a review of its management strategy for a company with below average ROE.
  • The company, which doesn’t require very large capital expenditures, plays a role in the infrastructure of the capital market, and has an oligopoly on the market, may be worth more.

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Dec 22
0

Daily Brief ESG: The Attitude Toward Information Disclosure May Make a Further Difference in Stock Valuations and more

By | Daily Briefs, ESG

In today’s briefing:

  • The Attitude Toward Information Disclosure May Make a Further Difference in Stock Valuations

The Attitude Toward Information Disclosure May Make a Further Difference in Stock Valuations

By Aki Matsumoto

  • The less frequently information is disclosed, the greater the impact of single disclosure on stock prices. Fewer quarterly disclosure reduces trading volume, which will have negative impact on stock valuations.
  • Companies listed on U.S. market will continue quarterly disclosure, while companies with limited human resources won’t adopt quarterly disclosure. Even within the same sector, companies may adopt different disclosure attitudes.
  • Metrical’s analysis shows that the IR factor is highly positively correlated with Tobin’s q. Also, different disclosure stances may emerge depending on the ratio of foreign shareholders.

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Dec 20
0

Daily Brief ESG: The Problem Isn’t for the Subsidiary Shareholders but for the Parent Company Shareholders and more

By | Daily Briefs, ESG

In today’s briefing:

  • The Problem Isn’t for the Subsidiary Shareholders but for the Parent Company Shareholders

The Problem Isn’t for the Subsidiary Shareholders but for the Parent Company Shareholders

By Aki Matsumoto

  • Both Kappa Kreate and ATOM are almost completely controlled by their parent company, ColoWide, and we cannot expect corporate governance practices that would actually be a relief to minority shareholders.
  • With the parent company in full control, the subsidiary’s minority shareholders are likely to be aware that the interests of the parent take precedence over those of the minority shareholders.
  • Parent company shareholders shouldn’t tolerate continuing to own subsidiaries that damage their interests. The problem isn’t a problem of the interests of the subsidiary’s shareholders, but of the parent’s shareholders.

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Dec 18
0

Daily Brief ESG: ESG Bonds for Individuals Matching Increased Issuance Intentions and more

By | Daily Briefs, ESG

In today’s briefing:

  • ESG Bonds for Individuals Matching Increased Issuance Intentions

ESG Bonds for Individuals Matching Increased Issuance Intentions

By Aki Matsumoto

  • The benefit of issuing ESG bonds for retail investors is that they provide an investment opportunity for retail investors to become familiar with the ESG initiatives of individual issuers.
  • For the issuers, they can reduce issuance costs compared to institutional bonds. For the underwriting investment banks, the bonds are more profitable than institutional bonds because of higher sales fees.
  • Since ESG bonds for individuals have a maturity of 3-10 years, ESG factors such as the environment may have a short time to affect credit risk.

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Dec 16
0

Daily Brief ESG: ROIC Helps to Raise Transparency in Business and more

By | Daily Briefs, ESG

In today’s briefing:

  • ROIC Helps to Raise Transparency in Business, but Management Skills Are the Key to Improve Return

ROIC Helps to Raise Transparency in Business, but Management Skills Are the Key to Improve Return

By Aki Matsumoto

  • The important thing is not whether the ROIC tool is used or not, but rather the risk-taking for investment and whether it resulted in sufficient returns.
  • A change in the outlook for improving profitability is necessary for the stock price to rise, and furthermore, a compelling growth policy and capital allocation can also be effective.
  • The fact that valuations have not risen sufficiently in the current situation infers that investors lack confidence in the path to improving profitability for each business.

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Dec 15
0

Daily Brief ESG: Companies that Buy Back Their Own Shares but Do Not Increase Their Share Price Should Consider Why and more

By | Daily Briefs, ESG

In today’s briefing:

  • Companies that Buy Back Their Own Shares but Do Not Increase Their Share Price Should Consider Why
  • A Win for Truston Asset Mgmt: Corporate Activism Worked on Taekwang Industrial

Companies that Buy Back Their Own Shares but Do Not Increase Their Share Price Should Consider Why

By Aki Matsumoto

  • Companies are presumably allocating cash to shareholder returns rather than investing in growth. Lack of investment in growth may lead to slower profit growth, which leads to lower valuations.
  • There is concern that management may be hesitant to take risks. Since no shareholder hates shareholder returns, they may be easily diverted to share repurchases that don’t require risk-taking decision.
  • Although the expected share repurchase will limit the risk of sharp decline in the stock prices, modest growth investments are likely to prevent the expansion of multiples.

A Win for Truston Asset Mgmt: Corporate Activism Worked on Taekwang Industrial

By Douglas Kim

  • This insight provides the details of how a local asset management company called Truston Asset Mgmt has been able to win a corporate activism battle against Taekwang Industrial.
  • Taekwang Industrial has repeatedly been boggled down by numerous corporate governance related issues for more than a couple of decades.
  • The overall result should be a modest positive sentiment on Taekwang Industrial’s shares in the near term which still trades at dirt cheap P/B multiple of 0.2x.

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Dec 13
0

Daily Brief ESG: Is Effective Reform Only Possible After Future Problems with High-Risk Companies? and more

By | Daily Briefs, ESG

In today’s briefing:

  • Is Effective Reform Only Possible After Future Problems with High-Risk Companies?

Is Effective Reform Only Possible After Future Problems with High-Risk Companies?

By Aki Matsumoto

  • Large audit firms focus on more profitable business and improving the profitability of their audit services. Consequently, high-risk firms that have been withdrawn from large firms flow to small-and-medium-sized firms.
  • “Enhancement of governance, including third-party evaluation function” is crucial to ensure that the audit firm has system to oversee and objectively determine the appropriateness of audit process and audit opinion.
  • Smaller audit firms will comply with the guidelines just for show, but only when future problems with high-risk firms arise will effective reforms be made in accordance with the guidelines.

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Dec 12
0

Daily Brief ESG: How Much Progress Has Been Made in Understanding the Concept of Shareholder Capitalism Since 1990s? and more

By | Daily Briefs, ESG

In today’s briefing:

  • How Much Progress Has Been Made in Understanding the Concept of Shareholder Capitalism Since 1990s?

How Much Progress Has Been Made in Understanding the Concept of Shareholder Capitalism Since 1990s?

By Aki Matsumoto

  • Looking back at the genesis of the scandals that are still recurring, the cause has always been lack of awareness of legal compliance. When cross-shareholdings were prevalent, shareholders were underestimated.
  • How widespread has the understanding of the concept of shareholder capitalism, including the cost of capital, become? The starting point is that management must comply with legal compliance.
  • The problem is that the statutory auditors had the authority to function even though independent directors didn’t exist. Diversity is important to create a board of directors that can dissent.

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Dec 10
0

Daily Brief ESG: Dish TV: Finale Still Awaits and more

By | Daily Briefs, ESG

In today’s briefing:

  • Dish TV: Finale Still Awaits
  • Going Private Is an Option for Both the Companies and Investors

Dish TV: Finale Still Awaits

By Nitin Mangal

  • Dish TV India (DITV IN) has been under the limelight for quite a while. ever since the legal tussle with shareholders.
  • The last six months have seen several events happening at the corporate governance level; the trials of churn in board and the required shareholders approvals has troubled the company.
  • Even though there have been monumental changes in the board such as resignation of Mr.Goel, the battle with the shareholders is still far from the finale.

Going Private Is an Option for Both the Companies and Investors

By Aki Matsumoto

  • While it’s natural for a rational investor to disagree with a company that cannot generate a return commensurate with the risk, the existence of cross-shareholdings in Japanese companies complicates matters.
  • The benefit of listing is raising capital on favorable terms by trading shares at a value greater than shareholders’ equity, but there are not many Japanese companies trading at premium.
  • Going private is one option for companies that are unable to find growth investment opportunities and accumulate cash on their balance sheets. In this regard, Japanese equities are of interest.

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Dec 08
0

Daily Brief ESG: ORIX Has Responsibility to Explain Transformation of DHC into a Company that Respects Human Rights and more

By | Daily Briefs, ESG

In today’s briefing:

  • ORIX Has Responsibility to Explain Transformation of DHC into a Company that Respects Human Rights

ORIX Has Responsibility to Explain Transformation of DHC into a Company that Respects Human Rights

By Aki Matsumoto

  • The difference is obvious when compared to Fancl’s case. While Fancl chose to form capital alliance with Kirin (less than 1/3 ownership), All DHC shares will be transferred to ORIX.
  • We believe that many of the buyer companies were concerned about the negative impact of consolidating DHC with Yoshida, who has repeatedly made discriminatory remarks.
  • ORIX is required to show the future management strategy of DHC, and ORIX is responsible for explaining the transformation of DHC into a company that respects human rights.

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