Category

ESG

Daily Brief ESG: Golden Egg Was Not Lost and more

By | Daily Briefs, ESG

In today’s briefing:

  • Golden Egg Was Not Lost, but How Long Can Keisei Electric Railway Buy Time?


Golden Egg Was Not Lost, but How Long Can Keisei Electric Railway Buy Time?

By Aki Matsumoto

  • Until the “parent-subsidiary (affiliate) listing” is resolved, the value of parent company isn’t  usually reflected. If Keisei has some business interest in holding OLC shares, it’s responsible for explaining it.
  • If OLC shares were mostly sold, there’d be nothing left for Keisei, which couldn’t find strategy for using cash, so the decision of not losing the growing affiliate isn’t bad.
  • This small sale is to buy time until a clear growth strategy is found, but once the ratio of foreign shareholders exceeds 1/3, building time will likely become more difficult.

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Daily Brief ESG: Stricter Voting Criteria for Domestic Asset Managers May Aim to Enhance Value Through Engagement and more

By | Daily Briefs, ESG

In today’s briefing:

  • Stricter Voting Criteria for Domestic Asset Managers May Aim to Enhance Value Through Engagement


Stricter Voting Criteria for Domestic Asset Managers May Aim to Enhance Value Through Engagement

By Aki Matsumoto

  • Stricter voting standards for domestic investment managers seem aimed at increasing value through engagement for companies that show little improvement in efforts to improve stock price and return on capital.
  • Stricter voting standards for policy shareholding ratios of domestic investment management companies are expected to push companies to consider reducing cross-shareholdings. Reference to deemed shareholdings is also commendable.
  • Since engagement of overseas investors has been effective in increasing value of companies, engagement by Japanese investment managers more seriously than before will contribute to enhancing the value of companies.

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Daily Brief ESG: More Companies Will Choose to Go Private Because They Can’t Find an Effective Use for Their Cash and more

By | Daily Briefs, ESG

In today’s briefing:

  • More Companies Will Choose to Go Private Because They Can’t Find an Effective Use for Their Cash
  • Reno De Medici – ESG Report – Lucror Analytics


More Companies Will Choose to Go Private Because They Can’t Find an Effective Use for Their Cash

By Aki Matsumoto

  • The problem lies in the fact that even with a 10% increase in net profit, ROE only grew by 0.5%. This is due to having too much cash on hand.
  • TSE has provided an opportunity for companies to develop measures to increase their corporate value. However, not many companies can derive concrete ways to effectively use cash.
  • Since many companies are expected to take time to find concrete solution to this problem, an increasing number of companies are expected to go private once they have done so.

Reno De Medici – ESG Report – Lucror Analytics

By Leonard Law, CFA

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We assess Reno de Medici’s ESG as “Adequate”, in line with its Environmental and Governance scores. The company has a “Strong” score for the Social pillar. Controversies are “Immaterial” and Disclosure is “Strong”. 


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Daily Brief ESG: The Solution to Better Corporate Governance Is to Reduce the # of Companies with Large Shareholders and more

By | Daily Briefs, ESG

In today’s briefing:

  • The Solution to Better Corporate Governance Is to Reduce the # of Companies with Large Shareholders


The Solution to Better Corporate Governance Is to Reduce the # of Companies with Large Shareholders

By Aki Matsumoto

  • Since “profitability of capital” like ROE or ROIC cannot create value in mid-to-long-term without improvement, the fact that ROE has stalled is a cause for concern for future stock prices.
  • The slow growth in Net Profit Margin and the sluggish improvement in Asset Turnover and Financial Leverage indicate that it is still holding too much cash, cross-held shares, etc. 
  • Nearly half of all listed companies are companies with major shareholders of 20% or more, which is an obstacle to improving corporate governance.

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Daily Brief ESG: Doesn’t Cooperation Rather than Competition Slow the Pace of Improvement in Disclosure in English? and more

By | Daily Briefs, ESG

In today’s briefing:

  • Doesn’t Cooperation Rather than Competition Slow the Pace of Improvement in Disclosure in English?


Doesn’t Cooperation Rather than Competition Slow the Pace of Improvement in Disclosure in English?

By Aki Matsumoto

  • TSE officially announced that it will request prime market listed companies to simultaneously disclose two documents, financial statements and timely disclosure information, in Japanese and English from April 2025.”
  • Given the characteristics of Japanese companies, which tend to implement only minimum requirements, few companies will engage in English language disclosure in their annual securities reports, which wasn’t explicitly stated.
  • Rather than improving the quality of the market to make it easier for global investors to trade, TSE has set efforts targets to match the speed of the slowest ship.

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Daily Brief ESG: Isn’t It Not Strong Enough to Raise ROE by Higher Profit Margin Due to Escape from Deflation? and more

By | Daily Briefs, ESG

In today’s briefing:

  • Isn’t It Not Strong Enough to Raise ROE by Higher Profit Margin Due to Escape from Deflation?


Isn’t It Not Strong Enough to Raise ROE by Higher Profit Margin Due to Escape from Deflation?

By Aki Matsumoto

  • Since 2020, there has been a divergence between P/B and TOPIX movements, complicating matters for listed companies that have been asked to raise their P/Bs.
  • Expectations are high for a rise in ROE, which has a certain correlation with nominal GDP, which is also increasingly correlated with TOPIX, as deflation exits.
  • If price pass-through fails, escaping deflation may not lead directly to higher profit margins. If profit margin increase is insufficient, reducing cash on hand is essential to increase ROE.

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Daily Brief ESG: How Long Will the Escape from Deflation Be a Greater Factor in Stock Price Rises than ROE? and more

By | Daily Briefs, ESG

In today’s briefing:

  • How Long Will the Escape from Deflation Be a Greater Factor in Stock Price Rises than ROE?


How Long Will the Escape from Deflation Be a Greater Factor in Stock Price Rises than ROE?

By Aki Matsumoto

  • Net profit per listed company increased 4.4 times over the 33 years from 1989 to 2023, which means only a modest 4.5% annual growth.
  • The reason why ROE has been sluggish since FY 2005 is due to the slow growth of Net Profit Margin, the decline of Asset Turnover, and the flat financial leverage.
  • When the escape from deflation becomes a reality, the key is to have products ready to pass on prices, and defense by cash alone is not sufficient for this purpose.

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Daily Brief ESG: In Correlation with TOPIX and more

By | Daily Briefs, ESG

In today’s briefing:

  • In Correlation with TOPIX, Nominal GDP Has Become Even Higher, While P/B Has Been Scarce Since 2020


In Correlation with TOPIX, Nominal GDP Has Become Even Higher, While P/B Has Been Scarce Since 2020

By Aki Matsumoto

  • Nominal GDP grew 1.8% from 2012 to 2017, higher than the annual average over the past 33 years, in anticipation of an escape from deflation, but TOPIX gains have stalled.
  • Nominal GDP from 2021 to 2023 will grow 3.8% per year, far above the average of the past 33 years, and the correlation with TOPIX is even higher.
  • With average P/B showing little correlation with TOPIX after 2020, expanding nominal earnings without losing out to rising prices seems to be a more important factor for stock price appreciation.

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Daily Brief ESG: ETFs Held by BOJ with No Prospect of Sale Are Unfortunate for Shareholders and more

By | Daily Briefs, ESG

In today’s briefing:

  • ETFs Held by BOJ with No Prospect of Sale Are Unfortunate for Shareholders


ETFs Held by BOJ with No Prospect of Sale Are Unfortunate for Shareholders

By Aki Matsumoto

  • ETF sale is pie in the sky if the dividend income from ETFs held by BOJ is used to cover the interest payments associated with lifting of negative interest rates.
  • ETFs held by the Bank of Japan, which account for 7% of prime market capitalization, are actually reducing the number of actual tradable shares and hindering trading liquidity.
  • Furthermore, ETFs held by BOJ, which don’t indicate their intention to be shareholders, may be voting in favor of the company’s proposal as new silent shareholders in place of cross-shareholdings.

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Daily Brief ESG: Will the TSE’s Convoy System Work? and more

By | Daily Briefs, ESG

In today’s briefing:

  • Will the TSE’s Convoy System Work?


Will the TSE’s Convoy System Work?

By Aki Matsumoto

  • While more companies should include the cost of capital in their disclosures, investors are demanding that management present specific solutions discussed by the board of directors to solve their company’s problems.
  • Many companies with high foreign shareholding disclose their own management strategies, while companies without high foreign shareholding tend to lack the ability to think of measures to increase profitability.
  • The TSE’s newly established department supports such companies to ensure that all listed companies are not left behind, but that seems to go against the quality of the market.

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