Category

ESG

Feb 29
0

Daily Brief ESG: Companies that Don’t Have Growth Plans but Are Competitive in a Specific Market Are Targeted for MBO and more

By | Daily Briefs, ESG

In today’s briefing:

  • Companies that Don’t Have Growth Plans but Are Competitive in a Specific Market Are Targeted for MBO

Companies that Don’t Have Growth Plans but Are Competitive in a Specific Market Are Targeted for MBO

By Aki Matsumoto

  • In order to carefully select IPOs and increase MBO/TOB, management’s mindset should be shifted to expanding shareholder interests and IPOs that are not for tax-saving purposes.
  • Many companies still have top management even though the founding family’s holdings have already declined. Such companies have relatively low ROE, ROA, and Tobin’s Q.
  • For MBO candidates, the key is to think on the side of institutional investors who propose MBOs through engagement with decision makers and PE funds who provide　capital and business plans.

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Feb 27
0

Daily Brief ESG: Companies with High Stock Valuations and High Profitability Will Increasingly Attract Investment and more

By | Daily Briefs, ESG

In today’s briefing:

  • Companies with High Stock Valuations and High Profitability Will Increasingly Attract Investment

Companies with High Stock Valuations and High Profitability Will Increasingly Attract Investment

By Aki Matsumoto

  • P/B’s slightly higher valuations in October 2023 while ROE, EPS, and BPS did not change much were due to external factors, not internal factors.
  • Clearly, improvements in ROE and ROA are effective in improving stock valuations, but valuations have further increased for companies with higher valuations and profitability for the past year.
  • Some of these companies have begun to use cash more effectively for investment and shareholder returns. The gap in market capitalization between these companies and the rest will increasingly widen.

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Feb 25
0

Daily Brief ESG: When Will Deflationary Mindset of Managers Disappear? Some Companies Have Begun to Change and more

By | Daily Briefs, ESG

In today’s briefing:

  • When Will Deflationary Mindset of Managers Disappear? Some Companies Have Begun to Change, Though

When Will Deflationary Mindset of Managers Disappear? Some Companies Have Begun to Change, Though

By Aki Matsumoto

  • Overseas investors have increased buying Japanese stocks in anticipation of acceleration in profit growth due to the shift to inflation. This is consistent with the trends of ROE and TOPIX.
  • As far as ROE trends are concerned, neither share buybacks nor dividends are sufficient. It may be said that many managers are still dominated by a deflationary mindset.
  • Companies with high foreign shareholdings are seeing changes that are starting to use cash more effectively. However, it’ll take time, as most companies will start to move after asking around.

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Feb 23
0

Daily Brief ESG: Whatever the Proxy Voting Advisor’s Criteria and more

By | Daily Briefs, ESG

In today’s briefing:

  • Whatever the Proxy Voting Advisor’s Criteria, It Is How Investors Actually Conduct Themselves

Whatever the Proxy Voting Advisor’s Criteria, It Is How Investors Actually Conduct Themselves

By Aki Matsumoto

  • Since many prime market listed companies have already achieved the gender and TCFD criteria, this will unlikely to be a major issue with regard to Glass Lewis’ criteria changes.
  • The ROE for the exception rule for companies with large policy shareholdings should have been even higher, not the same as the TSE’s 5-year average ROE of 8%.
  • The criteria for maximum tenure of outside directors should not have provided magic number, but rather performance and other factors that would determine whether he/she is qualified for the position.

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Feb 22
0

Daily Brief ESG: Investors Want to See a Shift in Management to Create Value and more

By | Daily Briefs, ESG

In today’s briefing:

  • Investors Want to See a Shift in Management to Create Value, Not Just Meet Government Target Numbers

Investors Want to See a Shift in Management to Create Value, Not Just Meet Government Target Numbers

By Aki Matsumoto

  • In 2023, % Woman Board Members increased progressively even in companies with lower corporate governance scores. Many companies are unanimous in their commitment to appointing women board members.
  • Together with the fact that business challenges have not been solved by only having people who think alike, 90% of institutional investors said that information on women’s activities is important.
  • Companies with over 25% women on their boards have superior values in profitability and stock valuation. Managers should implement the promotion of women in order to transition to value-creating management.

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Feb 20
0

Daily Brief ESG: Inclusion of ‘Shareholder Value Improvement’ Mgmt Evaluation Reforms for Listed Govt Enterprises and more

By | Daily Briefs, ESG

In today’s briefing:

  • Inclusion of ‘Shareholder Value Improvement’ Mgmt Evaluation Reforms for Listed Govt Enterprises
  • Governance Improvement in 2023 Was Modest but Saved by a Rise in % Woman Board Members

Inclusion of ‘Shareholder Value Improvement’ Mgmt Evaluation Reforms for Listed Govt Enterprises

By Douglas Kim

  • It was reported today in numerous local media that there will be an inclusion of ‘shareholder value improvement’ management evaluation criteria for listed government enterprises.
  • Some of these listed government enterprises rallied strongly today (KEPCO – up 10%; KOGAS – up 12.7%; Korea District Heating – Up 30%). 
  • The detailed evaluation criteria for management evaluation of government enterprises will include the appropriateness of dividend levels, protection of minority shareholders, and compliance with best practices for ESG improvement.

Governance Improvement in 2023 Was Modest but Saved by a Rise in % Woman Board Members

By Aki Matsumoto

  • There was modest improvements in corporate governance in 2023, without any Code revisions. About two thirds of companies showed little improvement in their corporate governance practices over the past year.
  • However, the increase in % Woman Board Members, a touchstone for measuring the improvement attitude of some companies that have shown improvement, gives us hope for the future.
  • Companies with Metrical CG scores rising below 2.5 points and those with declines have challenges with their use of cash, along with their stock repurchase and dividend policies.

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Feb 18
0

Daily Brief ESG: Higher ROE & ROA Are Keys to Higher Valuation and more

By | Daily Briefs, ESG

In today’s briefing:

  • Higher ROE & ROA Are Keys to Higher Valuation, but This Wasn’t Easy for Companies with Low Valuation

Higher ROE & ROA Are Keys to Higher Valuation, but This Wasn’t Easy for Companies with Low Valuation

By Aki Matsumoto

  • Over the past year, Tobin’s Q increased slightly for listed companies as a whole; companies that increased their ROE and ROA increased their Tobin’s Q. vice versa.
  • Companies that originally had high stock valuations and high ROE and ROA increased their valuations by becoming more profitable. Raising ROE and ROA is the key to higher valuations.
  • For companies with low valuations, it wasn’t easy to raise ROE and ROA solely at TSE’s request. Some of companies whose stock valuations have fallen will go private through MBOs.

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Feb 16
0

Daily Brief ESG: Corporate Governance in Japan Is Improving and more

By | Daily Briefs, ESG

In today’s briefing:

  • Corporate Governance in Japan Is Improving, but Has yet to Take Steps to Create Value

Corporate Governance in Japan Is Improving, but Has yet to Take Steps to Create Value

By Aki Matsumoto

  • % of independent directors continued a modest rise, and % of women board members still reached 10% level. 6 of 1,788 companies transitioned to Company with US type 3 Committees.
  • Growth Policy score improved as more companies included ROIC in their KPIs, and AGM Disclosures score improved as the majority of prime market listed companies joined the voting platform.
  • Scores related to the use of cash and IR Disclosures score also didn’t improve noticeably. Companies are not taking action on how to use cash to expand their corporate value.

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Feb 15
0

Daily Brief ESG: Selecta – ESG Report – Lucror Analytics and more

By | Daily Briefs, ESG

In today’s briefing:

  • Selecta – ESG Report – Lucror Analytics

Selecta – 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 view Selecta’s ESG as “Adequate”, in line with the Environmental and Governance scores, while the Social pillar is “Weak”. Controversies are “Immaterial” and Disclosure is “Adequate”.
  • Selecta claims to be the leader in the European vending machine market. The company operates vending and coffee machines in workplaces, public areas (e.g. hospitals, universities, train stations, airports and petrol stations) and entertainment venues.

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Feb 14
0

Daily Brief ESG: Shareholder Proposals Likely a Focus at 2024 AGM Are ROE and more

By | Daily Briefs, ESG

In today’s briefing:

  • Shareholder Proposals Likely a Focus at 2024 AGM Are ROE, P/B, and Parent-Subsidiary Listings

Shareholder Proposals Likely a Focus at 2024 AGM Are ROE, P/B, and Parent-Subsidiary Listings

By Aki Matsumoto

  • With ISS’s plan to resume ROE criteria and TSE’s mention of P/B, more shareholder proposals calling for stronger shareholder returns due to stagnant stock prices and ROEs can be expected.
  • Since over 30% of listed companies have major shareholders holding 20% or more of their interests, the voting behavior of domestic institutions is key to the passage of shareholder proposals.
  • With TSE’s disclosure request regarding the significance of parent-subsidiary listings, this matter will become another focus of the AGM in business portfolio reform and securing the interests of minority shareholders.

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