Executive Director, Metrical Inc

Aki Matsumoto

Executive Director

Independent Leading Corporate Governance Research

Metrical Inc

METRICAL INC. is an independent leading Corporate Governance research firm in Japan where Corporate Governance is increasingly recognized as an important element on corporate management in these days. Thus, CG research and solutions would become an essential component of global capital markets and play important to contribute to transparency of the markets and maximize shareholders’ value in Japan. 

METRICAL INC. provides Corporate Governance research and analysis including rating services, and  also offers investment research and IR services with solutions and customized profound research on CG and IR issues.

<ul>
<li>I will discuss the points on the Nikkei article, "TSE Reorganization Leads to Shareholder Proposal: British Fund to Subsidiary of Nippon Steel Corporation."</li>
<li>Since the parent-subsidiary listing is related to the parent company's market capitalization, I don't believe that the issue is one that can be postponed so long.</li>
<li>NSSOL, which maintains stable profitability and cash generation, is expected to see its share price rise further if NSSOL becomes independent and foreign shareholding will increase.</li>
</ul>


I will discuss the points on the Nikkei article, "TSE Reorganization Leads to Shareholder Proposal: British Fund to Subsidiary of Nippon Steel Corporation."
Since the parent-subsidiary listing is related to the parent company's market capitalization, I don't believe that the issue is one that can be postponed so long.
NSSOL, which maintains stable profitability and cash generation, is expected to see its share price rise further if NSSOL becomes independent and foreign shareholding will increase.


Is It Really Better for Shareholders if NISSOL Remains a Subsidiary of Nippon Steel Corporation?

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Event-Driven

NTT (Nippon Telegraph & Telephone) / Event-Driven

NTT (Nippon Telegraph & Telephone) (9432 JP)

<ul>
<li>On 7 April, the JPX announced the changes to the Free Float Weights (FFW) for the TOPIX Index. There are some big changes due to the updated FFW methodology.</li>
<li>From April to June, we see a one-way turnover of 2.87% and a one-way trade of ¥2,285bn. Some stocks have opposite way flows in different months.</li>
<li>Stocks with inflows outperformed stocks with outflows from Oct-Dec 2021 before giving up all the gains. These stocks have started to outperform and could continue outperforming over the next quarter.</li>
</ul>


On 7 April, the JPX announced the changes to the Free Float Weights (FFW) for the TOPIX Index. There are some big changes due to the updated FFW methodology.
From April to June, we see a one-way turnover of 2.87% and a one-way trade of ¥2,285bn. Some stocks have opposite way flows in different months.
Stocks with inflows outperformed stocks with outflows from Oct-Dec 2021 before giving up all the gains. These stocks have started to outperform and could continue outperforming over the next quarter.


TOPIX FFW Transition - Big Flows from April to June

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

Simplex Holdings / Equity Capital Markets

<div>
<p>Simplex Holdings’ shareholders aim to raise up to US$304m via selling some of their stake in the company. Simplex has consistently been ranked among the top companies in IDC Fintech rankings over the past nine years.</p>
<p>Simplex provides consulting, system development, maintenance and operations to banks, asset managers and insurance companies in Asia. Simplex was established in Sep 97. It was listed on JASDAQ in Feb 2002 and progressed to the First Section in Sep 2005. The company undertook an MBO, in Apr 2013 and was delisted in Oct 2013. Since delisting, Simplex has expanded its product offering further to cover life insurance and non-life insurance companies as well, along with crypto exchanges.</p>
</div><div><p>We have looked at the company’s past performance in our earlier notes, <a href="https://www.smartkarma.com/insights/simplex-holdings-pre-ipo-steady-topline-growth-but-appears-to-be-at-peak-margins" target="_blank" rel="noopener">Simplex Holdings Pre-IPO - Steady topline growth but appears to be at peak margins</a> and  <a href="https://www.smartkarma.com/insights/simplex-holdings-pre-ipo-peer-comp-valuation-lagging-in-size-but-leading-in-growth-and-margins" target="_blank" rel="noopener">Simplex Holdings Pre-IPO - Peer Comp, Valuation - Lagging in Size but Leading in Growth and Margins</a>.</p></div><div><p>In this note we will undertake a peer comparison and talk about valuations.</p></div>


Simplex Holdings’ shareholders aim to raise up to US$304m via selling some of their stake in the company. Simplex has consistently been ranked among the top companies in IDC Fintech rankings over the past nine years.
Simplex provides consulting, system development, maintenance and operations to banks, asset managers and insurance companies in Asia. Simplex was established in Sep 97. It was listed on JASDAQ in Feb 2002 and progressed to the First Section in Sep 2005. The company undertook an MBO, in Apr 2013 and was delisted in Oct 2013. Since delisting, Simplex has expanded its product offering further to cover life insurance and non-life insurance companies as well, along with crypto exchanges.
We have looked at the company’s past performance in our earlier notes, Simplex Holdings Pre-IPO - Steady topline growth but appears to be at peak margins and  Simplex Holdings Pre-IPO - Peer Comp, Valuation - Lagging in Size but Leading in Growth and Margins.In this note we will undertake a peer comparison and talk about valuations.

Simplex Holdings IPO - Valuation Looks Ok, past Performance Will Weigh on Sentiment

<p>Simplex Holding’s shareholders aim to raise around US$300m via selling some of their stake in the company. Simplex has consistently been ranked among the top companies in IDC Fintech rankings over the past nine years.</p><p>Simplex provides consulting, system development, maintenance and operations to banks, asset managers and insurance companies in Asia. Simplex was established in Sep 97. It was listed on JASDAQ in Feb 2002 and progressed to the First Section in Sep 2005. The company undertook an MBO, in Apr 2013 and was delisted in Oct 2013.</p><p>Since delisting, Simplex has expanded its product offering further to cover life insurance and non-life insurance companies as well, along with crypto exchanges. It has been reporting steady revenue growth over the past few years, although its margins have been volatile. Its performance prior to delisting wasn’t great, as it missed its medium term targets, and it now appears to be at peak margins.</p><p>We have looked at the company’s past performance in our earlier note, <a href="https://www.smartkarma.com/insights/simplex-holdings-pre-ipo-steady-topline-growth-but-appears-to-be-at-peak-margins" target="_blank" rel="noopener">Simplex Holdings Pre-IPO - Steady topline growth but appears to be at peak margins</a>.</p><p>In this note we will undertake a peer comparison and talk about valuations.</p>

Simplex Holding’s shareholders aim to raise around US$300m via selling some of their stake in the company. Simplex has consistently been ranked among the top companies in IDC Fintech rankings over the past nine years.Simplex provides consulting, system development, maintenance and operations to banks, asset managers and insurance companies in Asia. Simplex was established in Sep 97. It was listed on JASDAQ in Feb 2002 and progressed to the First Section in Sep 2005. The company undertook an MBO, in Apr 2013 and was delisted in Oct 2013.Since delisting, Simplex has expanded its product offering further to cover life insurance and non-life insurance companies as well, along with crypto exchanges. It has been reporting steady revenue growth over the past few years, although its margins have been volatile. Its performance prior to delisting wasn’t great, as it missed its medium term targets, and it now appears to be at peak margins.We have looked at the company’s past performance in our earlier note, Simplex Holdings Pre-IPO - Steady topline growth but appears to be at peak margins.In this note we will undertake a peer comparison and talk about valuations.

Simplex Holdings Pre-IPO - Peer Comp, Valuation - Lagging in Size but Leading in Growth and Margins

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

<p>Last year, 55 Japanese listed companies received shareholder proposals in the June AGM season. Of course, some of the shareholder proposals made are spurious and made for a laugh, but last year <a href="https://www.nikkei.com/article/DGXMZO60929010Z20C20A6EA1000/?s=5" target="_blank" rel="noopener">23 companies received proposals from activist investors</a>, up from 16 in June 2019.  Data collated by <a href="https://www.whitecase.com/publications/alert/japans-2020-proxy-season-results-announced" target="_blank" rel="noopener">White &amp; Case</a> in summer 2020 showed that of the 22 companies which received activist proposals (their number is different than IR Japan's), 30 proposals to those 22 companies received more than 20% of votes, and just under half (14) received 30%. </p><p>Various commentators noted that for the 2020 AGM season, the impact of COVID-19 and the fact that many meetings became virtual meetings, along with the fact that the lockdowns were of unknown effect but revenue and profit impact in the year ahead was deemed to be severe, many activist shareholders which would have proposed large buybacks as a use of excess cash may have decided to temper their request. Where they did not, often the response from management was that because of the significant potential impact of covid-19 mitigation/safety/response measures, large buybacks using up significant cash (just when Japanese corporates had pulled all available cash out of credit lines) was perhaps not wise. </p><p>Importantly, no measure among the activists shareholder measures last year gained 50% of the vote on that agenda item let alone two-thirds needed to achieve a change in the Articles of Incorporation. Such wins remain rare. However, as White &amp; Case points out, an item which <a href="https://www.smartkarma.com/entities/mizuho-financial-group-inc" target="_blank" data-smartkarma-citation="entities:219:1" rel="noopener">Mizuho Financial Group (8411 JP)</a> management had objected to in 2015, 2016, 2017 and was rejected (shareholder input on income allocation) but with significant support of 41%, 48%, and 43% respectively in those years was <em>re-suggested</em> last year by management itself where the measure received 98% approval.</p><p>Sometimes these messages get through. But importantly, they are a message because shareholders send them (see <a href="https://www.smartkarma.com/insights/japan-needs-more-cowbell" target="_blank" data-smartkarma-citation="insights:41191" rel="noopener">Japan Needs More Cowbell</a> for more thoughts on the matter). The measure proposed by the activist to Mizuho was actually an individual activist named Mitsutaka YAMAGUCHI and he held 30,000 shares, giving him the right to make the proposal.*</p><div class="content-remarks"><p>*The minimum criteria are that a shareholder hold 300 voting rights or 1.0% of shares outstanding for at least six months to be able to put a proposal to shareholders at an AGM. And based on a change in the Companies Act which should have gone into effect on March 1, the content for such shareholder proposals is restricted now to one of ten areas. </p></div><p>The deadline for such shareholder proposals is usually 8 weeks prior to the AGM which means in <em>most</em> cases for June-end AGMs, they had to be submitted by the end of April. I expect we will see a flurry of company reports of new shareholder proposals in the days ahead.</p><p><em>This insight serves as an anchor for selected insights to follow which discuss shareholder proposals on specific companies, how to get information, and follow-up where notable, from shareholder proxy services, etc. </em></p>

Last year, 55 Japanese listed companies received shareholder proposals in the June AGM season. Of course, some of the shareholder proposals made are spurious and made for a laugh, but last year 23 companies received proposals from activist investors, up from 16 in June 2019.  Data collated by White &amp; Case in summer 2020 showed that of the 22 companies which received activist proposals (their number is different than IR Japan's), 30 proposals to those 22 companies received more than 20% of votes, and just under half (14) received 30%. Various commentators noted that for the 2020 AGM season, the impact of COVID-19 and the fact that many meetings became virtual meetings, along with the fact that the lockdowns were of unknown effect but revenue and profit impact in the year ahead was deemed to be severe, many activist shareholders which would have proposed large buybacks as a use of excess cash may have decided to temper their request. Where they did not, often the response from management was that because of the significant potential impact of covid-19 mitigation/safety/response measures, large buybacks using up significant cash (just when Japanese corporates had pulled all available cash out of credit lines) was perhaps not wise. Importantly, no measure among the activists shareholder measures last year gained 50% of the vote on that agenda item let alone two-thirds needed to achieve a change in the Articles of Incorporation. Such wins remain rare. However, as White &amp; Case points out, an item which Mizuho Financial Group (8411 JP) management had objected to in 2015, 2016, 2017 and was rejected (shareholder input on income allocation) but with significant support of 41%, 48%, and 43% respectively in those years was re-suggested last year by management itself where the measure received 98% approval.Sometimes these messages get through. But importantly, they are a message because shareholders send them (see Japan Needs More Cowbell for more thoughts on the matter). The measure proposed by the activist to Mizuho was actually an individual activist named Mitsutaka YAMAGUCHI and he held 30,000 shares, giving him the right to make the proposal.**The minimum criteria are that a shareholder hold 300 voting rights or 1.0% of shares outstanding for at least six months to be able to put a proposal to shareholders at an AGM. And based on a change in the Companies Act which should have gone into effect on March 1, the content for such shareholder proposals is restricted now to one of ten areas. The deadline for such shareholder proposals is usually 8 weeks prior to the AGM which means in most cases for June-end AGMs, they had to be submitted by the end of April. I expect we will see a flurry of company reports of new shareholder proposals in the days ahead.This insight serves as an anchor for selected insights to follow which discuss shareholder proposals on specific companies, how to get information, and follow-up where notable, from shareholder proxy services, etc. 

Japan Activism:  Shareholder Proposals for the Q2 AGM Season Start Trickling In

Japan

NS Solutions Corporation operates system consulting services and proposal of solutions.  The Company also manages operation and maintenance of engineering systems and develops software.

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NS Solutions (2327 JP)

Is It Really Better for Shareholders if NISSOL Remains a Subsidiary of Nippon Steel Corporation?

I would like to discuss the points on the Nikkei article, "TSE Reorganization Leads to Shareholder Proposal: British Fund to Subsidiary of Nippon...

Metrical Inc

TOPIX FFW Transition - Big Flows from April to June

Changes to the Topix FFW methodology will result in a turnover of 2.87% & trade of ¥2,285bn from April to June. There is a lot to trade on some...

Brian Freitas

Simplex Holdings IPO - Valuation Looks Ok, past Performance Will Weigh on Sentiment

Simplex Holdings’ shareholders aim to raise up to US$304m via selling some of their stake in the company. Simplex has consistently been ranked...

Sumeet Singh

Simplex Holdings Pre-IPO - Peer Comp, Valuation - Lagging in Size but Leading in Growth and Margins

Simplex Holding’s shareholders aim to raise around US$300m via selling some of their stake in the company. Simplex has consistently been ranked...

Sumeet Singh

Japan Activism: Shareholder Proposals for the Q2 AGM Season Start Trickling In

Japan AGM season starts in earnest in mid-June but the deadline for shareholder proposals is 8 weeks prior. 8 June AGM Companies so far received...

Travis Lundy

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