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>From the standpoint of endorsing parent-subsidiary listings, TSE intends to provide better disclosure guidance to ensure that the interests of minority shareholders of listed subsidiaries are adequately secured.</li>
<li>While investors expect early resolution, parent-subsidiary listings continue to be a long-lived theme and investment opportunity, thanks to the TSE giving them time to dissolve their parent-subsidiary listings.</li>
<li>As for the parent-subsidiary listings, the key is the percentage of foreign holdings, with some companies initiating restructuring of their business portfolios and many others not.</li>
</ul>


From the standpoint of endorsing parent-subsidiary listings, TSE intends to provide better disclosure guidance to ensure that the interests of minority shareholders of listed subsidiaries are adequately secured.
While investors expect early resolution, parent-subsidiary listings continue to be a long-lived theme and investment opportunity, thanks to the TSE giving them time to dissolve their parent-subsidiary listings.
As for the parent-subsidiary listings, the key is the percentage of foreign holdings, with some companies initiating restructuring of their business portfolios and many others not.


Thanks to TSE's Guidance, Parent-Subsidiary Listings Remain a Long-Lasting Investment Opportunity

<ul>
<li>Improvements in OP margin and Sales/Total Assets have been slow to improve ROE. More companies are including DOE in their dividend policy against the backdrop of increasing cash on hand.</li>
<li>With costs expected to increase amid rising prices, sales and gross margins need to be raised, and therefore the component costs of investment and high-margin operations need to be raised.</li>
<li>Restructuring the business portfolio later to determine cash allocation will not result in effective investment and must result in limited improvement in profit margins on sales.</li>
</ul>


Improvements in OP margin and Sales/Total Assets have been slow to improve ROE. More companies are including DOE in their dividend policy against the backdrop of increasing cash on hand.
With costs expected to increase amid rising prices, sales and gross margins need to be raised, and therefore the component costs of investment and high-margin operations need to be raised.
Restructuring the business portfolio later to determine cash allocation will not result in effective investment and must result in limited improvement in profit margins on sales.


Many Companies Are in Stage of Setting Caps to Ensure that Cash on Hand Grows No More than Necessary

<ul>
<li>The driver of higher stock valuations is overseas investors, and engagement by overseas investors is likely to have a positive effect on return on capital and stock valuations.</li>
<li>In many aspects, companies seem to be unwilling to face shareholders. If they don't confront shareholders and proceed with management reforms, they will not be able to implement serious initiatives.</li>
<li>It can be hypothesized that the behavior of prioritizing control over the AGM over engaging with shareholders provides a clue as to the seriousness of a company's efforts.</li>
</ul>


The driver of higher stock valuations is overseas investors, and engagement by overseas investors is likely to have a positive effect on return on capital and stock valuations.
In many aspects, companies seem to be unwilling to face shareholders. If they don't confront shareholders and proceed with management reforms, they will not be able to implement serious initiatives.
It can be hypothesized that the behavior of prioritizing control over the AGM over engaging with shareholders provides a clue as to the seriousness of a company's efforts.


One of the Clues to Know How Serious a Company Is About Shifting to Management that Creates Value

<ul>
<li>In 2024, 69.7% of AGMs concentrated on the last three days of June, but in 2025, 79.9% of companies will hold AGMs on the last four days of June.</li>
<li>Most companies have established that they provide electronic convocation notices up to three weeks in advance. Meanwhile, only 1/3 of Prime companies provide English translations of all convocation notices.</li>
<li>Over 80% of companies hold AGMs in formats that require attendance at the venue to have a say. Only 1.6% hold AGMs where a shareholder can attend and speak online.</li>
</ul>


In 2024, 69.7% of AGMs concentrated on the last three days of June, but in 2025, 79.9% of companies will hold AGMs on the last four days of June.
Most companies have established that they provide electronic convocation notices up to three weeks in advance. Meanwhile, only 1/3 of Prime companies provide English translations of all convocation notices.
Over 80% of companies hold AGMs in formats that require attendance at the venue to have a say. Only 1.6% hold AGMs where a shareholder can attend and speak online.


The Reality of the Concentration of AGM Dates Has Not Changed

<ul>
<li>That's good news when considering that the number of listed shares is declining, which means that the understanding of the cost of capital has spread to some extent among companies.</li>
<li>With many companies having excess cash on hand and being able to generate cash from restructuring their business portfolios, the number of listed shares is expected to continue to decline.</li>
<li>Since there are only a few companies that global investors can invest in, there is a need to strengthen profitability to increase corporate value to increase market capitalization per company.</li>
</ul>


That's good news when considering that the number of listed shares is declining, which means that the understanding of the cost of capital has spread to some extent among companies.
With many companies having excess cash on hand and being able to generate cash from restructuring their business portfolios, the number of listed shares is expected to continue to decline.
Since there are only a few companies that global investors can invest in, there is a need to strengthen profitability to increase corporate value to increase market capitalization per company.


Declining Number of Shares Has Just Begun, but Valuations Need to Rise for Market Cap to Grow

Japan

The TOPIX, also known as the Tokyo Stock Price Index, is a capitalization-weighted index of all companies listed on the First Section of the Tokyo Stock Exchange. The index is supplemented by the subindices of the 33 industry sectors. The index calculation excludes temporary issues and preferred stocks, and has a base value of 100 as of January 4, 1968.

TSE Tokyo Price Index TOPIX (TPX INDEX)

Thanks to TSE's Guidance, Parent-Subsidiary Listings Remain a Long-Lasting Investment Opportunity

I would like to discuss the May 14 Nikkei article, “NTT and Mitsubishi Corporation...Parent and Subsidiary Dissolve Listing, Who's Next? The market...

Metrical Inc

Many Companies Are in Stage of Setting Caps to Ensure that Cash on Hand Grows No More than Necessary

I would like to discuss the issues on the May 16th Nikkei Newspaper article, “Ten Years of Corporate Governance Reform, Wealth Distribution...

Metrical Inc

One of the Clues to Know How Serious a Company Is About Shifting to Management that Creates Value

I would like to discuss the issues on the April 21 Nikkei article, “DNP Stock with ‘Elliott Loss’: Market Questions True Value of Reform."

Metrical Inc

The Reality of the Concentration of AGM Dates Has Not Changed

I would like to discuss the material disclosed by the TSE on April 25 regarding the “Trends in Annual General Meetings of Shareholders of Companies...

Metrical Inc

Declining Number of Shares Has Just Begun, but Valuations Need to Rise for Market Cap to Grow

I would like to discuss the May 9 Nikkei Newspaper's article “Japanese Stocks Enter Era of Declining Number of Shares,” recommending that “Share...

Metrical Inc