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>70% of Tokyo market is traded by overseas investors, so even companies with smaller market capitalization need to catch the attention of overseas investors by increasing their return on capital.</li>
<li>It is possible that the difference in stock valuations over the past few years has been due to a greater difference in return on capital between large-cap and small-cap stocks.</li>
<li>Skillful IR alone is not enough to raise stock price valuations. The IR department must have management who can execute management strategies and personnel who can formulate persuasive plans.</li>
</ul>


70% of Tokyo market is traded by overseas investors, so even companies with smaller market capitalization need to catch the attention of overseas investors by increasing their return on capital.
It is possible that the difference in stock valuations over the past few years has been due to a greater difference in return on capital between large-cap and small-cap stocks.
Skillful IR alone is not enough to raise stock price valuations. The IR department must have management who can execute management strategies and personnel who can formulate persuasive plans.


It's Not a Lack of Analyst Coverage that Is Causing the Lack of Trading.....

<ul>
<li>The profit outlook for many Japanese companies may not be good enough for overseas investors, who are selecting the best investments from among stocks around the world.</li>
<li>In FY2025, both sales and recurring profit are expected to slow in the manufacturing sector. This casts a shadow over TSE stock prices, which are dominated by manufacturing companies.</li>
<li>Companies whose corporate performance are at a standstill has good opportunity to show investors how it will use the proceeds from the sale of cross-held shares to expand corporate value.</li>
</ul>


The profit outlook for many Japanese companies may not be good enough for overseas investors, who are selecting the best investments from among stocks around the world.
In FY2025, both sales and recurring profit are expected to slow in the manufacturing sector. This casts a shadow over TSE stock prices, which are dominated by manufacturing companies.
Companies whose corporate performance are at a standstill has good opportunity to show investors how it will use the proceeds from the sale of cross-held shares to expand corporate value.


Now Is the Time to Turn the Slowdown in Profit Growth into an Opportunity

<ul>
<li>REITs, whose main players are regional banks that invest as a bond alternative, tend to stop their market decline when the spread with JGB yields approaches 400 basis points.</li>
<li>While there is certainly room for REITs to strengthen shareholder returns, the possibility that domestic investors may want stable dividends cannot be denied.</li>
<li>Other activist investors are watching with interest to see if the shareholder activism approach works in REITs as well, but the main battleground is still listed equities.</li>
</ul>


REITs, whose main players are regional banks that invest as a bond alternative, tend to stop their market decline when the spread with JGB yields approaches 400 basis points.
While there is certainly room for REITs to strengthen shareholder returns, the possibility that domestic investors may want stable dividends cannot be denied.
Other activist investors are watching with interest to see if the shareholder activism approach works in REITs as well, but the main battleground is still listed equities.


Aiming for REITs with Lower Downside Risk and Expectations of Higher Shareholder Returns?

<ul>
<li>Since the ROE of Japanese companies is lower than that of U.S. and European companies, few companies become the companies of choice for long-term investors to invest in.</li>
<li>Overseas investors bought significant overbought of Japanese equities in previous year, in the hope that the shift to inflation would trigger an improving ROE as they used their cash reserves.</li>
<li>Simply using cash on hand for shareholder returns doesn't create value. To bring investors back, the key is to let them know that it won't take much to see results.</li>
</ul>


Since the ROE of Japanese companies is lower than that of U.S. and European companies, few companies become the companies of choice for long-term investors to invest in.
Overseas investors bought significant overbought of Japanese equities in previous year, in the hope that the shift to inflation would trigger an improving ROE as they used their cash reserves.
Simply using cash on hand for shareholder returns doesn't create value. To bring investors back, the key is to let them know that it won't take much to see results.


What It Takes to Bring Back Overseas Investors once They Have Left ....

<ul>
<li>Since important decisions on REIT management are made by the sponsor companies, governance isn't functioning. That's why REITs have been very careful to strengthen their compliance systems and information disclosure.</li>
<li>For REITs that rely heavily on properties contributed by their sponsors, it is unlikely that other investors would support an activist fund's advocacy for a change of asset manager.</li>
<li>The most annoying thing for the sponsor is the change of asset manager. The tactic of this TOB is to extract shareholder returns by addressing what the sponsor company dislike.</li>
</ul>


Since important decisions on REIT management are made by the sponsor companies, governance isn't functioning. That's why REITs have been very careful to strengthen their compliance systems and information disclosure.
For REITs that rely heavily on properties contributed by their sponsors, it is unlikely that other investors would support an activist fund's advocacy for a change of asset manager.
The most annoying thing for the sponsor is the change of asset manager. The tactic of this TOB is to extract shareholder returns by addressing what the sponsor company dislike.


This TOB Does Not Question the Fundamental Issue of REIT Governance, but Will the Tactic Succeed?

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)

It's Not a Lack of Analyst Coverage that Is Causing the Lack of Trading.....

I would like to discuss the issues on the March 2 Nikkei article, “Analyst Shortage in Japan: 70% of Stocks Lacking Analysts, Wall for Investment...

Metrical Inc

Now Is the Time to Turn the Slowdown in Profit Growth into an Opportunity

I would like to discuss the February 22 Nikkei Shimbun article, "Listed companies increase profits in 70% of industries from April to December, net...

Metrical Inc

Aiming for REITs with Lower Downside Risk and Expectations of Higher Shareholder Returns?

I would like to discuss the issues on the February 26 Nikkei article, “Overseas Investors Interested in REITs Despite BOJ's Rate Hike; Market...

Metrical Inc

What It Takes to Bring Back Overseas Investors once They Have Left ....

I would like to discuss the issues on the February 22 Nikkei article, “Growth Expectations Not Enough for Japanese Stocks: Stocks Fall One Year...

Metrical Inc

This TOB Does Not Question the Fundamental Issue of REIT Governance, but Will the Tactic Succeed?

I would like to discuss the issues on the February 20 Nikkei article, “Conflict of Interest Issues Left Unaddressed in REITs, Leading to Intrusion...

Metrical Inc