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>In many cases, management is involved rather than seeking clarification of the actual situation from an independent body. This is the reason why scandals are repeated.</li>
<li>In Japan, awareness of integrity and code of ethics compliance remains very low. A thorough awareness change is required to consider “what is ethical to do and what is not.”</li>
<li>Even after the revision of Whistleblower Protection Act in 2022, harassment of whistleblowers hasn’t stopped. Consequently, the number of whistleblowers is low and whistleblowing hasn’t been able to deter scandals.</li>
</ul>


In many cases, management is involved rather than seeking clarification of the actual situation from an independent body. This is the reason why scandals are repeated.
In Japan, awareness of integrity and code of ethics compliance remains very low. A thorough awareness change is required to consider “what is ethical to do and what is not.”
Even after the revision of Whistleblower Protection Act in 2022, harassment of whistleblowers hasn’t stopped. Consequently, the number of whistleblowers is low and whistleblowing hasn’t been able to deter scandals.


In Order to Avoid Scandals in the Future, Management Must Take Leadership in Changing Mindsets

<ul>
<li>With the TSE shortly declaring the conclusion of discussions regarding parent-subsidiary listings, more parent-subsidiary listings (including listed affiliates) are likely to continue to appear going forward.</li>
<li>“TSE's Request” states a restructuring of business portfolio, but leaves out the issue of restructuring the parent company's business portfolio and shifting to a management approach that increases corporate value.</li>
<li>The parent-subsidiary listings (including listed affiliates) that continue to be created will continue to provide investment opportunities for investors, including activist investors.</li>
</ul>


With the TSE shortly declaring the conclusion of discussions regarding parent-subsidiary listings, more parent-subsidiary listings (including listed affiliates) are likely to continue to appear going forward.
“TSE's Request” states a restructuring of business portfolio, but leaves out the issue of restructuring the parent company's business portfolio and shifting to a management approach that increases corporate value.
The parent-subsidiary listings (including listed affiliates) that continue to be created will continue to provide investment opportunities for investors, including activist investors.


“Parent-Subsidiary Listing” Heaven Continues to Provide Rich Investment Performance for Investors

<ul>
<li>In many cases of bad disclosures where the capital allocation policy has not been adequately considered, the company often fails to develop a concrete growth strategy using cash.</li>
<li>The reason for the misaligned disclosures with investors may be that the company lacks the process to produce projected financial statements and to estimate corporate value/share price calculated from DCF.</li>
<li>If a plan containing unreasonable figures is disclosed as is, the independent outside director may not be involved in the decision making or may not be accompanied by adequate skills.</li>
</ul>


In many cases of bad disclosures where the capital allocation policy has not been adequately considered, the company often fails to develop a concrete growth strategy using cash.
The reason for the misaligned disclosures with investors may be that the company lacks the process to produce projected financial statements and to estimate corporate value/share price calculated from DCF.
If a plan containing unreasonable figures is disclosed as is, the independent outside director may not be involved in the decision making or may not be accompanied by adequate skills.


Independent Directors Are Responsible for Disclosures that Have Gaps from the Investors' Perspective

Asia L/S Equity PM/Macro/Thematic Idea Generation

Rikki Malik

Cross Asset Strategy

<ul>
<li>A monthly review of how the markets and our themes are currently performing</li>
<li>Analysing what went wrong and what went right in stocks and sectors</li>
<li>Highlighting positions added or removed from the thematic investment portfolio</li>
</ul>


A monthly review of how the markets and our themes are currently performing
Analysing what went wrong and what went right in stocks and sectors
Highlighting positions added or removed from the thematic investment portfolio


November Themes and Thematic Portfolio Review

<ul>
<li>The measure to implement 100% inclusion or separation of subsidiary profits from parent company profits is only the first step, and this alone won't reflect positively on the stock price.</li>
<li>The key is the second phase of measures to strengthen the parent company's overall ability to generate cash flow by investing in highly profitable businesses after restructuring its business portfolio.</li>
<li>Hitachi is one of the few cases where it quickly implemented the second phase and reflected growth in corporate value in its stock price through realization of cash flow expansion.</li>
</ul>


The measure to implement 100% inclusion or separation of subsidiary profits from parent company profits is only the first step, and this alone won't reflect positively on the stock price.
The key is the second phase of measures to strengthen the parent company's overall ability to generate cash flow by investing in highly profitable businesses after restructuring its business portfolio.
Hitachi is one of the few cases where it quickly implemented the second phase and reflected growth in corporate value in its stock price through realization of cash flow expansion.


In the Dissolution of the Parent-Subsidiary Listing, the Second Step Is Key for the Parent Company

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)

In Order to Avoid Scandals in the Future, Management Must Take Leadership in Changing Mindsets

I would like to discuss the issues on the November 16 Nikkei article, “Corporate Fraud; Challenges in Preparing for Response; 30% of Companies Have...

Metrical Inc

“Parent-Subsidiary Listing” Heaven Continues to Provide Rich Investment Performance for Investors

I would like to discuss the document entitled “Status of Discussions at the Study Group on Minority Shareholder Protection at Dependent Listed...

Metrical Inc

Independent Directors Are Responsible for Disclosures that Have Gaps from the Investors' Perspective

I would like to discuss the issues on the document “Points and Examples of Gaps from Investors' Perspective (Draft)” disclosed by the TSE on...

Metrical Inc

November Themes and Thematic Portfolio Review

We review overall market performance, our investment themes, highlighting additions and substractions in the thematic portfolio.

Rikki Malik

In the Dissolution of the Parent-Subsidiary Listing, the Second Step Is Key for the Parent Company

I would like to discuss the October 30 Nikkei Shimbun article, “Following Hitachi, whose stock price is performing well, NEC and Toyota Tsusho are...

Metrical Inc