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>The dissolution of cross-shareholdings and changing environment in which foreign ownership has risen to 30% have changed the view of activist investors. TSE is one such example of big change.</li>
<li>It's convenient that activist investors can use “TSE requested” language that is both easily understood and undeniable by the company when communicating with the portfolio company to improve its issues.</li>
<li>We must determine whether this is a temporary return to shareholders until the activist investors are removed from the shareholder list, or a shift to value-creating management.</li>
</ul>


The dissolution of cross-shareholdings and changing environment in which foreign ownership has risen to 30% have changed the view of activist investors. TSE is one such example of big change.
It's convenient that activist investors can use “TSE requested” language that is both easily understood and undeniable by the company when communicating with the portfolio company to improve its issues.
We must determine whether this is a temporary return to shareholders until the activist investors are removed from the shareholder list, or a shift to value-creating management.


Determine Whether Shareholder Return Is a Temporary Measure or a Shift to Value-Creating Management

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

<ul>
<li>15 shareholders are looking to sell between 73.9-85m shares (US$1.2bn-US$1.38bn) of <a href="https://www.smartkarma.com/entities/asics-corp" target="_blank" data-smartkarma-citation="entities:16287:1" rel="noopener">ASICS Corp (7936 JP)</a> in a secondary offering that will likely be priced on 23 July.</li>
<li>
<a href="https://www.smartkarma.com/entities/asics-corp" target="_blank" data-smartkarma-citation="entities:16287:1" rel="noopener">ASICS Corp (7936 JP)</a> has also announced a huge upward revision to its sales and profit forecasts with EPS expected to increase 61% from earlier estimates.</li>
<li>Passive buying will be extremely limited in the short-term with the downward pressure offset to a large extent by the sales and earnings revisions.</li>
</ul>


15 shareholders are looking to sell between 73.9-85m shares (US$1.2bn-US$1.38bn) of ASICS Corp (7936 JP) in a secondary offering that will likely be priced on 23 July.

ASICS Corp (7936 JP) has also announced a huge upward revision to its sales and profit forecasts with EPS expected to increase 61% from earlier estimates.
Passive buying will be extremely limited in the short-term with the downward pressure offset to a large extent by the sales and earnings revisions.


Asics (7936 JP): Huge Forecast Revision to Offset Limited Passive Buying

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

Rikki Malik

Cross Asset Strategy

<ul>
<li>A review of recent events impacting our investment themes or outlook</li>
<li>Japan perks up as machine tool orders rise y/y for the first time in nearly 19 months</li>
<li>US Interest Rate cut expectations rise to a “sure thing” in September</li>
</ul>


A review of recent events impacting our investment themes or outlook
Japan perks up as machine tool orders rise y/y for the first time in nearly 19 months
US Interest Rate cut expectations rise to a “sure thing” in September


<ul>
<li>Competition little work because the portfolio company had advantage over competitors in business. This distorted competitive environment may have prevented the beneficiaries from receiving the benefits they should have received.</li>
<li>If the business was advanced by competitive advantage through the ownership of shares in the portfolio company, the beneficiaries may not have received the benefits that they should have received.</li>
<li>The question is whether the life insurers are exercising their voting rights properly for the benefit of the beneficiaries in the shares of client companies they hold.</li>
</ul>


Competition little work because the portfolio company had advantage over competitors in business. This distorted competitive environment may have prevented the beneficiaries from receiving the benefits they should have received.
If the business was advanced by competitive advantage through the ownership of shares in the portfolio company, the beneficiaries may not have received the benefits that they should have received.
The question is whether the life insurers are exercising their voting rights properly for the benefit of the beneficiaries in the shares of client companies they hold.


Is It Difficult to Separate Business Relationships from Proxy Voting?

<ul>
<li>Since non-cash expenses are added to net profit for many manufacturing companies, cash on hand will not decrease at all if the dividend policy is based on net profit.</li>
<li>Using DOE as the basis for dividend policy would help improve ROE because it places certain constraints on the expansion of shareholders' equity.</li>
<li>However, the challenge for raising ROE is the strategic allocation of excess cash on hand and cash flow to shareholder returns and growth investments to improve profitability.</li>
</ul>


Since non-cash expenses are added to net profit for many manufacturing companies, cash on hand will not decrease at all if the dividend policy is based on net profit.
Using DOE as the basis for dividend policy would help improve ROE because it places certain constraints on the expansion of shareholders' equity.
However, the challenge for raising ROE is the strategic allocation of excess cash on hand and cash flow to shareholder returns and growth investments to improve profitability.


Adopting DOE Is Step Forward, but Explanation Needed to Step into Strategic Allocation of Cash Flow

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)

Determine Whether Shareholder Return Is a Temporary Measure or a Shift to Value-Creating Management

I would like to discuss the issues on the June 9 Nikkei article, “Shareholder Meetings, Dialogue with Activist Investors Increasingly Settled in...

Metrical Inc

Asics (7936 JP): Huge Forecast Revision to Offset Limited Passive Buying

Existing shareholders are looking to sell up to US$1.4bn of Asics. Limited passive buying will be offset by a big revision in forecast sales and...

Brian Freitas

Overview #6 - Japanese Data Perks Up.

Recent events show Japan's economy improving with machine tool orders rising, while US interest rate cut in September is now highly expected.

Rikki Malik

Is It Difficult to Separate Business Relationships from Proxy Voting?

I would like to discuss the issues on the June 8 Nikkei article, “Selling Policy Shareholdings of P&C Insurers, Life Insurers Wary of Sparks, Focus...

Metrical Inc

Adopting DOE Is Step Forward, but Explanation Needed to Step into Strategic Allocation of Cash Flow

I will discuss the May 15 Nikkei article, “Japanese Stocks Supported by Stronger Shareholder Returns: More Strength in Shareholder Returns than in...

Metrical Inc

Determine Whether Shareholder Return Is a Temporary Measure or a Shift to Value-Creating Management

I would like to discuss the issues on the June 9 Nikkei article, “Shareholder Meetings, Dialogue with Activist Investors Increasingly Settled in...

Metrical Inc

Asics (7936 JP): Huge Forecast Revision to Offset Limited Passive Buying

Existing shareholders are looking to sell up to US$1.4bn of Asics. Limited passive buying will be offset by a big revision in forecast sales and...

Brian Freitas

Overview #6 - Japanese Data Perks Up.

​Recent events show Japan's economy improving with machine tool orders rising, while US interest rate cut in September is now highly expected.

Rikki Malik

Is It Difficult to Separate Business Relationships from Proxy Voting?

I would like to discuss the issues on the June 8 Nikkei article, “Selling Policy Shareholdings of P&C Insurers, Life Insurers Wary of Sparks, Focus...

Metrical Inc

Adopting DOE Is Step Forward, but Explanation Needed to Step into Strategic Allocation of Cash Flow

I will discuss the May 15 Nikkei article, “Japanese Stocks Supported by Stronger Shareholder Returns: More Strength in Shareholder Returns than in...

Metrical Inc

Recent events show Japan's economy improving with machine tool orders rising, while US interest rate cut in September is now highly expected.