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>Few companies have disclosed their cost of capital, so TSE provided specific indicators for this purpose. On the other hand, allergies to cost of capital disclosure are persistent in companies.</li>
<li>It is a concern that many companies still have more fixed remuneration than variable remuneration for compensation incentives, which are a mechanism for achieving capital profitability goals like ROE.</li>
<li>Engagement with overseas investors can be effective, but there are challenges, such as the existence of passive funds and companies with small market capitalizations that are not eligible for investment.</li>
</ul>


Few companies have disclosed their cost of capital, so TSE provided specific indicators for this purpose. On the other hand, allergies to cost of capital disclosure are persistent in companies.
It is a concern that many companies still have more fixed remuneration than variable remuneration for compensation incentives, which are a mechanism for achieving capital profitability goals like ROE.
Engagement with overseas investors can be effective, but there are challenges, such as the existence of passive funds and companies with small market capitalizations that are not eligible for investment.


Guidebook for Raising P/B Published, but Still Much Work to Be Done to Achieve Goals

<ul>
<li>Code of Corporate Conduct lacks explanation of the role to be played by a listed company and the background. Consequently, there're cases where the same companies have repeatedly committed misconduct.</li>
<li>For companies that are good at pretending that they are trying, without any substance to their corporate governance, making the provisions of Corporate Governance Code mandatory effort won't be effective.</li>
<li>TSE's request seems to be an effort obligation. It is good that the substance of the company's improvement plan, which only made an effort to improve, will be improved.</li>
</ul>


Code of Corporate Conduct lacks explanation of the role to be played by a listed company and the background. Consequently, there're cases where the same companies have repeatedly committed misconduct.
For companies that are good at pretending that they are trying, without any substance to their corporate governance, making the provisions of Corporate Governance Code mandatory effort won't be effective.
TSE's request seems to be an effort obligation. It is good that the substance of the company's improvement plan, which only made an effort to improve, will be improved.


What Happens to the Effectiveness of TSE Requests when They Become Effort Obligations?

<ul>
<li>Although many institutional investors' voting criteria apply the rule of "support the proposed appointment of top management director if one female director is nominated," more in-depth examination should be conducted.</li>
<li>Agenda based on TSE's request isn't easy to understand for all investors, and the current voting guidelines for domestic institutional investors make it unlikely that they will vote for it.</li>
<li>The ISS ROE criteria will be raised next year, and companies may not raise ROE with bold shareholder returns until the voting guidelines for domestic institutional investors are also raised.</li>
</ul>


Although many institutional investors' voting criteria apply the rule of "support the proposed appointment of top management director if one female director is nominated," more in-depth examination should be conducted.
Agenda based on TSE's request isn't easy to understand for all investors, and the current voting guidelines for domestic institutional investors make it unlikely that they will vote for it.
The ISS ROE criteria will be raised next year, and companies may not raise ROE with bold shareholder returns until the voting guidelines for domestic institutional investors are also raised.


Raising ROE May Require Raising Proxy Voting Guidelines

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

Rikki Malik

Cross Asset Strategy

<ul>
<li>A weekly review of recent events impacting our investment themes</li>
<li>Changing consumer preferences impact the Chinese May day  travel data</li>
<li>Cosnumers in the US and Japan face different issues  with real incomes declining</li>
</ul>


A weekly review of recent events impacting our investment themes
Changing consumer preferences impact the Chinese May day  travel data
Cosnumers in the US and Japan face different issues  with real incomes declining


Overview #4 - Analysis of Chinese Travel Data Is on the Wrong Path.

<ul>
<li>Most large companies initially estimate sales and profits conservatively, and CapEx, which is often planned more than a year in advance, isn’t often above plan.</li>
<li>Companies have a cautious earnings outlook, but the market consensus still expects profit growth in FY2024. CapEx growth in the BOJ Tankan is expected to be slightly higher than profits.</li>
<li>Assuming an 8.5% increase in CapEx for large manufacturing companies and a low single-digit growth in the recurring profit outlook, the level of cash on hand is unlikely to decrease.</li>
</ul>


Most large companies initially estimate sales and profits conservatively, and CapEx, which is often planned more than a year in advance, isn’t often above plan.
Companies have a cautious earnings outlook, but the market consensus still expects profit growth in FY2024. CapEx growth in the BOJ Tankan is expected to be slightly higher than profits.
Assuming an 8.5% increase in CapEx for large manufacturing companies and a low single-digit growth in the recurring profit outlook, the level of cash on hand is unlikely to decrease.


Since Cash on Hand Will Not Decrease in FY2024, Shareholder Returns Remain a Hot Topic

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)

Guidebook for Raising P/B Published, but Still Much Work to Be Done to Achieve Goals

I would like to discuss the issues on the TSE's March 31st disclosure document by TSE, "Measures to Achieve Management Conscious of Cost of Capital...

Metrical Inc

What Happens to the Effectiveness of TSE Requests when They Become Effort Obligations?

I would like to discuss the issues on the material "Review of Corporate Code of Conduct" at the "15th Follow-up Meeting on Review of Market...

Metrical Inc

Raising ROE May Require Raising Proxy Voting Guidelines

In summary, I would like to discuss the issues on the Nikkei Shimbun article of March 29, "March Shareholders' Meetings, Stock Market High, but...

Metrical Inc

Overview #4 - Analysis of Chinese Travel Data Is on the Wrong Path.

Changing consumer preferences affecting Chinese May Day travel data, while consumers in the US and Japan are dealing with declining real incomes.

Rikki Malik

Since Cash on Hand Will Not Decrease in FY2024, Shareholder Returns Remain a Hot Topic

I would like to discuss the issues on the April 1 Nikkei article, "CapEx up 8.5%, first growth since the bubble economy, driving future economic...

Metrical Inc