Category

ESG

Nov 15
0

Daily Brief ESG: Will Companies Change with Cash Allocation Disclosures that Don’t Allow Copy-And-Paste Solutions? and more

By | Daily Briefs, ESG

In today’s briefing:

  • Will Companies Change with Cash Allocation Disclosures that Don’t Allow Copy-And-Paste Solutions?

Will Companies Change with Cash Allocation Disclosures that Don’t Allow Copy-And-Paste Solutions?

By Aki Matsumoto

  • Since sustainable growth in corporate value could not be achieved, the revised Corporate Governance Code now focuses on cash allocation practices that are strongly linked to corporate value creation.
  • To achieve the goal of maximizing shareholder interest, strategic planning and investment are essential, and it’s natural to consider the remaining free cash flow as belonging to the owners, shareholders.
  • Pointing out better disclosure methods won’t lead to cash allocation that satisfies investors unless they understand underlying contractual relationship between shareholders and management and the mindset behind executing management decisions.

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Nov 13
0

Daily Brief ESG: For Both the Company and Investors and more

By | Daily Briefs, ESG

In today’s briefing:

  • For Both the Company and Investors, Pre-Negotiation Process as SR Is Becoming Increasingly Important

For Both the Company and Investors, Pre-Negotiation Process as SR Is Becoming Increasingly Important

By Aki Matsumoto

  • Following the 2020 revision of Stewardship Code, domestic institutional investors have gradually increased their support for shareholder proposals. However, the rise in approval rates has paused in the 10% range.
  • Some investors adopt voting policy that allows them to support company proposals if the company’s efforts are deemed commendable, even if numerical targets aren’t met. This makes shareholder engagement important.
  • Given that conditions must align where a company has substantial foreign ownership and doesn’t implement initiatives desired by investors, the approval rate for shareholder proposals is unlikely to rise significantly.

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Nov 10
0

Daily Brief ESG: Combining Equity Method Affiliates and Founder Family Companies Provide Sufficient Number of Targets and more

By | Daily Briefs, ESG

In today’s briefing:

  • Combining Equity Method Affiliates and Founder Family Companies Provide Sufficient Number of Targets

Combining Equity Method Affiliates and Founder Family Companies Provide Sufficient Number of Targets

By Aki Matsumoto

  • In response to calls from overseas investors to eliminate parent-subsidiary dual listings, the number of listed subsidiaries has decreased, while the number of equity-method affiliates has increased.
  • Some companies that found themselves with no wayout resorted to selling off part of their holdings to transition to equity method affiliates, for the time being, driven by herd mentality.
  • When considering investment strategies focused on parent-subsidiary listings, in the highly liquid Prime Market, equity method affiliates are more promising investment targets than the limited number of listed subsidiaries.

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Nov 08
0

Daily Brief ESG: Will Strengthened Disclosure Rules and Tax Incentives Drive Growth Investment? and more

By | Daily Briefs, ESG

In today’s briefing:

  • Will Strengthened Disclosure Rules and Tax Incentives Drive Growth Investment?

Will Strengthened Disclosure Rules and Tax Incentives Drive Growth Investment?

By Aki Matsumoto

  • Corporate Governance Code seems to be revised in ‘verifying and disclosing cash allocation’ in addition to ‘requests for disclosure in annual securities reports to enhance items related to human capital.’
  • This time, the disclosure request concerns cash allocation. Previously, disclosure regarding policy shareholdings was requested, but the elimination of cross-shareholdings did not progress smoothly.
  • The government plans to encourage growth investment in accumulated cash reserves without business plans for growth by strengthening disclosure rules and offering tax incentives.

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Nov 06
0

Daily Brief ESG: With Many Parent/Founder-Family Companies and more

By | Daily Briefs, ESG

In today’s briefing:

  • With Many Parent/Founder-Family Companies, Effective Succession Planning Is a Difficult Task

With Many Parent/Founder-Family Companies, Effective Succession Planning Is a Difficult Task

By Aki Matsumoto

  • In the activities of Nomination Committee, the formulation of policies and criteria for appointing directors, CEOs, as well as the consideration of succession plans, are given low priority.
  • With major shareholders holding over 20% stakes present in half of companies, implementing process where the board accepts the nomination committee’s deliberated proposal on succession plans presents a significant hurdle.
  • The failure of nomination committees and independent outside directors, who constitute a majority in many companies, to fulfill their critical roles may be a significant hindrance to corporate growth.

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Nov 05
0

Daily Brief ESG: Keppel Infrastructure Trust (KIT) – Global Marine Group Acquisition: A Case for Rejection and more

By | Daily Briefs, ESG

In today’s briefing:

  • Keppel Infrastructure Trust (KIT) – Global Marine Group Acquisition: A Case for Rejection

Keppel Infrastructure Trust (KIT) – Global Marine Group Acquisition: A Case for Rejection

By Tan Yee Peng

  • Corporate Monitor strongly recommends that unitholders of Keppel Infrastructure Trust (“KIT”) reject the proposed acquisition of a 46.7% interest in Global Marine Group (“GMG”) for approximately S$119 million, with additional equity commitment of S$68 million.
  • Keppel Infrastructure Fund (“KIF”), managed by Keppel Ltd., owns another 46.7% stake and the balance is held by a co-investor.
  • KIT argues that GMG operates in a resilient, high-barrier subsea cable industry supported by strong structural demand drivers.

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Nov 03
0

Daily Brief ESG: Parent-Subsidiary Listing Focus: From Small-Scale Fixe to Real Reform and more

By | Daily Briefs, ESG

In today’s briefing:

  • Parent-Subsidiary Listing Focus: From Small-Scale Fixe to Real Reform, from Prime to Standard Market

Parent-Subsidiary Listing Focus: From Small-Scale Fixe to Real Reform, from Prime to Standard Market

By Aki Matsumoto

  • The number of listed subsidiaries is decreasing, while equity-method affiliates are increasing. If parent-subsidiary listings are dissolved by selling part of equity interests, this doesn’t lead to fundamental management reform.
  • While some companies have finally gotten off their backsides after seeing engagement results, the challenge is shifting to the many companies that refuse to seriously confront management reform.
  • Investors want confidence in which businesses generate and expand the company’s overall cash flow. A serious business portfolio restructuring to provide that confidence remains only halfway complete.

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Oct 31
0

Daily Brief ESG: Is TSE List Effective? Companies Need to Demonstrate Momentum in Raising Their Capital Profitability and more

By | Daily Briefs, ESG

In today’s briefing:

  • Is TSE List Effective? Companies Need to Demonstrate Momentum in Raising Their Capital Profitability

Is TSE List Effective? Companies Need to Demonstrate Momentum in Raising Their Capital Profitability

By Aki Matsumoto

  • For investors targeting large-cap companies, improvements in ROE and P/B are almost expected. However, for the majority of smaller-cap companies, such improvements have not yet reached a visible level.
  • Lately, while P/B of companies with low market capitalization is rising, ROE growth remains sluggish. If ROE remains slow, support from BoJ’s continued monetary easing policy must play significant role.
  • It is unreasonable to expect investors to take an interest solely through IR outreach without providing evidence that signals change within the company or convinces investors that change is imminent.

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Oct 29
0

Daily Brief ESG: Nevertheless and more

By | Daily Briefs, ESG

In today’s briefing:

  • Nevertheless, Concern Remain that TSE Growth Market Might Include Companies that Don’t Pursue Growth

Nevertheless, Concern Remain that TSE Growth Market Might Include Companies that Don’t Pursue Growth

By Aki Matsumoto

  • The decline in IPOs for small-cap companies was as anticipated. Once the topic of revising the listing criteria for Growth Markets arose, IPOs had to pay attention to new criteria.
  • For companies planning IPOs, the requirement to demonstrate a commitment to growth during the listing review process has a positive aspect: it’ll lead to a decrease in small-scale listings.
  • Growing companies will move to Prime Market, while those failing to reach JPY10 billion will transition to Standard. Companies maintaining JPY10 billion but without growth may stay in Growth Market.

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Oct 27
0

Daily Brief ESG: Companies that Wish to Distance from Facing Shareholders Are Unlikely to Achieve Management Reform and more

By | Daily Briefs, ESG

In today’s briefing:

  • Companies that Wish to Distance from Facing Shareholders Are Unlikely to Achieve Management Reform

Companies that Wish to Distance from Facing Shareholders Are Unlikely to Achieve Management Reform

By Aki Matsumoto

  • The increase in stock splits reflects a shift toward meeting the needs of individual shareholders of listed companies, occurring as cross-shareholdings decline and the presence of overseas investors grows.
  • Companies unwilling to increase foreign ownership further use stock splits to boost individual shareholders. Companies with low stock prices use it to meet as a tool of TSE’s P/B request.
  • It has become clear that increasing the foreign ownership is a higher priority than the increased costs associated with the rise in the number of shareholders resulting from stock split.

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