Pan-Asian Hunting Stocks -- Corporate Governance, bottom-up ::Macquarie Research,

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Pan-Asian Hunting Stocks
Corporate Governance, bottom-up
Our 1 April 2011 Pan-Asian Hunting Stocks: Home-grown multinationals
investigated how the increased integration of economies across Asia is
facilitating the emergence of home-grown multinationals. Our resulting thematic
list of the leading 50 Home-grown multinationals, Fig 1, shows the companies
under further investigation here.
This report includes an examination of the quality of the companies‘ corporate
governance practices, bottom-up, and a qualitative ranking, Fig 2, pages 5 and 6.
The 50 Home-grown multinationals were evaluated based on:
1) Structure and degree of entrenchment of the board of directors (age,
tenure, independence, cross-board positions)
2) Concentration of shareholder structure (who owns it and how much)
3) Stated corporate governance policy and investor accessibility (ease of
finding information, quality and timeliness of annual report, etc.)
4) AGM highlights and accessibility
5) Cyber security structures and other issues of corporate integrity
Stock recommendations. We believe the Home-grown multinationals, as a
group, have a strong commitment to corporate governance. Highlighted
companies in grey in Fig 1 are those that appear in our highest two corporate
governance categories (Leaders, Good). An example of a company that, in
addition, has over 40% upside to our analyst‘s target price is Mitsubishi Corp
(8058 JP, ¥1,842, Outperform, TP: ¥3,000, Polina Diyachkina).


Thematic investing is about earnings expectations 3–5 years out, as
compounding turns today‘s exciting growth opportunities into material business.
The Pan-Asian Hunting Stocks section from page 59 provides information on the
research program to-date. Page 58 shows the performance of each of eight
thematic baskets since the start of 2008.