Japanese stock report - Daiwa Securities Group

JAP

Daiwa Securities increases 1.0% April 20, 2018 15:00 JST

NEWS BITES - JAPAN

Daiwa Securities Group Inc. (TO:8601), the 2nd largest Securities & commodity futures company by market cap in Japan, has increased JPY6.90 (1.0%) from its last trading session of April 19 to close at JPY672.0. Compared with the Nikkei 225 Index which fell 28.9 points (0.1%) in the day, the relative price increase was 1.2%. The volume was 0.9 times the average daily trading volume of 8.4 million shares.

THE PAST THREE YEARS

Daiwa Securities plunges 29% in 3 years

Daiwa Securities Group Inc. (TO:8601), has plunged JPY273.70 (or 28.9%) in the past three years to close at JPY672.0. Compared with the Nikkei 225 Index which has risen 12.8% over the same period, this is a relative price change of -41.7%.

Highlights in today's Report:

SECTION 1 BULLISH SIGNALS

Fundamentals, Undervaluation [compared with sector average], Technicals, High Performance Indicators

SECTION 2 BEARISH SIGNALS

Fundamentals, Overvaluation [compared with sector average], Low Performance Indicators

SECTION 3 PRICE VOLUME DYNAMICS

Technicals, Moving Annual Return, Turnover Rate & Turnover Period

SECTION 4 RANKING

Global, Independent Ratings

SECTION 5 FINANCIALS

Financials Summary, Annual Report for the year ended March 31, 2017 (year-on-year comparisons with previous corresponding period)-, Trailing 12 Months Dividends

SECTION 6 PROFILE

Activities, Top Management, Issued Capital

SECTION 7 STOCK BUZZ

SECTION 1 DAIWA SECURITIES BULLISH SIGNALS

1.1 Fundamentals:

+ The relative yield of the stock, defined by its yield of 3.9%, divided by average yield of dividend yielding stocks in the Nikkei 225 Index of 2.9% is 133.9%. This suggests the stock is undervalued in dividend yield terms.

+ Net profit margin has averaged 23.4% in the last 3 years. This is considered superior and suggests a high margin of safety.

+ As per the Du Pont analysis, Return on Equity of 8.3% is better than sector average of 7.9%. This is computed as net profit margin of 16.9% times asset turnover [sales/assets] of 0.03 times leverage factor [total assets/shareholders' equity] of 15.7.

1.2 Undervaluation [compared with sector average]:

+ Price to Book of 1 [1.1]. We estimate Daiwa Securities stock is trading at a current year Price to Book of 1 and a forward year Price to Book of 1.

+ Dividend yield of 3.9% [2.0%].

+ Price to EBITDA of 4.4 [5.4].

1.3 Technicals:

+ In the last three months the stock has hit a new 52-week high twice.

+ The present value of JPY1,000 (PV1000) invested twenty years ago in Daiwa Securities is JPY2,017, including a capital gain of JPY683 and dividend reinvested of JPY334.

+ 20 years Multiplier in JPY = 2.017x

+ Compound Annual Growth Rate (CAGR) in JPY = 3.6%

Present Value of USD1,000 invested 20 years ago:

+ The present value of USD1,000 (PV1000) invested twenty years ago in Daiwa Securities is $US2,466, including a capital gain of $US1,057 and dividend reinvested of $US409.

+ 20 years ago USD 1 equalled JPY 131.5789

+ 20 years Multiplier in USD = 2.466x

+ Compound Annual Growth Rate (CAGR) in USD = 4.6%

Apr 20, 2018: USD 1 equals JPY 107.65

1.4 High Performance Indicators:

DescriptionValueRank In Market
EBITDA Margin %42.4In Top 3%
Today's TurnoverJPY4.9 billion (US$45.7 million)In Top 4%
Price Change %1.0In Top Quartile
Volatility %1.0In Top Quartile

SECTION 2 DAIWA SECURITIES BEARISH SIGNALS

2.1 Fundamentals:

+ Total Liabilities/EBITDA of 70.8 which compares unfavourably with the Joseph Piotroski benchmark of 5.

+ Revenue growth and EBITDA growth have shown signs of deterioration in recent years. [Year ended, all figures in %]

YearRevenue GrowthEBITDA Growth
Mar 17-5.7-7.8
Mar 1645.918,463.6

2.2 Overvaluation [compared with sector average]:

+ Return on Assets 0.5% [0.6%].

+ Return on Capital Employed 6.2% [7.4%].

2.3 Low Performance Indicators:

DescriptionValueRank In Market
Total Debt to Equity7.6In Bottom 1%
Return on Assets [ROA] %0.5In Bottom 5%
Price to Sales1.9In Bottom Quartile

SECTION 3 PRICE VOLUME DYNAMICS

3.1 Technicals:

+ Volume: there were 7,320,000 shares worth JPY4.9 billion (US$45.7 million) traded today. In the past week, volume was 0.8 times average and the shares were down 0.5%.

+ Daiwa Securities is at a discount of 17.1% to its 12-month high of JPY810.50 on January 24. It is also at a premium of 15.5% to the 12-month low of JPY581.83 on September 08, 2017.

+ The present value of JPY1,000 (PV1000) invested one year ago in Daiwa Securities is JPY1,079, comprising a capital gain of JPY38 and dividend reinvested of JPY42.

PV10001-week1-month1-year
8601.TO9959571,079
Nikkei 225 Index1,0181,0471,202

3.2 Moving Annual Return

Based on a dynamic start date of 5 years ago, the Moving Annual Return has been positive in 4 of the last 5 years. An investment a year ago in 8601 would have produced a return of 7.8%.

8601Close (JPY)Dividends (JPY)Capital Gain / (Loss) %% YieldAnnual Return %
Apr 20672263.847.8
1 Yr ago647.6813(1.7)20.3
2 Yrs ago658.7617(30.3)1.8(28.5)
3 Yrs ago945.74719.65.925.6
4 Yrs ago790.43171.32.23.5

Close 5 years ago JPY780.50

3.3 Turnover Rate & Turnover Period:

+ The turnover rate in the 12 months to date was 124.1% (or a turnover period of 9 months). This average length of ownership of the stock at 0.8 times the average holding period of 1 year 18 days for stocks in the Nikkei 225 Index suggests a larger number of speculators on the share register, making it less safe for long-term investors.

SECTION 4 RANKING

4.1 Global Rank [out of 47,666 stocks] and Rank in the Asia Region [out of 22,769 stocks]

DescriptionValueGlobal RankIn Asia Region
MCap (US$)10.6B1,477459
Total Assets (US$)186.7B36177
Revenue (US$)5.8B2,090714
Net Profit (US$)979.7M1,107291
Return on Equity %8.316,0708,747
Net Profit Margin %16.96,9823,129
Price to Book1.011,0316,375
Yield %3.86,8572,622
PV$1000 (1Year) US$*1,09119,0189,604
US$* Change (1Year) %5.020,4059,865

* 1 year ago USD 1 = JPY 109.29

Apr 20, 2018: USD 1 equals JPY 107.65

4.2 Independent Ratings

+ Brand Finance 500:

Daiwa Securities Group Inc. was ranked 132 in the Brand Finance list of the world's 500 Valuable Banking brands by brand value in 2015; a deterioration over a year from rank 131 in 2014. Brand Finance valued the brand at US$1,309 million.

+ Forbes 2000:

It is the 1285th largest by revenue in the Forbes Global 2000.

+ BSS/News Bites:

It is placed 2718/3475 in BSS News Bites' ranking of Japan performers in the past year, a percentile ranking of 22.

+ Vanguard Total World Stock ETF 7517:

The stock was one of 7517 global stocks selected by Vanguard Total World Stock ETF (VT) who bought 22,000 shares in the period Nov 30, 2017 to Jan 31, 2018 worth $US17,024,933 at an estimated Volume Weighted Average Price (VWAP) of $US773.8606. As at Jan 31, 2018, the Vanguard Total World Stock ETF held 461,000 shares worth $US3,267,471 or 0.02% by value of the ETF's portfolio [Ranked 882 out of 7517 by value and 92 out of 1306 for Japan].

SECTION 5 DAIWA SECURITIES FINANCIALS

5.1 Financials Summary

Year endedMar 2017Mar 2016Mar 2015
Sales (USD B)5.76.16.3
Pretax (USD B)1.31.61.7
Net (USD)970M1.1B1.4B
EPS (JPY)-67.663786.7246

Sales were down 5.7% from US$6.1 billion in 2016 to US$5.7 billion in 2017. Net profit was down 10.9% from US$1.1 billion in 2016 to US$970 million in 2017.

5.2 Annual Report for the year ended March 31, 2017 (year-on-year comparisons with previous corresponding period)-

Favourable Changes:

+ Working capital to total assets up from 14.8% to 16.4%.

+ Retained earnings to total assets up from 3.4% to 3.6%.

+ Current Debtors to Total Assets up from 27.9% to 30.2%.

+ Cash to Total Assets up from 16.3% to 19.3%.

+ Total non-current assets to Total Assets up from 2.8% to 2.9%.

Unfavourable Changes:

+ Net profit down 10.9% from JPY116.8b ($US1.0b) to JPY104.1b ($US934.8m)

+ EBIT Margin down from 39.7% to 38.6%.

+ Interest cover down 16.9% from 2.9 to 2.4.

+ EBIT to total assets down from 1.3% to 1.2%.

+ Sales and marketing expenses to Sales up from 52.1% to 53.6%.

+ Profit before tax to Sales down from 26% to 22.5%.

+ Interest expenses to Sales up from 13.7% to 16%.

+ Debt to Equity up 63.7% from 4.7 to 7.6.

+ Total Liabilities to EBITDA of 70.8 compares unfavourably with the Joseph Piotroski benchmark of <5. This ratio has deteriorated by 4.9% from the previous year's ratio of 67.5.

Note:

+ Tax expenses to Sales down from 7.2% to 5.6%.

+ Depreciation to Sales up from 3.6% to 3.8%.

+ Total liabilities to Total assets steady at 0.9.

+ Current ratio steady at 1.2.

+ Total current assets to Total Assets down from 97.2% to 97.1%.

+ Short-term investments to Total Assets down from 14% to 12.8%.

5.3 Trailing 12 Months Dividends

Trailing 12 Months ToValue (JPY)
20 Apr 201826
20 Apr 201713
20 Apr 201617
20 Apr 201547
20 Apr 201417

SECTION 6 DAIWA SECURITIES PROFILE

6.1 Activities

Daiwa Securities Group Inc. is a Japan-based security company engaged in the securities, investment, financing and service businesses. The Company, comprised of 46 consolidated subsidiaries and six associated companies, is engaged in the trading and brokerage of securities and derivatives, as well as the the underwriting, sale, offering and private offering of securities. It is also involved in the investment trust, information service, real estate leasing, venture capital, financing and clerical service businesses. The Company has operations in both domestic and overseas financial markets, including Japan, North America, Europe, Asia and Oceania. Daiwa Securities Group has a global network.

6.2 Top Management

The chairman is Takashi Hibino, the chief executive officer is Seiji Nakata and the chief financial officer is Mikita Komatsu.

6.3 Issued Capital

Based on 1,700,000,000 issued shares the market capitalisation is JPY1,142.4 billion (US$10.6 billion).

SECTION 7 STOCK BUZZ

Corporate Wire

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April 09: Daiwa Securities: World Bank Sustainable Development Bonds Designed for Japanese Retail Investors

Tokyo, April 9, 2018 - Daiwa Securities Group Inc. announced news series of three Sustainable Development Bonds of the World Bank (International Bank for Reconstruction and Development, IBRD) designed specifically for Japanese retail investors denominated in Turkish Lira.("The Bonds") The use of proceeds from the Bonds will be used to support the financing of sustainable development projects and programs in IBRD's member countries supporting various sectors including agriculture, education, energy, finance/trade/industry, health and social services, transportation, water/sanitation, gender equality, environment.

April 06: Daiwa Securities Group Medium-Term Management Plan "Passion for the Best" 2020

Daiwa Securities Group Inc. has released "Passion for the Best" 2020, the new Medium-term Management Plan for the group covering 3 years from FY2018 to FY2020.

March 09: Daiwa Securities: Results of Share Repurchase

This document is an unofficial translation of a press release announced on March 8, 2018 by Daiwa Securities Group Inc. The original press release is in Japanese.

Daiwa Securities Group Inc. announces the results of share repurchase, as outlined below. The share repurchase was resolved by the meeting of Board of Directors on October 25, 2017 under the provisions of the Articles of Incorporation pursuant to Article 459, Paragraph 1 of the Companies Act of Japan

March 06: Daiwa Securities: Preparation for establishing a new subsidiary; Fintertech Co. Ltd.

Daiwa Securities Group Inc. ("DSGI") today announced the establishment of Fintertech Co. Ltd. ("Fintertech"), which aims to develop and provide next-generation financial services and solutions using cutting-edge technologies.

DSGI is now working on the establishment of the platform which provides optimal products and comfortable information access in order to be the securities company group chosen by a wide range of customers including the young and the retired.

March 06: DAIWA SECURITIES : SAGENT ADVISORS AND SIGNAL HILL COMBINE TO FORM DCS ADVISORY, A GLOBAL M&A ADVISORY FIRM AND PART OF DAIWA SECURITIES GROUP

TOKYO, JAPAN, March 6, 2018 - Daiwa Securities Group Inc. is pleased to announce the formation of DCS Advisory. DCS Advisory combines the operations of Sagent Advisors and Signal Hill to form a new North America-based advisory firm that will focus on providing M&A advice and private capital raising for companies powering the growth economy.

DCS Advisory will operate out of seven offices in the US including Baltimore, Boston, Chicago, New York, Northern Virginia and San Francisco and two offices in India, Bangalore and Mumbai.

Contact: 81 35 55 51 11 1

Physical Address: 1-9-1 Marunouchi Chiyoda-ku Tokyo, 100-6751 Japan

State/Province/Country: TKY, Japan

Country of Incorporation: Japan

Exchange: Tokyo Stock Exchange

ISIN: JP3502200003

TO:8601; TYO:8601; T:8601; JP:8601; 8601.T

RIC: 8601.T

Daiwa Securities Group Inc

Source: www.BuySellSignals.com