Japanese stock report - Daiwa Securities Group

JAP

Daiwa Securities rises for a second consecutive day, a two-day rise of 1.2% as investors eye AGM June 23, 2017 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 risen JPY6.30 (1.0%) for a second consecutive day on Friday. This brought its two-day rise to JPY7.60 (1.2%). Cumulative volume in the 2 days was 0.6 times the average 2-day volume of 8.8 million shares. The stock last traded at JPY668.10.

UPCOMING EVENT: AGM

The annual general meeting (AGM) will be held on Wednesday, June 28.

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 1.9% is 204.7%. 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 6.2%. 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.

+ Revenue growth has shown signs of recovery in recent quarters. [Quarter ended, all figures in %]

QtrRevenue GrowthNet Profit GrowthNet Profit Margin
Dec 165.6-12.317.4
Sep 16-4.923.921

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.

+ Return on Equity 8.3% [6.2%].

+ Dividend yield of 3.9% [2.6%].

+ Price to EBITDA of 4.3 [5.3].

1.3 Technicals:

+ The present value of JPY1,000 (PV1000) invested one year ago in Daiwa Securities is JPY1,147, comprising a capital gain of JPY106 and dividend reinvested of JPY42.

PV10001-week1-month1-year
8601.TO1,0041,0101,147
Nikkei 225 Index1,0101,0141,240

+ The present value of JPY1,000 (PV1000) invested twenty years ago in Daiwa Securities is JPY1,102, including a capital loss of JPY67 and dividend reinvested of JPY169.

+ 20 years Multiplier in JPY = 1.102x

+ Compound Annual Growth Rate (CAGR) in JPY = 0.5%

Present Value of USD1,000 invested 20 years ago:

+ The present value of USD1,000 (PV1000) invested twenty years ago in Daiwa Securities is $US1,138, including a capital loss of $US37 and dividend reinvested of $US175.

+ 20 years ago USD 1 equalled JPY 114.9425

+ 20 years Multiplier in USD = 1.138x

+ Compound Annual Growth Rate (CAGR) in USD = 0.7%

Jun 23, 2017: USD 1 equals JPY 111.28

1.4 High Performance Indicators:

DescriptionValueRank In Market
EBITDA Margin %42.4In Top 4%
Today's TurnoverJPY3.7 billion (US$33.5 million)In Top 4%
Price Change %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 Capital Employed 6.2% [7.2%].

2.3 Technicals:

+ The price decreased 0.8% in the last month.

2.4 Low Performance Indicators:

DescriptionValueRank In Market
Price/MAP500.97In Bottom Quartile
Price to Sales1.8In Bottom Quartile
Price/MAP2000.99In Bottom Quartile
Return on Assets [ROA] %0.5In Bottom 5%
Total Debt to Equity7.6In Bottom 1%

SECTION 3

PRICE VOLUME DYNAMICS

3.1 Technicals:

+ Volume: there were 5,580,000 shares worth JPY3.7 billion (US$33.5 million) traded today. In the past week, volume was 0.7 times average and the shares were up 0.4%. The volume was 0.6 times the average daily trading volume of 8.8 million shares.

+ Daiwa Securities is at a discount of 14.9% to its 12-month high of JPY785.0 on December 12, 2016. It is also at a premium of 34.7% to the 12-month low of JPY496.0 on June 28, 2016.

3.2 Moving Annual Return

8601Close (JPY)Dividends (JPY)Capital Gain / (Loss) %% YieldAnnual Return %
June 23668.12610.64.314.9
1 Yr ago604.317(35.3)1.8(33.4)
2 Yrs ago933.5306.83.410.2
3 Yrs ago874.443412.74.417.0
4 Yrs ago776.1515187.15.5192.7

3.3 Beta:

+ Beta: the Beta of Daiwa Securities stock is 1.5. A Beta greater than 1 suggests this is a high risk, high return stock with volatility greater than that of the market.

3.4 Turnover Rate & Turnover Period:

+ The turnover rate in the 12 months to date was 119.1% (or a turnover period of 10 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 47,398 stocks] and Rank in the Asia Region [out of 21,950 stocks]

DescriptionValueGlobal RankIn Asia Region
MCap (US$)10.2B1,350404
Total Assets (US$)178.2B31872
Revenue (US$)5.5B2,029687
Net Profit (US$)935.1M996266
Return on Equity %8.315,2378,101
Net Profit Margin %16.96,6802,932
Price to Book1.010,3435,689
Yield %3.95,8292,258
PV$1000 (1Year) US$*1,07821,35710,470
US$* Change (1Year) %4.921,84910,863

* 1 year ago USD 1 = JPY 104.54

Jun 23, 2017: USD 1 equals JPY 111.28

4.2 Independent Ratings

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.

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

It is placed 2582/3341 in BSS News Bites' ranking of Japan performers in the past year, a percentile ranking of 23.

SECTION 5

DAIWA SECURITIES FINANCIALS

5.1 Financials Summary

Year endedMar 2017Mar 2016Mar 2015
Sales (USD B)5.65.96.1
Pretax (USD B)1.31.51.6
Net (USD)938.5M1.1B1.4B
EPS (JPY)-67.663786.7246

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

Daiwa Securities Net Profit down 10.9%

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%.

+ 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%.

+ Debt to Equity steady at 7.6.

+ 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 12.4% to 11.1%.

5.3 Trailing 12 Months Dividends

Trailing 12 Months ToValue (JPY)
23 Jun 201726
23 Jun 201617
23 Jun 201530
23 Jun 201434
23 Jun 201315

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 chief executive officer is Shigeharu Suzuki and the chief financial officer is Nobuyuki Iwamoto.

6.3 Issued Capital

Based on 1,700,000,000 issued shares the market capitalisation is JPY1,135.8 billion (US$10.2 billion).

SECTION 7

STOCK BUZZ

Corporate Wire

To view Recent Company Headlines, click here

June 22: Daiwa Securities: Preparation for establishing a new subsidiary in Frankfurt (Germany)

June 02: Daiwa Securities announces AGM

April 28: Daiwa Securities announces dividend

April 21: Daiwa Securities: Results of Share Repurchase

April 21: Daiwa's investment in COL Financial Group, Inc.

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

Daiwa Securities Group Inc

Source: www.BuySellSignals.com