Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>In 2018, Suruga Bank got itself in trouble, the shares fell 80% or more in a year-plus. In 2019 they took a big hit, and the Okano family sold out.</li>
<li>
<a href="https://www.smartkarma.com/entities/nojima-corp" target="_blank" data-smartkarma-citation="entities:9655:1" rel="noopener">Nojima Corp (7419 JP)</a> bought the shares -85% from the peak. Now they are selling those shares, plus the ones they already owned. Down nearly 10% from where they bought. </li>
<li>This is an instant 15+% boost to BVPS and 22+% boost to EPS. That's great. But that may be where greatness stops.</li>
</ul>


In 2018, Suruga Bank got itself in trouble, the shares fell 80% or more in a year-plus. In 2019 they took a big hit, and the Okano family sold out.

Nojima Corp (7419 JP) bought the shares -85% from the peak. Now they are selling those shares, plus the ones they already owned. Down nearly 10% from where they bought. 
This is an instant 15+% boost to BVPS and 22+% boost to EPS. That's great. But that may be where greatness stops.


Senior Bank Analyst - Japanese Banks, Windamee Research

J. Brian Waterhouse

Senior Bank Analyst - Japanese Banks

Windamee Research

Japanese Banks

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/suruga-bank-ltd" target="_blank" data-smartkarma-citation="entities:6267:1" rel="noopener">Suruga Bank Ltd (8358 JP)</a>has raised its interim guidance for 1H FY3/2022 consolidated net profits for the second time in three months: this time by +78% to ¥17.8 billion, or ¥76.86/share.  Credit costs, initially estimated at ¥2 billion for 1H FY3/2022, are now likely to be negative: a write-back to profits of ‘surplus’ loan loss reserves of as much as ¥6.6 billion, suggesting further progress in cleaning up the balance-sheet after the catastrophic ‘share house’ scandal.  This is significant: back in May this year, Suruga was forecasting an interim net loss of ¥2.3 billion because of further precautionary provisioning expenses.Suruga Bank remains one of the most heavily traded Japanese bank stocks and is regularly one of the Top 5 Japanese bank stocks in terms of daily trading volume behind only the three megabanks and <a href="https://www.smartkarma.com/entities/resona-holdings-inc" target="_blank" data-smartkarma-citation="entities:6841:1" rel="noopener">Resona Holdings (8308 JP)</a>. It is currently trading on a remarkably low PER versus peers of 4.1x (assuming 2H FY3/2022 consolidated net profits are at least ¥8 billion, producing a FY3/2022 EPS of ¥122.2/share or better) and an undemanding PBR of 0.37x.Risks remain, of course, and we continue to warn that this is a stock for players of the Long Game only.  The intended disposal of the 18.5% stake in Suruga held by its largest shareholder, <a href="https://www.smartkarma.com/entities/nojima-corp" target="_blank" data-smartkarma-citation="entities:9655:1" rel="noopener">Nojima Corp (7419 JP)</a>, remains an unresolved issue. Nevertheless, the positives continue to increase while the negatives continue to diminish, and the shares are significantly outperforming the Topix Banks Index for the first time in many months.<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/240/048/original/8358-Suruga-2021-1105-8358vsTPNBNK-CY2021.jpg?1636249764" class="editor-image img-responsive" data-smartkarma-image-id="240048"></figure></section>

Suruga Bank Ltd (8358 JP)has raised its interim guidance for 1H FY3/2022 consolidated net profits for the second time in three months: this time by +78% to ¥17.8 billion, or ¥76.86/share.  Credit costs, initially estimated at ¥2 billion for 1H FY3/2022, are now likely to be negative: a write-back to profits of ‘surplus’ loan loss reserves of as much as ¥6.6 billion, suggesting further progress in cleaning up the balance-sheet after the catastrophic ‘share house’ scandal.  This is significant: back in May this year, Suruga was forecasting an interim net loss of ¥2.3 billion because of further precautionary provisioning expenses.Suruga Bank remains one of the most heavily traded Japanese bank stocks and is regularly one of the Top 5 Japanese bank stocks in terms of daily trading volume behind only the three megabanks and Resona Holdings (8308 JP). It is currently trading on a remarkably low PER versus peers of 4.1x (assuming 2H FY3/2022 consolidated net profits are at least ¥8 billion, producing a FY3/2022 EPS of ¥122.2/share or better) and an undemanding PBR of 0.37x.Risks remain, of course, and we continue to warn that this is a stock for players of the Long Game only.  The intended disposal of the 18.5% stake in Suruga held by its largest shareholder, Nojima Corp (7419 JP), remains an unresolved issue. Nevertheless, the positives continue to increase while the negatives continue to diminish, and the shares are significantly outperforming the Topix Banks Index for the first time in many months.

Suruga Bank (8358 JP):  The Sun Also Rises

FY3/2020 consolidated results were slightly below guidance and FY3/2021 guidance suggests consolidated net profits may fall as much as 76% YoY to just ¥6bn, with a ¥3.5bn net loss in 1H FY3/2021 as a result of further precautionary provisioning.  That said, <a href="https://www.smartkarma.com/entities/suruga-bank-ltd" target="_blank" data-smartkarma-citation="entities:6267:1" rel="noopener">Suruga Bank Ltd (8358 JP)</a> reached some important milestones in FY3/2020 on the long, slow road to recovery after the catastrophic ‘share house’ scandal.Management is now focusing on a new business model that includes more corporate business in a bid to stabilise and diversify revenues.  Market reaction has remained mixed to date, as shown in the high volatility of the share price from one day to the next.  Nevertheless, the stock has risen over 20% since our last Insight <a href="https://www.smartkarma.com/insights/suruga-bank-8358-jp-swimming-against-the-tide" target="_blank" data-smartkarma-citation="insights:38141" rel="noopener">Suruga Bank (8358 JP):  Swimming Against the Tide</a> in early April 2020: a considerably better performance than that of several much larger regional banks that are also widely held by foreign investors.  Suruga Bank remains one of the most heavily-traded Japanese bank stocks, and is regularly one of the Top 5 Japanese bank stocks in terms of daily trading volume behind only the three megabanks and <a href="https://www.smartkarma.com/entities/resona-holdings-inc" target="_blank" data-smartkarma-citation="entities:6841:1" rel="noopener">Resona Holdings (8308 JP)</a>.Risks remain, and we continue to warn that this is a stock for players of the Long Game only.  Nevertheless, the positives are increasing while the negatives are gradually starting to diminish.

FY3/2020 consolidated results were slightly below guidance and FY3/2021 guidance suggests consolidated net profits may fall as much as 76% YoY to just ¥6bn, with a ¥3.5bn net loss in 1H FY3/2021 as a result of further precautionary provisioning.  That said, Suruga Bank Ltd (8358 JP) reached some important milestones in FY3/2020 on the long, slow road to recovery after the catastrophic ‘share house’ scandal.Management is now focusing on a new business model that includes more corporate business in a bid to stabilise and diversify revenues.  Market reaction has remained mixed to date, as shown in the high volatility of the share price from one day to the next.  Nevertheless, the stock has risen over 20% since our last Insight Suruga Bank (8358 JP):  Swimming Against the Tide in early April 2020: a considerably better performance than that of several much larger regional banks that are also widely held by foreign investors.  Suruga Bank remains one of the most heavily-traded Japanese bank stocks, and is regularly one of the Top 5 Japanese bank stocks in terms of daily trading volume behind only the three megabanks and Resona Holdings (8308 JP).Risks remain, and we continue to warn that this is a stock for players of the Long Game only.  Nevertheless, the positives are increasing while the negatives are gradually starting to diminish.

Suruga Bank (8358 JP):  One Step Back, but Several Steps Forward

While investors brace themselves for a tidal wave of downward revisions to FY3/2020 Japanese bank earnings estimates as a result of heavy valuation losses on their (largely domestic) securities portfolios, one bank has been quietly raising its forecasts throughout the financial year, and has now reinstated its previously-suspended dividend, albeit at the humble level of ¥5/share.  That bank is <a href="https://www.smartkarma.com/entities/suruga-bank-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:6267:1">Suruga Bank Ltd (8358 JP)</a> but, amid rising market concerns over the long-term economic impact globally of the ongoing coronavirus pandemic and the continuing underperformance of the Japanese banking sector against Topix, few if any investors appear to have noticed.

While investors brace themselves for a tidal wave of downward revisions to FY3/2020 Japanese bank earnings estimates as a result of heavy valuation losses on their (largely domestic) securities portfolios, one bank has been quietly raising its forecasts throughout the financial year, and has now reinstated its previously-suspended dividend, albeit at the humble level of ¥5/share.  That bank is Suruga Bank Ltd (8358 JP) but, amid rising market concerns over the long-term economic impact globally of the ongoing coronavirus pandemic and the continuing underperformance of the Japanese banking sector against Topix, few if any investors appear to have noticed. 

Suruga Bank (8358 JP):  Swimming Against the Tide

Expert on Japan Retail and Consumer Markets, JapanConsuming

Michael Causton

Expert on Japan Retail and Consumer Markets

Real Insight on Japanese Consumer Markets

JapanConsuming

JapanConsuming is a specialist research firm producing intelligence on Japanese retail and consumer markets. Founded in 2000, JapanConsuming has become the leading provider of insights on Japanese retailers and consumer trends to retailers, brands, government agencies and investors. As well as a highly regarded monthly report on the market, JapanConsuming produces in-depth reports on retail sectors, seminars on key trends and telephone consulting to investors on trends and retailers.

JapanConsuming was founded by Michael Causton and Roy Larke. 

Consumer electronics retailer <a href="https://www.smartkarma.com/entities/k-s-holdings-corp" target="_blank" data-smartkarma-citation="entities:13745:1" rel="noopener">K'S Holdings (8282 JP) </a>has had two excellent years by pursuing a policy that its rivals have all but abandoned. It has cut its range down to concentrate on home appliances, removing more technologically fast-moving gadgets, while focusing on large stores out in the suburbs. Despite this success, it faces market saturation.<a href="https://www.smartkarma.com/entities/k-s-holdings-corp" target="_blank" data-smartkarma-citation="entities:13745:1" rel="noopener"> </a>

Consumer electronics retailer K'S Holdings (8282 JP) has had two excellent years by pursuing a policy that its rivals have all but abandoned. It has cut its range down to concentrate on home appliances, removing more technologically fast-moving gadgets, while focusing on large stores out in the suburbs. Despite this success, it faces market saturation. 

Japan

Nojima Corporation operates consumer electronic store chains that specialize in computers and communication products.  The Company also sells entertainment related items such as game software and CDs, and household appliances. The Company operates  and franchises stores in Kanagawa Prefecture.

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Nojima Corp (7419 JP)

HUGE Suruga Bank (8358 JP) Buyback

Suruga Bank will do a large ToSTNeT-3 Buyback this morning at last trade. It is 15.7% accretive to BVPS and 22.7% accretive to EPS. That's great....

Travis Lundy

Suruga Bank (8358 JP): The Sun Also Rises

Suruga Bank (8358 JP) has raised its interim guidance for the second time in three months to ¥17.8 billion, or ¥76.86/share. The stock is...

J. Brian Waterhouse

Suruga Bank (8358 JP): One Step Back, but Several Steps Forward

FY3/2020 consolidated results were slightly below guidance and FY3/2021 guidance suggests consolidated net profits may fall as much as 76% YoY to...

J. Brian Waterhouse

Suruga Bank (8358 JP): Swimming Against the Tide

While investors brace themselves for a tidal wave of downward revisions to FY3/2020 Japanese bank earnings estimates as a result of heavy valuation...

J. Brian Waterhouse

K’s Holdings: Thriving in the Suburbs

Consumer electronics retailer K'S Holdings (8282 JP) has had two excellent years by pursuing a policy that its rivals have all but abandoned. It...

Michael Causton

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