Toyota Stock May Rise 30% After Banks Complete Sales (Update1)
By Kae Inoue
quote.bloomberg.com
Tokyo, March 25 (Bloomberg) -- Toyota Motor Corp.'s decision nine months ago to spend $6 billion buying back 4.7 percent of its shares failed to bolster its stock, which fell to a four-year low on March 11. That may be about to change, investors said.
The reason: Japanese banks are under government orders to sell shares of non-financial companies such as Toyota. As those sales slow -- many are ending with the close of the fiscal year next week -- investors will focus on the performance of Toyota, which is headed for a fourth year of record earnings.
``The company's strong performance and the buyback effort have been diminished by the bank sales,'' said Norihiko Kamada, who helps manage $1.2 billion, including auto shares at Chuo Mitsui Asset Management Co. ``Toyota shares are relatively cheap at the moment,'' said Kamada, who expects them to rise as much as 30 percent after banks and pension funds finish selling Toyota shares, without giving a time frame.
Some Japanese politicians are already pushing for a two-year extension to the sales, which are scheduled to end in September of next year, aiming to help lift the benchmark index from two-decade lows. Yet Toyota may benefit as a slowdown in forced sales provides investors with more incentive to focus on its expanding market share in the U.S., Europe and China and its plans to push global market share to 15 percent from 10 percent.
Toyota shares, down 8 percent this year compared with a 1.7 percent drop in the Nikkei 225 Stock average, fell to 2,695 yen on March 11, the lowest since Jan. 13, 1999. The shares fell as much as 2.2 percent today and traded at 2,880 at 11:06 a.m. in Tokyo.
U.S. Slowdown
Granted, an end to the sales alone won't necessarily buoy Toyota shares. As global growth slows, the U.S. and U.K. invaded Iraq last week, crimping demand for exports.
``The U.S. economy is in a bad state and war concerns will all be negative factors for exporters,'' said Takahiro Nakayama, who helps manage about $800 million at Morley Fund Management in Tokyo. He declined to say if he holds Toyota shares. ``Growth for these automakers is likely to slow because of the U.S. slowdown.''
The maker of Camry sedans and Lexus luxury cars plans to spend as much as 600 billion yen on the buyback program, which ends on March 31, repurchasing as many as 70 million shares. The company said yesterday that it spent 453.5 billion yen ($3.76 billion) between June 26, 2002 and March 24 of this year to buy 154.6 million shares.
Toyota Executive Vice President Ryuji Araki said in January the automaker plans to set up another buyback program for the next fiscal year. He declined to elaborate. Toyota will seek shareholder approval in late June for another buyback program for year starting on April 1.
``That's a huge amount Toyota's spending compared with other companies and you can expect that it will be an on-going program,'' said Yoshio Inamura, who helps manage $339 million in funds at Tokyo-Mitsubishi Asset Management. Inamura expects Toyota shares to rise as much as 20 percent next year.
Pension Funds
Toyota's buyback has made it easier for banks to sell stocks.
UFJ Bank told the Ministry of Finance on Feb. 14, 2003 that its Toyota stake fell to 4.84 percent from 5.3 percent after it sold shares, according to a ministry document obtained by Bloomberg News. Sumitomo Mitsui told the ministry on Nov. 14, 2002, that its stake dropped to 3.2 percent from 5 percent, according to another ministry document.
UFJ, Sumitomo Mitsui Financial Group Inc., Mitsubishi Tokyo Financial Group Inc. are selling about $180 billion of shares they own in other companies. The limit on shareholdings is part of government plans to help banks eliminate bad loans totaling 52.4 trillion yen as of March 31, 2002, helping revive the world's No. 2 economy.
It isn't just banks that have been selling shares. Private pension funds are also selling shares to raise cash so they can return the public portion of their funds to the government under changes introduced in April.
Big stocks like Toyota are easier to sell and form the bulk of pension funds' holdings, investors said, adding to the pressure on the stock. Shares of Nissan Motor Co., a smaller rival that is also set to report record earnings this year, rose 28 percent in 2002 and was the best-performing auto stock in the world.
Looking Abroad
Some investors say the price-earnings ratio of stocks such as Toyota, Honda Motor Co. and Nissan may not provide accurate valuations.
Investors such as Tokyo-Mitsubishi's Inamura said price-to- book ratio, a stock's price divided by the book value per share, is a better measure. Toyota's price-to book value is at 1.42, lower than Honda's 1.66, and Nissan's 2.47.
Toyota's price earnings ratio, the relationship between the price of a stock and its earnings per share, is at 17.19, higher than rival Honda Motor Co.'s 11.77 and Nissan's 9.56. That compares with Ford Motor Co.'s 18.23 and General Motors Corp.'s 5.31.
Toyota, meantime, is expanding its presence overseas.
In the U.S., where it generates about 80 percent of its operating profit, the automaker has a market share of 10.4 percent, an all-time high, while in Europe the company is expecting to extend its record sales this year. |
