On Wednesday, BofA Securities adjusted its stance on Resona Holdings, Inc (8308:JP) (OTC: RSNHF) stock, shifting the rating from Buy to Neutral and reducing the price target to ¥1,150 from the previous ¥1,320. The revision is attributed to a reassessment of the stock's value in light of recent market conditions.
The analyst from BofA Securities noted that while Resona Holdings' potential return on equity (ROE) improvement is appealing, with projections reaching 6.37% in FY3/25, 8.14% in FY3/26, and 9.91% in FY3/27, the stock's valuations based on price-to-book (P/B) and price-to-earnings (P/E) ratios have begun to appear more expensive. This reassessment comes despite the anticipated benefits from Bank of Japan interest rate hikes and increased gains from cross-shareholding sales.
The stock's diminishing attractiveness is also linked to its dividend yield and total payout yield, which are now considered less compelling compared to other options in the market. The analyst believes that the share price, which has previously shown strong performance, is unlikely to maintain its momentum and is expected to stabilize at a broadly neutral level.
The new price target of ¥1,150 is based on a forecasted book value per share (BPS) of ¥1,193 by FY3/25 and a P/B ratio of 0.96 times. Additionally, the target price corresponds to a P/E ratio of 11.6 times the estimated earnings per share (EPS) for FY3/26 and 9.2 times for FY3/27. At this juncture, the impact of the Bank of Japan's rate hikes is anticipated to be almost completely realized, and the current stock valuations show minimal discount.
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