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Nomura Holdings Inc ADR NMR Stock Quote

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Japanese Brokers Report Weak Quarter on Sluggish Market; Nomura Looks Undervalued

Michael Makdad Senior Equity Analyst

Analyst Note

| Michael Makdad |

We maintain our fair value estimate of JPY 615 for Nomura Holdings, equivalent to 0.60 times book value; and our fair value estimate of JPY 650 for Daiwa Securities, equivalent to 0.69 times book value, after Japan’s securities brokers’ results for the April-June quarter. Although we think Daiwa Securities deserves a higher price/book multiple than Nomura—reflecting lower historical earnings volatility and smaller risk than Nomura—we think Nomura is making some progress toward reducing its future risk, such as by emphasizing recurring sources of revenue in its retail segment rather than flow-based sources. Such recurring sources of revenue covered 49% of retail-segment costs in the past quarter, compared with 47% a year earlier. We change our Morningstar Uncertainty Rating for Nomura to Medium from High, in line with Daiwa’s Medium rating, though we still think Nomura's risk is slightly higher. At current P/B multiples of 0.48 times for Nomura and 0.63 times for Daiwa, Nomura looks more undervalued relative to its intrinsic value.

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Company Profile NMR

Business Description

Nomura is Japan’s largest broker, about twice the size of rival Daiwa Securities and roughly three times the size of the securities units of the three megabanks. It is also the largest asset-management company in Japan, with a similar size differential compared with its rivals. Despite its topnotch brand name in retail broking and asset management in Japan, Nomura has struggled to compete effectively in the institutional securities business against larger global rivals. In 2008, Nomura bought European and Asian assets of the failed Lehman Brothers, which led to a sharply higher cost base but did not provide commensurate revenue. Nomura has reduced the scale of these businesses but maintains its ambition to compete globally with the top players.

13-1, Nihonbashi 1-chome, Chuo-Ku
Tokyo, 103-8645, Japan
T +81 352551000
Industry Capital Markets
Most Recent Earnings Jun 30, 2022
Fiscal Year End Mar 31, 2023
Stock Type
Employees 26,973