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On Thursday, JPMorgan adjusted the firm's stance on Tokio Marine Holdings, Inc (8766:JP) (OTC: TKOMY), upgrading the stock from Neutral to Overweight, while slightly reducing the price target to JPY6,120.00 from the previous JPY6,260.00.
The revision follows a significant share price drop of 12.8% since the company reported its second-quarter results on November 19, through January 20, a period during which the stock notably underperformed compared to its peer Sompo Holdings, which saw an increase of 17.5%, and the TOPIX index, which remained mostly flat.
The downgrade in the company's share price is attributed to various factors, including additional reserve risk surfacing for U.S. commercial real estate loans and investor disappointment with the scale of the share buyback program, which was announced at JPY120 billion. Despite these challenges, JPMorgan sees potential for share price recovery.
JPMorgan highlighted that the perceived negative aspects could also be interpreted positively. The additional reserve for future risk in the U.S. commercial real estate sector is seen as a prudent measure, and the modest share buyback program could drive more robust capital level adjustments in response to the disappointing share price performance.
Furthermore, JPMorgan anticipates that Tokio Marine's dividend yield, based on their forecast for the fiscal year 2025, will be close to 4%, which is considered high by historical standards. This expectation of a strong dividend yield adds to the firm's positive outlook on the stock's future performance.
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