Daily Brief Financials: Resona Holdings, Longfor Properties, Far East Hospitality Trust, Bank Mandiri Persero, Root /OH and more

• The Japanese banks’ share prices have barely moved following the Bank of Japan’s exit from negative interest rates; is it largely discounted or does the continued accommodative stance instil caution? 
• Japanese banks will benefit from 100% of their deposits at the BoJ earning 0.1%, as opposed to 40% of bank deposits which was the case up to the 20th March
• We believe our positive recommendations are all geared into higher domestic interest rates; we highlight Resona, Mizuho and Suruga in this report for their high cash and at bank balances

Longfor Group’s FY 2023 results were acceptable in our view. The earnings decline was in line with expectations, driven by reduced revenue from the property development segment. The gross margin for property development was decent at 11%, relative to some distressed peers with negative to low single-digit gross margins. Recurring revenue from rentals and services rose by 6%, with recurring operating profit covering 1.4x of interest expense. Net debt declined marginally, supported by slightly positive FCF generation.

Liquidity was adequate, with Unrestricted Cash/ST Debt of 1.4x. We note positively that the company has been repaying some debt well in advance of maturity, possibly using cheaper and longer tenor loans backed against its commercial properties. We believe near-term default risk for Longfor is low, albeit its financial flexibility would gradually diminish as the company pledges more assets for funding.

• Taylor Swift concerts in Singapore has increased both hotels’ occupancy rate and daily rate
• Far East Hospitality Trust (FEHT SP) share price has not moved much since the Swift concert. 
• There is a slim chance FEHT hotels did not participate in the upside during Swift event, but the odds are higher that FEHT hotels will participate in the upside.

• It’s the largest bank by assets in Indonesia, but its loan growth is about 2x the country aggregate growth rate.
• NPL decline is stronger than most all banks in the country over the past few years, implications for credit costs are positive.
• Boring old costs should not be ignored, especially where they are driving radical expansion of ROA.

• Fiscal spending has been the key driver for this bull market as it reaccelerated in late 2022 following the inflation and subsequent interest rate shock.
• This impulse will likely diminish over the next months. It will be replaced by a credit impulse from rate cuts, the first few of which will be very powerful.
• Market mechanics will be accommodating. Leverage in the system is low. In fact, the pain trade is still higher.