In this briefing:
- Korea Circuit Long Support for Press Above Overhead Barriers
- Concordia Financial Group (7186 JP): Out of Focus
- Chiba Bank (8331 JP): Top Dog
1. Korea Circuit Long Support for Press Above Overhead Barriers
Korea Circuit (007810 KS) exhibits the ability to make headway through triple resistance barriers on the back of higher degree divergence that has been forming since late 2017.
Overhead resistance barriers, represented by old floor support levels, once cleared, would open up the intermediate up cycle for Korea Circuit. A failure to clear these important levels would induce a fresh test of recent basing lows.
RSI pocket support helps fine tune a pullback level to take a long bet.
Risk to reward is attractive on a dip near support for a 6:1 ratio (reward to risk).
There are some major hurdles on the way up represented by old floor supports.
2. Concordia Financial Group (7186 JP): Out of Focus
CY2018 was not a good year for Concordia Financial Group, Ltd (7186 JP) (CFG), the holding company for one of Japan’s largest regional banks, the Bank of Yokohama (BoY), and a small secondary regional bank, Higashi-Nippon Bank (HNPB). Beset by a lending scandal at HNPB, which forced the bank’s president to step down, CFG’s share price remains some 30% below February 2018 levels, and has essentially traded sideways so far this year.
CFG management’s attempts to placate disgruntled shareholders with stock buybacks and dividend payout increases have largely failed to impress. 3Q FY3/2019 profits declined by 8% year-on-year but relied heavily on non-core profit items: true core earnings collapsed 35.9%. The Japanese banking sector remains unloved at present. That said, currently trading on similar valuations to our much-preferred Chiba Bank (8331 JP) , CFG remains a liquid alternative to the ‘crowded trade’ of simply buying megabanks for exposure to the Japanese financial sector. Patience, however, is the key word for investors here. No harm in waiting to buy at a better entry price.
3. Chiba Bank (8331 JP): Top Dog
Chiba Bank (8331 JP) , Japan’s 4th-largest regional bank in terms of deposits, loans or total assets, reported consolidated recurring profits for the nine months to end-December 2018 (3Q FY3/2019) of ¥59.66 billion (down 10.6% YoY) and net profits of ¥41.44 billion (down 10.8% YoY) on marginally higher revenues of ¥180.20 billion (+1.3% YoY). Results were influenced by higher funding costs and a sharp rise in credit costs that offset the benefits of strong growth in loan demand. There was also some improvement in net interest income and securities trading profits, and a reduction in administrative expenses. The Japanese banking sector is currently unloved by foreign investors. However, trading on a forward-looking PE ratio of 9.1x (using the bank’s own FY3/2019 guidance), a PBR of 0.52x and boasting the highest current market capitalisation of any Japanese regional bank of ¥553.9 billion (US$5.04 billion), Chiba Bank continues to offer good prospects of long-term growth and a strong profits ‘track record’ supported by the underlying strength of the Chiba prefectural economy.
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