We Lift Daiwa Securities’ FVE Modestly to JPY 650 After Good Quarter, but Shares Fully Valued

We maintain our no-moat rating on Daiwa Securities while raising our fair value estimate modestly to JPY 650 from JPY 635 after its latest quarterly results. We think JPY 650, equivalent to 0.72 times book value and about 6% below the current share price, is an appropriate fair value estimate for Daiwa as we expect its return on equity to average around 7%, in line with Daiwa’s long-term historical average and somewhat below our assumed cost of equity of 8.5%.