Nikko Cordial Corporation (NIKOY/OTC) is the Japanese financial company I've mentioned buying recently. The order was completed yesterday. I purchased the ADRs (each ADR represents 10 common shares), trading over the counter in the “pink sheets.” The common shares trade in Japan under ticker symbol 8603.
Nikko Cordial is Japan’s third-largest brokerage and investment banking firm. The market capitalization is roughly $8.26 billion. It has a major joint venture with Citigroup, which has a stake in the company. I've owned the ADRs for a while now. But the shares have fallen over the past year, and I decided to add to my holdings for three reasons.
First, Nikko Cordial is a fine company with a strong balance sheet and shareholder-friendly management (important in Japan). The ADRs closed yesterday at $43.20. The book value as of 3/31/05 was $42.90 per ADR. But Nikko Cordial states its book value conservatively. I estimate the company is worth approximately $64 per ADR on a liquidation basis.
Second, the company is a potential takeover target. The most likely acquirer appears to be the Japanese behemoth Mizuho Financial, which already owns a stake.
And third, Nikko Cordial is a play on Japan’s continuing progress in restructuring their corporate landscape with shareholder friendly management styles taking root. One of the biggest changes in the Japanese market is how much foreign ownership there is, and that this foreign presence is increasingly welcomed by managements. But the country still has a long way to go, so progress sometimes seems painfully slow.
CAUTION: Even though Nikko Cordial has a market cap of about $8.26 billion, its ADRs trade thinly in the US in the “pink sheets.” They can also be very volatile. I placed a “good until canceled” limit order of $44. Part of the order was filled at $43 but before the remainder could be purchased, the ADRs suddenly shot up over $50 for no apparent reason (there was no news on the company). I waited a couple of days and the ADRs fell back and we got the rest of our order filled at $43.25.
My advice for anyone wanting to buy the ADRs is to use a limit order and patience -- otherwise you could get whipsawed. (As stated previously, I use limit orders for every stock purchased.) The company’s common shares trading in Japan are much more liquid, so that’s another option.
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Posted by: World business for sale | January 19, 2006 at 06:56 AM
Oh well, is it possible?
Posted by: Forex Trader and stocks hater | February 23, 2006 at 05:59 PM