Takefuji Coping with Uncertainty

If you've been reading this blog, you know that portfolio holding Takefuji Corp. (8564/JP or TAKAF/OTC) has seen its stock price suffer.

One factor is uncertainty over the maximum interest rate consumer lenders like Takefuji may charge.

Another is continuing investigations into the practices of consumer lenders in Japan.

The latest development on this front broke overnight with an Asahi newspaper report that consumer lender Acom Ltd. is being probed for the second time this year. Bloomberg describes the news:

Regulators are now investigating Acom because the company is suspected of engaging in various illegal lending practices such as providing loans without giving borrowers all the necessary paperwork, the Asahi said.

Fortunately, Takefuji was only down 1% on the news. Perhaps confirming what one analyst told The Wall Street Journal recently -- that Takefuji may have seen its bottom in the washout among Japanese consumer finance companies.

That may be true and, as a shareholder, I certainly hope it is.

Yet Takefuji must still cope with those uncertainties mentioned above. And they will discourage investors until after they are cleared up. More from the Bloomberg report:

"We just don't know how much more bad news will come out and what will happen to the tightening of regulation for consumer lenders,'' said Masayuki Kubota, who oversees $2.1 billion at Daiwa SB Investments Ltd. in Tokyo. "I'll continue to avoid the stocks until the outlook becomes more clear.''

Well, I haven't avoided Takefuji. And, as Mr. Kubota could tell us, that's what makes a market.

If I'm right, then these uncertainties have created an excellent opportunity to buy a cash-rich company on the cheap. If you're willing to hold on for the long term.

But I could be wrong -- I don't think so, but I could be. There are no guarantees, remember. ;-)

Comments

[Rogermunibond]

Yesterday, FT had a piece about how certain US financial types are pressuring Japan's FSA (?) to ease up on the interest rate cap. They're afraid it will hurt Japanese consumption and possibly push loan consumers into the hands of more unscrupulous loan sharks. Take a look.

[John]

Roger: I saw a similar report, not in the FT, can't recall where at the moment. Thanks for reading and commenting.