Financial services firm Orix Corp. is targeting a 10 percent return on equity in three years and a gradual increase in payments to shareholders, after cutting its dividend by 71 percent in the wake of the credit crisis.
Orix’s return on equity, a measure of how well companies reinvest shareholders’ money, climbed to 3.06 percent as of last March from 1.8 percent a year earlier, according to data compiled by Bloomberg.
Its annual dividend rose to ¥75 in the business year that ended last March from ¥70 after being slashed from ¥260. Orix is yet to announce a payment for this fiscal year.
“We’ll quickly go for the 10 percent target focused on caution and stability,” Chairman Yoshihiko Miyauchi, 75, said last week. “For the time being, our dividend won’t return to the levels paid before the financial crisis, as the global market is still fragile.”
Orix, whose businesses include brokering, golf courses and Osaka’s Buffaloes baseball team, has almost tripled its cash holdings over the past three years for investment and acquisitions abroad to cope with Japan’s population decline and waning demand for financial products.
Domestic industries that Miyauchi expects to fare well include Tokyo real estate and businesses tied with the aging society.
“The 10 percent ROE within three years is possible given expectations that the domestic real estate market is bottoming out and lending demand from small and midsize companies will pick up” toward mid-2011, said Tatsuo Majima, an analyst at Tokai Tokyo Financial Holdings Inc.
Orix forecasts net income will rise 51 percent in the year ending in March to ¥57 billion, as overseas businesses and investment banking demand recovered in the first half. Cash and equivalents last fiscal year surged to ¥639 billion from ¥215 billion in the year ended March 2007.
Miyauchi aims to tap the country’s consumer wealth locked away with citizens over 65, who make up more than a fifth of the population, according to government statistics. Only 13 percent of the country is under 15 years old. Miyauchi plans to add to Orix’s nursing homes and condominiums.
“An aging population with people over 65 years old owning most of the country’s wealth is unique to Japan, but one of the areas that will see business growth in the years ahead,” he said. “In Asia, we’ve been gaining knowhow in financial businesses outside of Japan.”
Chief Financial Officer Haruyuki Urata said in September that Orix will spend ¥100 billion this fiscal year to expand overseas assets, mainly in China. The company unveiled plans last month to build a 41-story building in Dalian to locate its China headquarters. Completion is slated for December 2013. Other investment targets include India, Indonesia and Vietnam.
Orix invested in China-based businesses in 1981 only to halt expansion later in the decade because the country’s legal framework prevented growth of its leasing business, according to Miyauchi. The company’s ventures back into the country in 2004 were made “too late,” he added, forcing Orix to be selective in making further investments in China.
Recent investments abroad include a 25 percent stake in Indochina Capital Corp. to add wealth management and advisory business in Vietnam, and the acquisition of a majority stake in MIG Holdings LLC, the holding company of Mariner Investment Group, an $11.7 billion U.S. hedge-fund manager.
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