On Tuesday, Tokyo Tatemono Co Ltd (8804:JP) shares received an upgraded stock rating from BofA Securities, moving from Neutral to Buy. Accompanying this upgrade, the firm also raised the price target for the real estate company's shares to JPY3,000, up from the previous target of JPY2,600.
BofA Securities justified the upgrade by adjusting their price objective calculation method for Tokyo Tatemono, taking into account a revised end-FY12/26 book value per share (BPS) estimate and an updated price-to-book (P/B) ratio. The firm lowered the adjusted BPS estimate due to an increased assumed capitalization rate, which is a reflection of rising interest rates.
Despite the lower BPS estimate, the analysts at BofA Securities increased the adjusted P/B ratio to 0.7 times, up from the previous 0.56 times. This change was made to better reflect a higher return on equity (ROE) and rising dividend yields that are anticipated based on Tokyo Tatemono's new medium-term management plan (MTP).
The firm's analysis suggests that the recent decline in Tokyo Tatemono's stock price following the announcement of the new MTP presents a buying opportunity. BofA Securities believes that the details of the new plan are not negative and that the market's initial reaction may have been overly cautious.
BofA Securities' revised outlook on Tokyo Tatemono is influenced by the company's historical earnings growth period from 2014 to 2020, which is used to adjust the P/B ratio. The firm's updated price target and stock rating reflect their expectations for the company's financial performance and market position going forward.
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