The Tokyo Electric Power Company, Incorporated (OTC: TKECF) |
Several weeks ago global stock markets slid, following the biggest drop in Tokyo since 2008, and Treasuries gained amid concern Japan’s biggest earthquake on record will hurt economic growth. As the people of Japan begin to move forward once again, many investors find themselves wondering if there are opportunities in Japanese stocks. First, we would like to express our sincere condolence and would like to extend our deep sorrow to the people and their families suffering damage. |
Hot topic: Japan's economy after earthquake shock
Merrill Lynch already has it covered, so we will spare you our opinion. You can read Merrill Lynch's opinion here.
The Best Stock Play
The Tokyo Electric Power Company, Incorporated (OTC: TKECF)
Established May 1, 1951
Equity capital 676.4 billion yen
Sales turnover 5016.2 billion yen (FY2009)
Ordinary income 204.3 billion yen (FY2009)
Net income 133.7 billion yen (FY2009)
Gross assets 13,203.9 billion yen
Electricity sales 280,167 GWh (FY2009)
Customer agreements 28.62 million (does not include specified scale demand)
Maximum output 64.3 GW (July 24, 2001)
Affiliated companies 258
Area served Tokyo, Kanagawa, Saitama, Chiba, Tochigi, Gunma, Ibaraki, Yamanashi, and eastern area of Shizuoka
Key people Masataka Shimizu, President
Services Electric generation, transmission, and distribution
Revenue ¥5308.0 billion (consolidated)
Operating income ¥576.2 billion (consolidated)
Net income ¥310.3 billion (consolidated)
Employees 38,235 (consolidated)
If you like buying stocks that are out of favor, Tokyo Electric could be an ideal scenario. Tokyo Electric, which is Asia’s largest utility and operates the Fukushima Dai-Ichi nuclear plant that was damaged by the 9.0 magnitude earthquake and tsunami, tumbled 14 percent to 902 yen last week, the biggest drop in the Nikkei 225. The company, which suspended its plan to pay a second-half dividend of 30 yen, was the most actively traded stock in Japan.
Tokyo Electric last failed to pay dividends in fiscal 1980 due to the fallout from the second oil shock, skipping interim dividend payments for the fiscal year.
Japan's major banks are considering extending loans up to 2 trillion yen to Tokyo Electric as early as by the end of March, sources close to the matter said Wednesday. The move is aimed at helping the utility raise funds for measures to boost electricity supply following a quake-triggered accident at its nuclear power plant in Fukushima Prefecture. Among banks, Sumitomo Mitsui Banking Corp. is expected to provide loans of about 600 billion yen, Mizuho Corporate Bank some 500 billion yen and the Bank of Tokyo-Mitsubishi UFJ about 300 billion yen, the sources said. In addition, Mitsubishi UFJ Trust and Banking Corp., Sumitomo Trust & Banking Co., Chuo Mitsui Trust and Banking Co. and Shinkin Central Bank are also considering extending loans as Tokyo Electric is likely to have requested loans from each of them last week, the sources said.
The utility firm had procured funds mostly through issuing corporate bonds, but it has apparently decided to ask banks for loans as conditions to issue corporate bonds have become severe following the nuclear power plant accident. Rating agencies Moody's Japan K.K. and Standard & Poor's downgraded their long-term credit ratings for Tokyo Electric with the utility's financial heath expected to worsen due to the nuclear power plant accident following the devastating March 11 earthquake.
The utility plans to repair its thermal power plants damaged by the quake and is expected to activate some of the thermal plants, whose operations have been suspended, to make up for an electricity shortage, likely costing the company a large amount of money to purchase heavy oil and other materials used to generate electricity.
Meanwhile, the government has started considering whether it is possible for the Development Bank of Japan to extend loans to Tokyo Electric with a scheme which involves providing loans in the event of wide-scale disasters using funds procured by the government, sources close to the matter said. The government has set aside about 3.3 trillion yen in fiscal 2010 for the scheme, while it is considering increasing the amount for fiscal 2011 starting April.
Think about this one for a minute. With world governments (especially the US) bailing everyone out these days, don't you think there will be some public funds (as well as insurance money) to clean up the nuclear disaster? In our opinion, we believe there will be. We also believe history repeats itself in the stock market and Tokyo Electric will return to favor one day and resume it's dividend. If you have access to Japanese markets, the stock trades in Tokyo, Osaka, and Nagoya. If you don't have access to Japan, buying TKECF or TKECY (the sponsored ADR) on the US OTC market is the same company.
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