Orix (8591): Implications of Toshiba Selling Down its Kioxia Stake and Recent Kioxia Share Price Movements

After market close on Nov 4, Toshiba, in which Orix has an equity stake, reported that it had reduced its stake in Kioxia Holdings to 10.46%. We highlight the following two points. While this could raise expectations for Orix to receive additional dividends from Toshiba, we do not think investors should have overly high expectations for Orix to announce an additional share buyback with its 2Q results. This is because Toshiba has continued to sell down its Kioxia stake intermittently since the start of this fiscal year, making it difficult for Orix to have clear visibility on cash flow at this point. Based on the current share price, Orix could book a pretax valuation loss of ~180bn yen on the sale in 4Q, but we would not expect this to materially change the market share price outlook for Orix. This is because, even if it lowers expectations for BPS at end-F3/27, this could be offset by higher ROE expectations for F3/28. Valuation is based on theoretical P/B methodology, applying 1.55x