ORIX Corp (ADR) (IX)

ORIX Corporation is diversified business entity, involved in offering variety of products and services primarily in the domestic market of Japan, which accounts for over 80% of the over all revenues. The company operates in seven segments: Corporate Financial Services; Automobile Operations; Rental Operations; Real Estate-Related Finance; Real Estate; Life Insurance; and Other. The Real Estate segment is engaged in the development, marketing and leasing of office buildings, hotels and condominiums, as well as asset management on behalf of Real estate Investment trusts (REITs), and contributes over 20% to the revenue tally. While the Automobile Operations that consist of automobile leasing and car rental operations also generate a sizable portion.

The Japanese economy has seen some troubled times with deflationary market and real estate collapse in early 90’s. All this has made a negative impact on the company’s with core operations in Japan. However, now there are few signs of a turnaround, with newly emergent inflation leading to banks offering an interest of 250 bps on the saving account. Moreover the real estate industry is also coming up on its own, aided by growth in REIT’s and the stock exchange moving on the path of recovery.

The company’s performance is registering a rising trend, with net income growth by 20% making net income reach to highest levels ever for the nine months period. The rise is led by strong performance of corporate financial services, real estate segments in the domestic market. The international market is also witnessing improved results in automobile leasing and loan servicing segments. Looking ahead, Orix’s estimate of 17% year on year net income growth in fiscal 2007 seems highly likely and could even surpass if the positive economic turnaround continue at a more rapid pace. Moreover, company’s aggressive strategy to speedily expand outside Japan, like the recent credit card business joint venture in UAE or the real estate development in Singapore, will be an important driver in the coming years. Further, considering Orix’s healthy return on equity, high margins and sturdy performance outlook, investing in the stock can generate strong results.