H.I.S.: Points in F10/26 2Q Results: MTP Unlikely to Be Catalyst Amid Uncertain Outlook

Research evidence excerpt

H.I.S.: Points in F10/26 2Q Results: MTP Unlikely to Be Catalyst Amid Uncertain Outlook

reater-than-expected materialization of effects P/BV, basic 1.8 1.3 1.2 1.0

ROE (%)* 9.1 15.5 14.2 14.1

from steps to control personnel costs could again push travel business OP above

EV/EBITDA, basic 10.8 9.1 9.1 8.8

our forecasts (which do not currently factor in such effects).

Unless otherwise noted, all metrics are based on Morgan Stanley ModelWare

Corporate action: 1) We think full-year guidance is likely to be unchanged. We framework

* = GAAP or approximated based on GAAP

forecast F10/26 1H OP of ¥7.2bn, ahead of ¥6.9bn guidance. However, we see no ** = Based on consensus methodology

e = Morgan Stanley Research estimates

reason to expect the uncertain outlook resulting from the Middle East situation

(and related risk of weak global travel demand) will be resolved for now, so we

think H.I.S. will probably leave full-year OP guidance unchanged at ¥14bn (MSe:

¥13.7bn; IFIS: ¥13.8bn). 2) New medium-term plan through F10/30 is likely to be

announced. Our view is that the announcement of a new MTP is unlikely in itself to

boost the shares as long as uncertainty regarding the Middle East persists. We think

the growth story will probably center on capturing global travel demand, expanding

hotel business, and M&A initiatives, etc. We estimate the OP target for the final year

of the plan could be around ¥20bn, roughly in line with the past peak.

Points to consider: 1) How far heightened Middle East tensions impact near-term

Morgan Stanley does and seeks to do business with

earnings: Possible scenarios include a) risk that higher crude prices lead to higher companies covered in Morgan Stanley Research. As a result,