Sony Financial Rises Modestly in Market Debut

Shares of Sony Financial Holdings, Sony's financial arm, rose 3.8% in their market debut on Thursday, after a $3 billion IPO and amid easing investor worries about the U.S. subprime crisis.

The listing is the latest step by Japanese electronics and entertainment conglomerate Sony to focus its resources on core products such as flat TVs and digital cameras, and sell non-strategic assets.

Although it was Japan's largest initial public offering since Aozora Bank's 380 billion yen (US$3.2 billion) listing last November, Sony Financial didn't surge as some investors expressed concern about its valuation and the prospects for company growth.

"This doesn't look like it's going to be that hot," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments.

"It's market capitalisation is not that big and it doesn't look that cheap."

Shares in Sony Financial, which oversees the group's online banking and insurance business, closed up 3.8% at 415,000 yen, compared with its premarket price of 400,000 yen, after opening 5% higher.

Sony, the maker of Playstation game gear and Cyber-shot digital cameras, competes with Samsung Electronics in the global flat TV market, Microsoft and Nintendo in videogames, and Canon in digital cameras.

The market debut follows a three week rise in Japanese financial stocks, which have been helped by optimism that the U.S. subprime mortgage crisis may be over.

With 90% of its revenues and 80% of its recurring profit coming from life insurance operations, Sony Financial is now Japan's second listed life insurer after T&D Holdings.

The latest share price put Sony Financial's market value around 903 billion yen (US$7.7 billion), compared with T&D's 1.8 trillion yen (US$15.3 billion).

Based on the insurance operations' embedded value of 900.5 billion yen (US$7.67 billion) as of the end of last business year, the current market price of 417,000 yen a share would put Sony Financial's price-embedded value ratio at 1.01, higher than T&D's 0.84.

Embedded value, widely used to assess corporate value of life insurers, is calculated based on a company's adjusted net asset value and the present value of future profits from existing contracts with policyholders.

The IPO is being lead-managed by Nomura Securities and JPMorgan, which has experience in the insurance sector. JPMorgan was a bookrunner on Taiyo Life Insurance's IPO and advised on Taiyo's merger with Daido Life to form T&D Holdings.

The listing follows a string of asset sales in a restructuring led by Chief Executive Howard Stringer.

Sony earlier this year cut its stake in online broker Monex Beans Holdings and last year sold interests in a wide range of retail activities such as cosmetics and restaurants.

Ahead of the listing, Sony offered 795,000 existing shares in Sony Financial, cutting its stake in the wholly owned unit to about 60%. The financial unit sold 75,000 new shares.

Sony said last week the share sale would boost its pretax profit by 78 billion yen (US$665 million) for the year to March 2008, although it did not revise its annual outlook to account for the gain.