Stock Analysis & Valuation Daiwa Securities Living Investment Corporation (8986.T)

• Previous Close: ¥114,800.00
• Sector Valuation Confidence Level: Low

Valuation method	Value, ¥	Upside, %
Artificial intelligence (AI)	140657.62	23
Intrinsic value (DCF)	43382.40	-62
Graham-Dodd Method	37137.31	-68
Graham Formula	94273.45	-18

Strategic Investment Analysis

Company Overview

Daiwa Securities Living Investment Corporation (8986.T) is a specialized residential real estate investment trust (REIT) listed on the Tokyo Stock Exchange. Focused on rental apartments in Japan's metropolitan areas—including Tokyo, Sapporo, Sendai, Nagoya, Osaka, and Fukuoka—the REIT leverages the expertise of its asset manager, Daiwa Real Estate Asset Management Co., Ltd., to optimize property acquisitions, occupancy rates, and cost efficiency. Backed by Daiwa Securities Group Inc. as its sponsor, the REIT benefits from strategic support aimed at sustainable growth and stable investor returns. With a market capitalization of ¥224.3 billion, Daiwa Securities Living Investment Corporation is a key player in Japan's residential REIT sector, targeting long-term profitability through disciplined asset management and portfolio enhancement.

Investment Summary

Daiwa Securities Living Investment Corporation presents a stable investment opportunity within Japan's residential REIT market, supported by strong sponsor backing and a focus on high-occupancy rental apartments. The REIT's disciplined approach to property acquisition and cost management has resulted in consistent distributions, with a dividend per share of ¥5,000. However, risks include high leverage (total debt of ¥204.7 billion) and exposure to Japan's demographic challenges, such as population decline and urbanization shifts. The low beta (0.083) suggests lower volatility relative to the market, appealing to income-focused investors, but growth may be constrained by the saturated domestic rental market.

Competitive Analysis

Daiwa Securities Living Investment Corporation differentiates itself through its specialized focus on rental apartments and the strategic backing of Daiwa Securities Group, which provides financial stability and access to capital. The REIT’s asset management strategy emphasizes high occupancy rates and cost efficiency, enhancing profitability. However, its competitive positioning is challenged by larger, diversified REITs with broader geographic and asset-class exposure. The reliance on Japan's urban rental market also exposes it to localized economic downturns and regulatory risks. While its sponsor support offers advantages in financing and deal flow, the REIT must contend with competitors that have greater scale or international diversification. Its conservative leverage profile (debt-to-equity ratio in line with industry norms) mitigates some risk, but growth depends heavily on Japan's real estate cycle.

Major Competitors

• Tokyu REIT, Inc. (3289.T): Tokyu REIT focuses on diversified real estate, including residential and commercial properties, with strong ties to Tokyu Group. Its larger portfolio provides stability but lacks the specialized focus of Daiwa Securities Living. Strengths include prime Tokyo assets, while weaknesses include higher exposure to retail and office sectors.
• Nomura Real Estate Master Fund, Inc. (3462.T): Nomura Real Estate Master Fund is one of Japan's largest REITs, with a diversified portfolio including residential, office, and retail. Its scale and Nomura's backing provide liquidity and access to premium assets. However, its broad focus dilutes expertise in residential properties compared to Daiwa Securities Living.
• GLP J-REIT (3281.T): GLP J-REIT specializes in logistics real estate, benefiting from e-commerce growth. Its niche focus contrasts with Daiwa's residential strategy. Strengths include high demand for warehouses, but it faces cyclical risks tied to industrial demand and lacks exposure to stable rental housing.
• Daiwa House REIT Investment Corporation (8976.T): Daiwa House REIT, backed by Daiwa House Group, focuses on residential and commercial properties. Its sponsor strength mirrors Daiwa Securities Living's, but its broader asset mix reduces concentration risk. Weaknesses include higher leverage and exposure to cyclical office demand.