SSUMY - Mitsui & Co: An Attractive Conglomerate At A Low Price To Book

2024-02-19 11:04:55 ET

Summary

• Mitsui is positioned as a Berkshire-esque holding company, with investments across hundreds of industries where it is benefiting from growth tailwinds, such as clean energy.
• Management is increasingly investing in growth companies while disposing off low-return assets, positioning Mitsui for growing returns in the coming decade.
• We believe the company has a strong business model and culture, which encourages a long-term outlook and superior asset allocation, priming it for accretive shareholder returns.
• Distributions are modest relative to its potential, suggesting a considerable increase is likely in the coming years without foregoing its investment objectives.
• Despite the scope for its distributions to increase and growth to improve, Mitsui is trading at a discount on a P/B and OCF basis, suggesting upside despite the share price run-up.

Investment thesis

Our current investment thesis is:

• Mitsui (MITSY) is a play on superior asset allocation in our view. The company is generating significant cash and reinvesting it in a range of industries, leveraging its global relationships and ability to buy-and-build to generate superior returns to its peers. Based on our analysis of case studies and its business model, we believe this is deliverable going forward.
• The company is clearly agile despite its size, while it takes a long-term view to allocating capital, positioning it to outlast trends and ensure it is exposed to the industries of tomorrow. Its growing investment in growth assets could be a turning point for the coming decade.
• Mitsui is trading at a P/B of 1.2x and a P/OCF of 7x, both of which imply upside in our view. Both metrics are below its peers’ average.

Company description

Mitsui Corporation is a Japanese conglomerate founded in 1876, operating globally across various industries. With a diverse portfolio, Mitsui engages in businesses such as trading, investment, and service provision in sectors including energy, infrastructure, chemicals, and finance. The company is known for its strategic partnerships and a commitment to sustainable business practices....

For further details see: