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Interview: Buffett effect does not factor in growth potential = Mitsubishi Corporation Executive Officer Kobayashi | Reuters

Interview: Buffett effect does not factor in growth potential = Mitsubishi Corporation Executive Officer Kobayashi | Reuters
Interview: Buffett effect does not factor in growth potential = Mitsubishi Corporation Executive Officer Kobayashi | Reuters

TOKYO (Reuters) – The stock price of Mitsubishi Corporation (8058.T), which has the largest market capitalization among the Japanese trading company stocks that attracted market attention due to additional investment by prominent US investor Warren Buffett, also increased at the beginning of the year. It has increased by 70% since then. Kenji Kobayashi, the executive officer in charge of the company’s stakeholder-related departments, pointed out that the current stock price does not incorporate growth potential and is “still undervalued,” indicating the need to communicate corporate value. .

He said this in an interview with Reuters.

Berkshire Hathaway, the investment firm headed by Buffett, currently owns 8.31% of Mitsubishi Corporation through a subsidiary. Executive Officer Kobayashi says that the company’s additional investment has “lowered the hurdles” for meeting with overseas institutional investors, who tended to dislike the business structure of a “conglomerate” that handles a wide range of businesses from resources to retail. Over the past six months, he has held about 200 meetings with investors, more than 100 of which were foreign institutional investors. The number of interviews for foreign investors has doubled since last year.

Executive Officer Kobayashi believes that his strength is that he is involved in a wide range of industries in new value chains as the traditional industrial structure that has been built globally is changing based on decarbonization and DX (digital transformation). He points out that it is “conglomerate value.” “There are more investors than ever who are disappointed,” he said.

While the company’s market capitalization exceeds the 10 trillion yen mark, its price-to-earnings ratio (PER) remains at 10 times, lower than the 15 times average for all stocks on the TSE prime market. Although its price-to-book ratio (PBR) exceeded the milestone of 1x, its 1.1x ratio is inferior to that of other companies, such as ITOCHU Corporation (8001.T)’s 1.6x.

Executive Officer Kobayashi analyzes that while there is a growing recognition among investors that the company has a competitive advantage, “the ability to realize this is not factored into the stock price.” Mitsubishi Corporation has listed investment candidates with a cumulative total of over 3 trillion yen, and plans to selectively invest in them during the period of its medium-term management plan, which ends in fiscal 2024. “It is important that we realize this first,” he said.

Looking at the data from the shareholder survey conducted at the end of September, it is said that “full-fledged investment from growth-oriented active investors is yet to begin.” He emphasized that “strengthening engagement (dialogue) will become increasingly important” in order to increase confidence in growth.

In April of this year, Executive Officer Kobayashi assumed the newly created position of Chief Stakeholder Engagement Officer (CSEO), reporting directly to the president. He was appointed by President Katsuya Nakanishi, who recognized the importance of communicating not only financial information but also the value of a company to shareholders, investors, the media, non-governmental organizations (NGOs), etc. as an “urgent task.”

As part of its efforts to strengthen its dialogue with investors, Mitsubishi Corporation has broadened the range of investors it contacts by making the selection process itself, which had previously been left to securities companies. The scope of disclosure has also been expanded to include the direction and progress of replacing inefficient assets and improving profitability. Masayuki Nagano, senior analyst at Daiwa Securities, commented, “These disclosures are a major improvement compared to the past, and indicate a change in the way they deal with investors.”

*The interview was conducted on the 16th.

(Miho Uranaka, Anton Bridge Editing: Hitoshi Ishida)

Our Code of Conduct: Thomson Reuters “Principles of Trust”

The article is in Japanese

Tags: Interview Buffett effect factor growth potential Mitsubishi Corporation Executive Officer Kobayashi Reuters


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