Two Mitsubishis for Japan's Recovery

03/29/2011 2:23 pm EST


Yiannis Mostrous

Editor, The Capitalist Times

The big conglomerate is already rallying in anticipation of the reconstruction, while the real estate firm remains on sale despite improving fundamentals, writes Yiannis Mostrous in Global Investment Strategist .

In the wake of disaster in Japan, Mitsubishi Estate Company (Tokyo: 8802, OTC: MITEY) and Mitsubishi Corp (Tokyo: 8058, OTC: MSBHY) offer attractive investment opportunities.

Mitsubishi Estate is one of the country’s most prestigious real estate companies, with land in some of the most coveted office areas in Tokyo. The company also has a very active residential business and runs six hotels in Japan.

The company’s shares were trading at attractive valuations before the earthquake. They’re an even better bargain now. The disaster-related problems notwithstanding, this is a good entry point for the longer-term investor.

Tokyo’s office rental market has been bottoming out. Vacancy rates are once again below 3%. Although demand for units is rising, supply of office space is expected to be limited for the next three years. 

Tokyo’s condo market is also improving. While supply increased by 22% last year, this was up from an almost two-decade low. Meanwhile, prices rose by almost 4%. Government statistics indicate that 48,331 people moved into Tokyo in 2010.

The chart below illustrates the run-up in the Topix real estate index up to the earthquake and tsunami:

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Mitsubishi Estate is a buy up to ¥1,900 in Japan and $190 in the US over-the-counter market. As always, we recommend buying local shares. [The US-traded proxy traded below $168 Tuesday, down 13% since the earthquake hit—Editor.]

Meanwhile, Mitsubishi Corp. is one of Japan’s largest trading companies and has performed well on the back of strong global economic growth.

It’s divided into six business groups: industrial finance, logistics, and development; energy; metals; machinery; chemicals; and living essentials. With assets of $140 billion, it’s one of the core members of the Mitsubishi Group.

Click to Enlarge

The energy division boasts the heaviest exposure among its peers to liquefied natural gas (LNG) projects. The company is involved in several phases of the LNG business, including the production and liquefaction of natural gas and LNG shipping operations. Mitsubishi Corp’s LNG business has a global reach; the firm is currently involved in LNG projects in Brunei, Alaska, Malaysia, Australia, Indonesia, Oman, and Russia.

Mitsubishi Corp is a buy in the over-the-counter market up to $55. [Shares traded just above that level Tuesday, and were up 6% since the quake—Editor.]

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