Mitsui & Co. Ltd. (MITSY, $446.06): “Riding the Global Market Change and Recovery”
By: Joseph
Anason, AIM Student at Marquette University
Summary
• Mitsui & Co. Ltd. (OTC: MITSY) is the largest general trading
business in Japan. The revenue sources are Mineral & Metal Resources (17.4%),
Energy (10.5%), Machinery & Infrastructure (9.9%), Lifestyle (29.6%),
Chemicals (24.1%), Innovation & Corporate Development (2.9%), and Iron
& Steel Products (5.5%). The company has revenue exposure in Japan, United States,
Australia, Singapore, China, and Europe.
• MITSY’s Core Operating Cash
Flow for the six-month period ending Sept. 30, 2021, has increased 92.2% to $4.64
billion (USD) as compared to the previous period.
• MITSY is facing decreased
exports from Japan due to decreased automobile production and bottlenecks in their
supply chains. However, the world economy is expected to strengthen and rebound
as infection rates decline and an increase in consumer spending.
• MITSY is benefitting from rising
commodity prices.
• MITSY beats Q2 Consensus EPS for
the Fiscal Year ending March 2022 of $19.62
by 16.86%.
Key
Points:
MITSY
is approaching its one-year anniversary in the AIM International Fund. The
original drivers of “Energy Solutions, Market Asia, and Commodity Prices” from the
original pitch are still in affect today. MITSY is well positioned in their
global presence and ties to the energy space to benefit from the global push to
fight against climate change. MITSY’s Lifestyle segment is benefitting greatly
from the Asian market growth and goal of a better quality of life. Lastly,
commodity prices are still near all time highs with inflation still being prominent.
According to the Federal Reserve
Bank of St. Louis, inflation was at 2.20% on November 3, 2021 compared to 1.82%
on November 3, 2020. Investors use real assets to help hedge against inflation,
driving commodity prices. The increased prices contributed to the increased Q2 Gross
Profit in iron ore and coal mining operations in Australia of $797 million (USD)
and $142.8 million (USD), respectively.
In the latest
earnings report, MITSY’s Core Operating Cash Flow increase is primarily driven
by their Lifestyle, Machinery & Infrastructure, and Mineral & Metal Resources.
The rebounding economy, increase in consumer spending, and targeting middle
class consumers, drove Core Operating Cash Flow from the Lifestyle segment to
grow 1,600% compared to the previous period. Machinery & Infrastructure and
Mineral & Metal Resources grew 193% and 147%, respectively. Additionally, all
other segments improved except for Innovation & Corporate Development,
which experienced a 14% decrease.
What
has the stock done lately?
MITSY stock
price is currently down 11% since their peak at the beginning of August of $502.09.
The peak was caused from MITSY beating Q1 Estimated EPS of $14.84 by 43.22%.
The stock price otherwise has primarily been fluctuating between $420 - $477
since May 2021.
Past
Year Performance:
MITSY
has increased 40.69% over the last year. The 52-week price range is $320.32 –
502.09. MITSY has outperformed the benchmark iShares MSCI ACWI es-US over the
last year by 7.72%. Additionally, MITSY has beaten Earnings EPS expectations
for each quarter over the last year. Lastly, the company has paid an interim
dividend of $0.40 (USD) per share, an increase of $0.05 (USD) per share dividend
paid from the previous period.
My
Takeaway
Mitsui
& Co. Ltd. is near the price target of $452.70 for when it was added to the
portfolio. The company has had strong growth over the last year as the world
economy is rebounding and heading back to operating as normal. MITSY is poised
to benefit from the current commodity prices and will experience greater efficiencies
as supply chains and exports improve. Additionally, MITSY is continuing to
provide strong Core Operating Cash Flow. Furthermore, the company’s global
presence and aligning goals of net-zero emissions will allow them to benefit
from the global market’s goal to decrease carbon emissions.
