Morningstar

Morningstar, Inc.

Equity Bottom-Up

Mitsubishi Estate made a surprisingly positive change to its shareholder orientation by announcing the removal of its takeover defense measures and its first-ever share buyback
The company originally introduced the takeover defense measures in 2007, when the large unrealized gains on its numerous office properties in the Marunouchi district between Tokyo Station and the Japanese Imperial Palace attracted some attention from activist investors. After instituting the takeover defense plan in…

Mitsubishi Estate delivered solid results for the October-December quarter, achieving 76% of its operating profit guidance of JPY 215 billion for the fiscal year ending March 2019 and 79% of its full-year net profit guidance of JPY 123 billion. Annualized ROE for the quarter was 8.0%, compared with 7.2% for the fiscal first half and 7.3% last fiscal year, while earnings depended on capital gains to a lesser degree. Capital gains totaled about JPY 2 billion in the quarter, versus an average of…

We keep our fair value estimate on no-moat Mitsubishi Estate, or MEC, unchanged at JPY 2,300 after revising our cash flow forecast model. MEC's second-quarter fiscal 2019 net profit, for the period ended September 2018, of JPY 38.6 billion puts the company well on track to meet full-year guidance of JPY 123 billion. Our fair value estimate remains underpinned by the company's substantial unrealized gain in its real estate assets of JPY 3.4 trillion. However, we see earnings growth slowing to…

Mitsubishi Estate Co, or MEC, remains relatively attractive with first-quarter (for fiscal year ending March 2019) performance that is within our expectations. We believe the company is on track to meet our full-year earnings growth estimate of 7.6% and we leave our projections and our fair value of JPY 2,300 unchanged. We remain slightly more optimistic with our fiscal 2019 net profit forecast around 5% above management guidance on our view that MEC should be able to sustain an operating margin…

Mitsubishi Estate's, or MEC's, operating margin held up better than we expected, leading to fiscal 2018 (fiscal year ended March 2018) net profit of JPY 120 billion, around 6% ahead of our estimate. We raise our gross profit margin assumptions by 100-200 basis points for fiscal 2019-23 to around 25%, leading to an average 9.5% upward revision in our earnings estimates. Our fair value estimate increases to JPY 2,300 from JPY 2,100, with the estimated unrealized revaluation gains of its assets…

Japan

Mitsubishi Estate Company Ltd. invests in real estate properties in Japan.  The Company leases, manages, and develops commercial buildings in central Tokyo. Mitsubishi Estate also develops and sells residential properties and parking lots and manages recreational facilities including golf courses and tennis clubs.

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