Hibiki Path Advisors (“Hibiki”) made a presentation ( link below) to Sojitz Corporation (“Sojitz”) on 10 November.
Sojitz is a general trading company ( called “sogo shosha” in Japan ) that excels in both the soft and hard elements of business, established in 2003 through the merger of Nissho Iwai Corporation, which has strengths in metals and resources, and Nichimen Corporation, which led Japan’s spinning industry with its cotton imports.
The sogo shosha is said to be a uniquely Japanese business model, and is a representative of companies that are difficult to evaluate because of their diverse business activities and the lack of comparative companies overseas. As times have changed, “the theory of the unnecessary trading company” has been repeatedly argued but we believe that the true value lies in the flexibility with which the company has changed with the times from trading to resource investment and now to the expansion of non-resource fields, and in the excellent and commercially-minded human resources that make it possible to do so.
Sojitz has spent many years since the merger working hard to strengthen its financial base with a strong sense of discipline, and has recently improved its solidity, with shareholders’ equity exceeding 860 billion yen, net DER below 1x, and its credit rating upgraded. The company has also announced a net profit target of 110 billion yen for the current financial year, boosted by a tailwind of high resource prices, far exceeding the record profit of 82.3 billion yen achieved last year.
Sojitz is an exactly high-flying company, and we are encouraged by the fact that it is steering its management with an emphasis on share price, such as introducing a new minimum dividend in addition to the existing market price DOE. We believe in Sojitz’s strong commitment to achieving a P/B ratio of 1x as it aims to progress from “debt governance to equity governance” and make this presentation public with a message of support.
This presentation does not constitute an offer, recommendation or solicitation to buy or sell any security or enter into any other transaction. Hibiki does not purport to provide any investment, financial, legal or other expert advice or recommendation in this document.