The monthly newsletter will now include our analysis of various situations where other activists are involved, there is clear value to be unlocked, and we can see a path to achieving a good outcome for all shareholders.
Mitsubishi Logistics (ML) is one such case. With a market cap of US$3bn, and liquidity of $10m/day, it is big and liquid enough for reasonable sized funds to accumulate a position.
We rate this opportunity as providing potential market-plus returns on improving governance and cash returns to shareholders. It does not offer huge return potential, but the risk / reward appears favourable due to support for the share price on the downside from the company’s very overcapitalised balance sheet, and Asset Value Investors’ (AVI’s) engagement. There is also optionality in other activists potentially joining AVI on the register and pushing for a sale of the company to private equity or a strategic white knight, given the company’s huge asset backing, weak operating profitability, huge capex plans, and relatively open share register.
Activist Asset Value Investors built a stake in the company during 2025, attracted by the company’s large real estate portfolio, and the strong interest of private equity firms in the logistics sector.
The company carries out warehousing, trucking, stevedoring, and freight forwarding businesses in its logistics segment. The real estate segment leases and manages commercial buildings, parking lots, shopping centres, and develops and sells condominiums. It also owns Kobe Suma Sea World!
We have not carried out a detailed business analysis, partly due to time constraints, complexity, and opacity, and partly for the simple reason that it is not really necessary for our purposes – due to the very clear asset backing.
ML is now AJOT’s (AVI’s Japan-focused closed-end listed investment trust) largest position, at a 9.1% weighting (as of 31 March 2026). It is also the #2 position in AVI’s UCITS fund “AVI Japanese Special Situations” with a 7.7% weighting. In total, Factset reports AVI’s holding as 3.7% of outstanding and 3.9% of voting shares (5% held in treasury).
The attraction is clear. On a ¥500bn market cap, the company owns:
– ¥185bn of equity securities (cross-shareholdings)
– ¥425bn of leased real estate (held on the books at ¥132bn)
– ¥145bn historic cost book value of operating real estate (not leased out – primarily logistics facilities)
It is unclear exactly what the ¥127bn of operational real estate is worth at today’s prices due to limited disclosure. The company has been around since 1887, so it is likely considerably more than the book value. For all of its tangible fixed assets, including leased assets, the company had accumulated depreciation of ¥361bn as of the FY2025 Yuho. AVI’s CEO, Joe Bauernfreund indicated that they believed ML’s real estate was worth about ¥850bn in total (on the “Merryn Talks Money” podcast back in October 2025 (he said “around 2x the current share price”, so we have estimated AVI’s implied valuation of the real estate from the price at that date).
In total, the company owns around one million sqm of real estate floorspace in Japan, and almost 300k sqm outside of Japan. A substantial portfolio.
Add the ¥185bn of equity securities to AVI’s assessment, and we have assets of 2x the current market cap.
The company is taking measures to increase its RoE and share price. The mid-term plan announced in February 2025 targets a 10% RoE by 2030 vs 8.2% in the FY ended March 2025.
Cross shareholdings are being sold down, with the company planning to sell ¥100bn of cross-shareholdings 2025-2030.
ML expects to spend ¥40bn or more on share buybacks, and increase dividends to a level that represents a 4% dividend-on-equity (a 4% dividend yield on the value of the company’s book equity, or around a 3% yield at the current 1.3x price/book ratio vs the current 2.6% yield)
In May 2025 the company announced a program to spend ¥20bn to buy back 33m shares, or 9.2% of voting stock by March 2026. Management spent the ¥20bn acquiring 16.8m shares, which they have since cancelled.
Looking more closely, the 2030 earnings target includes capital gains from sale of properties in the real estate division – indicating more of a “manufactured” RoE from realizing long-accrued historical capital gains, rather than a sustainable recurring RoE.
In their October 2025 report for AJOT, AVI stated that they will “constructively engage with management to encourage the timely liquidation of investment securities and rotation of real estate”.
Based on our analysis of Factset data, the shareholder register is around 25% aligned with management. But a 7% combined stake is owned by two companies which have committed to sell their cross-shareholdings – insurer Tokio Marine Holdings, and developer Mitsubishi Estate Co. Various bank and other shareholders are also under pressure to reduce cross holdings, which could open the register yet further.
Concerningly, the company plans to continue to invest heavily into the real estate business, with total investments across logistics, real estate, and new businesses 2025-2030 planned to be almost double the level of operating cash flow, and greater than the company’s entire market capitalization, at ¥590bn. Of that, replacement / maintenance investment is only expected to be ¥80bn. So, the company is chasing asset-intensive growth via increased borrowings of ¥290bn.
The plan to spend on acquisitions is especially concerning given the company’s recent history – writing 25bn off the carrying value of 2024 acquisition Cavalier Logistics so far in FY03/2026.
Identifying great targets for shareholder activism often involves inverting the normal stock selection process. You are looking for management making poor decisions and doing silly things with capital, as that creates the opportunity for the activist to change things. There is a clear opportunity for activist engagement with ML.
AVI and/or another activist, can push the company to sell off the real estate business for a valuation that reflects the true asset value, and focus on improving the performance of its core logistics operations, before it tries to embark on any further M&A or organic business expansion.
An upside case would be if the entire company were sold to private equity.
It is hard to put a precise value on the logistics business, but as an indication, KKR paid 0.9x sales / 10.7x EBITDA (per Factset) for Hitachi Transport Systems in 2022, and quickly conducted a sale and leaseback of 33 logistics centres for ¥220bn to transition it to an “asset-light” model.
Using this transaction as a comparison, the logistics business could be worth ¥216bn-¥275bn.
Adding this to the market value of real estate and the cross shareholdings gets us to 860bn pre-tax. Around 1.7x the current market cap. Even if we fully tax the unrealized capital gain on the rental real estate, we still get a valuation at a 55% premium to the current trading price.
There is likely a lot more hidden value inside the company. For example the Kobe Suma Seaworld asset is not included in the above analysis.
This presents as a reasonable opportunity with strong asset backing, in a sector with private equity demand, and plenty of engagement topics for an activist with appetite – of which there is already at least one on the register.
