Mitsubishi Estate’s Office Leasing Business Remains Resilient; Shares Undervalued

We maintain our fair value estimate of JPY 2,100 for Mitsubishi Estate, equivalent to 0.61 times net asset value and 22% above the current share price after it reported results for April-June, the first quarter in its fiscal year ending March 2022. Net profit for the quarter was JPY 35 billion, 24.4% of its full-year guidance of JPY 142 billion, and operating profit was JPY 63 billion, 25.5% of its full-year guidance of JPY 245 billion. By segment, commercial real estate was slightly ahead of 25% of guidance as office leasing has been resilient in 2021 for Mitsubishi Estate. The residential segment, meanwhile, was behind, despite the booking of JPY 5 billion in capital gains on the sale of a rental-apartment property.