Materials| Industrials |Commodities

Rahul Jain

Equity Bottom-Up

<ul>
<li>Sumitomo’s £7.5B (~¥1.46T) UK clean energy investment marks a pivot from trading and resource-linked businesses to long-duration, regulated infrastructure—anchoring its Energy Transformation strategy.</li>
<li>Annual deployment (~¥146B) is ~24% of operating cash flow; funded via SPVs, project finance, and equity partners. Majority of spend is front-weighted through FY2031, earnings back-loaded.</li>
<li>Currently trading at ~5.7x EV/EBITDA, a successful infra scale-up could justify a multiple closer to 6.5–7.0x—in line with peers like Marubeni or Mitsui. ROE uplift is likely beyond FY2028.</li>
</ul>


Sumitomo’s £7.5B (~¥1.46T) UK clean energy investment marks a pivot from trading and resource-linked businesses to long-duration, regulated infrastructure—anchoring its Energy Transformation strategy.
Annual deployment (~¥146B) is ~24% of operating cash flow; funded via SPVs, project finance, and equity partners. Majority of spend is front-weighted through FY2031, earnings back-loaded.
Currently trading at ~5.7x EV/EBITDA, a successful infra scale-up could justify a multiple closer to 6.5–7.0x—in line with peers like Marubeni or Mitsui. ROE uplift is likely beyond FY2028.


Sumitomo Corp (8053 JP): £7.5B UK Clean Energy Pivot to Boost Infra Exposure and Earnings Quality

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

<ul>
<li>The Berkshire Hathaway <a href="https://www.berkshirehathaway.com/2024ar/2024ar.pdf" target="_blank" rel="noopener">Annual Shareholder Letter for 2024</a> was released this weekend. Much was made in Japanese twitter-space of the comments he made on the Japanese trading houses. </li>
<li>He said Berkshire Hathaway's admiration of these companies "has consistently grown" and Berkshire likes their capital deployment, managements, and their attitude in respect to investors. They also pay themselves reasonably.</li>
<li>He mentioned Berkshire will increase their stakes somewhat in the trading houses "over time." That comment deserves some exploration, as does the comment about yen funding.</li>
</ul>


The Berkshire Hathaway Annual Shareholder Letter for 2024 was released this weekend. Much was made in Japanese twitter-space of the comments he made on the Japanese trading houses. 
He said Berkshire Hathaway's admiration of these companies "has consistently grown" and Berkshire likes their capital deployment, managements, and their attitude in respect to investors. They also pay themselves reasonably.
He mentioned Berkshire will increase their stakes somewhat in the trading houses "over time." That comment deserves some exploration, as does the comment about yen funding.


Warren Buffett and the Japanese Trading Houses I

Expert on Japan Retail and Consumer Markets, JapanConsuming

Michael Causton

Expert on Japan Retail and Consumer Markets

Real Insight on Japanese Consumer Markets

JapanConsuming

JapanConsuming is a specialist research firm producing intelligence on Japanese retail and consumer markets. Founded in 2000, JapanConsuming has become the leading provider of insights on Japanese retailers and consumer trends to retailers, brands, government agencies and investors. As well as a highly regarded monthly report on the market, JapanConsuming produces in-depth reports on retail sectors, seminars on key trends and telephone consulting to investors on trends and retailers.

JapanConsuming was founded by Michael Causton and Roy Larke. 

Thematic (Sector/Industry)

<ul>
<li>Consumer distribution has been transformed since 2020 through accelerated concentration of market share. While some has come about through organic growth, the real drivers have been M&amp;A and MBOs. </li>
<li>The result is a realignment of the retail leader board as companies like PPI, Welcia and Trial buy their way to the top, while others, notably Seven &amp; I, shrink.</li>
<li>Here we identify the retail leaders in driving consolidation going forward, and the intensifying pressure on both smaller retailers and the wholesalers that supply them.</li>
</ul>


Consumer distribution has been transformed since 2020 through accelerated concentration of market share. While some has come about through organic growth, the real drivers have been M&amp;A and MBOs. 
The result is a realignment of the retail leader board as companies like PPI, Welcia and Trial buy their way to the top, while others, notably Seven &amp; I, shrink.
Here we identify the retail leaders in driving consolidation going forward, and the intensifying pressure on both smaller retailers and the wholesalers that supply them.


[Japan M&A] Who Owns Who: The Growing Concentration of Power in Japanese Consumer Markets

Event-Driven

<ul>
<li>The <a href="https://www.smartkarma.com/entities/seven-i-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:1041:1" rel="noopener">Seven &amp; I Holdings (3382 JP)</a> to rid itself of control of the Ito-Yokado, York Benimaru, Akachan Hompo, and Denny's Japan businesses in York Holdings proceeds apace.</li>
<li>The First Round of bids is due tomorrow, apparently, and all manner of bidders have assembled. </li>
<li>This leads to the question of a deal for the rest of 7&amp;i. If a TradingCo is a natural co-investor for the Ito family (or ACT), so is Berkshire Hathaway.</li>
</ul>


The Seven &amp; I Holdings (3382 JP) to rid itself of control of the Ito-Yokado, York Benimaru, Akachan Hompo, and Denny's Japan businesses in York Holdings proceeds apace.
The First Round of bids is due tomorrow, apparently, and all manner of bidders have assembled. 
This leads to the question of a deal for the rest of 7&amp;i. If a TradingCo is a natural co-investor for the Ito family (or ACT), so is Berkshire Hathaway.


7&I (3382 JP) - A York Holdings Deal And Warren Buffett?

<ul>
<li>Yesterday a news article from Bloomberg suggested 7&amp;i was "considering" an MBO. <a href="https://www.smartkarma.com/entities/seven-i-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:1041:1" rel="noopener">Seven &amp; I Holdings (3382 JP)</a> later confirmed they had received a non-binding proposal from ITO Junro/family.</li>
<li>The initial number was ¥9trln. If market cap? High. If EV, too low. That would have implied a price just over the first "grossly inadequate" ACT price.</li>
<li>There is a lot we don't know. This changes the landscape. It probably shifts the range trade, but it will shift more when we get more clarity on ITO-san's price.</li>
</ul>


Yesterday a news article from Bloomberg suggested 7&amp;i was "considering" an MBO. Seven &amp; I Holdings (3382 JP) later confirmed they had received a non-binding proposal from ITO Junro/family.
The initial number was ¥9trln. If market cap? High. If EV, too low. That would have implied a price just over the first "grossly inadequate" ACT price.
There is a lot we don't know. This changes the landscape. It probably shifts the range trade, but it will shift more when we get more clarity on ITO-san's price.


7&I (3382 JP) - An ITO Family MBO? With Itochu? At ¥9trln? Maybe. Information Is Scarce

Japan

Sumitomo Corp is a general trading company.  The Company imports and exports a wide variety of goods such as metals, machinery, chemicals, fuel,food products, and textiles.  Sumitomo also operates real estate, construction, shipping, insurance, finance, and leasing businesses.

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Sumitomo Corp (8053 JP)