Itochu: Recent Developments Are Favorable (Rating Upgrade)

Core Viewpoint - Itochu Corporation is positioned for growth through strategic initiatives, including a potential stock split and the acquisition of licensing rights for the FRUIT OF THE LOOM brand, which aligns with its focus on consumer-related businesses [5][6][16]. Group 1: Corporate Developments - Itochu has acquired master licensing rights for the FRUIT OF THE LOOM brand in Asia, indicating progress in expanding its consumer-related businesses [6]. - The company is considering a stock split to lower the minimum investment amount, which could enhance share liquidity and attract a broader investor base [9]. - Itochu aims to achieve retail sales of 20 billion yen from the FRUIT OF THE LOOM brand within five years, reflecting its commitment to growth in the apparel sector [6]. Group 2: Financial Metrics and Valuation - The average daily trading value of Itochu's shares on the Tokyo Stock Exchange was approximately $150 million over the past three months, compared to $2 million for its OTC shares [5]. - The updated valuation analysis suggests a target P/B ratio of 2.6 times, which is 34% higher than the current trailing P/B multiple of 1.94 times [10]. - The company has guided for a 25% increase in dividend per share and a 50% growth in share buybacks for the new fiscal year, indicating a shareholder-friendly approach [10]. Group 3: Market Performance and Outlook - Historical data shows that more than half of Japanese companies that conducted stock splits outperformed the Topix index a month after the announcement, suggesting a positive outlook for Itochu's shares if a stock split occurs [4]. - The strategic focus on consumer and retail businesses, particularly leveraging the FamilyMart convenience store chain, positions Itochu well for future growth [6].