* Elliott says market undervalues the business

* Elliott pushing for real estate portfolio review,

sources say

* Mitsui OSK shares up 11% after Reuters report

* Hedge fund at forefront of growing activist activity in

Japan

(Adds Elliott statement in paragraphs 1 and 6, share reaction

in paragraph 5)

By Sam Nussey and Anton Bridge

TOKYO, March 18 (Reuters) - Elliott Investment

Management has taken a "significant" stake in Mitsui OSK Lines

, with two sources saying it is pushing the shipping

company to improve shareholder returns and capital efficiency.

The hedge fund is at the forefront of growing activist

activity in Japan which is pushing companies to accelerate

governance reforms and reshape portfolios.

Elliott believes Mitsui OSK should conduct a review of its

real estate portfolio and consider relisting subsidiary Daibiru,

the sources familiar with the matter also said.

In 2022 Mitsui OSK made Daibiru, whose assets include

commercial property in central Tokyo, a wholly owned subsidiary

and delisted the company.

Reuters could not immediately determine the size of the

stake. Mitsui OSK's shares extended gains and were up 11% after

Reuters reported the investment.

Mitsui OSK declined to comment on discussions with

investors. The sources declined to be named as the information

is not public.

Elliott in a statement said "the market materially

undervalues the business." It aims to work with the company to

ensure its upcoming management plan "is appropriately

ambitious."

Mitsui OSK has a fleet of more than 900 vessels, including

bulk carriers, tankers and ferries. Its peers include Nippon

Yusen and Kawasaki Kisen.

It has said it aims to gradually improve its price-to-book

ratio, a key valuation metric, to 1 and more over time from 0.67

times at the end of last March.

The Tokyo bourse has put pressure on companies trading below

book value to improve their use of capital.

Mitsui OSK has emphasised both the importance of shareholder

returns and the need for growth investment. The shipping

industry is cyclical and the company aims to grow the proportion

of stable revenue.

The shipping company will announce its latest management

plan at the end of this month.

Elliott has a growing presence in Japan and scored a

landmark win this month after forcing Toyota ( TM ) to

​sweeten its bid for Toyota Industries ( TYIDF ).

The hedge fund, which has built a reputation as a relentless

activist, has invested in companies including Tokyo Gas ( TKGSF )

and Sumitomo Realty & Development ( SURDF ).

Elliott target Kansai Electric Power ( KAEPF ) is considering

selling shares of construction firm Kinden ( KNDEF ), Reuters

reported last week.

Shipping firms are grappling with the fallout from the Iran

war. A Mitsui OSK-owned container ship sustained minor damage

while at anchor in the Gulf last week.