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Samty Co., Ltd. (JP-3244) Tokyo Stock Exchange First Section ( II )

2018-03-13  提供機構:FISCO  作者:FISCO  點閱次數:2

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Basically achieved the forecasts, which were upwardly revised twice in FY11/17. The profit margin further improved, against the backdrop of the favorable sales environment.

2. Overview of the FY11/17 results

In terms of FY11/17 results, sales and profits steadily increased and basically achieved the revised targets. Net sales increased 15.4% YoY to ¥60,479mn and operating income rose 18.0% to ¥10,131mn. Ordinary income was up 24.6% to ¥8,461mn and profit attributable to owners of parent rose 22.3% to ¥5,661mn.

Net sales exceeded their respective forecasts in each of the three businesses. In particular, they grew significantly in the Real Estate Business, which benefitted from strong property sales. Centered on properties in the metropolitan Tokyo region, it seems that development mobilization (S-RESIDENCE sales) and regeneration real estate (regener­ation and sales, including of existing income properties) for which the investment demand, such as from overseas funds and wealthy investors, has continued to be strong, are being sold at prices higher than expected. Sales of investment condominiums (the planning, development, and sales of condominiums for investment) were also favorable, supported by the strong demand from individual investors and others. Elsewhere, results in the Property Leasing Business and the Other Business, which are stable sources of revenue, trended strongly.

In terms of profits, the cost ratio greatly improved (down 0.6 of a percentage point YoY) due to the upward trend in sales prices and the stable construction costs. Conversely, SG&A expenses rose, including due to the broadcasting of TV commercials in order to improve name recognition, and the higher personnel expenses following the additional recruitment of personnel and raising up the salary base. However, the Company still achieved higher operating income from the effects of the higher sales and the improvement in the cost ratio. The operating income margin also rose to 16.8% (16.4% in the previous fiscal year). In addition, ordinary income growth rates saw a major rise against the backdrop of a reduction in interest payments due to lower interest rates in the market.

Also, for the status of purchases, which will lead to growth in the future, the Company has acquired 22 development sites (estimated net sales, ¥51bn / acquisition price, ¥17bn) and 46 income properties (acquisition price; ¥32bn),* which can be said to be basically as planned. In particular, it is generally said that it is difficult to acquire development sites, particularly in metropolitan Tokyo region, but one-room condominiums, which are the Company’s business area, can be developed even on land that is comparatively narrow, so it is considered that there is little competition with the major developers.

* The FY11/16 results were 20 development sites (estimated net sales, equivalent to ¥28.2bn; acquisition price, ¥11.5bn), and 35 income properties (acquisition price, ¥29bn).

For the financial condition, due to the increases in real estate for sale under construction (current assets) and property and equipment (non-current assets), total assets were up 17.9% from the end of the previous fiscal year to ¥166,449mn. Shareholders’ equity also rose 19.9% to ¥39,017mn because of the accumulation of internal reserves, and as a result, the equity ratio improved slightly, to 23.4% (23.1% at the end of the previous fiscal year). Conversely, interest-bearing debt increased 20.1% to ¥114,786mn, which is the first time it has exceeded ¥100bn. But 73.3% of this amount is long-term debt, and there are no concerns about the Company’s financial stability.

The results according to each business are as follows.

(1) Real Estate Business

Net sales increased 17.7% YoY to ¥51,522mn and segment income steadily rose 31.3% to ¥10,600mn. In partic­ular, development mobilization grew significantly, up 66.0% to ¥15,402mn. The Company sold 8 S-RESIDENCE properties* (7 in the previous fiscal year), while against the backdrop of factors including the ongoing low interest rates and the stable political situation, there continued to be a strong purchasing demand from overseas funds and upward trend in sales prices contributed to the growth in the results. It also sold 29 regeneration mobilization prop­erties (18, including large-scale properties, in the previous fiscal year), and net sales were basically unchanged, up 0.5% to ¥23,632mn. Same as for development mobilization, it seems that bulk sales to overseas funds and other such factors contributed greatly to profits. Net sales were also strong for investment condominiums, up 19.2% to ¥12,049mn, due to sales of 690 units (628 units in the previous fiscal year; the forecast was for 663 units). Sales were supported by strong demand from individual investors, against the backdrop of factors such as concerns about pensions in the future and as a measure to deal with inheritance tax.

* Within the 8 S-RESIDENCE properties, 2 properties were for SRR (including the bridge fund).

In profits, the segment income margin improved greatly, to 20.6% (18.4% in the previous fiscal year), due to the increase in direct sales to overseas funds and wealthy investors, in addition to the upward trend in sales prices and the stable construction costs. Therefore, the Company was able to realize a major increase in profits.

(2) Property Leasing Business

Net sales increased 5.2% YoY to ¥7,386mn, while segment income decreased 8.2% to ¥2,094mn, for higher sales but lower profits. In addition to the increase in the number of properties owned*, the occupancy rates also trended at high levels, so sales grew steadily.

* The number of properties owned increased to 88, as 29 were sold and 46 were acquired.

Profits declined due to the increase in depreciation following the acquisitions of large-scale properties*, but this was within the expected range.

* It acquired Samty Kego Tower (a high-rise condominium building in Fukuoka) in November 2016 and a large-scale logistics warehouse (in Mito) in March 2017, while S-RESIDENCE Miyanomori, which are rental condominiums for families, was completed in November 2017 (in Sapporo, the first condominiums for families under the S-RESIDENCE brand), etc.

(3) Other Business

Net sales increased 1.7% to ¥1,885mn, while segment income decreased 38.1% to ¥243mn, for higher sales but lower profits. In addition to the increase in the number of condominiums under management, in the hotel business also, the newly acquired GOZAN HOTEL contributed, while the occupancy rates were maintained at high levels*. As a result, net sales exceeded their forecast.

* The Q4 average occupancy rates were 96.4% at Center Hotel Tokyo, 94.5% at Center Hotel Osaka, and 94.4% at S-PERIA Hotel Nagasaki. In particular, the occupancy rate recovered steadily at S-PERIA Hotel Nagasaki, as it had fallen slightly in Q2.

Conversely, the reasons for the lower profits seem to be 1) the recording of rental costs for Center Hotel Tokyo, which was sold in December 2016 and which is currently only managed by the Company, and 2) the absence of the highly profitable construction projects in the previous fiscal year (a temporary factor), but the decrease in profits was within the expected range.

As a result of the above, FY11/17 earnings were strong overall as 1) Real Estate Business earnings grew at a faster pace than expected with tailwind support from a strong real estate market (particularly in terms of profit due to the upward trend in sales price) and 2) the company made steady progress on acquisitions to drive future growth (development properties and income properties).

3. The development plan (pipeline) situation

The development status of the S-RESIDENCE series is that 8 buildings (420 units) were completed in 2017 and 13 buildings (949 units) are to be completed in 2018. The buildings to be completed in 2019 are being steadily accumulated, as development sites for 3 buildings (368 units) have already been purchased, and other purchases are currently being progressed. In terms of regions, 14 buildings are in the metropolitan Tokyo region (11 in Tokyo, 1 in Kanagawa, and 2 in Chiba), 5 buildings are in Kansai (Osaka), and 5 buildings are in Aichi (Nagoya).

Conversely, the development status of investment condominium projects are that 1 building (96 units) was completed in 2017, 7 buildings (328 units) are to be completed in 2018, and 7 buildings (424 units) are to be completed in 2019. The Company is making progress toward this total of 15 buildings (848 units), which will have a total scheduled sales price of approximately ¥17bn.

In the background to the fact that there has been little accumulation of investment condominiums compared to S-RESIDENCE (development mobilization) properties is the fact that, in order to respond to the strong demand from overseas funds and wealthy investors, the Company has been changing the properties it initially developed as investment condominiums to the S-RESIDENCE (entire-building sales) series with a high profit margin. Whichever the case, it can be said that it is continuing to steadily accumulate properties in the pipeline as a whole.

◆Topics

The Daiwa Securities Group entered into a sponsor support agreement with SRR

1. Improving name recognition through TV commercials

To improve its name recognition and corporate image, the Company broadcast the “Shiba Inu Maru” TV commercial (April to September 2017). The commercial features heartwarming content with the main character Maru, a Shiba Inu dog, introducing the various properties the Company manages, such as condominiums, commercial facilities, and hotels. As a result of the commercials, it seems that the Company was able to increase its name recognition by approximately two times*, and it has decided to produce a sequel commercial.

*The Company’s name recognition rose from 5.4% (survey in January 2017) to 10.4% (survey in October 2017).

2. The Daiwa Securities Group entered into a sponsor support agreement with SRR

In January 2018, the Company and the Daiwa Securities Group subscribed for the third party allotment investment units issued by SRR, and the Daiwa Securities Group entered into a sponsor support agreement with SRR*2.

*1 Within the 173,600 new investment units issued by SRR, the Daiwa Securities Group subscribed 161,700 units (after the capital increase, investor ratio of 35.4%), while the Company subscribed 11,900 units (5.3%), and SRR raised funds of approximately ¥15.1bn.

*2 Together with the capital increase, out of the 4,200 shares of Samty Asset Management (the Company’s wholly owned subsidiary), which is an asset management company of SRR, 1,386 shares (33% of voting rights) were transferred from the Company to the Daiwa Securities Group.

For SRR, this has the major advantages of 1) not only realizing external growth*1, but also 2) acquiring powerful support for growth in the future*2. At the same time, it can be understood to be a major development for the Company, which has created a growth strategy that is centered on SRR.

*1 Through the fund raising, SRR acquired 33 properties and was able to greatly increase its total asset amount, from ¥52bn to ¥81.5bn.

*2 The participation of the Daiwa Securities Group is expected to have major effects, including for the acquisition of properties and improvements to name recognition and creditworthiness.

◆Results outlook

The favorable revenue environment is expected to continue in FY11/18 also

The Company forecasts increases in sales and profit, with net sales of ¥64,000mn, up 5.8% YoY, operating income of ¥11,000mn, up 8.6%, ordinary income of ¥8,900mn, up 5.2%, and profit attributable to owners of parent of ¥6,500mn, up 14.8%. Although the sales-increase rate will remain at a moderate level, the Company can be highly evaluated for its forecasts that prioritize profit growth.

For net sales, within the continuing favorable sales environment, the Real Estate Business will maintain its sales growth from the previous fiscal year, while sales in the Other Business are also expected to increase significantly, mainly due to the expansion of the hotel business.

The growth in profits is also forecast to be maintained, as the profit margin will improve against the backdrop of the favorable conditions in the real estate market (sales prices, rental prices, occupancy rates, etc.) in addition to the effects of the higher sales.

On the other hand, the scheduled investments are for approximately ¥21bn in development sites (¥17bn in previous fiscal year) and ¥23bn in income properties (¥32bn). The total for both is approximately ¥44bn (¥49bn), which can be said to be somewhat restrained compared to the previous fiscal year, but this is because the Company is taking a slightly cautious stance about the trends in the real estate market in the future. It also seems that the Company is taking steps to strengthen its financial base in the current fiscal year.

The results outlook for each business and the prerequisites for these outlooks to be realized are as follows.

(1) Real Estate Business

The forecasts are for net sales to increase 5.4% YoY to ¥54,300mn and for segment income to rise 10.4% to ¥11,700mn. For development mobilization, the Company is planning 16 S-RESIDENCE properties and for regeneration mobilization, 52 income properties (of which, 28 are non-current asset properties)*, and 4 investment condominium properties (around 261 units). Within the 16 development mobilization properties, the sales of 10 properties have already been decided, and it seems that the schedules for the sales of the remaining 6 properties have also almost been decided.

* It is necessary to be aware that sales from non-current assets are not recorded in net sales. Gains on the sale of non-current assets are recorded in extraordinary income.

(2) Property Leasing Business

The forecasts are for net sales to increase 0.2% YoY to ¥7,400mn and for segment income to rise 9.8% to ¥2,300mn. While net sales will remain basically unchanged, profits are expected to increase, including from the improvements in the occupancy rates and in rental income.

(3) Other Business

Net sales are forecast to increase 37.9% YoY ¥2,600mn and segment income to grow 64.6% to ¥400mn. The driving force behind the growth is expected to be the expansion of the hotel business, including the opening of S-PERIA Hotel Hakata (scheduled for March 2018).

At FISCO, we think that when considering the favorable external environment (the favorable conditions in the real estate market), and also the internal factors (including the accumulation of pipeline properties, the excellent reputations of the Company’s development and regeneration properties, and the steady launch of the hotel business), it is highly likely that the Company will achieve its results forecasts. Also, as its forecasts for the assumed sales prices are at a conservative level compared to the actual conditions, it is necessary to be aware that, the same as in the previous fiscal year, the upward trend in sales prices may push-up the results as a whole.

◆Growth strategy

Aiming for steady medium- to long-term growth by expanding development in regional metropolitan areas

1. Medium-term management plan

The Company’s current medium-term management plan covers the five-year period from FY11/16 to FY11/20. The plan targets net sales at the ¥100bn level and ordinary income at the ¥10bn level for FY11/20 amid a favorable external environment (implementation of negative interest rate policy, growth in inbound demand) and factoring in the impact of measures taken by the Company (expansion of area of operations, entry into J-REIT business).

As previously described, the targets for the FY11/18 results were for net sales of ¥64bn and ordinary income of ¥8.9bn, and although net sales will not reach their target, ordinary income is expected to be basically in line with the target (the forecast is for EPS to surpass the target, of ¥258.10). The Company conducts management prioritizing the growth of ordinary income and EPS, so it seems reasonable to evaluate that it is making steady progress.

2. Future direction and progress

As its growth strategy for the future, the Company has set the following three key strategies: (1) Development of a business model centered on SRR, (2) Strategic investment in regional metropolitan areas, and (3) Expansion of the hotel development business. Also, as its financial targets, it is aiming to maintain its capital efficiency and establish a financial base.

(1) Development of a business model centered on SRR

The Company’s policy is to further evolve its business model, in which it handles every aspect of the property business, from land purchasing and development through to leasing, sales, and after-sales, centered on SRR, which has been smoothly launched. Specifically, in addition to supplying development properties preferentially to SRR, it is aiming to establish a stable fee business through conducting commissioned asset management and property management after it has supplied the properties. In other words, its strategy can be described as con­necting the growth of SRR to the growth of the Company. SRR’s asset scale of ¥100bn is within its range owing to the implementation of the third-party allotment investment, however, the Company plans to continue supplying properties to SRR with the aim of further growth in conjunction with expanding steady asset management fees.

(2) Strategic investment in regional metropolitan areas

The Company plans to invest a total of approximately ¥300bn in five years. The specific details of its measures are as follows. Purchases of development sites and income properties amounted to about ¥40.5bn in FY11/16 and ¥49.0bn in FY11/17, with purchases of about ¥44.0bn planned for FY11/18. Going forward, the Company plans to accelerate the pace of investment further.

a) Expansion of development areas

Up to the present time, developments have been focused in the metropolitan Tokyo region and the Kansai region, but it will expand its development into each branch office region, including Hokkaido, Chubu, and Kyushu.

b) Diversification of development assets

SRR, which targets accommodation assets (rental housing, and real estate in areas adjacent to rental housing, such as hotels and health care facilities), will be able to incorporate hotels (up to 20% of its assets-held balance), and will actively conduct measures for hotel development, centered on each branch office region.

c) For income properties and regeneration real estate, in addition to working to discover properties with high yields in regional metropolitan areas, it will secure cash flow through facilitating turnover.

(3) Expansion of the hotel development business

Within the previously mentioned total investment amount of approximately ¥300bn, the Company plans to invest around ¥53bn in its hotel development business (land + construction expenses). Specifically, it plans to invest ¥5bn in the Hokkaido region (from 2 to 3 properties), ¥19bn in the metropolitan Tokyo region (around 10 properties), ¥5bn in the Chubu region (from 2 to 3 properties), ¥13bn in the Kansai region (from 5 to 6 properties), and ¥11bn in the Kyushu region (around 5 properties). In addition to developing S-PERIA hotels as a new brand name, it intends to capture both business and inbound demand. The opening of S-PERIA Hotel Hakata is scheduled for March 2018. The Company plans to proceed cautiously with investments in the hotel development business only after carefully selecting properties based on the area.

(4) Financial strategy

The Company’s policy is to realize sustainable growth while maintaining a certain level of financial soundness. Specifically, for FY11/20, it is aiming for an equity ratio of 30% or more on the one hand, while on the other hand it intends to maintain capital efficiency with ROE of 15% or more and ROA of 7% or more. It also targets cutting the cost of interest-bearing debts and a net D/E ratio of 2.0 or less.

(5) Other

The Company will also work to enter overseas businesses. As part of these efforts, in September 2016, the Company made an investment (US$5 million) in a fund targeting investments in real estate companies under­taking real estate development and leasing businesses in Ho Chi Minh City, a major city in Vietnam. Using this investment as a foothold for its overseas businesses, the Company will strive to drive further overseas business expansion primarily in the ASEAN countries, which offer prospects for high growth, with the view to conducting joint development with local companies and other partners, purchasing and owning leasing properties and opening overseas branches or setting up subsidiaries.

◆Returns to shareholders

The FY11/18 dividend forecast is for a ¥5 increase YoY. Targeting a dividend payout ratio of 30% in FY11/20.

The Company is aware that returning profits to shareholders is one of its most important management issues. Its policy is to pay dividends that reflect its business results and also based on a comprehensive consideration of its future business plans and financial condition.

The Company upwardly revised the dividend forecast twice in FY11/17 and decided on a dividend per share of ¥47 (dividend payout ratio of 20.1%), which was an increase of ¥14 YoY. For FY11/18 also, it is planning to increase the dividend by ¥5 to ¥52 per share (dividend payout ratio of 20.1%).

The Company is targeting a dividend payout ratio of 30% by FY11/20. At FISCO, we think that there is still consid­erable room for the Company to increase dividends through profit growth and raising the dividend payout ratio for FY11/19 onwards. It also aims to improve shareholder value by increasing EPS.

 

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