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MEIKO NETWORK JAPAN CO., LTD. (JP-4668) Tokyo Stock Exchange First Section ( II )

2018-09-06  提供機構:FISCO  作者:FISCO  點閱次數:7

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◆Business outlook

The FY8/18 results forecasts were downwardly revised due to the delay in the recovery of Meiko Gijuku student numbers

1. FY8/18 outlook

At the same time as it announced the 3Q results, the Company announced that it had downwardly revised the FY8/18 consolidated results forecasts. It is now forecasting that net sales will decrease 1.4% YoY to ¥19,120mn, operating income will decline 51.1% to ¥1,280mn, ordinary income will fall 50.5% to ¥1,390mn, and net income attributable to owners of the parent will decrease 64.3% to ¥730mn. Compared to the initial forecasts, net sales have been downwardly revised by 6.3% and operating income by 36.4%.

In terms of the reasons for the revisions, in the Meiko Gijuku business, the number of students, which was initially expected to recover from the 2H, is not recovering and it seems that it will continue to decline YoY in 4Q as well. In the preparatory school business also, the number of new students entering the schools in the spring of 2018 was less than anticipated, so net sales are also set to fall below the initial forecast. The other businesses are expected to perform basically in line with the initial forecasts.

From the current 4Q, K. Line’s results will be included in the consolidated results. K. Line operates 42 schools in metropolitan Tokyo, Kanagawa Prefecture, Shizuoka Prefecture, and Aichi Prefecture. In FY8/17, it recorded net sales of ¥1,267mn and an operating loss of ¥120mn. Previously, its sales were recorded in the Meiko Gijuku franchise operations business as royalty sales, but the same as with MAXIS, it will be incorporated into the Meiko Gijuku directly operated business.

Going forward, the Company intends to strengthen MEIKO Style Coaching, Meiko e-Po, and the enhancement of new content as its differentiation strategy in order to recover student numbers

2. Measures for the renewed growth of the Meiko Gijuku business

(1) The reasons for the slump and the issues in the Meiko Gijuku business

The Company leads its industry as the pioneer of private tutorial schools, and it has continued to grow by developing its franchised operations to increase the numbers of schools and students. However, since peaking in FY8/15, both the number of schools and the number of students have been declining, and in recent years, it has been forced to struggle. The number of companies entering the private tutorial schools industry is increasing, and amidst competing businesses’ wide-ranging pricing strategies, branding strategies, and establishment of new classrooms to acquire students, it has not been able to successfully appeal to students and their parents and guardians about its educational philosophy of fostering creativity through “independent learning,” which is a characteristic of Meiko Gijuku.

Looking toward the future, some positive signs are starting to appear. The sales unit price per student in both the directly operated and franchise operations schools changed direction and increased YoY from the current 3Q. This is thought to be due to the progress made in enhancing content, including English content that utilizes ICT, and the sales unit price is expected to rise in the future also from the further enhancement of this new content. Moreover, net sales for elementary school students, which has continued to trend downward since FY8/13, is expected to change direction and increase in FY8/18 for the first time in five fiscal years, which is another positive sign. Enhancing learning content can be expected to lead to an increase in the number of students, and Meiko Mirai Eigo for elementary school students had been favorably received. So we can expect the number of elementary school students to increase, which will contribute to a rise in the sales unit price.

(2) Priority measures toward renewed growth

Toward renewed growth from FY8/19 onwards, the Company’s policy is to first to work to recover the number of students per school. Within the continuing intense competition, since the fall of 2017 it has been working to introduce the new learning guidance method of MEIKO Style Coaching and Meiko e-Po, and also to enhance learning content that utilizes ICT, as its differentiation strategy. In addition, at the same time it is strengthening web marketing and enhancing the contact center to improve service quality.

MEIKO Style Coaching is a new learning guidance method incorporating coaching techniques that further evolves Company’s conventional educational philosophy of “independent learning.” It further raises students’ understand­ing capabilities during learning through the tutor giving them hints during the class, and the students then solving problems using their own capabilities and explaining what they have understood using their own words to the tutor. As the tools to advance MEIKO Style Coaching, the Company is utilizing review note and Meiko e-Po. In the review note, the students themselves write out the content they have learned on that day and also other information, such as their learning plans for the future. A feature of Meiko e-Po is that it is a platform on which students’ learning records and other information are accumulated via a tablet PC, and the parents can use their smartphones to check on their child’s learning records and improvement in academic performance. Up until now, confirmation of matters such as a child’s performance at a school could not be done outside of a periodic consultation. At FISCO, we think that through providing MEIKO Style Coaching, the students’ academic performance will improve, which in turn will lead to an improvement in customer satisfaction and a recovery in student numbers.

The Company began to introduce MEIKO Style Coaching and Meiko e-Po into directly operated schools from the fall of 2017, and it also began introducing them into franchise operations schools from April 2018. It plans to have introduced them into all schools by the spring of 2019.

As new learning content that utilizes ICT, a feature of Meiko Mirai Eigo for elementary school students, which has been favorably received, is that incorporates the four elements of listening, speaking, reading, and writing that are needed to acquire communication skills in English, and the students can enjoy learning using a tablet device. It seems that for English education, the Japanese government’s new Courses of Study, which it will introduce in 2020, will prioritize classes that educate students in communication skills such as listening and speaking, as well as the former grammar-centric classes that focused on reading and writing. Therefore, the number of students taking this course is expected to increase in the future. The same can also be said for Meiko Chugaku Listening, which is English content for junior high school students. Since the past the Company has provided various learning content that utilizes ICT, including its Risha Quipper online materials for junior high school students and MEIKO MUSE, which is a video course for high school students. They are also expected to contribute to a rise in the sales unit price per student in the future.

(3) FY8/19 outlook

There has been no change to the fact the key to the FY8/19 results will be whether and to what extent the Company can recover student numbers in the Meiko Gijuku business. Also, at FISCO we think that even if student numbers remain basically unchanged, it is highly likely that net sales in the Meiko Gijuku business will increase for the first time in four fiscal periods from the rise in the sales unit price per student. In addition, in FY8/18 the Company conducted strategic investment, including in advertising expenses and sales promotions expenses, but it has not yet decided the extent of this investment in FY8/19, so it would seem that profits will change depending on the level of this investment.

In the preparatory school business, as the number of new students in the spring of 2018 remained at a low level, the FY8/19 results are also set to remain at a low level up to the 1H. On the other hand, the other businesses, including the Kids Schools business and the Japanese language schools business, will come to play a driving role, and it is forecast that they will continue to achieve higher sales and profits.

◆Shareholder return policy

The Company plans to increase the dividend for the 20th consecutive fiscal period Also has a shareholder benefit program and actively returns profits to shareholders

The Company is considered to have taken an active stance on returning profits to shareholders. It has continued to consecutively increase dividends since it listed on the JASDAQ in April 1997, and has also introduced a shareholder benefit program. The Company’s basic policy on dividends remains the initial forecasts. In FY8/18, it is planning a dividend per share of ¥42.0, up ¥2.0 YoY, with a payout ratio of 152.8%, making the 20th consecutive fiscal period of increased dividends.

Under the shareholder benefit program, the Company gives QUO cards worth ¥1,000-5,000 to shareholders as of the end of August, according to the number of shares they hold and the length of time that they have held them. Those holding 100 shares for less than three years will receive a ¥1,000 QUO card, while those holding the same number of shares continuously for three years will receive cards with a value of ¥3,000. The gross investment yield per share unit, including the shareholder benefit program, is at the 5-7% level at the current share price (¥1,015 as of September 6). The Company’s capital policy is to strengthen its equity and to flexibly consider acquiring treasury stock when possible, taking into account the share price and financial position.

◆Information security policy

The Company manages tutorial schools and also concludes contracts with member companies based on its own franchise system, and it provides continuous school management guidance. In the school management process, it obtains personal information on students, parents and guardians, and tutors. It manages this personal information in accordance with its Regulations on the Protection of Personal Information. It also examines measures to prevent the leakage of information through the Risk Management Committee and verifies the operational statutes of measures to protect personal information.

 

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