1st Half Results Briefing for Fiscal Year Ending March 31, Prospect Co., Ltd.

Transcription

1 1st Half Results Briefing for Fiscal Year Ending March 31, 2018 Prospect Co., Ltd.

2 Important notice Though Prospect Co., Ltd. (the Company ) has assumed the accuracy and completeness of all information available to it in preparing this presentation, the Company makes no representation as to its actual accuracy or completeness. The information in this presentation is subject to change without prior notice. This report has been prepared solely for the purpose of providing information in English to shareholders of the Company and other interested parties and is not intended to be a recommendation or solicitation to buy or sell the Company shares or any other securities. Nothing contained in this presentation constitutes either an offer to sell, or invitation to purchase or subscribe for, any shares or other securities in the Company. Each recipient should consult its own legal, commercial and tax advisers as to legal, commercial, tax and related matters related to the contents of this presentation. None of the contents of this presentation may be used by any person for any purpose whatsoever without the prior written consent of the Company. Neither the presentation (nor any part of it, nor the fact of its distribution) will form the basis of, nor may it be relied upon in connection with, any contract for the sale of shares in the Company. None of the Company nor its advisers, nor any of their respective officers, employees, agents or associated companies, nor any other person, make or have been authorized to make any representation or warranty, express or implied, as to the accuracy or completeness or fairness of such information. Nothing contained in this presentation, is, or should be relied on as, a promise, representation or warranty as to the historic, current or future performance of the Company. Accordingly, none of the Company, its advisers, nor any of their respective officers, employees, agents or associated companies shall be liable for any direct, indirect or consequential loss, loss of profit or damage suffered by any person as a result of relying on any statement, omission or alleged omission from the presentation. This presentation is provided for the sole purpose of providing information in English to shareholders of the Company and other interested parties. Nothing herein constitutes an offer of securities for sale in the United States or any other jurisdiction in which required registration is absent or an exemption from registration under the applicable securities laws is not granted. Neither the US Securities and Exchange Commission nor any state securities commission has approved or disapproved of shares in the Company nor passed upon the adequacy or accuracy of the presentation. In this presentation, financial information for the year ended 31 March, 2017 and first half of the year ended 31 March, 2018 has been derived from the audited consolidated financial statements of the Company for those financial years prepared in accordance with Japanese GAAP. As a consequence of legal restrictions, the release, publication or distribution of information contained in this presentation in certain jurisdictions or to certain persons may be restricted or unlawful. All persons who wish to view the presentation must first satisfy themselves that they are not subject to any local requirements that prohibit or restrict them from doing so and should inform themselves of, and observe, any applicable legal or regulatory requirements applicable in their jurisdiction. Statements made in this presentation with respect to the Company s current plans, estimates, strategies and beliefs and other statements that are not historical facts are forward-looking statements about the future performance of the Company and any enlarged group. Forward-looking statements include, but are not limited to, those statements using words such as believe, expect, plans, strategy, prospects, forecast, estimate, project, anticipate, aim, intend, seek, may, might, could or should, and words of similar meaning in connection with a discussion of future operations, financial performance, events or conditions. These statements are based on management s assumptions, judgments and beliefs in light of the information currently available to it. The Company cautions recipients that a number of important risks and uncertainties could cause actual results to differ materially from those discussed in the forward-looking statements, and therefore recipients should not place undue reliance on them. Recipients should not rely on any obligation of the Company to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. 2

3 Table of Contents 1. Introduction 2. History & development 3. Group structure / affiliated companies 4. Latest published financials 5. Key business segments 6. Advisory board 3

4 Stock information Second Section of Tokyo Stock exchange: Ticker 3528 Outstanding Shares: 403,448,312** Number of Shareholders: 14,079* Closing Share Price: JPY 52* Market Cap: JPY 21 billion* Total Shares traded in 2017: 1,164 million* = 451.6% of TSO (total shares outstanding) Monthly Average % = 64.6% of TSO Weekly Average % = 15.2% of TSO Dividend forecast: 4 Yen per share. Prospect s dividend yield of 7.69%* is one of the highest in Japan. *As of 29 September 2017 **As described in the Quarterly Report of the Company dated 10 November, 2017, as at 30 September, 2017, 403,448,312 ordinary shares of the Company were issued and outstanding, and traded on the Tokyo Stock Exchange. As at the same date, Prospect held 2,775,408 ordinary shares (in treasury). Under Japanese practice, "the number of shares in issue and outstanding" includes the number of ordinary shares held in treasury. The number of shares in issue and outstanding outside of treasury was 400,672,904 as at 30 September

5 1. INTRODUCTION Prospect is a leading licensed Japanese Investment Company focused on: Real Estate Development Asset Management Public Works Construction Renewable Energy Prospect delivers consistent services from selection of site, planning, construction, and sales to aftersales services for over 7,800 residential condominiums. Prospect Asset Management Inc. advises on Japanese equity investments. Kidoh Construction Industry Co., Ltd. Construction s track record exceeds 2,500 km of tunneling globally. Sasaki House is a long-established home builder with 109 years of experience. Source: Company Home Page 5

6 2. HISTORY & DEVELOPMENT Established in 1937, the textile business was the cornerstone of the Company. In the early 1990s, the Company changed its focus to the property business. The Company has developed and sold over 7,800 condominiums, mainly in the Tokyo metropolitan area. The Company has been diversifying its revenue sources from its traditional condominium business since Curtis Freeze became President and now includes housing construction, investment advisory, public works construction and renewable energy businesses, as well as overseas real estate investments Inami Kigyo Co., Ltd. established in Toyama Prefecture Started production of special artificial silk for domestic demand (start of textiles business) 1961 Changed trade name to Carolina Co., Ltd. Listed on Second Section of Osaka Stock Exchange (de-listed in March 2003) 1962 Listed on Second Section of Tokyo Stock Exchange (Ticker: 3528) 1993 Started internally developed condominium business 1994 Withdrew from textiles business 2001 Changed trade name to Gro-Bels Co., Ltd th anniversary of listing on Tokyo Stock Exchange Acquired all shares of Sasaki House Co., Ltd.; made a consolidated subsidiary 2013 Acquired all shares of (former) Prospect Co., Ltd.; made a consolidated subsidiary Started overseas real estate-related business Acquired all shares of Kidoh Construction Co., Ltd.; made a consolidated subsidiary 2014 Entry into renewable energy (solar) power generation business Absorption-type merger of subsidiary (former) Prospect Co., Ltd.; changed trade name to "Prospect Co., Ltd." 2015 Started solar power generation 2017 Acquired all shares of The Prospect Japan Fund Limited; made a consolidated subsidiary Source: Company Home Page 6

7 3. GROUP STRUCTURE / AFFILIATED COMPANIES Established: 1937 Head Office: , Sendagaya, Shibuya-ku, Tokyo , Japan Total Employees of Prospect Group: 174 Directors: Curtis Freeze, Masato Tabata, Dominic Henderson Board of Auditors Audit Office Administrative Division General Affairs Accounting Auditors Property Division Business Promotion Operation Construction General Shareholders Meeting Board Meeting Representative Director, President Management Meeting Asset Management Division Marketing Business Development Stock Research Source: Company Home Page 7

8 Prospect Co. Ltd. Tokyo (Japanese Ticker: 3528) Prospect Asset Management (CI) Ltd. (PAMCI) Guernsey Registered Manager Prospect Asset Management, Inc. (PAMI) US SEC registered Advisor Sasaki House (Japan) Single family home builder Kidoh Construction (Japan) Micro Tunneling Prospect Energy Management (Japan) Renewable Energy The Prospect Japan Fund Limited (Guernsey) Company Description Number of employees Company Management Prospect Co., Ltd. Real Estate Developer 41 C. Freeze, M. Tabata, Outside director D. Henderson Sasaki House Co., Ltd. Home Builder 38 Prospect Asset Management, Inc. Asset Management 4 K. Endo, sent in from Prospect to be President, has over 30 years of experience in Real Estate Development K. Matsumoto, H. Smith both have over 20 years of experience in investment and management Kidoh Construction Co., Ltd. Public Works Construction 91 M. Nakano, over 30 years of experience in construction. President of Japanese Microtunneling Association Prospect Energy Management Co. Ltd. Renewable Energy 5* Y. Yoda, over 20 years of experience in Trust Banks, JREIT and Real Estate The Prospect Japan Fund Limited Investment Fund 0 J. Hawkins, non-executive chairman, a director of a range of funds which include hedge funds and equity funds investing in Japan and Asia. *employees of Prospect Co., Ltd. 8

9 4. LATEST PUBLISHED FINANCIALS FY 2017 FY /04-09 Full year 2017/04-09 YoY change Unit: MM JPY Sales 3,989 14,143 3, Cost of Goods Sold 3,387 11,880 2, Gross Profit on Sales 602 2, Selling, General and Administrative Expenses 970 2,307 1, Operating profits , Non-operating income 253 1, Non-operating expenses Ordinary profits Extraordinary profits 9 9 2,420 2,411 Extraordinary losses Net profit before silent partnership profit distribution and taxes Silent partnership profit distributions ,134 2, (Included distributions to Prospect) Net profit before taxes ,119 2,670 Corporate, inhabitant and enterprise taxes Adjustments on corporate tax, etc Net profit attributable to noncontrolling interests Sales in the first half of fiscal year ended 31 March 2018 were JPY 3,486m, slightly decreased from last year s JPY 3,989m. Operating loss was JPY 1,007m (vs. operating loss JPY 367m) largely due to increased legal and advisory costs on the acquisition of The Prospect Japan Fund Limited (TPJF). Non-operating income improved primarily due to profits from the completion of the Keauhou Place condominium project in Honolulu, Hawaii. In August 2017, the Company successfully acquired The Prospect Japan Fund Limited (TPJF). The excess of net assets in TPJF over the acquisition cost was recorded as negative goodwill with resulting JPY 2.4bn increase in extraordinary profits. Net profits ,903 2,472 Source: Company Securities Report 9

10 4. LATEST PUBLISHED FINANCIALS Balance Sheet Overview Unit: MM JPY Current liabilities 7,736 Current Assets 24,753 Long-term liabilities 7,580 Tangible fixed assets 8,556 Intangible fixed assets 967 Investments and other assets 4,887 Net Assets 23,846 Equity ratio 61% Total Assets: 39,162 Total Liability and Equity: 39,162 Source: Company Securities Report 10

11 5. KEY BUSINESS SEGMENTS Real estate development business Asset management business Public works construction business Renewable energy business Revenue: JPY 1,243m 35.7% of total revenue Revenue: JPY 133m 3.8% of total revenue Revenue: JPY 1,799m 51.6% of total revenue Revenue: JPY 293m 8.4% of total revenue Revenue Segment 1st half of FY st half of FY 2018 YoY change 2016/ /04-09 Amount Share Amount Share Unit: MM JPY % Unit: MM JPY % % Real estate development , Condominiums Land and buildings Custom-built houses Asset management Public works construction 2, , Renewable energy Total 3, , Others Elimination of intersegment transactions Total 3, , Renewable energy 8% Public works construction 52% Real estate development 36% Asset management 4% Source: Company Securities Report 11

12 5. KEY BUSINESS SEGMENTS Real estate development business Revenue: JPY 1,243m 35.7% of total revenue Gross Profit: JPY 276m 41.6% of total Gross Profit Gro-bel Company s condo brand Since entering the real estate business over 20 years ago, the Company has developed 7,873 condominiums, mainly in the Metropolitan Tokyo area. The Company takes into consideration factors such as floor plan and/or location suitable for customer s life plan as well as environmental symbiosis, health, child rearing, crime prevention, disaster preparedness etc. The Company jointly developed a mixed use project in Hawaii, comprising 422 residential units for sale and rental and commercial facilities including a parking lot. More than 98% of the units have been sold. The project was completed in October Keauhou Place, Hawaii condo tower Sasaki House, single family home subsidiary Source: Company Home Page and latest Interim Report 12

13 5. KEY BUSINESS SEGMENTS Recent property development Gro-bel Company s condo brand Name: Location: Completion: 10/25/2017 Units: 43 Gro-bel Koenji Premium Koenji station 6 minutes from Shinjuku station Name: Location: Completion: 11/15/2017 Units: 36 Gro-bel Kokubunji Crysta Kokubunji station 19 minutes from Shinjuku station Source: Company Home Page and latest Interim Report 13

14 5. KEY BUSINESS SEGMENTS Recent property development Gro-bel Company s condo brand Name: Location: Completion: March, 2018 Units: 41 Gro-bel Minami-Ōtsuka Ōtsuka station 8 minutes from Shinjuku station Name: Location: Completion: June, 2018 Units: 34 Gro-bel Ōmori Ōmori station 18 minutes from Shinjuku station Source: Company Home Page and latest Interim Report 14

15 5. KEY BUSINESS SEGMENTS Asset management business Revenue: JPY 133m 3.8% of total revenue Gross Profit: JPY 133m 20.0% of total Gross Profit Subsidiary Prospect Asset Management, Inc. ( PAMI ) is an Investment Advisor focusing on Japanese shares, primarily through advising the Prospect Japan Fund Limited Joined Prospect Group in 2006 Prospect Japan Fund Holdings * Prospect Japan Fund Sector Weightings * PAMI was founded in 1994 as a Japan focused Investment Advisor, and has a strong longterm track record. In 2006 PAMI was acquired by former Prospect Co., Ltd., which is also a provider of nondiscretionary investment advice. Security % of total assets FUKUSHIMA BANK LTD 28.8 DAITO BANK LTD 27.4 SHAKLEE GLOBAL GROUP INC MARUHACHI WAREHOUSE CO LTD NAGANO BANK LTD 2.3 Sectors % of total assets Banks 58.6 Retail 10.3 Storage/Warehousing 9.7 Total* 78.6 No of Positions 5 *as of 29 September

16 5. KEY BUSINESS SEGMENTS Public Works construction business Revenue: JPY 1,799m 51.6% of total revenue Gross Profit: JPY 100m 15.1% of total Gross Profit Water purification plant in Toyama Prefecture Subsidiary Kidoh Construction Industry Co., Ltd. ( Kidoh ) Construction track record exceeds 2,500km of tunneling. Joined Prospect Group in Kidoh was established in 1946 as a civil engineering and construction contractor to commercialize its unique jacking method. The company is headquartered in Osaka, Japan and has branches in Kansai, Kanto, Nagoya, Kanazawa, and Kyushu, Japan. It has number of patents/utility models in relation to construction methods focused on underground jacking works for water/sewerage, gas, telephone, electrical tunnels and also prestressed concrete (PC) works for building/bridge construction. Large water tank in Toyama Prefecture Source: Company Home Page 16

17 5. KEY BUSINESS SEGMENTS Renewable energy business Revenue: JPY 293m 8.4% of total revenue Gross Profit: JPY 148m 22.4% of total Gross Profit Revenue: ( %) Operating income: No. of employees: The Company has made significant progress in its efforts to Joined Prospect Group in make solar power generation a core part of its renewable energy business. The Company currently has 5 solar projects producing electricity and 6 additional projects under development and scheduled to come online over the next few years. Total output of the 11 projects is expected to be 101 mw. In 2015, the Company started sales from its first solar project located in Asago City, Hyogo Prefecture. It has also started sales of electricity from projects in Rikuzentakata City (1.6 mw), Ushiku city (1.8 mw), Katori City (2.0 mw), and Sanmu City (5.1 mw). The Company aims to start operations at its projects in Utsunomiya City, Tochigi Prefecture (4.8 mw) by the end of 2017 and Sendai City, Miyagi Prefecture (1.8 mw) by early Sanbu Higashi Project Potential future buyers for the Company s solar projects are pensions and life insurance companies looking for high yield investments in yen. Source: Company Home Page 17

18 5. KEY BUSINESS SEGMENTS Renewable energy business Solar power plants Solar Plant Location Output Capacity (mw) Start Operation Site Area m2 Output from 3/2017 to 9/2017 (kwh) Feed-in Tariff yen/kwh Plants producing electricity Asago Project Asago City, Hyogo 1.1 Mar-15 12, , Rikuzentakata Project Rikuzentakata City, Iwate 1.6 Jan-16 27, , Ushiku Project Ushiku City, Ibaraki 1.8 Feb-16 34,049 1,300, Katori Project Katori City, Chiba 2.0 Jul-16 31,237 1,337, Sanbu Higashi Project Sanmu City, Chiba 5.1 Mar ,762 3,531, Plants under development Sendai Project Sendai City, Miyagi 1.8 Jan-18 97,000 n/a 36 Higashi Hiroshima Project Higashi Hiroshima City, Hiroshima 18.7 Jul-18 1,130,000 n/a 36 Narita Kozaki Project Narita City, Chiba 24.0 Oct ,000 n/a 36 Tokujiro Utsunomiya I & II Utsunomiya City, Tochigi 4.8 Dec-17 93,800 n/a 36 Okayama Aida Hikari CC Mimaku City, Okayama 38.0 Dec ,000 n/a 32 Sanbu Minami Project Sanmu City, Chiba 2.0 Sep-18 32,000 n/a 36 18

19 5. KEY BUSINESS SEGMENTS Renewable energy - new business Project: Wood Pellet Production for Biomass Power Generation Location: Russia As part of the Company s increasing activities in the renewable energy business, it has signed two Letters of Intent ( LOI ) with regard to joint investments in wood pellet mill projects with the RFP Group. One LOI is for a financing effort to build a 90 thousand tons wood pellet plant in the Russian Far East. Pellets are the raw material for Biomass electrical production plants in Japan. The other is an LOI to develop additional wood pellet plants with total capacity of 500 thousand tons. This was announced at the subcommittee meeting of Japan-Russia Economic Dialogue which was held in Tokyo on 16 December Partner: RFP Group Revenue: ( %) Operating income: No. of employees: Joined Prospect Group in Wood chip/pellet RFP Group is the largest forestry Biomass power Unused Generation plant wood industry company in the Russian Far East. The Company believes that Russia has the potential to become Japan s Source: Company Press Release dated 16 th December 2016 fastest growing source of biomass fuel. 19

20 6. Advisory Board established for the purpose of obtaining opinions from external experts who have thorough insight into financial, administrative and legal matters in developing multifaceted business strategies for the future. Members: Masamoto Yashiro former Chairman of Shinsei Bank Taro Kiritani Former Managing Executive Officer of Sumitomo Mitsui Trust Bank Bill Wilder Former President and CIO of Nikko Asset Management Yasuo Shida Attorney, former official of Ministry of Finance 20