The Monogatari Corporation (3097)

Transcription

1 URL: Written by Yoshiyuki Muroya Phone: The Monogatari Corporation (3097) Parent Fiscal Year Sales OP RP NP EPS DPS BPS (Million Yen) (Yen) (Yen) (Yen) FY06/10 12, , FY06/11 15,745 1,195 1, FY06/12CoE 18,847 1,478 1, FY06/11 YoY 23.1% 21.6% 22.8% 4.6% FY06/12CoE YoY 19.7% 23.7% 21.8% 43.9% Parent Half Year Sales OP RP NP EPS DPS BPS (Million Yen) (Yen) (Yen) (Yen) Q1 to Q2 FY06/11 7, Q3 to Q4 FY06/11 8, Q1 to Q2 FY06/12CoE 8, Q3 to Q4 FY06/12CoE 9, Q1 to A2 FY06/12CoE YoY 15.5% (10.9%) (11.2%) (4.8%) Q3 to Q4 FY06/12CoE YoY 23.7% 75.1% 70.7% 131.6% Parent Quarter Sales OP RP NP EPS DPS BPS (Million Yen) (Yen) (Yen) (Yen) Q1 FY06/11 3, Q2 FY06/11 3, Q3 FY06/11 4, Q4 FY06/11 4, Q1 FY06/11 YoY 21.4% 10.2% 10.4% (22.8%) Q2 FY06/11 YoY 33.1% 194.6% 187.5% 283.9% Q3 FY06/11 YoY 21.0% 28.8% 29.9% 31.6% Q4 FY06/11 YoY 18.5% (48.8%) (46.9%) (92.8%) Executive Summary (6 September 2011) Ongoing Growth by Developments of New Formats The Monogatari Corporation is seeing steady earnings growth. In FY06/2012, the Company is expected to see some 20% YoY earnings growth, two years in a row. The Company, in charge of developing new formats for its businesses, is mainly involved with running roadside chain stores for Korean Barbecue, Noodle Soup and Japanese Pancake restaurants, nation-wide. As of the end of FY06/2011, the collective number of stores stood at 213, in which the core part was accounted for by Korean Barbecue, comprising brands like Yakiniku King. Here did the Company develop and launch a new format of all-you-can-eat, served at table, which has been so well accepted by consumers, and this has massively contributed to the Company s performance in FY06/2011, in which sales, on a comparable basis, rose 7.9% YoY. Going forward, it will be difficult to further pursue high sales growth on a comparable basis, but new openings of stores, collectively as many as 48, will contribute to increases in sales and earnings with the Company, in FY06/2012. The key driver for such increases will again come from the Korean Barbecue side. All-you-can-eat, served at table is now being established as a format that would surely post decent sales, and thus, the Company s basic strategy is to keep on opening new stores based on this format in high-customer-density areas. In this format, it cannot be avoided that the gross profit margins are relatively lower than the average with the Company, in a respect that this is all-you-can-eat. Meanwhile, there are

2 external factors like hiking costs for procuring food materials & ingredients and for fuel etc., and they are to negatively affect to gross profit margins with the Company. Still, the Company s business model is expected to see marginal improvements with its profit margins in FY06/2012 over FY06/2011, given that costs associated with large-scale refurbishments & renovation on existing stores facilities in FY06/2011 will not reappear in FY06/2012 and that startup of own noodle manufacturing facilities is to cutback the Company s costs on a net basis. Even longer-term, the Company believes that it should be able to maintain some 20% YoY earnings growth. Over the past six years in a row, the Company has achieved increases in sales and earnings. According to the Company, it has never tried for excess investments in new store openings, and this is one of the key reasons why the Company has kept on seeing increases in sales and earnings every year. Even after this, the Company believes that it is a good timing now to aggressively increase the number of new store openings. This is because the Company believes in high performance of all-you-can-eat, served at table in the foreseeable future, as well as in developments of such successful new formats in other segments like Noodle Soup in the near future. The Company calls for collective 369 stores under management as of the end of FY06/2014 versus 213 stores as of the end of FY06/ Company Profile Running Korean Barbecue Chain Restaurant Stores Company Name The Monogatari Corporation Website (Japanese, English) IR Information (Japanese, English) Share Price (Japanese, English) Established 4 September 1969 Listing 27 June 2011 (TSE1: Ticker 3097) Capital 1,060m (as of the end of June 2011) No. of Shares 4,935,182 shares, including treasury of 714 shares (as of the end of June 2011) Main Features Running roadside chain restaurant stores for Korean Barbecue, Noodle Soup and Japanese Pancake, in Aichi-pref. as well as nationwide Developing new formats, aggressively opening new stores Focus on all-you-can-eat Business Contents Ⅰ. Korean Barbecue Ⅱ. Noodle Soup Ⅲ. Japanese Pancake Ⅳ. Specialty Store Ⅴ. Franchise Top Management President: Yoshio Kobayashi Shareholders Yoshio Kobayashi 15.0%, Yusuke Kobayashi 11.9% (as of the end of June 2011) Headquarters Toyohashi, Aichi-pref. JAPAN No. of Employees Parent: 427 (as of the end of June 2011) 2 Source: Company Data

3 3.0 Recent Trading & Prospects FY06/2011 Results In FY06/2011 results, sales came in at 15.7bn (up 23.1% YoY), operating profit 1.2bn (up 21.6%), recurring profit 1.2bn (up 22.8%) and net profit 0.5bn (up 4.6%). Compared with the latest Company Forecasts, sales were exceeded by 3.7%, operating profit 10.3%, recurring profit 11.3% and net profit 1.5%. While sales on a comparable basis rose 7.9% YoY, new store openings were well feeding through, and thus the Company saw a robust growth with sales. By segment, the mainstay Korean Barbecue contributed to sales increases most significantly. Here were sales driven by increasing demand for all-you-can-eat, served at table of Yakiniku King that carries relatively lower margins than the average, and the overall gross profit margins with the Company inevitably suffered from a 1.6% point deterioration to 69.6% from 71.2% in the previous year. The thing is that the Company places more emphasis upon increases of absolute value of earnings rather than the pursuit for higher profit margins, and thus such levels of gross profit margins contractions should be of something intentional. At the extraordinary levels, the Company reported increased extraordinary losses than usual, and this is the key reason why the Company saw low growth on the net profit side. The Company has been continuously closing down bad-performance existing stores and/or applying to them new formats etc., and the fact that the Company did so more drastically in FY06/2011 led to increased costs at the extraordinary levels. As a result of this, the Company should be starting with a more efficient state for overall stores in FY06/2012 than normal years. 3 Quarterly Sales & Recurring Profit Margins 7,000 6,500 6,000 5,500 5,000 4,500 4,000 3,500 3,000 2,500 2, % 3, % 2, % 8.6% 8.9% 10.0% 8.6% 3,307 3,386 3,824 3,908 4, % 7.3% 3.9% 4,012 4,468 4, % 8.6% 4,956 4, % 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% (2.0%) (4.0%) (6.0%) Sales (Million Yen) RPM (%) Q1 FY06/10 Q2 FY06/10 Q3 FY06/10 Q4 FY06/10 Q1 FY06/11 Q2 FY06/11 Q3 FY06/11 Q4 FY06/11 Q1 FY06/12 Q2 FY06/12 Q3 FY06/12 Q4 FY06/12 (quarterly figures are estimated by H1 and H2 Company Forecasts equally divided into two) On a quarterly basis, it should be spotted that earnings in Q4 came down sharply, although this is to be one-off. In Q4, the Company saw concentration of costs associated with new store openings and refurbishments of existing stores, while the Company suggests that it maintained recurring profit margins

4 in Q4 over Q3 when such one-off issues are excluded. In fact, the gross profit margins in Q4 came in at 69.6%, roughly the same as in Q1, Q2 and Q3, confirming that irregular issues at the SG&A levels made one-off adjustments in terms of recurring profit margins. Meanwhile, it is also noteworthy that the Company s financial state has been continuously improving to date. Net-debt-equity ratio stood at 530.4% as of the end of FY06/2007, suggesting an exceptionally high gearing with the Company, while the Company saw some net cash, albeit small, as of the end of FY06/2011. It is too difficult for the Company, investing some 80m per store to run a company store (on a simple average basis), to continue enjoying rich net inflow in terms of free cash flow, but the Company has steadily and consistently reduced its exposure to interest-bearing debts. Changes in Company Forecasts & Results Parent Fiscal Year Date Event Sales OP RP NP (Million Yen) FY06/11CoE 11-Aug-10 Q4 Results 15,187 1,083 1, FY06/11CoE 09-Nov-10 Q1 Results 15,187 1,083 1, FY06/11CoE 10-Feb-11 Q2 Results 15,187 1,083 1, FY06/11CoE 09-May-11 Q3 Results 15,187 1,083 1, FY06/11Act 11-Aug-11 Q4 Results 15,745 1,195 1, Amount of Gap Rate of Gap 3.7% 10.3% 11.3% 1.5% Parent Half Year Date Event Sales OP RP NP (Million Yen) Q1 to Q2 FY06/11CoE 11-Aug-10 Q4 Results 7, Q1 to Q2 FY06/11CoE 09-Nov-10 Q1 Results 7, Q1 to Q2 FY06/11Act 10-Feb-11 Q2 Results 7, Amount of Gap Rate of Gap 7.7% 123.1% 119.2% 193.1% Parent Half Year Date Event Sales OP RP NP (Million Yen) Q3 to Q4 FY06/11CoE 11-Aug-10 Q4 Results 8, Q3 to Q4 FY06/11CoE 09-Nov-10 Q1 Results 8, Q3 to Q4 FY06/11CoE 10-Feb-11 Q2 Results 7, Q3 to Q4 FY06/11CoE 09-May-11 Q3 Results 7, Q3 to Q4 FY06/11Act 11-Aug-11 Q4 Results 8, Amount of Gap Rate of Gap 7.5% 30.4% 33.5% 4.4% 4

5 Sales by Segment (On A Quarterly Basis) 2,500 2,000 1,500 1, (Million Yen) Korean Barbecue Noodle Soup Japanese Pancake Specialty Store Franchise 0 Q1 FY06/10 Q2 FY06/10 Q3 FY06/10 Q4 FY06/10 Q1 FY06/11 Q2 FY06/11 Q3 FY06/11 Q4 FY06/11 Monthly Sales Trends 40.0% 30.0% 20.0% 21.6% 20.4% 19.8% 28.1% 35.8% 23.4% 26.9% 28.2% 28.1% 13.6% 26.2% 19.5% 19.4% 17.7% % 0.0% (10.0%) (20.0%) 14.9% 9.7% 11.2% 16.1% 16.8% Sales (YoY) Korean Barbecue (comparable, YoY) 19.6% 11.9% (5.9%) 5.4% 4.7% (1.0%) (0.6%) (30.0%) Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 FY06/2012 Company Forecasts In FY06/2012, the Company calls for prospective sales 18.8bn (up 19.7% YoY), operating profit 1.5bn (up 23.7%), recurring profit 1.5bn (up 22.0%) and net profit 0.8bn (up 43.9%). Sales, on a comparable basis, having had seen a high 7.9% YoY growth in FY06/2011, are to inevitably suffer from substantial adjustments in terms of growth rates in the following year, i.e., FY06/2012. Company Forecasts assume a 0.2% YoY growth for sales on a comparable basis. Still, overall sales with the Company are expected to rise some 20% YoY, due to the effect of new store openings. The number of new stores to be opened is expected to be 48, while the Company is to close down 5 stores in FY06/2012, implying net increases of 43 stores in

6 FY06/2012. The net increases in the number of stores came in at 30 in FY06/2011, and thus the effect of new store openings in FY06/2012 will be larger than that of FY06/2011. By segment, Korean Barbecue will be the key driver for overall sales increases with the Company, as in FY06/2011. Prospective net increases in sales with the Company are 3.1bn YoY, of which 2.1bn (69% of total) is expected to be accounted for by Korean Barbecue, 0.5bn (17%) by Noodle Soup and 0.4bn (13%) by Franchise. Currently is the Company under pressure from external factors including procurement cost increases as a result of hiking prices for food materials & ingredients and increasing charges of utilities, as a result of hiking crude oil prices. On top of this, further increases of exposure to Korean Barbecue in terms of sales should lead to a deterioration of sales mix, as this segment carries less-than-average gross profit margins. In spite of all these negative factors, however, Company Forecasts assume gross profit margins 69.4%, almost unchanged from 69.6% in FY06/2011. One of the key factors to be mentioned is that Franchise (royalty incomes etc. from franchisees), carrying higher-than-average gross profit margins, is expected to account for increased proportion of overall sales with the Company, giving positive impacts to sales mix. Meanwhile, the Company is starting up a factory to process noodles, for own consumption, and this is expected to reduce costs with the Company, on a net basis. Together with these positive factors, the Company is expected to see minimal deterioration with its gross profit margins. As mentioned, the Company reported large-scale refurbishment costs for renovating existing stores etc., in FY06/2011, to a more substantial extent than regular years, particularly in Q4, while this is not expected to reappear two years in a row. On top of this, the Company suggests that costs for physical distribution should be reduced, and thus SG&A costs, as a ratio to sales, are expected to come down. The extent of this is expected to be larger than the extent of deterioration of gross profit margins, eventually calling for marginal increases in operating profit margins. 6 At the extraordinary levels, it is also expected that the Company will not suffer from reappearing irregular costs. Extraordinary balance came in at negative 151m in FY06/2011, larger than regular years, due to aggressive format changes at existing stores etc., while this is expected to come in at negative 60m. It should be noticed that the Company made a decent progress with operations to improve efficiency over the whole stores under management In FY06/2012, the Company has a plan to deliver 22.0 per share as divided with shareholders (payout ratio: 14.2%). Compared with 21.0 per share (16.9%) in FY06/2011, this suggests that the Company is to raise its dividend per share, but payout ratio is to come down. The levels of payout ratio are not very high, as the Company admits, but the current levels should be almost acceptable, when the Company s current business model is taken into account. The Company is in a state where it is aggressively investing in operations with ROE almost 20%. Rather than increasing outflow of cash by raising dividend per share, it should be more beneficial to shareholders, longer term, for the Company to spend more on investing in its profitable operations.

7 Sales by Segment (Cumulative, Quarterly) Sales by Segment Par.Act Par.Act Par.Act Par.Act Par.Act Par.Act Par.Act Par.Act Q1 Q1 to Q2 Q1 to Q3 Q1 to Q4 Q1 Q1 to Q2 Q1 to Q3 Q1 to Q4 YoY (Million Yen) 06/ / / / / / / /2011 Net Chg. Korean Barbecue 1,617 3,092 4,848 6,735 2,096 4,139 6,295 8,481 +1,746 Noodle Soup 592 1,161 1,786 2, ,529 2,340 3, Japanese Pancake ,210 1, ,387 1, Specialty Store Franchise ,057 1, ,194 1, Sales 3,151 6,088 9,395 12,780 3,824 7,732 11,733 15,745 +2,965 Korean Barbecue 51% 51% 52% 53% 55% 54% 54% 54% - Noodle Soup 19% 19% 19% 19% 19% 20% 20% 20% - Japanese Pancake 13% 13% 13% 13% 12% 12% 12% 12% - Specialty Store 5% 5% 5% 5% 4% 4% 4% 4% - Franchise 12% 12% 11% 11% 10% 10% 10% 10% - Sales 100% 100% 100% 100% 100% 100% 100% 100% - Korean Barbecue % +33.9% +29.8% +25.9% 59% Noodle Soup % +31.7% +31.0% +30.2% 24% Japanese Pancake % +12.7% +14.7% +16.9% 9% Specialty Store % +8.4% +5.7% +7.4% 2% Franchise % +14.3% +12.9% +13.7% 7% Sales % +27.0% +24.9% +23.2% 100% Sales by Segment Par.Act Par.Act Par.Act Par.Act Par.Act Par.Act Par.Act Par.Act Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 YoY (Million Yen) 06/ / / / / / / /2011 Net Chg. Korean Barbecue 1,617 1,475 1,756 1,887 2,096 2,043 2,156 2, Noodle Soup Japanese Pancake Specialty Store Franchise Sales 3,151 2,937 3,307 3,385 3,824 3,908 4,001 4, Korean Barbecue 51% 50% 53% 56% 55% 52% 54% 54% - Noodle Soup 19% 19% 19% 17% 19% 20% 20% 19% - Japanese Pancake 13% 13% 12% 12% 12% 12% 12% 12% - Specialty Store 5% 6% 5% 4% 4% 5% 4% 4% - Franchise 12% 11% 11% 11% 10% 11% 10% 11% - Sales 100% 100% 100% 100% 100% 100% 100% 100% - Korean Barbecue % +38.5% +22.8% +15.8% 48% Noodle Soup % +38.5% +29.8% +27.5% 26% Japanese Pancake % +20.1% +18.5% +23.9% 15% Specialty Store % +9.7% +0.4% +12.8% 3% Franchise % +27.5% +10.1% +16.1% 9% Sales % +33.1% +21.0% +18.5% 100% 7

8 Income Statement (Cumulative, Quarterly) Income Statement Par.Act Par.Act Par.Act Par.Act Par.Act Par.Act Par.Act Par.Act Q1 Q1 to Q2 Q1 to Q3 Q1 to Q4 Q1 Q1 to Q2 Q1 to Q3 Q1 to Q4 YoY (Million Yen) 06/ / / / / / / /2011 Net Chg. Sales 3,151 6,089 9,396 12,782 3,824 7,732 11,734 15,745 +2,963 CoGS 886 1,720 2,686 3,684 1,129 2,321 3,572 4,790 +1,106 Gross Profit 2,265 4,369 6,710 9,098 2,695 5,412 8,162 10,955 +1,857 SG&A 1,961 3,937 6,020 8,115 2,361 4,697 7,116 9,760 +1,645 Operating Profit ,046 1, Non Operating Balance Recurring Profit , ,076 1, Extraordinary Balance (10) (36) (47) (47) (108) (109) (119) (151) (104) Pretax Profit , Tax Charges etc Net Profit Sales YoY % +27.0% +24.9% +23.2% - Operating Profit YoY % +65.3% +51.7% +21.6% - Recurring Profit YoY % +64.4% +51.5% +22.8% - Net Profit YoY (22.5%) +55.6% +46.4% +4.6% - Gross Profit Margins 71.9% 71.7% 71.4% 71.2% 70.5% 70.0% 69.6% 69.6% - (SG&A / Sales) 62.2% 64.7% 64.1% 63.5% 61.7% 60.7% 60.6% 62.0% - Operating Profit Margins 9.6% 7.1% 7.3% 7.7% 8.7% 9.2% 8.9% 7.6% - Recurring Profit Margins 9.8% 7.3% 7.6% 7.8% 8.9% 9.5% 9.2% 7.8% - Net Profit Margins 5.1% 3.6% 3.8% 4.0% 3.3% 4.4% 4.4% 3.4% - Tax Charges etc. / Pretax Profit 45.9% 46.7% 46.5% 46.9% 46.2% 45.4% 45.7% 50.9% - Income Statement Par.Act Par.Act Par.Act Par.Act Par.Act Par.Act Par.Act Par.Act Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 YoY (Million Yen) 06/ / / / / / / /2011 Net Chg. Sales 3,151 2,938 3,307 3,386 3,824 3,908 4,001 4, CoGS ,129 1,192 1,251 1, Gross Profit 2,265 2,104 2,341 2,388 2,695 2,716 2,750 2, SG&A 1,961 1,975 2,084 2,095 2,361 2,336 2,419 2, Operating Profit (144) Non Operating Balance (1) Recurring Profit (137) Extraordinary Balance (10) (25) (11) (0) (108) (1) (10) (32) (32) Pretax Profit (168) Tax Charges etc (27) Net Profit (141) Sales YoY % +33.0% +21.0% +18.5% - Operating Profit YoY % % +28.8% (49.1%) - Recurring Profit YoY % % +29.7% (46.8%) - Net Profit YoY (22.5%) % +31.6% (92.9%) - Gross Profit Margins 71.9% 71.6% 70.8% 70.5% 70.5% 69.5% 68.7% 69.6% - (SG&A / Sales) 62.2% 67.2% 63.0% 61.9% 61.7% 59.8% 60.4% 65.9% - Operating Profit Margins 9.6% 4.4% 7.8% 8.7% 8.7% 9.7% 8.3% 3.7% - Recurring Profit Margins 9.8% 4.6% 8.0% 8.6% 8.9% 10.0% 8.6% 3.9% - Net Profit Margins 5.1% 1.9% 4.1% 4.5% 3.3% 5.5% 4.5% 0.3% - Tax Charges etc. / Pretax Profit 45.9% 48.8% 46.3% 47.9% 46.2% 45.0% 46.2% 91.2% - 8

9 Cash Flow Statement (Cumulative, Quarterly) Cash Flow Statement Par.Act Par.Act Par.Act Par.Act Par.Act Par.Act Par.Act Par.Act Q1 Q1 to Q2 Q1 to Q3 Q1 to Q4 Q1 Q1 to Q2 Q1 to Q3 Q1 to Q4 YoY (Million Yen) 06/ / / / / / / /2011 Net Chg. Operating Cash Flow ,089 1,366 1, Investment Cash Flow (214) (509) (828) (1,014) (204) (378) (684) (1,036) (22) Operating CF + Investment CF (131) (183) (314) (99) Financing Cash Flow (134) (465) (727) 338 (142) Pretax Profit , Depreciation Working Capital Changes Tax Charges (338) (338) (600) (600) (183) (183) (407) (407) +193 Capital Expenditure (192) (470) (802) (977) (168) (353) (621) (927) +51 Free Cash Flow (110) (123) (298) (88) Cash Flow Statement Par.Act Par.Act Par.Act Par.Act Par.Act Par.Act Par.Act Par.Act +0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 YoY (Million Yen) 06/ / / / / / / /2011 Net Chg. Operating Cash Flow (53) Investment Cash Flow (214) (295) (319) (186) (204) (174) (306) (352) (166) Operating CF + Investment CF (131) (52) (131) (29) (5) (220) Financing Cash Flow (61) 413 (134) (331) (262) 1, Pretax Profit (168) Depreciation Working Capital Changes (53) (77) (23) Tax Charges (338) (0) (261) (0) (183) (0) (224) (0) +0 Capital Expenditure (192) (278) (332) (175) (168) (185) (268) (306) (130) Free Cash Flow (110) (12) (175) (8) (104) (314) Balance Sheet (Quarterly) Balance Sheet Par.Act Par.Act Par.Act Par.Act Par.Act Par.Act Par.Act Par.Act +0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 YoY (Million Yen) 06/ / / / / / / /2011 Net Chg. Cash & Deposit 1,399 1,434 1,242 1,870 1,956 2,116 1,825 2,885 +1,015 Accounts Receivables Securities Other Current Assets 1,911 2,003 1,813 2,424 2,536 2,773 2,434 3,598 +1,174 Tangible Assets 3,489 3,702 3,867 3,840 3,949 4,050 4,073 4, Intangible Assets LT Investment Securities etc. 1,715 1,729 1,718 1,724 1,760 1,747 1,780 1,723 (2) Fixed Assets 5,275 5,503 5,655 5,634 5,778 5,863 5,934 6, Total Assets 7,187 7,507 7,468 8,057 8,313 8,636 8,368 9,870 +1,812 Accounts Payable Short Term Debt 1,307 1,251 1,314 1,214 1,186 1,116 1, (224) Other 919 1, ,055 1,329 1,180 1, Current Liabilities 2,551 2,667 2,623 2,516 2,666 3,003 2,719 3, Long Term Debt 2,128 2,277 2,185 2,119 2,031 1,775 1,639 1,864 (255) Other Fixed Liabilities 2,879 3,025 2,925 2,878 2,881 2,645 2,512 2,786 (92) Total Liabilities 5,430 5,693 5,549 5,395 5,547 5,648 5,231 5, Shareholders' Equity 1,757 1,814 1,919 2,663 2,767 2,986 3,133 4,031 +1,368 Other (0) (0) Net Assets 1,757 1,814 1,920 2,663 2,766 2,988 3,138 4,037 +1,374 Total Liabilities & Net Assets 7,187 7,507 7,468 8,057 8,313 8,636 8,368 9,870 +1,812 Interest Bearing Debt 3,435 3,529 3,500 3,333 3,217 2,891 2,661 2,853 (479) Net Debt 2,036 2,094 2,257 1,463 1, (32) (1,494) Days for Inventory Turnover Quick Ratio 62% 61% 56% 82% 81% 78% 75% 101% - Current Ratio 75% 75% 69% 96% 95% 92% 90% 118% - Equity Ratio 24.4% 24.2% 25.7% 33.0% 33.3% 34.6% 37.4% 40.8% - Net Debt Equity Ratio 115.9% 115.4% 117.6% 54.9% 45.6% 26.0% 26.7% (0.8%) - 9

10 Long-Term Prospects According to long-term projections (FY06/2012 to FY06/2014) by the Company, released at its IR meeting on 25 August 2011, the Company goes for sales 25.4bn, recurring profit 2.1bn and recurring profit margins 8.2% in FY06/2014 versus sales 15.7bn, recurring profit 1.1bn and recurring profit margins 7.8% in FY06/2011 results. This means that sales are to rise 62% and recurring profit 69% over the next three years or recurring profit to rise some 20% YoY over the next three years in a row. Looking back on the historical trends through FY06/2006 to FY06/2009, the Company s recurring profit margins continued edging up every year. Steady increases in sales during the same period led to edging up volume effect with the Company, in terms of both gross profit margins and of the ratio of SG&A costs to sales. Most recently, however, the strategy with the Company is to pursue the absolute levels of earnings, combined with sales enhancement, rather than sticking to the pursuit of higher profit margins. The issue is enhancing sales as much as possible by aggressively opening new stores in high-customer-density areas while trying to at least maintain the current levels of profit margins. By segment, Korean Barbecue is expected to play the most important role with the Company s strategy. All-you-can-eat, served at table with Yakiniku King is now being established as a format to see decent sales with a very high probability, although profit margins are relatively lower. Thus, the key driver with the Company s long-term projections is to go on opening new stores based on this format. Meanwhile, Noodle Soup is expected to be the second driver. At the moment, sales of this segment is not seeing growth (on a comparable basis), being exposed to head-on competition with fast food chain stores, in general, represented by beef bowl chain stores. Nevertheless, near-term developments and launches of new formats, with this segment, are expected to contribute to the achievements of the Company s long-term projections. The other thing is that the Company has a plan to start up its operations in China towards the end of FY06/2012 by setting up a subsidiary in Shanghai in November 2011 with a 224m capital injection. 10 Long-Term Prospects 30,000 25,000 20,000 15,000 10,000 5, % 8, % 8, % 7.7% 7.8% 7.8% 8.0% 8.1% 8.2% 10,119 11,578 12,782 15,745 18,847 22,124 25, % 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Sales (Million) RPM (%) FY06/06 FY06/07 FY06/08 FY06/09 FY06/10 FY06/11 FY06/12 FY06/13 FY06/14

11 4.0 Business Model Developing New Formants for Chain Restaurant Stores The Company is in charge of developing new formats for chain restaurant stores. Concerning Korean Barbecue (54% of sales in Q4 FY06/2011), Noodle Soup (19%), Japanese Pancake (12%) and Specialty Store (4%), the Company is running roadside company stores in Aichi-pref. (that includes Toyohashi in which the Company is based) as well as nationwide, while developing new formats in each segment at a time and offering them to consumers. In addition to this, the Company is involved with Franchise that accounts for the remaining 11% of sales and this comprises royalty incomes etc. from franchisees. This segment has a relatively high gross profit margins some 80% (versus 69.6% for the Company s gross profit margins in Q4 FY06/2011). As the business model here is to collect fees etc. from franchisees with no trading of food materials & ingredients, costs of goods sold is small in a respect to the proportion to sales. Meanwhile, gross profit margins at company stores are estimated at 60% to 65%. Sales by Segment (Q4 FY06/2011 Results) 11% 4% Korean Barbecue 12% 54% Noodle Soup Japanese Pancake Specialty Store 11 19% Franchise Source: Company Data The core part of the Company s operations is Korean Barbecue, comprising company stores of Yakiniku King, Ichiban Karubi and Ichiban Karubi. A new format of all-you-can-eat, served at table has been developed and launched for some time, and this had once achieved an astonishing 28.1% YoY sales growth on a comparable basis (in October 2010) due to its positive impacts to sales. The strengths of the Company relate to its capability to develop such new formats for chain restaurant stores, to practically carry out such operations and to eventually make consumers pay for the Company in reality. There is a peer that launched a format quite similar to the Company s format of all-you-can-eat, served at table, prior to the Company, currently holding the leading position as far as this category is concerned, in terms of the number of stores and sales. Meanwhile, the Company suggests that the Company will surely take over the leading position within a several months time, as a result of aggressive new store openings planned in FY06/2012.

12 On top of Korean Barbecue, the Company is in the process of developing and launching new formats, also, for other segments. In particular, the issue is crucial in Noodle Soup, as already mentioned, given the largest exposure to overall sales with the Company, second only to Korean Barbecue. New Store Openings As of the end of FY06/2011, the number of stores stood at 213, collectively, while the Company has a plan to run collective 369 stores as of the end of FY06/2014. Collective 213 stores as of the end of FY06/2011 comprise company stores 115 and franchisees (FC) 116. The core part of company stores relates to Korean Barbecue 53, while franchisees Noodle Soup 65. FY End (Company Store) + (FC) (Company Store) (FC) No. of Stores (Company Store) (FC) Korean Barbecue Noodle Soup Japanese Pancake Specialty Store Korean Barbecue Noodle Soup Japanese Pancake Specialty Store FY06/ Q1 FY06/ Q2 FY06/ Q3 FY06/ FY06/ Q1 FY06/ Q2 FY06/ Q3 FY06/ FY06/ FY06/ FY06/ New Openings (Company Store) + (FC) (Company Store) (FC) 12 No. of Stores (Company Store) (FC) Korean Barbecue Noodle Soup Japanese Pancake Specialty Store Korean Barbecue Noodle Soup Japanese Pancake Specialty Store Q1 FY06/ Q2 FY06/ Q3 FY06/ FY06/ Closed (Company Store) + (FC) (Company Store) (FC) No. of Stores (Company Store) (FC) Korean Barbecue Noodle Soup Japanese Pancake Specialty Store Korean Barbecue Noodle Soup Japanese Pancake Specialty Store Q1 FY06/ Q2 FY06/ Q3 FY06/ FY06/12 (5) (2) (3) (1) (0) (1) (0) (0) (1) (2) (0)

13 As of the end of FY06/2012, the number of stores is expected to be collective 256. New store openings 48 over 12-month period are to increase the number, while 5 stores are to be closed to decrease the number. The Company is to basically maintain the trends of FY06/2011 in a respect that Korean Barbecue will be the mainstay for new store openings on the company store side, while Noodle Soup on the FC side. Going forward, the number of stores is expected to be collective 299 and 369, respectively, as of the end of FY06/2013 and FY06/2014, although further details have not been disclosed. Thus, the net increases in the number of stores, collectively, are 43, 43 and 70, respectively, in FY06/2012, FY06/2013 and FY06/2014. Stores by Region With Korean Barbecue, the core part of the Company s business, it is disclosed that the business has high exposure to Kanto and Tokai by region, in terms of the numbers of stores, operating 22 stores and 12 stores, respectively, out of collective 53 stores (as of the end of FY06/2011) across regions in Japan. The idea for the Company s new store openings is to do it in the middle of high-consumer-density areas and to hold the number one position in each. This is the reason why the Company is heavily exposed to Kanto that incorporates the Tokyo metropolitan areas, while high exposure to Tokai relates to the fact that the Company is based in Aichi-pref. (Toyohashi) that is a part of Tokai. Company Stores for Korean Barbecue by Region (Collective 53 Stores, As of The End of FY06/2011) Kyushu 5 Shikoku Kinki Tokai 12 Hokuriku Shinetsu 2 2 Kanto 22 Tohoku According to the estimates by the Company, the market for Korean barbecue is some 560bn pa in Japan. One of the characteristics with this is that the market remains fragmented unlike the market for beef bowls (domestic market some 320bn pa in Japan). The Company is one of the largest players in the market for Korean barbecue in Japan, but sales of Korean Barbecue with the Company in FY06/2011 were no more than 8.5bn. Even when sales of Korean barbecue by its franchisees are included, it should be the case that the Company holds some 3% share in the market. Given a prospect that the market for Korean barbecue is unlikely to grow fast in the future, it is an issue for the Company to come up with sensible strategy to efficiently develop undeveloped areas. Standing on this point, it could be an idea to increase exposure to regions to which the Company is barely exposed, but the Company, as mentioned earlier, places the biggest emphasis upon new store openings in high-consumer-density areas for its new store openings.

14 Brands for Each Segment (As of The End of FY06/2011) Korean Barbecue (3 brands, 77 stores) Yakiniku King : 55 stores (company store 45, FC10), featured by all-you-can-eat, served at table Ichiban Karubi : 16 stores (company store 7, FC9), Japanese-style and settled atmosphere produced Ichiban Karubi : 6 stores (company store 1, FC5), featured by pop designs Noodle Soup (2 brands, 89 stores) Marugen Ramen : 80 stores (company store 18, FC62), featured by specialty dish Niku Soba Nidaime Marugen : 9 stores (company store 6, FC3), featured by specialty dish Kyabeton Japanese Pancake (1 brand, 44 stores) 14 Okonomiyaki Hompo : 44 stores (company store 17, FC27), Teppanyaki restaurants, serving steak, seafood and Japanese pancake Specialty Store (2 brands, 3 stores) Genya : 1 store (company store 1), high-class Japanese cuisine restaurant, serving food in season and fresh fish and shellfish Genji-Sohonten : 2 stores (company store 2), large-scale Japanese cuisine restaurant, serving shabu-shabu and seafood at a time 出所 : 会社データ

15 5.0 Financial Statements Income Statement Income Statement Par.Act Par.Act Par.Act Par.Act Par.Act Par.CoE FY FY FY FY FY FY YoY (Million Yen) 06/ / / / / /2012 Net Chg. Sales 8,663 10,119 11,578 12,782 15,745 18,847 +3,102 CoGS 2,603 3,018 3,430 3,684 4,790 5, Gross Profit 6,060 7,101 8,148 9,098 10,955 13,087 +2,132 SG&A 5,487 6,327 7,315 8,115 9,760 11,609 +1,849 Operating Profit ,195 1, Non Operating Balance (44) (45) (14) Recurring Profit ,002 1,231 1, Extraordinary Balance (244) (45) (38) (47) (151) (60) +91 Pretax Profit ,080 1, Tax Charges etc Net Profit Sales YoY +7.9% +16.8% +14.4% +10.4% +23.2% +19.7% - Operating Profit YoY +33.9% +35.1% +7.5% +18.1% +21.6% +23.7% - Recurring Profit YoY +34.3% +38.0% +22.7% +11.9% +22.8% +21.9% - Net Profit YoY % +8.0% +11.7% +4.6% +43.9% - Gross Profit Margins 70.0% 70.2% 70.4% 71.2% 69.6% 69.4% - (SG&A / Sales) 63.3% 62.5% 63.2% 63.5% 62.0% 61.6% - Operating Profit Margins 6.6% 7.7% 7.2% 7.7% 7.6% 7.8% - Recurring Profit Margins 6.1% 7.2% 7.7% 7.8% 7.8% 8.0% - Net Profit Margins 1.3% 4.2% 3.9% 4.0% 3.4% 4.0% - Tax Charges etc. / Pretax Profit 61.7% 38.6% 47.1% 46.9% 50.9% 47.0% - 15 Sales by Segment Sales by Segment Par.Act Par.Act Par.Act Par.Act Par.Act Par.CoE FY FY FY FY FY FY YoY (Million Yen) 06/ / / / / /2012 Net Chg. Korean Barbecue 4,948 5,324 5,947 6,737 8,481 10,625 +2,144 Noodle Soup 1,478 1,723 2,112 2,374 3,086 3, Japanese Pancake - 1,395 1,653 1,610 1,879 1, Specialty Store 1, Franchise 879 1,030 1,235 1,424 1,617 2, Sales 8,663 10,119 11,578 12,781 15,745 18,847 +3,102 Korean Barbecue 57% 53% 51% 53% 54% 56% - Noodle Soup 17% 17% 18% 19% 20% 19% - Japanese Pancake - 14% 14% 13% 12% 10% - Specialty Store 16% 6% 5% 5% 4% 4% - Franchise 10% 10% 11% 11% 10% 11% - Sales 100% 100% 100% 100% 100% 100% - Korean Barbecue (1.9%) +7.6% +11.7% +13.3% +25.9% +25.3% 69% Noodle Soup +3.1% +16.6% +22.6% +12.4% +30.0% +16.7% 17% Japanese Pancake % (2.6%) +16.7% +0.5% 0% Specialty Store +65.2% (52.2%) (2.7%) +0.9% +7.1% +5.5% 1% Franchise +20.4% +17.1% +19.9% +15.3% +13.6% +24.4% 13% Sales +7.9% +16.8% +14.4% +10.4% +23.2% +19.7% 100%

16 Per Share Data Per Share Data Par.Act Par.Act Par.Act Par.Act Par.Act Par.CoE (Before Adjustments for Split) FY FY FY FY FY FY YoY (Yen) 06/ / / / / /2012 Net Chg. No. of Shares FY End (Shares) 273,800 1,220,100 1,230,600 1,403,500 4,935, Net Profit / EPS (Shares) 258,337 1,061,266 1,221,294 1,235,201 4,267,056 4,938,192 - Treasury Stocks FY End (Shares) Earnings Per Share Earnings Per Share (Fully Diluted) Book Value Per Share 1, , , , Dividend Per Share Payout ratio 11.8% 10.1% 12.1% 12.2% 16.9% 14.2% - Per Share Data Par.Act Par.Act Par.Act Par.Act Par.Act Par.CoE (Before Adjustments for Split) FY FY FY FY FY FY YoY (Yen) 06/ / / / / /2012 Net Chg. Stock Split Factor Earnings Per Share Book Value Per Share Dividend Per Share Cash Flow Statement Cash Flow Statement Par.Act Par.Act Par.Act Par.Act Par.Act Par.CoE FY FY FY FY FY FY YoY (Million Yen) 06/ / / / / /2012 Net Chg. Operating Cash Flow , , Investment Cash Flow (643) (659) (772) (1,014) (1,036) - - Operating CF + Investment CF (99) Financing Cash Flow 241 (147) (236) Pretax Profit , Depreciation Working Capital Changes (3) (11) (16) Tax Charges (204) (200) (417) (600) (407) - - Capital Expenditure (609) (737) (722) (977) (927) - - Free Cash Flow (270) (88) (New Openings of Company Stores) ,600 - (Other) Capital Expenditure ,096 1,119 1,800 - Depreciation Operating Profit ,195 1,478 - EBITDA (OP + Depreciation) 834 1,122 1,262 1,484 1,765 2,116 - No. of New Company Store Openings Capital Expenditure Per Store

17 Balance Sheet Balance Sheet Par.Act Par.Act Par.Act Par.Act Par.Act Par.CoE FY FY FY FY FY FY YoY (Million Yen) 06/ / / / / /2012 Net Chg. Cash & Deposit 1,147 1,244 1,489 1,870 2, Accounts Receivables Securities Other Current Assets 1,513 1,640 1,971 2,424 3, Tangible Assets 2,769 3,060 3,436 3,840 4, Intangible Assets LT Investment Securities etc. 1,544 1,572 1,702 1,724 1, Fixed Assets 4,388 4,700 5,211 5,634 6, Total Assets 5,901 6,340 7,182 8,057 9, Accounts Payable Short Term Debt 1,002 1,025 1,191 1, Other , , Current Liabilities 1,977 2,093 2,636 2,516 3, Long Term Debt 2,941 2,502 2,173 2,119 1, Other Fixed Liabilities 3,392 3,011 2,920 2,878 2, Total Liabilities 5,369 5,104 5,556 5,395 5, Shareholders' Equity 527 1,234 1,626 2,663 4, Other (0) Net Assets 532 1,236 1,626 2,663 4, Total Liabilities & Net Assets 5,901 6,340 7,182 8,057 9, Interest Bearing Debt 3,943 3,528 3,365 3,333 2, Net Debt 2,796 2,284 1,876 1,463 (32) - - ROA (Net Profit / Total Assets) 2.1% 7.1% 7.2% 7.1% 6.6% 7.7% - ROE (Net Profit / Equity) 36.5% 79.7% 36.8% 31.2% 19.9% 18.9% - Days for Inventory Turnover Quick Ratio 64% 66% 63% 82% 101% - - Current Ratio 77% 78% 75% 96% 118% - - Equity Ratio 8.9% 19.5% 22.6% 33.0% 40.8% - - Net Debt Equity Ratio 530.4% 185.1% 115.4% 54.9% (0.8%)

18 6.0 Other Information Set Up in 1969 The Company was first founded as Genji ltd. In September Genji Ltd. opened the first company store for Korean barbecue in December 1995 at Toyohashi Aichi-pref. where it was based, and then the company name changed to The Monogatari Corporation in November Then, the Company opened its first company store for noodle soup in June The Company nicely expanded its business, after this, and the Company had an IPO on the JASDAQ stock exchange (in those days) in March 2008, while the listing on Tokyo Stock Exchange Second Section in June 2010 and on Tokyo Stock Exchange First Section in June 2011 was followed. On top of the same old debt finance prior to the listing, the Company took advantage of equity finance after the listing, having given increasing stability to its balance sheet to date. At the moment, the Company holds almost sufficient funds to carry out its long-term projections. The top management with the Company is Mr. Yoshio Kobayashi (born in 1949), the current president. He is also the leading shareholder with the Company, holding 15.0% of the shares outstanding. In April 1977, Mr. Kobayashi joined with Genji Ltd. (currently the Company) that was founded by his mother. He was appointed as president in April 1980, and has enlarged the business with the Company as the top management. Most recently, it was announced that he is to be appointed as chairman & CEO on 22 September Mr. Kobayashi implements his policy, in reality, to separate ownership and management with the Company. He has been gradually reducing his holdings of the shares of the Company, by selling them in the stock market, while trying to find the successor for him as the top management with the Company out of people who would not succeed any of his shares. Mr. Yukio Kaji (born in 1956), having joined with the Company in April 2011, is now appointed as president & COO, replacing Mr. Kobayashi. 18

19 Company History Date Events December 1949 Shubo Genji, an oden restaurant store, founded in Hirokoji, Toyohashi, Aichi-pref. September 1969 Genji Ltd., founded with a 5m capital injection December 1995 The first Korea barbecue store, Yakiniku Icihban Karubi Akebono-Store, opened in Toyohashi, Aichi-pref. June 1997 Company name, changed to The Monogatari Corporation from Genji Ltd. November 1997 Headquarter office, moved to Nishi-Iwata, Toyohashi, Aichi-pref. from Mukaiyama, Toyohashi, in order to expand its floor space December 1998 The first franchisee for Korean barbecue, Yakiniku Ichiban Karubi Hane-Store, opened in Okazaki, Aichi-pref. August 1999 Kama-Age Chaashu Shanghai Butamen, based on a new format for Chinese cuisine, opened in Toyohashi, Aichi-pref. June 2001 Marugen Ramen Mikawa-Anjo-Store, the first large-scale noodle soup store, opened in Anjo, Aichi-pref. May 2002 Margen Ramen Okehazama-Store, the first franchisee of Chinese Cuisine, opened in Midori-ku, Nagoya. October 2002 Korean Barbecue Ichiban Karubi Tsukimino-Store, renewed and opened as Korean Barbecue Ichiban Kalbi Tsukimino-Store, i.e., a new format for Korean Barbecue November 2003 Kama-Age Chaashu Shanghai Butamen, renewed as Hong Kong Kitchen Myourenka, i.e., a new format December 2004 Byakuro Tantanmen, a new format, opened in Sagamihara, Kanaga-pref. November 2005 Margen Ramen Ichinomiya-Store, renewed and opened as Nidaime Margen Ichinomiya-Store, i.e., a new format December 2005 Byakuro Tantanmen, renewed and opened as Osaka-Umeda Okonomiyaki Homp Sagamihara-Store, i.e., a new format March 2006 Yakiniku Ichiban Karubi Miyagidai-Store, renewed and opened as Yakiniku King Miyagidai-Store, i.e., a new format for Korean Barbecue July 2006 The first franchisee for Japanese Pancake, Osaka-Umeda Okonomiyaki Hompo Niigata-Ohmi-Store, opened in Chuo-ku, Niigata. March 2007 Yakiniku King Okyozuka-Store, renewed and opened as Yakiniku King Okyozuka-Store, a new format for Korean Barbecue March 2008 IPO at JASDAQ Stock Exchange June 2010 Listed on Tokyo Stock Exchange Second Section June 2011 Listed on Tokyo Stock Exchange First Section 19

20 20 Disclaimer Information here is a summary of IR Information of the Company, compiled by Walden Research Japan, from a neutral and professional standing point, in the form of a report. IR Information of the Company comprises a) contents of our interview with the Company, b) contents of presentations for institutional investors, c) contents of timely disclosed information and d) contents of the homepage etc. Company name: Walden Research Japan Incorporated Headquarters office: # Hatchobori, Chuo-ku, Tokyo JAPAN URL: info@walden.co.jp Phone: Copyright 2011 Walden Research Japan Incorporated