Financial Result Summary For FY Nov 2016 January 13, 2017 Star Mica Co., Ltd.
Contents 1.Executive Summary 2. Business Outline 3.Corporate Strategy 4.Market Analysis and Reference 5.Company Profile 2
-PL- Profit reached new record high. Recurring Profit up by over 40%. Record earning was led by extensive marketing and sales of renovated pre-owned condominium. Sale of properties by investment business also contributed to profit. FY Nov 2014 FY Nov 2015 FY Nov 2016 (JPY million) (JPY million) (JPY million) YoY Change Sales 13,901 19,333 20,973 +8.5% Gross profit 3,531 4,600 5,519 +20.0% Operating income 1,903 2,465 3,258 +32.2% Recurring profit 1,286 1,797 2,581 +43.6% Net income 772 1,114 1,678 +50.6% Depreciation/Amortization 451 332 286-14.0% EBITDA ( ) 2,354 2,798 3,544 +26.7% EBITDA = Operating profit + Depreciation/Amortization 3
Growth of Pre-owned Condominium Business contributed as our main domain. Rent revenue and profit increased from acquisition of properties. Sales of properties increased by refined marketing strategies to meet various demand. FY Nov 2014 FY Nov 2015 FY Nov 2016 (JPY million) (JPY million) (JPY million) YoY Change Sales 13,901 19,333 20,973 +8.5% Pre-owned Condominium Explanation of business units 12,253 15,497 16,982 +9.6% Revenue from pre-owned condominium rent/sales Rent 2,120 2,363 2,530 +7.1% Sales 10,132 13,134 14,452 +10.0% Investment business 1,199 3,419 3,547 +3.7% Revenue excluding pre-owned condominium rent/sales including sale of properties FY Nov 2015 : 2,433 JPY million FY Nov 2016 : 2,512 JPY million Advisory business 448 416 443 +6.7% Revenue from real estate brokerage, management fee, etc FY Nov 2014 Profit Margin FY Nov 2015 Profit Margin FY Nov 2016 (JPY million) (JPY million) (JPY million) Profit Margin YoY Change Gross profit 3,531 25.4% 4,600 23.8% 5,519 26.3% +20.0% Pre-owned Condominium Explanation of business units 2,932 23.9% 3,627 23.4% 3,857 22.7% +6.4% Profit from pre-owned condominium rent/sales Rent 1,558 73.5% 1,719 72.8% 1,797 71.0% +4.5% Sales 1,385 13.7% 1,947 14.8% 2,204 15.3% +13.2% Mark-to-market loss -11 - -40 - -143 - - Investment business 242 20.2% 668 19.5% 1,334 37.6% +99.7% Profit from pre-owned condominium rent/sales including revenue of properties FY Nov 2015 : 276 JPY million FY Nov 2016 : 896 JPY million Mark-to-market loss - - - - -0 - - Advisory business 356 79.6% 305 73.4% 328 73.9% +7.5% Profit from real estate brokerage, management fee, etc 4
-BS- Total real estate holdings are at JPY47.2 billion, will become future profit source. We strived to acquire quality assets to add to our real estate holdings. FY Nov 2015 FY Nov 2016 (JPY million) (JPY million) YoY Change Current assets 39,315 43,093 +9.6% Cash and deposits 1,933 3,260 +68.6% Inventories 36,890 39,221 +6.3% Fixed assets 9,477 8,550-9.8% Tangible fixed assets 9,067 8,004-11.7% Total assets 48,802 51,651 +5.8% Short-term liabilities 6,094 4,941-18.9% Long-term liabilities 30,154 32,804 +8.8% Shareholder's equity 12,486 13,846 +10.9% Capital-to-asset ratio 25.6% 26.8% Total real estate holdings 45,957 47,225 +2.8% (inventories+tangible fixed assets) +1,267 Most of the inventories are condos from pre-owned condominium business Most of the fixed assets are properties from investment business 5
Highlights 2016.1 Started sales of Stella Garden Musashikoganei after renovation of the whole building. 2016.3 Hosted 2 nd Design Contest by College students. 2016.6 Initiated investment in Minpaku related company, dispatched corporate director. 2016.6 Revised up FY result forecast (1 st revision). Revised up dividend per share forecast (34 yen to 41 yen). 2016.12 Renewed corporate logo and web site. 2016.12 Revised up FY result forecast (2 nd revision). Revised up dividend per share forecast (41 yen to 46 yen). 6
1.Executive Summary 2.Business Outline 3.Corporate Strategy 4.Market Analysis and Reference 5.Company Profile 7
Corporate Philosophy We strive to realize society from "build" to "utilize. 8
We offer better lifestyle through renovation. We consider unique characteristics and renew each condominium functionally as a new residence. We provide total lifestyle service through our group companies in purchase/sale, reform, and property management. We have recorded sales of more than 5,000 units to date, or 600 units per year, mainly in Tokyo Metropolitan area. before after 9
Example of product concept: Renovation that supports women. Pursue comfortable living from women s perspective. Product planning focused in storage, line of human flow, and ease of maintenance. Shiawase (Happy life) Renovation http://www.shiawase.starmica-r.co.jp/ Storage cabinet for big-size stuff Straight route from entrance to kitchen Easy-care sink Pantry (storage space in kitchen) 10
Renovation of the entire building. Renovate condominium unit and also the entire building by large scale. Consider not only building exterior or facility but also softwares such as security service and living environment. Successful sales as Stella brand, 9 buildings in Tokyo and Kanagawa. Before After Stella Residence Hikawadai Stella Residence Koenji Stella Garden Mizonokuchi 11
Working with external vendors to revitalize renovation market. Lifestyle proposal with house facility providers, interior designers, renovation service providers. Diverse offering in renovation plan to meet wide variety of lifestyles. 12
1.Executive Summary 2.Business Outline 3.Corporate Strategy 4.Market Analysis and Reference 5.Company Profile 13
We own largest number of pre-owned condominiums in the industry. Our pre-owned condominium holdings is over 1,800 units. We will continue to offer variety of condominiums from our stock. ( Unit : JPY bn ) Comparison of pre-owed condominium holdings (as of Nov. 30, 2016. in book value) 40 30 20 10 0 A B C Star Mica Summarized by Star Mica from corporate fiscal reports 14
Our profit margin remains strong. We aim to expand profit margin by optimizing marketing strategy and making improvements in product quality. ( Unit : % ) Comparison of gross profit margin (last 3 years ) 30.0% last year 2 years ago 3 years ago 20.0% 10.0% A B C Star Mica Listed comparable companies, gross profit margin of consolidated financial results for last 3 years. 15
A well diversified condominium portfolio. Composition by region Composition by year built Areas under Others 3.4% ~1980 10.8% Osaka branch Tokyo 9.2% (central Chiba 3.5% 5 wards) 12.6% 1981~1988 1998~ 33.2% Saitama 4.3% 22.0% Kanagawa 17.6% Tokyo (23 wards, 1989~1997 34.1% Tokyo ex-above) (ex-23 39.7% wards) 9.7% Average unit data Above figures are as of November 2016. Average property figures are based on number of properties. (all unit based) Regional and Age segregation are based on acquisition amount. (all unit based) Avg size Avg age Avg acquisition 64.02 m2 25.0 year 20,049 K(JPY) 16
Unrealized gain in pre-owned condominiums are estimated to be approximately 11 billion yen. Appraisal from third party appraiser indicates inventory market value (Estimated sales value) of JPY56.2bn. Estimated profit from sales will be JPY11.3bn, increase by JPY1.5bn YoY. Unrealized gain from recent FY end book value (Unit: JPY billion) Estimated sales revenue Estimated cost before sale 5.7 56.2 39.2 Book 1value Estimated 2 sales value Estimated cost before sale is calculated based on past record of transaction fee and renovation cost. Above figures are based on projection under certain accounting method, this does not guarantee future capital gain revenue. 17
Unique strategy We invest in less liquid pre-owned condominiums that are occupied, rather than more liquid vacant condominiums. Our unique strategy was recognized by Porter Prize in 2011. Porter Prize Award named after Professor Michael E. Porter (Harvard Business School) in Corporate Strategy. This award is given to companies that have innovative product, process and management, with unique strategy and solid earning results. Awarded companies Marui Group YKK Fastener Business Kakaku.com, Inc. Komatsu Kirin Brewery Gourmet Navigator Fast Retailing Co., Ltd. Oisix Inc. etc. 18
We are reaching the goal of 3-year medium term business plan (2015-2017) in 2 years. FY2017 Goals ( 3 rd year ) FY2016 Results ( 2 nd year ) < Sales 20.0bn 20.9bn Recurring Profit 2.2bn < 2.5bn EBITDA 3.3bn < 3.5bn ROE 10.0% < 12.7% 19
We have achieved strong results to meet Strategic Emphasis in FY2015 and FY2016. Strategic Emphasis 2-year results Pre-owned condominium Expand area of acquisition. Enhance product quality. Opened Saitama branch(2016/6) Expanded product offerings Investment Invest in real estate restoration projects. Invested 1.6billion yen. Realized sales of 1.0 billion yen. Advisory Reinforce real estate brokerage, property management. Strengthened renovation proposal ability. Enhanced services to tenants. Finance/Corporate management Increase corporate publicity through change in listed market, recruiting efforts. Changed listing to Tokyo Stock Exchange 2 nd Section. Total number of management and employees over 100. 20
We are planning medium term, 3-year business plan (2017-2019). Business Environment Changes are uncertain in Japanese economy (fragile outlook of the world economy, aging population etc) Rising price in newly built condominiums, potential over supply of them, higher activities in pre-owned condominium market. Evolution of Sharing economy, Integration of IT and existing businesses (Development in Fin-tech etc) Our Direction Focus our resources to pre-owned condominium business Establish leading position in pre-owned condominium industry in both volume and quality. Challenge for Innovation Challenge ourselves to further integrate IT and real estate to pursue new business opportunities. 21
We renewed our corporate logo to meet new challenges. We hope to share our value through brand communication. Points of new logo Strong logo type to express trust, innovation and challenging spirit. Golden ratio to provide beauty, stability and universality. 22
Challenges toward integration of real estate business and IT. Examples of business Home key system by smartphones. Virtual property visits utilizing VR technologies. Match making of demand and supply through cloud servers. Paperless contracts/agreements by tablets. 23
Preparing to enter Minpaku service. Seek to meet inbound short stay demand. Government is considering launch or Minpaku service, related legislation is to be discussed in 2017 ordinary diet session. (Unit:million) 40 35 Number of international visitors to Japan Year 2020 goal 40 million Recent developments Negotiation and adjustments to prepare a bill Announcement of companies to provide Minpaku services. Our positioning 30 25 20 15 10 5 0 2011 2012 2013 2014 2015 2020 We own large number of condominiums in Tokyo and suburbs. We have alliance with Squeeze, a minpaku marketing/operation company. We have experience in furnished condominium, short-term rent arrangements. 24
We aim to establish leading role in the industry in 3 years (end of FY2019). FY 2016/11 FY 2019/11(E) Sales 20.9bn 23.5bn Operating Profit 3.2bn 3.5bn Inventory 37.7bn 45.0bn Others Achieve ROE of 10% for all 3 years. Listing change from Tokyo Stock Exchange 2 nd section to 1 st section. 25
We plan to make aggressive acquisition in pre-owned condominiums. From increased inventory of pre-owned condominiums, we anticipate improvement in rent revenue and sales revenue. (Unit : JPY bn) 50.0 Transition of Inventories (at end of each year) 45.0 40.0 35.3 37.7 31.1 30.0 20.0 21.2 24.1 23.9 26.9 10.0 0.0 2010/11 2011/11 2012/11 2013/11 2014/11 2015/11 2016/11 2019/11 (Planned) 26
Operating profit is growing along with business expansion. Growth of Pre-owned condominium holdings lead us to future stable gains. (Unit : JPY bn) 4.0 3.5 History of Operating Profit 3.2 3.3 3.5 3.0 2.5 2.0 1.6 1.8 1.5 1.8 1.9 2.4 1.5 1.0 0.5 0.0 2010/11 2011/11 2012/11 2013/11 2014/11 2015/11 2016/11 2017/11 2019/11 (Forecast) (Planned) 27
We are looking forward to breaking record high earnings again in FY 2017. We believe demand of renovated pre-owned condominiums remains high due to expensiveness in newly built condominiums. We will strive to increase supply of quality pre-owned condominiums for higher sales and profit. FY Nov 2016 Result (JPY million) ( 1) FY Nov 2017 Forecast (JPY million) YoY Change Sales 20,973 21,800 +3.9% Pre-owned Condominium business 16,982 17,430 +2.6% Gross profit 5,519 5,669 +2.7% Pre-owned Condominium business 3,857 4,032 +4.5% Operating income 3,258 3,356 +3.0% Recurring profit 2,581 2,727 +5.7% Net income 1,678 1,750 +4.3% 28
We plan to increase dividend, eight consecutive years in a row. FY 2016 annual dividend was 46 yen, increase of 17 yen YoY. FY 2017 annual dividend forecast is 50 yen. Goal of dividend payout ratio is 30%, long-term. We continue to plan on increase in dividends. (Unit : Yen ) 60.0 50.0 50.0 History of dividend per share ( ) 46.0 40.0 30.0 29.0 20.0 10.0 10.0 11.0 11.5 12.0 15.0 18.0 Consolidated dividend payout ratio 0.0 2009/11 2010/11 2011/11 2012/11 2013/11 2014/11 2015/11 2016/11 2017/11 22.8% 14.0% 14.4% 20.2% 17.9% 21.0% Due to stock split of 1-100 in December 2012, past per share dividends are adjusted. 23.5% 24.8% 25.9% (Forecast ) 29
Semi-annual shareholder benefit plan. Sample Sample Benefit Record date Stock Holding : Lifestyle Goods (2,000 yen) : Nov end : over 100shares Benefit Record date Stock Holding : Quo Card (1,000 yen) : May end : over 100shares Sample photo subject to change without notice 30
1.Executive Summary 2.Business Outline 3.Corporate Strategy 4.Market Analysis and Reference 5.Company Profile 31
Japanese pre-owned condominium stock now over 6 million units. Supply of newly built condominiums is rising steadily. We expect growth and development in Japanese condominium market. 7,000,000 6,000,000 Number of new condominiums construction in units Over 6million units 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 Source: Star Mica, based on the statistical data from Ministry of Land, Infrastructure, and Transport data 32
Condominium market is shifting towards pre-owned. Number of pre-owned condominiums for purchase/sale is in increasing trend. (Unit:One contract)) 40,000 Number of pre-owned condominium purchase and sale in Tokyo metropolitan area 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 Source: Star Mica, based on the statistical data from REINS Market Trend 12 months total in each year except for the year 2016. 11 out of 12 months total as for the year 2016. 33
Potential upside in market growth, in a global perspective. 70-90% of housing market in developed countries are used(pre-owned) properties, whereas 10% in Japan. Along with maturing social infrastructure, we think this as a growth market. Ratio of used(pre-owned) properties among all housing market 83.1% 88.0% 68.4% 14.7% US UK France Japan (2014) (2012) (2013) (2013) Source: Star Mica based on the data from and Ministry of Land, Infrastructure and Transport data 34
Future outlook of renovation business. Households can own higher grade for-sale condominiums compared to lower grade for-rent condominiums, with better economics. Planning, renovating and providing warranty by experienced company like us can offer reliable housing to households. Standard monthly rent ( 1) Monthly mortgage repayment ( 2) 143 thousand yen 85 thousand yen 1 Based on our corporate results at November 2016, Average sales price of 31.8million yen, average space of 67.53 square meters 2 Assumed mortgage of 30 million yen, at 1%, for 35 years 35
1.Executive Summary 2.Business Outline 3.Corporate Strategy 4.Market Analysis and Reference 5.Company Profile 36
Company profile(as of 30 Nov. 2016) Company name Representative Star Mica Co., Ltd. Chairman and CEO Masashi Mizunaga Date of incorporation May 1, 2001 Listing date October 2, 2006 Listed market Tokyo Stock Exchange 2nd Section (stock code: 3230) Capital Offices Main Bank Auditor 3,573 million yen Tokyo head office (Minato Ward), Yokohama branch(yokohama City), Osaka branch (Osaka City), Saitama branch ( Saitama City ) Bank of Tokyo-Mitsubishi UFJ, Sumitomo Mitsui Banking Corporation, Aozora Bank, Mizuho bank, Ltd, Resona Bank, Ltd. KPMG AZSA LLC Employees 101 Businesses Pre-owned Comdominium business, Investment business, Advisory business 37
Major shareholders (as of 30 Nov. 2016) Major Shareholders (Unit : Shares ) Shareholder May 2016 Nov 2016 % Holdings % Voting Rights Office Ohgi 1,497,000 1,497,000 15.0% 16.5% Private Company of Masashi Mizunaga Masashi Mizunaga 1,343,900 1,351,200 13.5% 14.9% Chairman / Representative Director Star Mica Co., Ltd 957,799 945,599 9.5% - Treasury stock Hiroshi Taguchi 900,000 900,000 9.0% 9.9% The Master Trust Bank of Japan, Ltd. (Account in trust) 527,000 730,200 7.3% 8.1% Japan Trustee Services Bank, Ltd. (Account in trust) 897,400 708,600 7.1% 7.8% Royal Bank of Canada Trust Company (Cayman) Ltd. 466,000 466,000 4.7% 5.1% Citibank London KIA FUND 136 140,300 213,480 2.1% 2.4% The Nomura Trust and Banking Co., Ltd. (Account in investment trust) 240,300 189,600 1.9% 2.1% Others 3,030,301 2,998,321 30.0% 33.1% Total 10,000,000 10,000,000 100.0% 100.0% Notes Distribution of share ownership Transition in number of shareholders Other corporations 0.2% Treasury Stock 9.5% Office Ohgi, Masashi Mizunaga 28.5% Individual investors Non-individual investors 5,016 8,047 7,058 Foreign entities 17.6% 2,347 Individual investors, others 25.1% Financial Institutions 19.2% 2013/11 2014/11 2015/11 2016/11 38
Cautionary Statement / Contact Information This presentation contains forward-looking statements, including forecasts of business performance and operation plans and targets. These statements are based on information available to the company s management when this material was prepared and on current assumptions for uncertain factors affecting future earnings. Actual results may differ from the information presented in this report due to a host of factors that are unforeseeable and/or beyond the control of the company. The information in this presentation includes data believed by the company to be reliable and has been obtained from public sources believed to be reliable. However, the company makes no representation as to the accuracy or completeness of such information. This presentation is not to be construed as a solicitation to invest in the company. Investors must make their own investment decisions. For further information please contact: Star Mica Co., Ltd., Corporate Planning Department E-mail: ir.group@starmica.co.jp 39