| WELLNET CORPORATION (2428) |
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Company |
WELLNET CORPORATION |
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Code No. |
2428 |
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Exchange |
TSE 1st |
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Industry |
Service |
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President |
Kazuhiro Miyazawa |
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HQ Address |
1-1-7 Uchisaiwaicho, Chiyoda-ku, Tokyo |
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Year-end |
June |
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URL |
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* Stock price as of the close on August 25, 2017. Number of shares outstanding at the end of the most recent quarter excludes treasury shares.
ROE and BPS are from the previous year. The estimated EPS is still to be announced, because the earnings forecast for the fiscal year June 2018 includes many uncertainties. |
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*A 2 for 1 stock split was implemented on July 1, 2016. EPS and BPS are calculated retroactively.
*The earnings forecast for the fiscal year June 2018 is still to be announced due to a lot of uncertainties. |
| Key Points |
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| Company Overview |
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With the key concepts of "real time" and "one stop," WELLNET offers a "convenient direct sales platform" to provide (1) its customers (i.e. the purchaser of service and goods) with the convenience of purchasing whatever they want at any time and from any place, and (2) its sales business operators (i.e. WELLNET's direct customers) with the capability of "maximizing sales opportunities" in selling products and services over the Internet. The multiple payment service, which is WELLNET's core business, has been implemented by a wide range of clientele including major Japanese airlines and express bus companies, in addition to major mail-order businesses. Ever since its inception, WELLNET has endeavored to maintain the spirit of taking on new challenges which is engrained in its corporate DNA. <Corporate History>
WELLNET CORPORATION got its start as a subsidiary of a gas and fuel merchant called Ichitaka Takahashi Co., Ltd. in Hokkaido for the purpose of developing new businesses. At the time of its inception, utility bill payment services at convenience stores had already begun. However the Company began preparations for the expansion of payment settlement services to include mail order catalog sales. WELLNET developed an integrated seamless "convenience store consigned bill payment settlement service" that included the functions of printing and mailing of invoices, and bill payment information processing which could be used 24 hours a day, 365 days a year. This system quickly spread amongst product and service merchants because it was distributed free of charge and enabled them to dispense with making large outlays to develop their own payment settlement systems. Furthermore, WELLNET developed a system that allows customers to avoid having to print out paper copies of invoices and allows for customers to make real time connections for electronic invoices and payments, which is the system currently used widely. The system's ability to eliminate development costs and to allow customers make electronic payment settlement connections with convenience stores and other payment outlets without the need to sign agreements has contributed to its strong reception and numerous implementations by airlines and bus companies, in addition to boosting WELLNET's earnings. In 2004, the Company listed its shares on the JASDAQ market. Thereafter, WELLNET has expanded the provision of its "multiple payment service" to include large companies such as amazon, Yahoo! Shopping, Yahoo! Auction, low cost carrier (LCC) airlines, West Japan Railway Company and JR Kyushu Railway Company. In addition, the Company has also focused its attention upon developing applications for the rapidly growing electronic ticket service market including the cellphone ticketing service, which has many good track records.  <Market Conditions>
According to the Ministry of Economy, Trade and Industry's report entitled FY 2016 Research on Infrastructure Development in Japan's Information-based Economy Society (E-Commerce Market Survey) issued on April 24, 2017, the Japanese electronic commerce market (B to C) for consumers rose by 9.9% year-over-year to ¥15.1 trillion in 2016. Compound average growth rate (CAGR) from 2010 to 2016 is 11.7%.
  <Business Description>
With the key concepts of "real time" and "one stop," WELLNET offers a "convenient direct sales platform" to provide (1) its customers (i.e. the purchaser of service and goods) with the convenience of purchasing whatever they want at any time and from any place, and (2) its sales business operators (i.e. WELLNET's direct customers) with the their capability of "maximizing sales opportunities" in selling products and services over the Internet. The business segment to be reported is only "payment settlement and authentication business." The following section will introduce the primary services of WELLNET.  Settlement service ① Multi-payment service Business operators do not need to develop systems for connecting to various payment receiving institutions, such as convenience stores, banks, post offices, and credit card companies, or sign individual contracts. <Advantages and Characteristics>
 Business operators only have to offer data to WELLNET, after settlement transactions of purchasers and users. WELLNET explains payment methods to purchasers and users.Since it is possible to electronically charge and obtain receipt information on a real-time basis without using any written bills, business operators can use the system instantly.Even if purchase contents (amounts) are changed, the payment of the changed amount can be settled.WELLNET provides modules for receiving information free of charge, and so system connection is easy.WELLNET develops and operates cutting-edge settlement systems, and so business operators do not need to develop systems.The service was launched in July 2000, and has been adopted by all of Japanese airlines, major express buses, major mail-order companies, etc.The operation center offers payment settlement services 24 hours a day, every day, with the 24-hour manned monitoring system.For paperless settlement, WELLNET has developed the largest infrastructure network in Japan.② Paper-less settlement service
It is possible to issue a written bill and charge and settle payment electronically on a real-time basis with a single service.
(Features)
Enterprises only have to upload the data of the bills to be sent to their customers to the management window in the WELLNET format. WELLNET sends the bills on behalf of enterprises by mail.The bills include the guide for a website for applying for electronic settlement, and customers easily complete the procedures in the website provided by WELLNET with a PC or a smartphone.Then, it becomes unnecessary to send bills to customers who have applied for paperless settlement.③ Shiharai-Hisho
By utilizing the smartphone app "Shiharai-Hisho," it is possible to complete payment anywhere without going to a convenience store or an ATM of banks.
(Features)
It is possible to pay a bill immediately just by reading the barcode on the bill sent to the customer with a camera.This provides customers who do not have a credit card with an instant payment method.It is also possible to debit from an account of an affiliated bank.When the payment of monthly public charges, etc. is registered, the app will notify customers of the deadline for payment, and so this is expected to prevent customers from forgetting to pay a bill.Cash transfer service① Cash transfer service to the bank account <Advantages and Characteristics>
The ability of consumers to input their own bank account information and automatic processing of this information allows merchants to reduce their work load by eliminating the need to input account information.Increases customer satisfaction by allowing merchants to make payment of refunds within the same day.Eliminates the need for merchants to develop their own refund systems.Eliminates the need to retain bank account information of customers and reduces the risk of leakage of personal information.② Cash receipt (Transfer) service at Convenience Stores
As with the Cash transfer service to the bank account, this service concerns refunds when consumers cancel an order from a merchant. Unlike the Cash transfer service to the bank account, this service requires no bank account.The consumer inputs a cash pickup number and ID (provided by the merchant) into a Lawson convenience store "Loppi" multimedia terminal, which issues a cash exchange ticket, and this cash exchange ticket can be exchanged for cash at the register. <Advantages and Characteristics>
Merchants can avoid risks related to possessing customer bank account dataCost reduction due to no handing charges of postal transfers or bank transfersSmooth refunds with no risk of errors in handling bank account informationBilling (Payment/Invoices at Convenience Stores) Services① Convenience store bill payment service Payment information is transmitted on the next business day after the payment is made (For payment at post offices, two business days), and automatically makes ledger notes of the payment. Currently, bills for mail order sales, fuel expenses, various membership fees, etc. can be paid in arrears using this system. <Advantages and Characteristics>
Payments can be made 24 hours a day, 365 days a year at nationwide convenience stores (Available at approximately 58,000 stores with 14 different convenience store chains, as of June 2017), relieving bill paying customers from the need to rush to post offices and banks during normal business hours.The packaged software "ConPay Kun" is provided free of charge, allowing merchants to begin operating the payment systems within short time after application.Merchants can print out their own bill payment receipts, and avoid leakage of customer information because the payment information is based on numeric bar code information only.② Consigned Invoice Issuance Service
WELLNET provides total comprehensive bill payment issuance and payment settlement support services including consigned bar code invoice payment printing and mailing functions, payment confirmation, and payment ledger note. In particular, its bill payment services are used commonly for payment of services that do not entail shipment of goods (gas bills, various membership fees). In addition, automatic payment and other information receipt services (Invoice issuance, payment service packaged software "Tokoro Kun") are also provided. Bus IT solution "Bus Mori!®"The culmination of the know-how is "Bus IT Project". This is an innovative service that can considerably improve the convenience for both bus agencies and users. While users can search for and book a bus service to reach a destination at ease without fail, bus agencies manage inventory efficiently on a real-time basis, increase selling opportunities, and settlement payment without fail. This service is composed of 2 systems: "Bus Mori!," which has been evolved considerably from "Bus Mori! NAVI," a smartphone app for displaying bus routes in a map and buying a ticket for bus users, and "Bus Mori! MONTA," a service of the real-time management of data on express bus reservations for bus agencies that use tablet terminals. As of Aug. 2017, the number of downloads of the "Bus Mori!" app is about 50,000, and the number of routes that accept a smartphone ticket is 166. The company released the new function "Smartphone Commuter Pass," which will be described later, in Mar. 2017 and plans to start "Electronic Ticket Collection" and "Electronic Coupons" within this year, to promote the "Bus IT Project."  "Bus Mori!," Japan's first smartphone app for searching for and booking an express bus seat, buying its ticket, and getting on the bus, which increases the convenience of inter-city express buses Users can receive the latest news about express buses and push notifications when a deadline for payment draws near, while bus agencies can send directions to reach a bus stop. In addition to tickets issued at convenience stores, electronic tickets which are displayed on the screen of smartphones are now available, resulting in significant improvement of user-friendliness because users can buy tickets anywhere and anytime 24 hours a day with their smartphones at hand. Users can receive the latest news about express buses and push notifications when a deadline for payment draws near, while bus agencies can send directions to reach a bus stop. As for the methods for authenticating electronic tickets, in addition to "Bus Mori! MONTA" which is an in-vehicle tablet terminal that has been already released, the company plans to add the function to authenticate tickets with "electronic punching" to "Bus Mori!" for bus agencies with no "authentication terminal" (scheduled in Dec. 2017). This will cover almost all the bus routes and therefore the number of routes where "electronic tickets" are acceptable will increase.  "Bus Mori! MONTA," a service of the real-time management of data on express bus reservations for bus agencies① Electronic seat chart: User can check the reservations and vacant seats of buses currently in operation.
② Ticket sale: If a user who has not yet paid the fare gets on a bus, the fare for the user can be displayed.
③ Ticket confirmation and authentication: User can authenticate the tickets of users, handle them online, and update reservation information.
  From Oct. 2017, one year after that, the company will broadcast a more effective promotional program titled "Bustabist(Travel by Bus)." SUPERSUB" ServiceThis system eliminates the need for merchants to develop individual systems that connect to servers, allowing for easy use by not only merchants but also individuals holding events. This system was launched in June 2012 aiming at increasing the number of customers, in addition to the existing large clients such as airlines and bus companies, based on its efficient and low-cost strategy. <Advantages and Characteristics>
Event organizers can create web pages for their events as to their ticket reservation, application and sales, simply by entering basic information relating to the events such as ticket pricing, location, date of the event, etc. into the registration page (Currently only available to PCs).Simply linking the above web pages to the organizer's event page will enable the launch of ticket sales.Customers seeking to participate in an event can purchase tickets via PCs, smartphones, and cellular telephones.Both e-tickets and paper tickets printed at convenience stores can be used. The tickets use QR codes and special applications will be used for authentication of these codes for entry to events. The system allows for smooth operations at events through accurate authentication. It is also possible to use just paper tickets, in which case the authentication application is unnecessary.Similar to multiple payment services, this service provides a multitude of various payment settlement methods. The system can be launched within three weeks from application for ticket through installment of the system to the sales of tickets.There are no initial costs or basic monthly fees. In exchange, a commission of 5% of ticket sales is collected to help keep operational costs extremely low. <Characteristics and Strengths>
① Strong Track Record of Implementations, Strong Customer Base
WELLNET's multiple payment service has developed a highly favorable reputation for its ability to eliminate development expenses at the time of their implementation and the need to form contracts with each payment institution. WELLNET's service has been introduced to the leading companies in each industry as described below.One of WELLNET's largest assets is the highly favorable reputation received from airlines and bus companies for their system's real time capabilities. It is this strong customer base that lies at the core of its highly favorable reputation, which is considered to be an important "invisible asset."  ② Corporate DNA: Always Taking on New Challenges
E-Billing Service, Billing Service, various money transfer services, cellular telephone ticket service and other services and systems developed by WELLNET, in almost all the cases, represent the first applications of their kind to be commercialized within Japan.Furthermore, the above implementation examples of systems are validation of their superiority. As WELLNET is not an affiliate or subsidiary of a large company, it started out without large amounts of business resources, including money, people and assets. Despite this fact, the spirit of "always taking on new challenges" engrained in the corporate DNA of WELLNET allowed it to become the "de facto standard setter" in electronic bill payments. President Miyazawa believes that the meaning and appeal of business are "to continue to believe in your own ability, to envision and take on the risk of developing mechanisms that would be convenient to have, and to provide them in tangible, readily available forms." Moreover, in our interview, Mr. Miyazawa also said that "the reason for our Company to exist is to come up with systems that only we can create." Since WELLNET is a small company with about 100 employees, keeping up the spirit of taking on new challenges engrained in its corporate DNA and the ideal represented in its corporate principle of "WELLNET Arete" seems to be vital to the company's existence. |
| Fiscal Year June 2017 Earnings Results and Fiscal Year June 2018 Earnings Estimates |
 Sales and profit dropped
Sales were 10,260 million yen, down 2.6% year on year. Although the non-face-to-face payment settlement market is still growing, the transaction conditions with major clients were revised, and OEM shrank. Operating profit was 1,099 million yen, down 46.5% year on year. While gross profit and its rate decreased due to the price strategies for major enterprises, etc., SG&A expenses augmented considerably through the active measures and investments, including the strengthening of personnel and promotion targeted at consumers. Neither sales nor operating profit reached the estimate (median of the range), but profit exceeded the minimum estimate.  As for liabilities, current liabilities augmented 1.1 billion yen from the end of the previous term, due to the increase in settlement deposits, etc. Total liabilities rose 1 billion yen from the end of the previous term to 13,677 million yen. The amount of treasury shares declined 300 million yen from the end of the previous term, while net assets increased 200 million yen from the end of the previous term to 8,780 million yen. Consequently, capital-to-asset ratio dropped 1.3% from 40.0% to 38.7%. (It is 78.5%, if the settlement deposits are excluded from assets and liabilities.)  The deficit of investing CF expanded due to the augmentation of payments for purchases of securities, etc. and the surplus of free CF decreased. The deficit of financing CF shrank, because the purchase of treasury stock, which had been posted in the previous term, was not posted. The cash position improved. (3) Regarding the outlook for business performance in the fiscal year June 2018
As of the date of the announcement of financial results for the fiscal year June 2017 (Aug. 7, 2017), the earnings forecast for the fiscal year June 2018 was not announced, because there were a lot of uncertainties that could affect business performance and it was difficult to estimate figures while the company aggressively engaged in promotional activities for popularizing "Bus Mori!" and "Shiharai-Hisho" and increasing the number of downloads of apps. The forecast will be announced when it becomes possible to estimate figures rationally. The dividend amount is to be 50 yen/share, unchanged from the previous term. (4) Topics
In Aug. 2017, the company started offering the electronic money service "Shiharai-Hisho" utilizing a smartphone app.◎ Start of the FinTech service "Shiharai-Hisho" (Outline of the service) "Shiharai-Hisho" is a server-based electronic money service that has been developed by the company since 2012, expecting the era of full-scale electronic money services. By using the Shiharai-Hisho app in a smartphone for payment, it is possible to settle the payment on the spot without a wire-transfer form or a credit card. With this service, users can pay anywhere, anytime, and since this is prepaid electronic money, they can manage money easily. After billing by the business, if a bill has not paid until just before a deadline, the "notification function" of the app will prevent users from missing the deadline.  It is possible to deposit electronic money into "Shiharai-Hisho" at banks and convenience stores that have formed alliances for the multi-payment service. The company has already formed a tie-up with Sumitomo Mitsui Banking and connected systems, and concluded a contract with Hiroshima Bank, and is proceeding with the formation of alliances with other banks. ◎ To mount "Bus Mori!" with "Smartphone Commuter Pass," a function to purchase a commuter pass for a route bus
The company developed "Smartphone Commuter Pass," a function to purchase a commuter pass for a route bus, in collaboration with JR Bus Kanto Co., Ltd. and installed it into "Bus Mori!," a smartphone app for booking and purchasing a bus ticket, and getting on a bus, in Mar. 2017. This service, which enables users to ride on a bus with "Smartphone Commuter Pass," is the first attempt in Japan, and was adopted by JR buses in Kanto, Tohoku, and Hokkaido regions. (Outline of Smartphone Commuter Pass) It has been common to apply for and purchase a commuter pass for a route bus at Ticket Reservation Office of each bus company or JR Reservation Ticket Offices (Midori-no-Madoguchi) at JR stations, but by using "Bus Mori!," it is possible to purchase and issue a worker's or student's commuter pass (Smartphone Commuter Pass) for a route bus through the easy operation of a smartphone app. (Some routes of JR Bus Kanto and the routes of JR Bus Tohoku will be covered as soon as preparation is completed, on or after Apr. 1, 2017.) ◎ Release of a "solution service for online enrollment procedures" for completing processes from enrollment procedures to the payment of an enrollment fee and tuition.
In Jun. 2017, the company announced that it would start offering the "solution service for online enrollment procedures" to colleges in fiscal 2017.(Outline of the service) The "solution service for online enrollment procedures" is a cloud service for announcing entrance exam passers and completing enrollment procedures and payment of an enrollment fee and tuition in a one-stop manner. The company made it possible to pay these charges via online instead of wire transfer for the first time in Japan. Colleges do not need to issue or send wire-transfer forms, while students can print out a wire-transfer form including a payee's account info and amount after choosing whether to pay at once or in installments. This system reduced errors in payment amounts. The convenience for students will improve, because it is possible to complete necessary procedures for enrollment and payment of an enrollment fee and tuition online. This service has been adopted by Tokai University, Hyogo University, Hyogo University Junior College, and Kyushu Sangyo University. |
| Regarding the New 5-Year Mid-Term Managerial Plan |
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"Shiharai-Hisho" and "Bus Mori!" are as described above. For "maintaining and improving the robust corporate structure," the company conducts the following activities. To divide business administration and execution with the aim of actualizing a slim, effective management system To organize an audit committee for securing the transparency and objectivity of business administration, and make more than half (3 out of 5) directors outside ones (the audit committee).( approved at the annual meeting of shareholders held in Sep. 2017.)To increase the number of operating officers by 3 for developing a system for attaining goals, while increasing sales staff for promoting Shiharai-Hisho and Bus Mori! In addition, the company is recruiting full-time employees for curbing and reducing outsourcing cost and conducting in-house production. It is possible to secure excellent personnel by utilizing the scholarship system "Doshin Mirai-kun WELLNET Scholarship" and developing relations with vocational high schools. |
| Conclusions |
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| <Reference 1: Outline of the new 5-year mid-term managerial plan> |
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Outline During the new 5-year mid-term managerial plan, the business environment surrounding WELLNET is expected to have massive changes, with the rapid development of FinTech and its implementation in addition to the beginning of the use and application of IoT. WELLNET has made active investments for turning this change into a new business opportunity, and aims to achieve an ordinary profit of ¥5 billion in the term ending Jun. 2021, which is the last fiscal year of the mid-term plan. Individual ProjectsA. FinTech Service - Shiharai-Hisho Shiharai-Hisho, a smartphone app, controls digital money on a server, and has the following functions. ① Users can add electronic money from any of allied banks. It is also possible to add money from other payment receiving agencies.
② Automatic reminder function, so business operators do not need to remind people to pay via mail.
③ The reminder function of "Hisho" will prevent users from "forgetting to pay inadvertently," which leads to improvements in money collection rate.
In addition, multiple small payments can now be made for digital content and other material, which have not been cost-efficient until now. Likewise, one-click payment, in which there has been a growing need for, is also possible. Furthermore, business operators in the domain of deferred payment will be able to cut costs for issuing invoices due to conventional paper invoices being switched to digital invoices. Regarding the distribution of Shiharai-Hisho, the company will proceed with the following promotions and make major efforts to expand and spread the app. ① Appealing to business operators who have already installed WELLNET's settlement system.
② Joint operations with allied banks.
③ A new settlement method will appear on the payment method window (provided by WELLNET) used by consumers million times a month.
④ Active consumer-oriented promotion.
B. Bus IT Project
The company will actively develop, release, and promote "Bus Mori! Series," which is the core of the Bus IT Project.The company released Bus Mori! MONTA, an in-vehicle terminal for authentication for intercity express buses, and in August 2016, they released a smartphone app, Bus Mori!, which is a heavily improved version of Bus Mori! NAVI. Since the increase of consumers who know, download and use this application is an important factor in turning a profit, they actively promote Bus Mori!. C. Open Innovation
The domain of WELLNET's business and related business has been undergoing a massive revolution with IoT, FinTech, etc., and at the same time there are growing business opportunities.The company intends to implement measures to seize those opportunities. Concretely, the company will strengthen the ties with universities, business entities and firms that possess expertise and technology to appropriately respond to these business opportunities. Also the company has been prepared to establish WELLNET Venture Capital, a CVC designed to develop a settlement related platform business by affiliating with other companies and invest in the research and development of financial services. D. Building the visualized profit structure system and the automated operation system
The company will visualize the basic information required to execute PDCA according to the productivity and profitability of each service in order to enhance ROI. The company will promote the smooth interaction in the operation so that it can prevent the back office from swelling during the company's expansion.
E. Governance - conducting proper corporate activities
WELLNET has established the following "WELLNET Arete" for representing company significance and behavioral policies for employees to aim for effective governance. Even if products change, the action philosophy that forms the foundation of the company will pass onto the employees.(Arete in Greek, means "virtue", "prowess" and "excellence".)  |
| <Reference2: Regarding corporate governance> |
 ◎ Corporate Governance Report
Last update date: September 28, 2017<Disclosure Based on the Principles of the Corporate Governance Code> In "Corporate Governance" of the corporate profile in the website of WELLNET, "the policy for the corporate governance code" is disclosed. Disclaimer
This report is intended solely for information purposes, and is not intended as a solicitation to invest in the shares of this company. The information and opinions contained within this report are based on data made publicly available by the Company, and comes from sources that we judge to be reliable. However we cannot guarantee the accuracy or completeness of the data. This report is not a guarantee of the accuracy, completeness or validity of said information and or opinions, nor do we bear any responsibility for the same. All rights pertaining to this report belong to Investment Bridge Co., Ltd., which may change the contents thereof at any time without prior notice. All investment decisions are the responsibility of the individual and should be made only after proper consideration. Copyright(C) 2017, All Rights Reserved by Investment Bridge Co., Ltd. |
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