BRIDGE REPORT
(3254)

東証1部

投資家向けIRセミナープレミアムブリッジサロン開催!
Pressance Corporation Co., Ltd. (3254)
President Shinobu Yamagishi
President Shinobu Yamagishi
Corporate Profile
Company
Pressance Corporation Co., Ltd.
Code No.
3254
Exchange
TSE 1st Section
Industry
Real estate business
President
Shinobu Yamagishi
Address
Crystal Tower, 1-2-27 Shiromi, Chuo-ku, Osaka
Year-end
End of March
URL
Stock Information
Share Price Number of shares issued Total market cap ROE (Actual) Trading Unit
¥1,430 61,613,600 shares ¥88,107 million 19.2% 100 shares
DPS (Est.) Dividend Yield (Est.) EPS (Est.) PER (Est.) BPS (Actual) PBR (Actual)
¥25.00 1.7% ¥207.04 6.9times ¥1,008.49 1.4times
*The share price is the closing price on June 21. The number of shares issued was taken from the latest brief financial report.
ROE and BPS are the values for the previous term.
 
Earnings Trends
Fiscal Year Net Sales Operating
Income
Ordinary
Income
Net Income EPS DPS
Mar. 2012 (Actual) 36,998 7,613 7,464 4,096 68.10 35.00
Mar. 2013 (Actual) 42,349 9,393 9,329 5,351 88.95 35.00
Mar. 2014 (Actual) 51,755 10,334 10,264 6,286 103.44 50.00
Mar. 2015 (Actual) 65,641 12,262 12,065 7,758 126.27 50.00
Mar. 2016 (Actual) 78,990 14,057 13,798 9,194 152.31 60.00
Mar. 2017 (Actual) 101,033 15,645 15,414 10,526 178.99 84.60
Mar. 2018 (Forecast) 126,562 18,301 17,818 12,176 207.04 25.00
* The forecast is from the company.
*4-for-1 share split was conducted on Oct. 1, 2016.
*From the FY 3/16, net income is profit attributable to owners of the parent. Hereinafter the same applies.
 
This report introduces Pressance Corporation's earnings results for the fiscal year March 2017, future growth strategies and so on.
 
Key Points
 
 
Company Overview
 
Pressance Corporation is an independent condominium developer that plans, develops, and sells family and single-room condominiums mainly in the Kinki, Tokai, and Chukyo regions, based on the business model of "creating high added value for real estate." The company supplies the largest number of condominium units in each of the Kinki, Tokai, and Chukyo regions. In Japan, the company ranks 4th. Its major strengths include plentiful experience of supplying condominiums, large market share, high sales capacity, sound financial position, and an excellent product appeal.
 
Corporate history
President Shinobu Yamagishi, who had accumulated experience in a leading condominium developer, established Nikkei Prestige Co., Ltd., the predecessor of Pressance Corporation, for the purpose of conducting real estate business in October 1997. The company released the first original brand condominium "Pressance Namba East" in 1998, and then the first originally developed condominium "Pressance Shinsaibashi East" in 2000, accumulating experience steadily.
In 2002, the company was renamed "Pressance Corporation Co., Ltd." From the Kinki region, the company expanded its business area and released "Pressance Nagoyajo-mae," the first originally developed condominium in the Tokai area, in 2003, expanding its operations steadily. Then, it was listed in the second section of Tokyo Stock Exchange in December 2007.
In 2008, it opened Tokyo Branch, commencing business operation in the Tokyo Metropolitan Area. Thanks to the steady expansion of its business, the company withstood the effects of the bankruptcy of Lehman Brothers, and kept growing. Then, it was listed in the first section of the Tokyo Stock Exchange in October 2013.
 
Corporate ethos
The "Light up your corner" spirit
"Light up your corner" is a teaching by one Buddhist monk called Saicho, the founder of Enryaku-Ji Temple in Shiga Prefecture and the Tendai sect of Buddhism. The slogan means that each and every individual should try their hardest in their own place and shine a light around by working for others, which in turn will brighten up society as a whole and eventually bring peace and happiness to the whole world. It is the original and still valid company motto proposed by President Yamagishi, himself a Shiga native.
 
 
Additionally, the company places a great value in "each and every individual trying their hardest in their given place" and has the idea of "Accomplishing ordinary tasks thoroughly and carefully enables us to achieve extraordinary results" as the precept of the whole company.
 
Market environment, etc.
◎ Market environment
According to the survey by the Real Estate Companies Association of Japan, the number of condominiums for sale in fiscal 2016 (April 2016 to March 2017) was 12,820 in the Kinki region, 2,157 in the Chubu region, 30,459 in the Tokyo Metropolitan Area, totaling 45,436 in the three areas.

According to the company's data (source: Real Estate Economic Institute) in the category of condominiums for sale, the company enjoys high market shares; it ranks first in the Kinki region for the seventh consecutive year (2,435 in 2016), ranks first in the Tokai and Chukyo regions for the fifth consecutive year, ranks first in Nagoya city for the sixth consecutive year (768 in 2015), and ranks fourth nationwide (3,225 in 2016).
Ranking for the supply of condominiums for sale by areas in 2016
 
 
◎ Competitors
Pressance Corporation was compared with the enterprises listed in the above table from various aspects.
 
 
Compared with competitors, the scale of Pressance Corporation is by no means large, but it has some notable characteristics: the small amount of completed inventory, high capital-to-asset ratio, and high profitability (ordinary income rate and ROE).
Meanwhile, PBR exceeds 1, but PER remains low despite that its share price has risen.
It is necessary to further increase investors' awareness of the company and to promote understanding of its growth strategy.
 
Business contents
Pressance Corporation has two business segments: "real estate sale business," in which the company plans, develops, and sells single-room condominiums for investment and family condominiums for actual residency, and "other business," in which the company manages the lease of single-room apartments for the benefit of the owners and the building maintenance
 
◎ Product mix
The outlines of the condominiums handled by the company are as follows:
The approximate average price of a property is 17 million yen for single-room condominiums and 32 million yen for family condominiums.
 
 
* The sale of condominium buildings includes the wholesale of the entire or part of each condominium building to condominium dealers.
* The sale of other housing includes used houses and single-family houses, other than newly built condominiums.
* The sale of other real estate includes commercial stores and sites for development, other than housing.
* Business accompanying real estate sale includes the agent commission for condominium sale and paperwork accompanying real estate sale.
 
 
◎ Sales by region
The cumulative sales volume during a period from November 1998, in which the company started selling original brand condominiums, to the end of March 2017 are 510 buildings and 33,156 condominium units nationwide, mainly in the Kinki, Tokai and Chukyo regions.
 
 
 
In the previous fiscal year ended in March 2017, the Kinki region accounted for 68.9% of the total number of condominiums sold, and the Tokai and Chukyo regions made up 27.4%.

Pressance Corporation targets the Kinki, Tokai, and Chukyo regions for selling single-room condominiums, and Tokyo and Okinawa in addition to the above regions for selling family condominiums. Although the Tokyo Metropolitan Area has a large market scale, the company focuses on selling only family condominiums, considering the cost of land and the selling price.
The company plans to enhance its brand, to increase market share further in the Kinki, Tokai as well as Chukyo regions and to proceed with deployment in new regions, such as Hiroshima and Hakata.
 
Characteristics and strengths
(1) Plentiful experience of supplying condominiums and large market share
As mentioned above, the company supplies the largest number of condominiums not only in the Kinki region, where it is headquartered, but also in the Tokai and Chukyo regions. It also ranked fourth nationwide in 2016.
Its large share brings some significant advantages, including the reduction in construction cost and the enhancement of information gathering capability.
 
(2) Strong selling power
On the sale of single-room condominiums, the entire sales persons are selling one real estate during the same period of time. In this way, in-company competitions are intensified and their motivation is kept high.
Since sales staffs sell only the brand developed in-house, they are experts at the specs and features of their real estate, and customers rely on them.
In addition, the company makes efforts to cultivate potential customers in various ways such as holding a seminar and flexibly responds to the changes in demand and market conditions.

Personnel are the driving force for strengthening and growing sales capabilities. Therefore, the company puts considerable energy into personnel education. The strong selling capability of the company originates from its vast educational effort.
It is important to train new employees so that they will become beneficial in actual business as soon as possible. The company trains new employees to accompany their seniors, and they experience vital business scenes, such as talking with customers, making documents and other activities critical to close a deal. Thus, accumulating successful experiences, new employees will grow to complete each sale by themselves in a short period of time.

Because of these factors, the company sells out condominiums early and has stable sales.
 
(3) Sound financial position
Pressance Corporation keeps capital-to-asset ratio high and can procure lands in an advantageous manner, based on high profit rate, the small amount of finished goods inventory, early recovery of funds and early repayment of project loans.
 
 
In the term ended March 2017, gross and ordinary income rates tend to drop due to the increase in land purchasing prices and construction cost.
Although active land procurement resulted in increasing debts, decreasing capital-to-asset ratio and increasing the dependence on interest-bearing liabilities, the company thinks that these conditions are not so serious as to affect the financial soundness of the company.
 
(4) Excellent product competitiveness
The customers are highly satisfied with "locations," "facilities" and "prices."
As for "locations," the company puts importance on convenience within 10 minutes on foot from a major station, especially in the urban area.
As for "facilities," the company puts emphasis on luxury, comfort and functionality, placing high added value on real estate by equipping a modular bathroom with a built-in dryer ventilator, floor heating systems with gas-heated hot water, soundproof window and noise insulation wooden floors as standard facilities.
As for "prices," the company has achieved high cost-effectiveness by setting reasonable prices while keeping luxury.
Through these efforts, its condominiums possess high asset and brand values in the long term.
 
 
(5) Outstanding information collecting capability
For condominium developers with the desire for business expansion, it is vital to collect information on good sites from brokers or financial institutions ahead of any other competitors.
In the wake of the bankruptcy of Lehman Brothers, while many competitors became unable to procure land, Pressance Corporation actively procured land because of its good financial standing.

For land brokers, Pressance Corporation is the most important customer since it actively procured lands even during the downturn in economy. It is also beneficial to brokers that Pressance Corporation makes quick decisions, compared with other large companies. As the result, Pressance Corporation won a reputation as a trade partner with significant benefits. Consequently, brokers started offering the latest information on land to Pressance first.
This relation has grown stronger and stronger after the aftershock of Lehman's fall subsided and is one of the reasons why the company is highly competitive.
Because of Pressance Corporation's fast decision-making and strong brand power, an increasing number of brokers contact Pressance first rather than other large developers even on large-scale projects.
 
(6) Stable earning capability
Pressance Corporation was listed in the stock market in December 2007, and it has released its financial statements 9 times from the term ended March 2009 to the term ended March 2017. Comparing the initial estimates and the actual results of sales and ordinary income, sales did not reach the initial estimates several times, however, ordinary income has never failed to reach the initial estimates.
Without being affected by the real estate market situation, the company can earn profit stably and continuously. This is a remarkable characteristic of this company.
 
 
 
ROE is high, because margin (net income margin) is high.
Since the three indices (i.e. operating income, ROE, and market capitalization) in the past 3 years satisfied certain criteria, Pressance Corporation was included in JPX-Nikkei Index 400* in August 2015. In addition, the stock of the company was designated as one of the stocks used for determining the new index "JPX-Nikkei Mid and Small Cap Index *2" in Dec. 2015. The company plans to make efforts to keep ROE high.
 
* JPX-Nikkei Index 400
This is the share price index composed of the shares of "400 companies with high appeal for investors" which meet requirements of global investment standards, such as efficient use of capital use and investor-focused management perspectives.

*2 JPX-Nikkei Mid and Small Cap Index
The range of small- to medium-sized stocks is determined according to market cap and trading volume, and they are ranked according to ROE and cumulative operating income in the past 3 years. This is a share price index based on 200 stocks of companies that are attractive from the viewpoint of investment, considering the qualitative conditions, such as the company having more than one independent outside director and producing the English versions of documents.
 
 
Fiscal Year March 2017 Earnings Results
 
 
Healthy growth despite increased sales and decreased profit
The sales were 101,083 million yen, up 28% year on year, crossing the 100,000 million yen mark for the first time. Although gross profit rate declined 2.5% due to increase in the cost to acquire development sites and high construction cost, gross profit increased. SG&A expenses rose, but it was offset by sales growth. Operating income increased 11.3% year on year to 15,645 million yen, and ordinary income grew 11.7% year on year to 15,414 million yen.
Operating income, ordinary income, and net income increased in double digits for the 7th consecutive term and marked a record high.
It was as was initially estimated.
 
 
(Real estate sale business)
The sales of Pressance Shin-Osaka The City (186 condominium units in total) of the single-room condominium "Pressance Series," etc. have been healthy.
 
* The sale of condominium buildings means the wholesale of the whole or part of each condominium building to condominium dealers.
* The sale of other housing means the sale of houses, including used houses and detached houses, other than newly built condominiums.
* The sale of other real estate means the sale of real estate, including commercial stores and sites for development, other than housing.
* Business accompanying real estate sale includes the agent commission for condominium sale and paperwork accompanying real estate sale.
 
(Others)
The performance of real estate for lease owned by the company has been healthy, and the income from rents increased.
 
 
Real estate for sale was 14,300 million yen, up 10,100 million yen from the end of the previous term. Real estate for sale in process was 122,100 million yen, up 33,700 million yen from the end of the previous term.
Both short-term interest-bearing liabilities and long-term interest-bearing liabilities increased, and total interest-bearing liabilities were 101,100 million yen, up 44,300 million yen from the end of the previous term.
As a result, capital-to-asset ratio dropped by 8.4% to 32.0%.

The inventory assets of acquired sites, which are calculated by subtracting construction fees, etc. from the inventory assets in the BS (sum of real estate for sale and real estate for sale in process), was 19,264 million yen (5,103 units) for single-room condominiums and 46,715 million yen (5,850 units) for family condominiums.
Under the assumption that the company will sell about 1,700 single-room condominiums and about 1,900 family condominiums every term from now on, it can be said that the company has already secured enough sites for both types for the coming three terms till the term ending March 2020.
The inventory assets of hotels, which are the company's current focus, were 5,518 million yen (1,180 units), including the hotels to be sold during the current and next terms.
 
 
Fiscal Year March 2018 Earnings Estimates
 
 
Sales and profit are estimated to grow for the 8th consecutive term, both making record highs.
The sales are estimated to grow 25.2% year on year to 126,562 million yen.
Due to augmentation of the costs for acquiring development sites and constructing condominiums, gross profit ratio is estimated to decrease by 0.9%. Accordingly, SG&A expenses are estimated to increase about 25.6% year on year due to growing merchandising expenses necessary for such as sale of model rooms associated with increase of sales of family condominiums and increase in employees associated with business expansion. However, it will be offset by sales growth, and operating income is projected to grow 17.0% year on year to 18,301 million yen.
Its dividends will be 25 yen/share. Payout ratio is projected to be 12.1%.
 
 
 
 
Progress of Development Strategies
 
(1) Progress of Family Condominiums Business
Progress of sale of major large-scale projects is as follows.
 
a) Pressance Legend Sakaisuji Honmachi Tower
This is the first project in Osaka in which Pressance Corporation builds an earthquake-resistant residential skyscraper with 30 stories and 337 units. The size of each unit is planned to range from a 40 ㎡ for compact type to an over 130 ㎡ for family type. This tower condominium is also planned to have various shared facilities such as party rooms, sky lounges and fitness rooms.

The sales of the tower began in January 2016. As of the end of March 2017, 289 units are under contract (contract rate 85.8%).
It is making a steady progress toward the completion and handover in March 2018.
 
 
b) "Pressance Legend Lake Biwa"
A family condominium building with a total of 486 units was built on the shore of Lake Biwa. This is one of the largest projects ever in the area, and every condominium unit will enjoy a lake view. The location has an easy access not only to Kyoto but also to Osaka. There are many community facilities such as a large shopping complex in the surrounding areas.
The sales of the condominium began in August 2016. As of the end of March 2017, 364 units are under contract (contract rate 74.9%).
It is making a steady progress toward the completion and handover in June 2018.
 
 
(2) Progress of Area Strategies
a) Area strategies - expanding in new areas -
As new business areas, the company decided to expand its business into Hiroshima and Hakata, and the projects are underway. Both areas offer strong condominium markets because they have large population, many company offices, schools and commercial facilities.
These areas are also well known as tourist destinations, and in-bound demand is expected to increase. Therefore, the company will also run the hotel business in these areas. Similar to the businesses in the Tokai and Chukyo regions, the company is planning to increase its share by steadily supplying single-room, family and mixed condominiums in addition to hotels or single homes that match to the community's needs in the areas.
 
 
 
 
(3) Progress of M&A strategies
Followed by the acquisition of 100% share of SANRITSU PRECON Co., Ltd. (Okazaki city, Aichi) in November 2016, the company made Lala Place Co., Ltd. a 100%-owned subsidiary in April 2017. Its head office is in Osaka, and its main business is to plan and sell single-room condominiums for investment in the Kinki region.

The reason for having acquired it is that the company is anticipating to strengthen its sales capacity for the sales of family condominiums in Okinawa as Lala Place has many experienced sales staff who can immediately contribute to strengthen the sales capacity of the company and sells family condominiums in Okinawa.
 
(4) Hotel business development
The company is currently developing 14 properties. It also purchased a hotel in operation.

The company promotes hotel business from various directions based on the following 3 scenarios, considering to eventually sell them to REIT or fund after continuously accumulating track records.
 
 
 
 
(5) Progress on overseas business
<Progress on the overseas project with Sanei Architecture Planning Co., Ltd.>
Project in Vietnam
The project for large-scale development of houses for sale in Ho Chi Min city in Vietnam is undertaken by "PROSEHRE Co., Ltd.", which was jointly established with Sanei Architecture Planning Co., Ltd. (1st Section of Tokyo Stock Exchange, 3228), and is now applying for permission of a partial change from the initial construction plan.
The development is progressing without problem towards completion in April 2020 as was initially planned. The sales are projected to begin in November 2017.

Site area: 10,076 ㎡
Construction period: Beginning in October 2017, ending in April 2020.
Total estimated sales from the project: About 5.8 billion yen
 
Project in the USA
The company will begin a real estate development project in the USA in collaboration with Sanei Architecture Planning Co., Ltd.

Population in the USA is growing due to high birth rate which is exceptional among developed countries. Furthermore, it is anticipated that the demand for the houses for both sale and rent among the millennials (people who were born from the 1980s to 1990s) will show healthy growth.
In order to respond to such demands, the company and Sanei Architecture Planning Co., Ltd. has jointly established a local company in California, and a real estate development project called "Inglewood Project" will begin.

The site area is 3,460 ㎡, and the total floor area is 9,856 ㎡. The total number of units is 116.
The construction will begin in August 2017 and complete in February 2019.
The sales estimated from the entire project is projected to be about 4.7 billion yen.
 
 
Conclusions
 
The projected delivery amount of the term against the projected sales of the term for the condominium sales business has already reached 70.8%, indicating only small risks of downward swing of business performance. In addition, hotel business is showing steady growth, which will contribute to further expansion of the business performance. We would like to pay attention to the progress of its development strategies including expansion in the other regions and overseas businesses.
 
 
<Reference: regarding corporate governance>
 
 
◎ Corporate governance report
Last modified: June 23, 2016.
 
 
 
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, Investment Bridge Co., Ltd. All Rights Reserved.
 
 
PAGE TOP