BRIDGE REPORT
(3254)

東証1部

プレミアムブリッジサロン 動画視聴はこちら
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
¥1,457 62,106,400 shares ¥90,489 million 19.2% 100 shares
DPS (Est.) Dividend Yield (Est.) EPS (Est.) PER (Est.) BPS (Actual) PBR (Actual)
¥25.00 1.7% ¥207.04 7.0times ¥1,008.49 1.4times
*The share price is the closing price on December 8. 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 first half of fiscal year March 2018, future growth strategies and so on.
 
Key Points
 
 
Company Overview
 
Pressance Corporation is an independent condominium developer that plans, develops, sells and manages 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 region for the seventh consecutive year and, Tokai and Chukyo regions for the fifth consecutive year. 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 2016), 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.
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 September 2017 are 551 buildings and 36,277 condominium units nationwide, mainly in the Kinki, Tokai and Chukyo regions.
 
 
 
In the 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.
 
 
The First Half of Fiscal Year March 2018 Earnings Results
 
 
Healthy growth despite increased sales and decreased profit
Sales were 66,241 million yen, up 7.7% year on year which is attributed to the different composition of condominium types sold mainly because of varying delivery times. The rise in selling as well as general and administrative (SG&A) expenses include the increased merchandising expenses for model rooms associated with the expanding sales volume of family condominiums and the increase in the number of employees following the business expansion. As the result, operating income and other incomes decreased; however, both sales and profit are making a good progress compared to the forecast.

The company is constructing each condominium in a construction period as short as possible, aiming to reduce costs. In addition, since multiple condominiums are constructed simultaneously, the number of condominium units to be transferred (sales to be recorded) varies by quarter.
 
 
* 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.
 
The growing sales of condominium buildings covered the shrinking sales volume of single-room and family condominiums.
The decline in sales of single-room and family condominiums resulted from the timing of delivery (recording of sales) of condominiums that varies with when each construction project is completed. Although sales of family condominiums shrank year on year, according to the company’s plan for this term, the quantity of condominiums delivered (recording of sales) will be large in the third and fourth quarters, meaning that sales are growing healthily. The company started delivery (recording of sales) of hotels this term.
 
 
Real estate for sale in process was approximately 145,700 million yen, up 23,500 million yen from the end of the previous term. Total assets were about 216,000 million yen, up 30,700 million yen from the end of the previous term. Short-term and long-term interest-bearing debts grew respectively by 13,500 million yen and 12,100 million yen , resulting in total interest-bearing debts of about 126,700 million yen, up 25,600 million yen from the end of the previous term. Consequently, asset-to-capital ratio was 30.7%, down 1.3% from the end of the previous term.

The land price of acquired sites for condominiums were 25,368 million yen (5,759 units) for single-room condominiums and 53,984 million yen (6,611 units) for family condominiums, calculated by subtracting construction fees and other related fees from the inventory assets in the balance sheet (the sum of real estate for sale and real estate for sale in process).
Assuming that the company will sell about 1,700 single-room condominiums and about 1,900 family condominiums every term from now on, it seems that the company has already secured the sites enough for sales volume for the next 3.4 years till February 2021 regarding single-room condominiums and those for 3.5 years till March 2021 regarding family condominiums.
Also, the land price of acquired sites for sale of condominium buildings business were 9,898 million yen (2,447 units). Comparing with 900 condominium buildings sold in the previous term, the company has acquired sites for condominium buildings for the next 2.7 years till July 2020.
The land price of acquired sites for sale of hotels were 12,805 million yen (2,117 units), and the company has already acquired sites for hotels by the end of FY March 2020.
 
 
Operating CF became negative mainly due to the increased inventory assets. The decrease in the purchase of noncurrent assets resulted in a decrease in deficit of investing CF. The deficit of Free CF increased.
Financing CF grew further as a result of the increase in short-term loans and proceeds from issuance of bonds with subscription rights to shares.
The cash position improved.
 
 
Fiscal Year March 2018 Earnings Estimates
 
 
Business forecast is unchanged. Sales and profit are estimated to grow for the 8th consecutive term, both making record highs.
Sales are estimated to be 126,562 million yen, up 25.2% year on year.
Gross profit ratio is estimated to drop by 0.9%, which is attributed to the growing costs for acquiring development sites and the building construction costs that remain high. SG&A expenses are estimated to go up by 25.6% year on year due to temporarily rising expenses for merchandising model rooms associated with the expanding sales volume of family condominiums as well as the increase in the number of employees following a business expansion; however, it will be offset by sales growth. As a result, operating income will be 18,301 million yen, up 17.0% year on year. The dividend will be 25 yen/share. Payout ratio is projected to be 12.1%.
 
 
“To be transferred this term” is the sum of the actual (cumulative total) number of units and amount transferred as of the second quarter and the estimated number of units and amount to be transferred in the third and fourth quarters under completed sales contract, with their sales volume for this term clearly estimated as of the second quarter.
The rate of progress against the estimated sales for this term has reached almost 100%.
 
 
 
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 m2 for compact type to an over 130 m2 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 September 2017, 326 units are under contract (contract rate 96.7%).
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 September 2017, 472 units are under contract (contract rate 97.1%).
It is making a steady progress toward the completion and handover in June 2018.
 
 
The company cites the following 3 points as reasons why its family condominiums have gained in tremendous popularity:
 
<1. Virtuous sales cycle by making full use of the dominant strategy>
The company operates galleries each of which features multiple model rooms, enabling customers who consider purchasing condominiums to efficiently look around multiple condominiums all at once. This results in a higher contract rate, which consequently boosts the sales efficiency of sales personnel and strengthens their motivation. In addition, the costs for constructing model rooms can be reduced. Furthermore, pricing has been competitive .
The company will achieve further dominance by continuing to expand the number of both condominiums and customers.
 
<2. Comprehensive strength of the leading company in the field of real estate investment>
The following 3 kinds of strengths are the key:
The first strength is a synergy with single-room condominiums for investment.
It is possible for the company to approach the residents of a massive quantity of single-room condominiums for investment, which is 282 buildings, or 14,478 units, as of the end of March 2017, about purchasing family condominiums. As the residents have lived in the rooms supplied by the company, they have a great sense of security and trust in the company and its condominiums.
In addition, regarding family condominiums, a trend of relocation is growing nowadays, in response to which the company can provide knowhow necessary for relocation. Consequently, use of family condominiums as real estate for investment has created new sales opportunities.

The second strength is an integrated system that can consistently offer services, ranging from site purchase to planning, sale, and management.
The business efficiency is great, and high quality and optimum prices have been realized. In addition, as the company can support customers even in resale after purchase and operations of condominiums for rent, customers can have a strong sense of security when they buy condominiums from the company.

The last strength is the overwhelming number of condominiums supplied by the company, which is ranked 1st for 7 consecutive years in the Kinki region and for 5 consecutive years in the Tokai and Chukyo region.
In addition to its advantage in obtaining information on sites earlier than any other companies, the company can make product proposals through its unique method for site acquisition and planning even for the sites with the conditions that are not suitable enough to family condominiums.
 
<3. Sales and promotional capabilities that other companies cannot imitate>
The company’s employees visit customers’ houses kindly and give advice necessary for purchasing family condominiums, including how to take out loans, location conditions and the market rate in a relevant area, through which the company have won trust. Furthermore, the “introduction/additional purchase” campaign which the company is conducting to a large number of their customers is one of its unique promotional activities.
In addition, it has successfully and synergistically enhanced the advertising effect by placing advertisements of multiple condominiums intensively in each area.
 
(2) Topic regarding the single-room condominium business
The business environment surrounding single-room condominiums continues to be favorable.
The occupancy rate of the single-room condominiums managed by the company for rent remains at a high level exceeding 97% both in the Kinki region and in the Chukyo and Tokai region, and there is almost no vacancy with the occupancy rate of 97.67% as of the end of September 2017. Accordingly, the buyers of the condominiums in inner-city areas handled by the company can earn income almost continuously from condominium rent. Thus, high occupancy rate is a strong tailwind for selling single-room condominiums for investment.
In addition, the number of units managed for rent is cumulatively growing in proportion to the increasing sales volume of newly-built condominiums, resulting in a steady rise in the company’s income from condominium management as a stable source of revenue.
 
 
(3) Hotel business development
The company is currently developing 19 hotels, including 3 properties newly added in and after July 2017. It also purchased a hotel in operation.

The company promotes the hotel business from various directions based on the following 3 scenarios, considering eventually selling them to REIT or fund after continuously accumulating track records.
 
 
 
 
 
Interview with Vice President Doi
 
We interviewed Vice President Doi about various matters, including the immediate situation and messages for investors.
 
"The progress in business performance is as projected. Our company has certainly taken in customers' demand by supplying a large number of condominiums, and besides, we are making steady progress with purchase."
As of this moment, our company has anticipated fluctuations of costs, such as building material costs and personnel expenses, and sale of condominiums is as forecasted in the beginning of this term, which means that we are making healthy progress. Customers' intention of purchasing condominiums is vigorous.
There are not so many developers, like our company, which have succeeded in supplying properties in exact regions and places where customers are looking for condominiums. We have successfully taken in demand through diverse approaches, including pricing, with the aim of becoming a company that is chosen first by customers.
Furthermore, our company has certainly acquired sites at a high rate even when competition exists. As we have raised funds on a continuous basis even after the 2008 financial crisis and accumulated results, reliability and trust of financial institutions in our company are great. We are steadily procuring sites for about next 3 years.
 
"The hotel business is becoming profitable on a steady basis. We will pursue approaches while taking risks into account."
It is certain that the hotel business is contributing to profit.
In general, hotels are owned and actually operated by a company itself for 6 months to 1 year from the completion of construction, and they are sold to hotel operation companies or REIT after actual business results (the yield) were obtained. In contrast, as the location of sites our company acquires is usually ideal, requests for purchasing hotels are made even before construction is completed.
It is projected that the sales value will be higher after operations were started than before the start of operations; however, taking risks into account, our company has pursued approaches that attach weight to a turnover of the invested capital.
 
"Our company will meet the expectations of shareholders and investors by multiplying 'double-digit profit growth' and 'continuous rise in payout ratio.'"
Our company has achieved a double-digit profit growth on a steady basis and will continuously strive to realize growth in double digits. Accordingly, we have purchased sites for the next 3 years in preparation for attaining the growth.

In addition to the steady profit growth, our company plans a proactive return of profit by sequentially raising payout ratio.
As it is necessary to consider the balance between investment (purchase of sites) and shareholder return, we cannot give a specific rate of increase in payout ratio as of this moment; however, our company will fulfill the expectations of shareholders and investors by enhancing corporate value and increasing profit return through multiplication of "double-digit profit growth" and "continuous rise in payout ratio." We would like to kindly ask for continued support from all of you.
 
 
Conclusions
 
The projected delivery amount of this term against the projected sales of the term for the condominium sales business, which was 70.8% at the beginning of this term and 88.1% as of the end of the first quarter, grew further to 98.2% at the end of the second quarter. The growth rate is higher than that of the previous term, indicating that it is quite certain that the company achieves the forecast and there may be even a possibility of an upturn.
We would like to pay attention to the progress for the third and fourth quarters from the short-term perspective made by the company, which is propelling proactive shareholder return by multiplying “profit growth” and “improvement of payout ratio.” Furthermore, investors would like to have a better and clearer idea of the medium-term sales and profit level of the company.
 
 
 
<Reference: regarding corporate governance>
 
 
◎ Corporate governance report
Last modified: June 26, 2017.

<Major principles that have not been followed, and reasons>
The company states, "Our company conducts each principle of the Corporate Governance Code."
 
 
 
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) 2018, Investment Bridge Co., Ltd. All Rights Reserved.
 
 
PAGE TOP