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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
¥1,778 62,365,600 shares ¥110,886 million 20.8% 100 shares
DPS (Est.) Dividend Yield (Est.) EPS (Est.) PER (Est.) BPS (Actual) PBR (Actual)
¥35.00 2.0% ¥269.09 6.6 times ¥1,221.10 1.5 times
*The share price is the closing price on June 7. The number of shares issued was taken from the latest brief financial report.
ROE and BPS are the values for the previous fiscal year.
 
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) 101,083 15,645 15,414 10,526 178.99 84.60
Mar. 2018 (Actual) 134,059 20,362 19,858 13,757 232.58 29.40
Mar. 2019 (Forecast) 152,471 24,541 23,661 16,132 269.09 35.00
* The forecast is from the company.
*4-for-1 share split was conducted on Oct. 1, 2016. EPS has been revised retroactively.
*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 ended March 2018, medium-term management plan and more.
 
Key Points
 
 
Company Overview
Pressance Corporation is an independent condominium developer that plans, develops, sells and manages family-type and studio condominiums mainly in the Kinki and Tokai-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 the Kinki region for the eight consecutive years as well as Tokai-Chukyo region for the six consecutive years. In Japan, the company was ranked in the 2nd place. Its major strengths include plentiful experience of supplying condominiums, large market share, outstanding sales capabilities, 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 on 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 on 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 guideline for the whole company. Market environment, etc. ◎ Market environment According to data provided by the company (Source: Real Estate Economic Institute), the number of condominium units provided during 2017 in the Kinki area is 19,560, and that in Tokai-Chukyo area is 4,753. Pressance has provided 3,845 units in the Kinki area and 1,322 units in the Tokai-Chukyo area. It has held the number one market share in the Kinki area for eight consecutive years and in the Tokai-Chukyo area for six consecutive years. It is the second largest provider of condominiums in Japan; with a total of 5,267 units nationwide. ◎ Competitors Below is a comparison between Pressance Corporation and major competitors from various aspects. *The values compared are from the results of the previous fiscal year. Market cap, PER, and PBR are based on the closing price on June 1, 2018. Compared with competitors, the scale of Pressance Corporation is not so large, but it has some notable characteristics: the small amount of finished goods inventory and high profitability (ordinary income margin 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 studio condominiums for investment and family-type condominiums for actual residency. And in "other business," the company manages the lease of studio apartments for the benefit of the owners and the building maintenance ◎ Product mix The lineup of the condominiums handled by the company are as follows: The approximate average price of a property is 17 million yen for studio condominiums and 38 million yen for family-type 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 March 2018 are 593 buildings and 38,940 condominium units nationwide, mainly in the Kinki and Tokai-Chukyo regions. Pressance Corporation targets the Kinki and Tokai-Chukyo regions for selling studio condominiums and Tokyo and Okinawa regions in addition to the above regions for selling family-type 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 and Tokai-Chukyo regions and to expand its business to new regions, such as Hiroshima and Hakata. Feature and advantage (1) Abundant past record 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-Chukyo region. It also ranked second nationwide in 2017. Its large share brings some significant advantages, including construction cost reduction and the enhancement of information-gathering ability. (2) Strong sales force The company's basic sales policy is to "sell all units before construction is completed," and it has mostly executed. On the sale of studio condominiums, the entire sales persons sell a piece of real estate during the same period of time. In this way, in-company competitions are intensified, and sales motivation is kept high. Since sales staffs sell only the brand developed by the company, they are the experts at the specs and features of their condominiums so that customers rely on them. In addition, the company makes efforts to cultivate potential customers in various ways such as holding a seminar and also flexibly responds to the changes in demand and market conditions. Personnel are the driving force for growth. Therefore, the company puts considerable energy into personnel education. The strong sales force of the company originates from its vast educational effort. It is important to train new employees in order to make them beneficial in actual business as soon as possible. The company trains new employees to accompany their seniors and experience vital business scenes, such as talking with customers and making documents. Consequently, accumulating successful experiences makes new employees to grow to complete deals by themselves in a short period of time. Because of these factors above, the company has sold out condominiums at an early point and has achieved stable sales. (3) Competitive products 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 works, its condominiums possess high asset and brand values in the long term. (4) Outstanding information-gathering ability For condominium developers, it is vital to attain good information from brokers or financial institutions ahead of any other competitors. When other companies in the industry were stuck with a lot of finished goods inventory and could no longer procure new land due to the Lehman shock, Pressance Corporation was financially doing well and recognized such situations as a good opportunity to begin actively purchasing land. 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 a result, Pressance Corporation won a reputation from land brokers 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. (5) Stable earning power Pressance Corporation was listed on the stock market in December 2007, and it has released its financial forecast 10 times from the fiscal year ended March 2009 to the fiscal year ended March 2018. Comparing the initial forecasts and the actual results of sales and ordinary income, sales did not reach the initial forecasts a few times, but ordinary income has never failed to reach the initial forecasts. Without being affected by the real estate market condition, the company can earn profit stably and continuously. This is a remarkable feature of the company. A high ROE has been realized, backed by high net income margin. Since the three indices (i.e. operating profit, 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 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 capital utilization 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 profit 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 releasing English documents.
 
 
Fiscal Year ended March 2018 Earnings Results
Sales and profits increased, exceeding the revised forecast and marking record highs. Sales were 134 billion yen, up 32.6% year on year. Sales were favorable in all segments of the real estate sale business. Operating profit was 20.3 billion yen, up 30.1% year on year. SG&A expenses augmented 19.8%, but they were offset by increased sales. Ordinary income was 19.8 billion yen, up 28.8% year on year. Both sales and profits exceeded revised forecasts, marking record highs. The number and the amount of studio condominiums decreased from the previous fiscal year due to a decline in the number of properties transferred during FY3/18, but sales were healthy. Sales of family-type condominiums greatly increased. Sales of condominium buildings also increased, strengthening land procurement. The company began transferring hotel property (recorded sales) in the fiscal year ended March 2018. Due to active acquisition of lands for development, there was an increase in the amount of real estate for sale in process. As a result, total assets grew, by 60 billion yen from the end of the previous fiscal year, to 245.3 billion yen. Total liabilities rose by 44.5 billion yen to 170.2 billion yen due to an increase in both short-term and long-term interest-bearing debts and corporate bonds. Net assets grew by 15.5 billion yen to 75.1 billion yen due to the rise in retained earnings. Equity ratio was 29.8%, down by 2.2 points from the end of the previous fiscal year. The amount of acquired lands for condominiums, which is 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), was 31,958 million yen (7,288 units) for studio condominiums and 60,272 million yen (7,219 units) for family-type condominiums. Pressance has obtained lands equivalent to roughly the next 3 years of sales for both studio condominiums and family-type condominiums. Similarly, the land price of acquired sites for condominium buildings was 11,443 million yen (2,721 units) and for hotel property sales 12,989 million yen (2,209 units), which means that the company has already acquired lands for sale until the fiscal year ending March 2021. Due to increases in inventories and other factors, the deficit of operating CF expanded. There was less expenditure for acquisition of fixed assets, and the deficit of investing CF shrank. The surplus of financing CF grew due to the issuance
 
 
Fiscal Year ending March 2019 Earnings Forecasts
Forecasted double-digit increase in sales and profits this fiscal year Sales are expected to be 152.4 billion yen, up 13.7% year on year. Sales will continue to be favorable overall this fiscal year. Gross profit margin is forecasted to rise by 1.6 points due to greater sales of studio condominiums, which have relatively low-cost rate. SG&A expenses will also augment due to an increase in personnel but will be offset by sales growth. Operating profit will be 24.5 billion yen, increasing by 20.5% year on year. Record highs for both sales and profits are expected in this FY3/19. 4,643 units (112.5 billion yen) out of outstanding orders at the end of the fiscal year ended March 2018 will be transferred during the this fiscal year ending March 2019. This figure is equal to 77.9% of the planned sales for the condominium sale business in the fiscal year ending March 2019, meaning that the company has already secured nearly 80% of its forecasted sales. It is characteristic for the company to start a new accounting period with a high progress rate (rate of securing sales), but as seen in the graph below, the rate for the fiscal year ending March 2019 is even higher than previous fiscal years. Sales of studio condominiums, which declined during the previous fiscal year, are expected to see a substantial increase. Sales of family condominiums will be steady. ◎ Hotel property development One additional property (144 rooms, located in Sennichimae, Chuo-ku, Osaka City) has been added since Jan. 2018. The company has currently commercialized 19 hotels (17 of which are developed or under development, 1 being renovated, and 1purchased).The company promotes the hotel property business from various directions based on the following two scenarios, considering eventually selling them to REIT or investment fund after continuously accumulating track records (4) Dividend policy The company recognizes that returning profits to shareholders is an important task for management and has set a new goal to "gradually raise the dividend payout ratio to 20% by the fiscal year ending March 2023." The company's traditional management objective is to grow operating profit by 10% or greater year on year and to increase dividend capital. In addition to this, they aim to raise total dividend amount by 15% or greater year on year. The dividend per share for the fiscal year ending March 2019 is to be 35.00 yen, consisting of a 17.50 yen interim dividend and a 17.50 yen year-end dividend. The forecasted payout ratio is 13.0%.
 
 
Medium-Term Management Plan
The company announced the 3-year medium-term management plan, which begins this fiscal year. The business strategies for achieving the goals are to expand the market share in existing major areas, including Osaka, Kobe, Kyoto, Nagoya, the Tokyo Metropolitan Area and Okinawa. And it intends to strengthen market position in new target areas, including Hiroshima, Hakata, and other local cities. Consequently, the company aims to increase the number of supplied and sold condominiums that meet market needs and are highly convenient. Both sales and profit are forecasted to increase at an annual growth rate of about 20% during the period of the medium-term management plan. As for the performance of each product category, the sales of studio and family-type condominiums are expected to rise steadily. The forecasted annual average growth rate in the three years is 29.5% for studio condominiums and 21.8% for family-type condominiums. Dividends As mentioned above, the company will increase the total dividend amount 15% or greater from the previous fiscal year, by "expanding the dividend resource (boosting operating profit 10% or greater from the previous fiscal year)" and "raising payout ratio to 20% in five years." *To increase the total dividend amount 15% or over from the previous fiscal year *To raise payout ratio to 20% * Forecasted net income in the medium-term management plan *No. of outstanding shares excluding treasury shares as of the end of March 2018: 59,953,448 Based on the above assumptions, the company forecasted the total dividend amount and EPS as follows. The total dividend amount and EPS will be increased 1.8 times and 1.5 times, respectively, in the next three fiscal years. For achieving the forecasts *Favorable progression of land acquisition. The target total sales in 3 years of the medium-term management plan are 604.3 billion yen. The company has already acquired land worth 142.1 billion yen necessary for achieving target sales in each fiscal year and is proceeding with construction and sales. In addition, the company has acquired land for its own property worth 6.3 billion yen. *High rate of securing sales As mentioned in the section "Earnings forecast for the fiscal year ending Mar. 2019," among the backlog of orders at the end of March 2018, 4,643 units are scheduled to be delivered to customers this fiscal year, attaining sales of 112.5 billion yen, which accounts for 77.9% of the forecasted sales of the condominium sale business in the fiscal year ending March 2019. Namely, around 80% of forecasted sales has been already secured. As a feature of the company, a new accounting period begins with a high progression rate (rate of securing target sales). For the fiscal year ending March 2019, the rate is higher than the past. *Target performance achievements The company, which was listed in December 2007, has announced financial results ten times between the fiscal year ended March 2009, in which initial forecasts were announced for the first time, and the fiscal year ended March 2018, and marked extremely high rates of achieving the initial forecasts. Sales did not reach the forecasts in 2009 and 2010 in the wake of Lehman's fall and in 2013 and 2014, in which the company focused on profit. Operating profit did not reach the forecast only at the time of Lehman's bankruptcy. Ordinary income never failed to reach the forecast.
 
 
Interview with Vice President Doi
We interviewed Vice President Doi about the key points of the medium-term management plan, etc. "We will expand its market share further in existing areas and cultivate markets in new areas." According to the medium-term management plan announced this time, our company will expand our market share further in Kinki and Tokai-Chukyo regions and energetically carry out procurement and sales activities in new areas, including Hiroshima, Hakata, and other local cities. We can earn sufficient sales and profit in existing areas only, but we will cultivate new markets for further growth. "While the Japanese market is facing the shortage of manpower, we are securing human resources well. This is attributable to our advantage in selling condominiums." The issues to be solved for accomplishing the medium-term plan are "the securing and education of personnel." As for the recruitment of sales staff, we have recruited a necessary number of workers smoothly, although the shortage of manpower is now a social issue. I think there are various factors, but the most important point is that our company has the advantage in selling condominiums. As the noteworthy external environment, market recognition of the popularity and effectiveness of investment in real estates has been widespread steadily, motivating people to invest in studio condominiums. In this situation, our company boasts a top share for the number of units supplied in Kinki and Tokai-Chukyo regions and ranks second in Japan. Thus, our company has been chosen by customers, because we offer high-quality real estate at affordable prices due to our large amount of supply . Accordingly, even new employees who have just graduated from college can sell the sufficient number of units in a short period of time, continuing to carry out what to do thoroughly . As our company has a system for training new employees, in which they can grow until they become able to complete a task alone in addition to attractive incentives, we have been able to recruit motivated and earnest college graduates. "As for profit and profit margin, material cost and selling prices are forecasted in a relatively conservative manner." The gross profit margin and operating profit margin for the fiscal year ending Mar. 2020 and the fiscal year ending Mar. 2021 are forecasted to decline. This is because the sales composition of products with different profit magin is forecasted to change and because material cost, selling prices of condominiums, etc. are forecasted in a relatively conservative manner. "We will expand the total dividend amount through profit growth and the increase in payout ratio. We would appreciate the continued support from shareholders and investors from the medium to long-term viewpoint." As for dividends, we set an explicit basic policy. We will expand the total dividend amount by increasing dividend resource through profit growth by 10% or more YoY and raising payout ratio stepwise to 20% in 5 years. We would appreciate the continuing support from shareholders and investors from the medium to long-term viewpoint.
 
 
Conclusions
In the previous report, we stated “The progression rate of the condominium sale business at the end of the third quarter is already nearly 100% of the revised forecast, and the abundance of outstanding orders will provide a major benefit to business performance. We look forward to seeing how much more growth can be achieved." The results exceeded revised forecasts. As for the company's first publicly announced medium-term management plan, the profit margin is based on a relatively conservative assumption, according to the interview. We would like to pay attention to the company's medium-term progression with regard to their positive attitude toward profit-sharing.
 
 
<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 for investment. The information and opinions contained within this report are made by our company based on data made publicly available, and the information within this report comes from sources that we judge to be reliable. However we cannot wholly guarantee the accuracy or completeness of the data. This report is not a guarantee of the accuracy, completeness or validity of said information and 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.
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