BRIDGE REPORT
(3254)

東証1部

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
¥1,486 62,818,585 shares ¥93,348 million 20.8% 100 shares
DPS (Est.) Dividend Yield (Est.) EPS (Est.) PER (Est.) BPS (Actual) PBR (Actual)
¥35.00 2.4% ¥269.09 5.5 times ¥1,221.10 1.2 times
*The share price is the closing price on December 10. 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 first half of fiscal year ending March 2019, etc.
 
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. Ranking for the supply of condominiums for sale by areas in 2017 ◎ Competitors Below is a comparison between Pressance Corporation and major competitors from various aspects. 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, sells, and manages 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. 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 Tokyo and Okinawa regions as well as 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 consecutively 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 Financial crisis, 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.
 
 
First Half of Fiscal Year ending March 2019 Earnings Results
Sales and profits increased substantially. Sales were 121.3 billion yen, up 83.2% year on year. Sales continued to be favorable. Operating profit was 25.7 billion yen, up 134.6% year on year. SG&A expenses augmented 23.3% year on year, but they were offset by increased sales, resulting in a substantial rise in profits. Ordinary income was 25.5 billion yen, up 138.5% year on year. The sales of studio condominiums including Pressance Itachibori Park City (148 units) and family-type condominiums such as Legend Biwako (486 units) were healthy. The sales of condominium buildings decreased but were as planned. Increased sales (delivered property) led to a rise in cash and deposits. The amount of real estate for sale also increased. As a result, total assets grew by 16.2 billion yen from the end of the previous term to 261.6 billion yen. Total liabilities declined by 3.3 billion yen to 166.9 billion yen due to a decrease in trade payables, etc. Net assets grew by 19.5 billion yen to 94.6 billion yen due to the rise in retained earnings. Equity ratio was 35.5%, up 5.7 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 43,337 million yen (9,159 units) for studio condominiums and 66,967 million yen (7,312 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 amount of acquired lands for condominium buildings was 13,421 million yen (3,116 units) and for hotel property sales 10,485 million yen (1,460 units), which means that the company has already acquired lands for sale until the fiscal year ending March 2021. Operating CF and free CF turned positive due to the increase in income before income taxes, the decrease in inventories, etc. The surplus of financing CF shrank as the income from the issuance of bonds with subscription rights to shares was posted in the same period of the previous fiscal year but not in this fiscal year. Consequently, the cash position improved. The overall occupancy rate of the rent properties under the rental management of the company at the end of September 2018 was 97.8%. As the graph above suggests, the number remained high, showing almost full occupancy. One of the reasons behind the favorable sales of the studio condominiums is that investing purchaser can expect a continuous rental revenue every month with almost no need to worry about vacancies. In addition, the number of units of rental properties under the rental management of the company increased in proportion to the increased number of condominium units sold, resulting in the expansion of stable earnings.
 
 
Earnings Forecasts for Fiscal Year ending March 2019
No change in the forecast as of now. Forecasted double-digit increase in sales and profits this fiscal year There is no change in the forecast as of now. 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 a relatively low-cost rate. SG&A expenses will also augment due to an increase in human resources 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. The company is proceeding with the transfer (sales) of a large number of studio and family-type condominiums as per the initial plan, and the sales of condominium buildings and hotel property are favorable as well. Its dividends will be 35 yen/share annually. The dividend payout ratio is projected to be 13.0%. For the condominium sale business, 142.8 billion yen (6,031 units) is the sum of the sales result of 116.7 billion yen (4,760 units) and the outstanding orders of 26.1 billion yen (1,271 units), which will be delivered during the current term, at the end of September 2018. So 142.8 billion yen is the sales figure already secured and is equal to 98.9% of the 144.4 billion yen annual sales forecast. As a feature of the company, a new accounting period begins with a high progression rate (rate of secured target sales). As seen in the graph below, for the fiscal year ending in March 2019, the rates at every quarter are higher than the previous two fiscal years, including the figure at the current period. The cumulative bar chart above shows the backlog of orders which will lead to sales in the next fiscal year. The secured sales for the next fiscal year were 58.4 billion yen at the end of the first quarter and 93.6 billion yen at the end of the second quarter. The sales of the next fiscal year show steady progress even at this point of time. Although it declined during the previous fiscal year., sales of studio condominiums are expected to see a substantial increase. Sales of family condominiums will be steady. All business segments are progressing in accordance with the plan. ◎ Hotel property development The company has currently commercialized 21 hotels (19 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, investment fund or business entities. For "To sell to other hotel business companies," the hotel business companies or candidates to whom properties will be sold have already been determined.
 
 
Interview with Vice President Doi
We interviewed Vice President Doi about the present situation, new projects, etc. Q: "There were many inappropriate incidents taking place in the real estate industry, but did they affect your business anyway?" A: "There was no negative effect. Rather, the situation has turned such that customers are now choosing our company for its reliability and product superiority, and sales of studio condominiums are growing further than before the incidents." To be honest, we were worried that people's interest in real estate investment would decline, but the fear turned out to be completely groundless. When our sales staff asked customers about their views on the occurrence of those incidents, majority of them told us that the incidents made them want to buy from a responsible, reliable and renowned real estate agent that provides sufficient after-sales services, rather than refraining from investing while there was still distrust toward real estate agents. These incidents will prompt customers to be more watchful for selecting a real estate agent. In the midst of this, the situation has turned such that, thankfully, more and more customers are preferring our company for its "product superiority," such as location, price and quality, and "the company's reliability," such as brand value, popularity, after-sales services offered with responsible rental management after the purchase, past performance as well as sales volume. As a result, the sales of studio condominiums are growing further with the increases in the number of new customers and the number of orders by 64% and 28% respectively during the first half of the current fiscal year than the second half of the previous fiscal year. We believe that our company's share will increase further in the studio condominium market, and our dominant strategy will function more effectively. Q: "The extremely high occupancy rate of Pressance's studio condominium is striking. What are the possible reasons behind it?" A: "We frequently collect information about the needs of occupants from the rental agents who are speaking on behalf of them and reflect their needs in the process of building condominiums." It is obvious that a rental agent helping occupants would prefer "easy to promote and to be chosen" properties. Regarding studio condominiums, we are happy that many rental agents prefer to promote Pressance's condominiums first because of their favorable conditions such as location, room layout, facilities and rent fee. We frequently collect information about the needs of occupants from the rental agents who are speaking on behalf of them and reflect their needs in the process of building condominiums. We have built a favorable cycle that the condominium quality to satisfy occupants' needs based on the collected information produces high occupancy rate, and the high rate leads to the steady growth of condominium sales business conclusively. Q: "Please tell us about your recent projects." A: "We have started a private lodging business in response to the rising demand of foreign tourists in Japan, utilizing the know-how of condominium construction that we have developed so far. In addition, we will make investments to enhance brand power and the level of recognition further and will engage in IT system development in order to build closer customer relation. We strive to expand the scale of the company further, so please look forward to our future business." Osaka is designated as an area of Special Zone Private Lodging, and therefore private lodging business can operate for 365 days a year. We considered starting a private lodging business in response to the rising demand of foreign tourists to Japan, utilizing the know-how of condominium construction that we have developed so far. And we decided on having a business alliance with the world's largest private lodging operating company Airbnb Japan. We will not be handling the private lodging itself, of course, but will be constructing buildings in appropriate location as private lodging facilities after considering various conditions such as convenience of access and cost of construction including acquisition cost of land. And we will lease them to the private lodging operating company. We are considering to sell the buildings eventually. As our first project, we are constructing a building exclusively for private lodging in Shin-Imamiya, Osaka, scheduled to be completed in autumn 2019. JR/Nankai Dentetsu Shin-Imamiya Station, which is the nearest station and within walking distance from the building. The location is highly convenient and is only around 40 minutes away from Kansai International Airport by a direct train. Since a famous resort hotel is scheduled to open in its vicinity, higher demand for the building is anticipated. We plan to promote property development for private lodging further. Also, we will make investments to enhance brand power as well as the level of recognition further and engage in IT system development in order to build closer customer relation. As I already said, we are currently under a favorable situation that customers are more likely to prefer our company to competitors. Taking this as a chance, we strive to expand the scale of the company further, so please look forward to our future business.
 
 
Conclusions
A few scandals that were detected and related to investment properties only highlighted the strengths of Pressance. As Pressance's "strong selling power," one of its strengths, allows sales staff members to build up successful experiences under a favorable environment, they are able to grow faster, and some of the new employees are already acting as important forces of the company only 6 months after they joined. This is resulting in further strengthening of the selling power in addition to much lower turnover rate, and the operating base is becoming more solid eventually. As Pressance will most likely achieve the goals for the whole fiscal year, its stock price, which has been trending down for long, is finally reversing its course while TOPIX fell to the lowest level since the beginning of the year. We would like to watch the future trend.
 
 
<Reference1: 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", 1271 units, 26.1 billion yen, is scheduled to be delivered to customers in this fiscal year among the backlog of orders at the end of September 2018. As of the end of the first half of Mar. 2019, the projected sales of this term adding actual sales of the first term 4760 units, 116.7 billion yen, is 6031 units, 142.8 billion yen. This number accounts for 98.9% of the forecasted 144.4 billion yen sales of the condominium sale business. 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.
 
 
<Reference2: Regarding Corporate Governance>
◎ Corporate governance report Last modified: November 22, 2018. <Basic policy> We consider corporate governance as the principal framework within which the corporate management of the relationship with various stakeholders, such as shareholders, customers, employees, business partners and local communities, is conducted and believe that putting the followings into practice will shape such a framework. We recognize the maximization of shareholder profit as our most important duty while putting the followings into practice at the same time. *Compliance with laws and regulations We believe that good practice of compliance helps avoid direct damage caused by scandals and improve our brand value and corporate image as the "trustworthy" and "sincere" company and further leads to enhancement of financial performance from the medium to long-term perspective and higher corporate value. *Risk management We think risk management is about taking control of threats and risks of events or actions that prevent the company from accomplishing its objectives with considering its cost-effectiveness. *Accountability As the word commonly means the responsibility to explain, we consider it as our duty to provide a logical explanation for the consequences caused by the action authorities took and did not take. <Major principles that have not been followed, and reasons> The company states, "Our company conducts all the principle of the Corporate Governance Code." All principles are provided based on the Corporate Governance Code revised in June 2018.
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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