BRIDGE REPORT
(3989)

東証マザーズ

SHARING TECHNOLOGY. INC (3989)
Representative Director and CEO Keisuke Hikiji
Representative Director and CEO
Keisuke Hikiji
Corporate Profile
Company
SHARING TECHNOLOGY. INC
Code No.
3989
Exchange
TSE Mothers
Industry
Information and communications
Representative Director and CEO
Keisuke Hikiji
Address
JP Tower Nagoya 19F, 1-1-1, Meieki, Nakamura-ku, Nagoya
Year-end
End of September
URL
Stock Information
Share price Number of shares issued Total market cap ROE (Actual) Trading Unit
¥1,251 18,371,100 shares 22,982 million 34.1% 100 shares
DPS (Est.) Dividend yield (Est.) EPS (Est.) PER (Est.) BPS (Actual) PBR (Actual)
¥0.00 - ¥47.73 26.2 times ¥110.48 11.3 times
*The share price is the closing price on Jan. 7. The number of shares issued, ROE, EPS and BPS were taken from the brief report on financial results for the term ended Sep. 2018.
3-for-1 share split was conducted on Aug. 6, 2018.
 
Earnings Trends
Fiscal Year Net Sales Operating
Income
Ordinary
Income
Net
Income
EPS DPS
Sep. 2016 (Actual) 1,141 57 55 21 1.42 0.00
Sep. 2017 (Actual) 1,754 400 389 268 16.93 0.00
Sep. 2018 (Actual) 4,727 553 539 695 38.74 0.00
Sep. 2019 (Est.) 8,800 1,700 1,620 973 47.73 0.00
*The estimates are from the Company. The values until the term ended Sep. 2017 are non-consolidated. The values from the term ended Sep. 2018 are consolidated ones based on the IFRS. Ordinary Income is pretax one. Net Income refers to Profit Attributable to Owners of Parent. 3-for-1 share split was conducted on Aug. 6, 2018. EPS has been adjusted retroactively.

This report introduces the company overview, earnings trends, etc. of SHARING TECHNOLOGY. INC.
 
Key Points
 
 
 
Company Overview
Under the corporate philosophy, "We will develop and evolve the matching services in which users and providers are connected through our high technology and contribute to the society," the Company offers services that match users who are facing "troubles in daily life" with business operators specializing in services related closely to everyday life, by operating "Seikatsu110," a home service platform, and "Vertical Media site (*)" that relates to the daily home service areas. It has realized speedy and high-accuracy business matchmaking services, which no other company can offer, and is striving for further growth by releasing "Mover," a home service infrastructure with improved functions. *What is a Vertical Media site? A Vertical Media site is a website that contains various pieces of information on a specific subject. It is designed in a manner to allow each user who is interested in the subject to efficiently find the information that he or she seeks, bringing advantages not only to users, but also to the operating company of the website because the Company can easily distribute contents that fulfill user needs and the Vertical Media site can be used as an advertising medium that readily appeals to target users. 【1-1 Corporate History】 With the aim of spurring innovations to the society, Representative Director and CEO Keisuke Hikiji founded Rits Co., Ltd., the predecessor of SHARING TECHNOLOGY. INC, in November 2006. In May 2009, the Company launched the "Net 110 (emergency) business" in which it served as an agency for Internet network service providers. Learning that people had difficulty in efficiently finding service providers that offer solutions to daily troubles, lock smiths, leaking roofs, water related improvement, termite extermination, renovation, and repair, Mr. Hikiji recognized a possibility of creating a new market through effective online business matchmaking services that introduce general consumers to business operators (home service providers), and he then conducted a market survey. What he found out is that, in such service categories, local handyman service providers and other similar operators offered just simple websites. Therefore, he set up a "Vertical Media site" relating to the daily home service fields and started this business that matches general consumers suffering from unexpected troubles with daily home service providers in April 2012, taking advantage of the know-how that the Company had cultivated. The Company then began providing a comprehensive portal site, "Seikatsu 110 (Life Emergency Call)," in June 2015. With a focus on the concept of "sharing economy" which is to efficiently utilize idle assets of daily home service providers, the Company thrived rapidly by realizing the business with its technology and taking in both demand and supply, and got listed on Tokyo Stock Exchange's Mothers (market of the high-growth and emerging stocks) in August 2017. 【1-2 Corporate Philosophy】 The Company has adopted a corporate philosophy (mission), which is "We will develop and evolve the matching services in which users and providers are connected through our high technology and contribute to the society." The Company, which has provided daily home service matching services that introduce users seeking services to service providers, has established an automatic "matchmaking technology system" that digitizes various information, such as detailed user needs, the characteristics and potential of service providers, and results of matches between users and providers, automatically analyzes the data, and incorporates the analyzed data into the services with increased matchmaking accuracy. As the leading company in the daily home service market, the Company will endeavor to maximize its corporate value by precisely grasping social needs, strengthening the existing businesses, and proactively making investments. 【1-3 Market Environment】 Throughout Japan, people are confronted with an array of troubles that begin unexpectedly in everyday life (lock smiths, leaking roofs, water related improvement, external/internal improvement, window glass replacement, and pet funerals) and troubles that occur in a specific season of the year (such as termite extermination), meaning that high demand is expected continuously every year, and it is the market in which the Company is able to earn stable revenue regardless of various adverse factors, including changes in the outside environment. Furthermore, the Company predicts that needs from older people who are unable to deal with troubles by themselves will grow more and more in the wake of the decreasing birthrate and aging population. Its services satisfy such demand and have enormous social significance. An outside survey company has estimated that, in the market of "troubles in daily life" consisting mainly of projects worth 3 million yen or less, the market scale of the Company's mainstay service categories (especially light labor) is about 5 trillion yen and that of other categories, such as building renovation, is about 9 trillion yen, amounting to gross merchandise sales (GMS) of over 14 trillion yen. To begin with, the Company plans to expand business by focusing on the mainstay market worth 5 trillion yen. The Company's current gross merchandise sales stand at about 10 billion yen, which means that its market share is not significant enough considering the above-mentioned market scale, and the Company believes that it can continue to thrive at a high rate. At the moment, there is no competitor that has built up as large a member-store network as the Company; however, in preparation for future risks, such as the increasing number of firms that will newly enter the field, and intensifying competition with existing competitors, the Company is continuously focusing on cementing relationships with service providers. 【1-4 Business Contents】 The reporting segments are composed of the "WEB business" and the "Investment business." (1) WEB business In the "WEB business," its mainstay, the Company provides business matchmaking services that introduce users facing "troubles in daily life" to business operators specializing in services related closely to everyday life (service providers) through a comprehensive portal site, "Seikatsu110," and "Vertical Media site" relating to the daily home service fields. ① WEB marketing service The Company performs matchmaking for a wide range of daily home service fields. ◎ Outline of the daily home service fields In the "Seikatsu110" service, the Company has offered multifarious contents, including information on service providers, for more than 140 different areas, which makes it possible to swiftly match a user with a proper service provider in response to users' inquiries. In addition, the Company regularly delivers contents useful in everyday life to help users enrich their lives. As of the end of September 2018, the Company operated about 200 Vertical Media sites for assisting users in dealing with troubles in daily life, lock smiths, leaking roofs, water related improvement, termites, and mowing, covering approximately 140 daily home service categories. The websites have been viewed more than 2 million times per month in total. ◎ Flowchart of service provision <About "Mover," daily home service infrastructure> "Mover" is a daily home service infrastructure released by the Company, which has realized a swift and highly accurate matchmaking services that cannot be imitated by any other companies, with the aim of further boosting convenience of both users and service providers, and the Company's own growth. (Overview) With each worker at service providers carrying a smartphone on which "Mover" has been installed, a daily home service infrastructure "Mover" is a system that makes it possible to look for the nearest member store all across Japan in real time and send workers to users swiftly by utilizing "GPS information" and the "real-time schedule function." Regarding "Mover," which may be referred to as a "daily home service version of Uber" in a sense, the Company held explanatory sessions for service providers at 17 areas in Japan in July 2018. Establishing a daily home service infrastructure for providing services at an overwhelmingly fast speed throughout Japan by making the most of "Mover," SHARING TECHNOLOGY is transforming from a "company operating websites for dealing with troubles in daily life" to a "company that establishes daily home service infrastructure for addressing life-related troubles." (Challenges) The previous systemhas several problems, such as the following, which have led to some negative consequences, including failures to receive orders and reduced work efficiency at service providers. ・There is lead time from the acceptance of a user's order to matchmaking. ・Users cannot always receive services on their preferred days. ・Workers at service providers have to travel a long distance. (Characteristics) In contrast, "Mover" has resolved these problems with additional two functions, which are "GPS information" and the "real-time schedule function." It is a system that brings significant advantages to both users and service providers, as it provides users with services in the swiftest and fastest manner, and realizes service providers' sales expansion through improved business efficiency. *Real-time schedule management function As the location information and the real-time schedule of each worker at service providers are available in the system, it is possible to propose the date and time for a worker's visit upon receipt of an inquiry from a user. According to a test conducted by the Company, lead time was shortened, increasing the rate of contract conclusion with customers introduced to service providers via the sites in to 50.2% from 42.4% an ordinary manner. *GPS function As the current location of each worker at service providers has been made available with this function throughout Japan, a user will be introduced to the nearest worker and receive a service in the shortest period of time. This is considered to be one of the factors that lead to an increase in the close rate. In addition, users wish to receive some of the services offered by the Company at a lower price, such as light bulb replacement and furniture assembly, and taking transportation costs into account, it is not realistic to proactively place advertisements for many of such services; however, if workers' transportation costs can be reduced with "Mover," such services will be provided at a price that meets user needs. (Possibility of a rapid profit increase created by Mover) A "further increase in the close rate = increase in substantial sales per project" through the use of "Mover" will very likely result in rapid expansion of the Company's profit. If the current average close rate after matchmaking was 38.2% and the sales target was 4 billion yen, and the close rate had grown by 15% to about 44% (38.2% × 1.15) thanks to "Mover," sales would be about 4.6 billion yen (4.0 billion yen × 1.15); however, as costs are fixed, the difference of 600 million yen would be the Company's profit. It is possible to increase profit more drastically than ever before by investing the profit earned using "Mover" in online advertising. The Company has established a system for doing so, which we can deem as one of its huge competitive advantages. ◎ Business model As mentioned above, the Company's sales consist mainly of remuneration (margin) paid by service providers. The Company receives remuneration from service providers primarily on a "pay-per-performance" basis in which a member store incurs the obligation of payment right after it completes service provision to a user. Furthermore, a margin is paid to the Company also on a "pay-per-introduction" basis in which the Company receives remuneration from a member store when it introduces a user to the store. With the intervention of the Company, service providers are able not only to increase the numbers of customers and orders received, but also to earn sales during pockets of time, which makes it possible for them to utilize excess business resources in a more effective fashion. The total number of service providers is over 3,000 as of the end of September 2018. (2) Investment Business With a certain degree of investment efficiency taken into consideration in order to accelerate the growth speed of the WEB business, the Company directly holds the shares of its subsidiaries and offers them management consulting. 【1-5 Characteristics and Strength】 We can cite the following points as the Company's powerful competitiveness, and the factors and backgrounds behind its considerable growth potential: (1) Establishment of a nationwide member-store network based on a pay-per-performance business model Many small and medium-sized companies, and small business owners still rely on the customer attraction methods using paper and other traditional media that do not always create reliable customer attraction effects. Therefore, the cost for reeling in customers is not necessarily linked to sales. The pay-per-performance business model does not require payment of initial registration fees or annual contract fees, and makes it possible to effectively receive orders and increase sales while cutting down on the cost of attracting customers. Thus, it is of great appeal to small and medium-sized companies, and small business owners. The Company has successfully captured service providers that possess extensive experience in work execution and are capable of flexibly coping with user needs, and is increasing the member store retention rate, establishing one of the largest member-store networks in Japan. (2) Business structure that boosts revenue in proportion to data cultivation A variety of information, such as the trend of user needs in each region, and project-related information including the characteristics and strengths of services of each member store, are being cultivated in the system on a continuous basis through repetitive provision of matchmaking services. With each worker at service providers carrying a smartphone on which "Mover" has been installed, the new system that builds up a daily home service infrastructure, "Mover," is a system that allows service providers to send a worker to the user who has placed an order swiftly through an improved matchmaking efficiency, as it has been made possible to look for the nearest member store all across Japan in real time by utilizing GPS information. Aiming to reduce users' lead time to "0 minute," "Mover," which may be referred to as a "daily home service version of Uber" in a sense, enables the Company to increase revenue by making matches more swiftly and enhancing the close rate. SHARING TECHNOLOGY is transforming from a "company operating websites for dealing with troubles in daily life" to a "company that establishes daily home service infrastructure for addressing troubles in daily life." In addition, the Company analyzes the Cost per Action (CPA) efficiency for all of its Vertical Media sites every day, which allows it to learn about the status of profit and loss by service category in a timely manner. When profit exceeds CPA, the Company proactively capitalizes on advertising costs in order to expand the number of orders received. Furthermore, the system automatically displays an order receipt talk manual for the inquiry telephone number assigned to each Vertical Media site; thus, even when a new service category is added, matchmaking services can be provided swiftly with homogenized operational quality (systematization of highly accurate contract conclusion operations). *CPA (Cost per Action) Cost per Action (CPA) is also referred to as cost per conversion, which indicates "the amount of money invested for achieving a conversion." CPA = advertising cost / No. of conversions
 
 
Fiscal Year September 2018 Earnings Results
Significant growth of sales and profit Sales were 4,708 million yen, up 169.5% year on year. In order to raise the following three KPIs, the Company actively implemented measures regarding websites and the infrastructure for daily home services, augmenting SG&A expenses by 189.1% year on year. However, it was offset by the sales growth, and operating income was 553 million yen, up 38.2% year on year. The major KPIs for its WEB business are the number of traffic (number of inflows to each website), CVR (conversion rate, which indicates the percentage of visitors who have inquired or applied), and unit price (real sales per inquiry). The number of inquiries was about 3,100 per day on average in Sep. 2018, showing steady growth (excluding the effects of unexpected typhoons). The traffic volumes of "Seikatsu110" and "Vertical Media," which are comprehensive portal site, showed considerable increase of about 20 times and about 2.5 times on average, respectively, from the previous term. The rate of return on writing costs one year after the investment, including the remunerations to writers, was 379.6% (obtained by dividing cumulative sales via content by writing costs). As a result of website renewal, conversion rate (CVR) rose 156.8% on average for keywords. The unit price per user, too, increased. The rate of contract conclusion was 42.4% for conventional systems, and 50.2% for systems mounted with "Mover." When contacted by customers, the operators of the Company made arrangements for visits to customers' houses at the earliest opportunities, improving the rate of contract conclusion. (2) Topics ① Progress toward the listing of Re-abroad INC. The number of applications has been increasing steadily. The Company will keep proceeding with the business while using the number of applications as a KPI. As mentioned in the news release in Nov. 2018, the Company concluded a basic contract for the sale of some shares held by the Company to a venture capital. The book value of Re-abroad INC. (acquisition price plus capital increase) was 428 million yen, and the appraised value at the time of the basic agreement was 2,038 million yen. SHARING TECHNOLOGY will keep selling the shares it holds with the aim of selling a majority of them, and promote its business expansion as an equity method affiliate rather than a consolidated subsidiary for IPO. According to the progress of sale, operating income may be earned from the sale. The number of applications to "SUMARYU," an overseas study service offered by Re-abroad INC., was 415 in Nov. 2018, up 814% year on year, showing significant growth. ② Capital and business tie-ups with MIKAWAYA21 Co., Ltd., which operates "Magokoro Support," etc. In Dec. 2018, SHARING TECHNOLOGY formed capital and business alliances with MIKAWAYA21 Co., Ltd. (in Tokyo), which operates "Magokoro Support," a service of helping mainly elderly people weed their yards, replace light bulbs, and solve other minor troubles based on community-based enterprises, including newspaper distributors, throughout Japan. (Outline of MIKAWAYA21 Co., Ltd.) MIKAWAYA21 operates "Magokoro Support," a service of helping seniors solve minor troubles in daily life at a rate of 500 yen per 30 min. based on newspaper distributors and about 500 stores offering community-based businesses throughout Japan. It was established in Aug. 2012. (Background of the alliance) SHARING TECHNOLOGY excels at offering highly specialized service, such as pet funerals and the extermination of harmful insects, through home service matchmaking, but did not have a sufficient number of workers for services whose fees are low, such as the setting of furniture and the cleaning of air-conditioners. By forming an alliance with MIKAWAYA21 and incorporating the network of about 500 stores offering "Magokoro Support," it would be possible to expand business further also in the field of light-duty services whose fees are low. While SHARING TECHNOLOGY excels at reeling in customers via websites, MIKAWAYA21 attracts customers by inserting flyers to newspapers, utilizing word of mouth, etc. Therefore, they can introduce customers to each other. Through the capital and business alliances, SHARING TECHNOLOGY will proceed with the development of an infrastructure for daily home services. (Details of the alliance) ① Details of the business alliance In cooperation with 41 newspaper publishers, MIKAWAYA21 offers "Magokoro Support" based on about 500 newspaper distributors throughout Japan. It already receives over 10,000 orders per month for the weeding of yards, the replacement of light bulbs, the relocation of furniture, and shopping on behalf of customers. By attracting customers online based on the know-how of SHARING TECHNOLOGY, it is expected to increase customers further. In "Magokoro Support" provided by MIKAWAYA21, the tasks that require expertise will be dealt with by the service providers of SHARING TECHNOLOGY. ② Details of the capital alliance In order to procure funds of about 200 million yen for actualizing the above activities through the business tie-up, MIKAWAYA21 will allocate new shares to SHARING TECHNOLOGY.
 
 
Fiscal Year September 2019 Earnings Estimates
Sales and profit are projected to keep growing considerably. Sales are estimated to be 8.8 billion yen, up 86.1% year on year. The Company aims to increase the sales from the WEB business, which is its mainstay, about two times at a growth rate higher than that of total sales. Operating income is forecasted to be 1.7 billion yen, up 207.1% year on year. (2) Activities and policies in this term The Company will conduct the A/B testing for each website and renew the websites. It will continue investment in about 200 sites in operation. The number of writers will be increased considerably from 69 in the previous term to 300 in Apr. 2019. The Company will accelerate investment in content, for example, by establishing a new office exclusively for writers. As for "Mover," it increased the ratio of successful orders, but there are many items to be improved as it has just been released. The investment amount will rise from 270 million yen in the previous term to 470 million yen this term for large-scale system improvement. Sales and profit are projected to grow, thanks to the increase in the close rate. The Company is planning to offer the "Mover" platform for enterprises. For example, mass retailers of home appliances suffer the shortage of workers for repairing and setting home appliances and installing air-conditioners in areas where the number of service providers is small and during a hectic period. If the service providers of the Company nationwide carry out these tasks based on "Mover" on behalf of the mass retailers, this will lead to quick work and increase of their sales. The Company will be able to boost the sales of service providers by utilizing pockets of time, securing a new source of revenue. In Dec. 2018, the Company initiated collaboration with the Bic Camera Group in the field of home appliances. SHARING TECHNOLOGY will undertake some of the growing number of tasks of setting home appliances sold by the Bic Camera Group, to increase new users and revenue, while the Bic Camera Group will enhance the satisfaction level and convenience for users, by taking advantage of the network of service providers and the business matchmaking system of SHARING TECHNOLOGY. Until the previous term, the Company conducted M&A based on the three strategies: Strategy A "To expect return on investment of over 30% in a short period of time by taking advantage of the online marketing know-how," Strategy B "To boost the corporate value through significant business growth by proactively making investment," and Strategy C "To strive to continue business stably with ample net assets compared to purchase prices." This term, the Company will conduct only the M&A that is expected to exert significant synergy.
 
 
Conclusions
In the term ended Sep. 2018, sales and profit grew considerably. This term, too, sales and profit are estimated to increase significantly, while the Company will invest in content and for the further growth of the WEB business, which is its mainstay, by brushing up "Mover" and so on. We would like to pay attention to whether they will achieve an operating income of 1.7 billion yen this term as mentioned in the new mid-term business plan and they will grow further.
 
 
<Regarding Corporate Governance>
◎ Corporate governance report Last modified: December 25, 2018. <Basic Policy> Our company recognizes that it is indispensable to establish corporate governance in order to expand revenue, improve corporate value, and maximize returns to shareholders as a going concern. In detail, we think that it is important for our representative director and other directors in charge of business administration to discipline themselves, make appropriate business decisions based on their duties, improve the efficiency and swiftness of business administration, pursue profit through our businesses, secure the soundness of corporate finance, increase its credibility, disclose information timely and properly to secure the transparency and objectivity of business activities, and develop an effective internal control system and it is essential for auditors to maintain their independence and exert their auditing abilities to a sufficient degree. <Reasons for Non-compliance with the Principles of the Corporate Governance Code (Excerpts)> It is stated that "our company observe all of the basic principles 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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