BRIDGE REPORT
(9416)

東証1部

Vision Inc. (9416)
President Kenichi Sano
President
Kenichi Sano
Corporate Profile
Company
Vision Inc.
Code No.
9416
Exchange
TSE 1st Section
Industry
Information and telecommunications
President
Kenichi Sano
Address
Shinjuku i-Land Tower, 6-5-1 Nishi-Shinjuku, Shinjuku-ku, Tokyo
Year-end
December
URL
Stock Information
Share Price Number of Shares Issued
(Treasury stock excluded)
Total market cap ROE (Act.) Trading Unit
¥4,540 16,216,206 shares ¥73,622 million 15.2% 100 shares
DPS (Est.) Dividend Yield (Est.) EPS (Est.) PER (Est.) BPS (Actual) PBR (Actual)
- - ¥93.77 48.4 times ¥526.19 8.6 times
* Stock price as of the close on August 20, 2018. Number of shares issued at the end of the most recent quarter excluding treasury shares. ROE and BPS are the values as of the end of the previous term.
 
Earnings Trends
Fiscal Year Net Sales Operating
Income
Ordinary
Income
Net
Income
EPS DPS
Dec. 2014 (Actual) 10,185 286 324 275 23.32 -
Dec. 2015 (Actual) 12,485 804 807 585 48.95 -
Dec. 2016 (Actual) 14,843 1,290 1,298 813 50.12 -
Dec. 2017 (Actual) 17,554 1,788 1,795 1,208 74.30 -
Dec. 2018 (Forecast) 20,599 2,252 2,254 1,520 93.77 -
* The forecasted values were provided by the company. From FY12/16, net income is profit attributable to owners of the parent company. Hereinafter the same shall apply.
* The company conducted a 100-for-1 share split in January 2015 and a 2-for-1 share split in July 2017.

This Bridge Report outlines Vision's results for the first half of the fiscal year ending December 2018 and the forecast for the full term.
 
Key Points
 
 
 
Company Overview
Under the management philosophy of "Contributing to the Information and Telecommunications Revolution," Vision conducts the Global WiFi service, which leases the personal Wi-Fi (wireless LAN) routers which can be used in over 200 countries and regions on a flat-rate packet basis, and as an information and telecommunications service distributor, it also provides information and telecommunications services of arranging telecommunications infrastructure and office equipment necessary for business activities, such as fixed-line telecommunications, mobile telecommunications, broadband etc. The company forms a group with its 19 consolidated subsidiaries, both inside and outside Japan. Of those, the 7 based in Japan are Members Net Inc. (which conducts the business of charging agency, fixed-line telephone service subscription agency, etc.) and Best Link Inc. (which carries out the business of broadband service subscription agency), etc. There are 12 overseas subsidiaries that operate as overseas hubs for the Global WiFi service in South Korea, Singapore, UK, Hong Kong, Hawaii, Taiwan, China (Shanghai), France, Italy, California and New Caledonia; there is also a local subsidiary in Vietnam, which is an offshore hub for database construction and system development. 【Business Description】 Global WiFi business The company offers services including "Global WiFi" (a Wi-Fi router rental service that allows people traveling overseas to use local internet services at a competitive rate through its partnerships with the overseas operators) and "NINJA WiFi" (a Wi-Fi router rental service for overseas visitors to Japan, etc.), while also engaging in services for the travelers between foreign countries in overseas bases (South Korea, Taiwan and California). Advantages ① Affordable fixed-rate system, ② the most comprehensive area coverage, ③ comfort, ④ safety/security, and ⑤ substantial support bases and corporate sales capabilities ⇒ One of the largest customer bases in the industry The advantages of "Global WiFi" and "NINJA WiFi" include the following: ① cost benefits of up to 89.9% (the rental fee per day is 300 yen at the minimum, depending on the travel destination) compared to the overseas fixed-rate packet plans offered by other Japanese mobile carriers, ② the industry's most comprehensive coverage of over 200 countries and regions, ③ high-speed telecommunication services through partnerships with telecommunication operators all over the world, ④ available at 24 hours a day, 365 days a year, at 47 bases worldwide, and ⑤ the industry's largest number of available spots at airport counters. Furthermore, from the business perspective, another advantageous point is the fact that use by corporations, through which stable demand can be expected, has accounted for about 50% in this business segment. As a result, the company has secured a great number of users, which is one of the largest market share in the industry. Growth Story About 28.7 million foreign tourists visited Japan (inbound travelers) in 2017 (according to the Japan National Tourism Organization). The company has estimated the scale of the personal Wi-Fi router rental market at approximately 200.8 billion yen, based on the average customer unit price. As the Japanese government has cited 40 million tourists annually in 2020 as a goal, the market scale is expected to further increase. Meanwhile, the number of Japanese tourists traveling to overseas nations (outbound travelers) is about 17 million per year, and the company estimated that the market scale is about 125.1 billion yen. The number of tourists travelling from one overseas country to another has exceeded 1.3 billion (according to the reference material of the company; source: officially published material by the United Nations World Tourism Organization), and the market scale estimated by the company is over 9 trillion yen. On another front, although the company has achieved a sales increase at an annual rate of 28.1% for the past 5 years, sales are forecasted to be only 20.5 billion yen for the fiscal year ending December 2018, meaning that the markets of inbound travelers, outbound travelers, and overseas-to-overseas travelers are all vast to the company. Considering the usage status of the company's personal Wi-Fi routers (the number of routers on lease), while the average growth rate of the number of routers leased to outbound travelers from the fiscal year ended December 2013 to the fiscal year ended December 2017 reached 55.3% (or 61.7% for a total of the inbound travelers market and the overseas business), the number of tourists from Japan to overseas countries for the same period grew only 0.6% on average, raising the usage rate of the company's personal Wi-Fi routers from 2.0% to 11.7%; however, the usage rate of 11.7% means that there is still plenty of room for improving the rate. The company will endeavor to further increase the percentage by not only prospecting for new users but also accumulating repeat users and taking in corporate demand. Furthermore, it will strengthen the business foundation through cost reduction and productivity improvement in an attempt to boost profitability. In the medium and long term, the company plans to develop a new business, "travel-related service platform," using the customer bases of "Global WiFi" and "NINJA WiFi." Information and Communications Service business With Best Link Inc., a consolidated subsidiary, at its core, the group offers services aimed mainly at newly established corporations, venture businesses and multi-store development enterprises such as food-service chains, from its 7 offices nationwide and in cooperation with its partner companies. The services include subscription agency operations for various telecommunication services such as business phones, agency operations of arranging lines for landline telephones, subscriber telephones, and NTT Hikari telephones, corporate mobile phones, broadband lines, sales and maintenance of mobile telecommunication devices, OA equipment and security products (UTM), etc., designing websites, and agency operations for new power services targeting enterprises. The company has advantages in prospecting for corporations newly established (within 6 months), one of its major targets, and it is estimated, according to the data by the Ministry of Justice (the number of newly registered companies was 118,811 in 2017 all around Japan), that the company has conducted transactions with one in every 6 - 7 corporations newly founded in Japan. These advantageous points are backed by the company's strong power to attract customers through its unique online marketing (Internet media strategy), through which the company maximizes running yield (recurring revenue-type business) and conducts additional sales with high productivity (up/cross selling) through its unique know-how, the Customer Relationship Management (CRM; customer relationship and ongoing transactions) strategy. The company continuously receives commission from operators for telephone line arrangements unless contracts for the service are cancelled, and it can earn maintenance fees for multifunction photocopiers on a continuous basis. Moreover, the follow-up service by its customer loyalty team has enabled the company to establish a recurring revenue-type business model, in which earnings are accumulated by taking in demand for lines and equipment that increases with customers' business growth, and providing optimal services according to customers' growth stage (additional sales with high productivity through up/cross selling). In the Information and Communications Service business, the company will evolve its recurring revenue-type business model while shifting the target customer from enterprises with growth potential to ones in the growth stage.
 
 
First Half of Fiscal Year December 2018 Earnings Results
Sales grew 18.0% year on year, and operating income rose 45.4% year on year as a result of cost reduction and productivity improvement. Sales were 9,855 million yen, up 18.0% year on year. In addition to the year-on-year growth of 26.5% in the Global WiFi business in which the number of routers on lease jumped by 31.4% year on year, the accumulation of continuous transactions through CRM and the agency operation of arranging subscription to the electricity service, "Haluene Denki," contributed to a steady increase of 6.5% in the Information and Communications Service business. Operating income grew 45.4% year on year to 1,236 million yen. The efforts of cost reduction and productivity improvement in the Global WiFi business raised the cost rate by 0.9 points year on year to 41.0%, increasing the gross profit by 19.9% year on year. This offset the rises in year-end bonuses granted following the positive earnings at the end of the previous term, and in SG&A expenses due to recruitment of a greater number of new graduates. The number of employees as of the end of the first half of the current term stands at 552, up 55 from the end of the previous term. Global WiFi Business Sales were 5,987 million yen (up 26.5% year on year) and operating income stood at 1,149 million yen (up 55.8% year on year). The number of routers rented increased 31.4% year on year, as a result of a 31.1% year-on-year rise of the number of personal Wi-Fi routers leased for use in overseas nations (leased to outbound travelers) that was achieved by taking in corporate demand, such as business trips which are not affected by seasons, and accumulating repeat users. In the first half of the term, corporations made up 39.9% of the number of routers on lease and 52.4% of the amount paid for router lease. Considering only the second quarter (April to June), the respective proportions stood at 42.6% and 50.8%, demonstrating that the company successfully took in corporate demand at an accelerating rate. In addition, repeat users accounted for 55.0% in terms of both the number of routers leased and the amount paid for router lease, with the respective ratios for the second quarter (April - June) being 58.0% and 57.7%. From these numerical values, we can see that the company is retaining customers on a steady basis while prospecting for new customers. As for profit, profit margin was 19.2%, up 3.6 points thanks to not only the increased sales, but also the results of the efforts toward cost reduction and profitability enhancement. Specifically, the efforts include a reduction in costs for procuring lines, installation of Cloud WiFi and an increase in the shipment ratio, and improvement of profitability through labor saving. The company successfully boosted the line usage efficiency by installing Cloud WiFi and cut down on operation costs through the streamlined shipping process. In addition, not only was the streamlining of the customer service operation propelled through AI-based FAQs and chat bot-based customer support, but also the profitability in delivering the company's products and services was improved by making the standing-type "Global WiFi for Biz" plan exclusively for corporations pervasive, and increasing the number of the automatic "Smart Pickup" delivery lockers. For the three months of the second quarter (April - June), sales and operating income rose 30.2% and 65.1%, respectively, year on year. While sales showed a year-on-year growth following the increased number of routers on lease, profit margin also increased as a result of the ongoing efforts to improve profitability, such as a reduction in cost and operation expenses. As the second quarter is the off-period in which the number of tourists traveling abroad is the smallest in a year, and thus, it is considered to be a quarter in which the company makes upfront investment in an attempt to take in demand for the busiest third quarter (July - September). Information and Communications Service Business Sales were 3,827 million yen (up 6.5% year on year), and operating income were 634 million yen (up 5.9% year on year). The recurring revenue-type business model functioned following the accumulation of continuous transactions through CRM, and the company made progress with up and cross selling. The agency operation of arranging subscription to the electricity service, "Haluene Denki," also showed a steady growth. For the three months of the second quarter (April - June), sales and operating income showed year-on-year increases of 12.7% and 6.6%, respectively. In addition to newly established corporations and venture companies, which are its major target markets, the company moved ahead with taking in demand which grew following the start of the new fiscal year. Total assets at the end of the first half of the term grew by 677 million yen from the end of the previous term to 12,161 million yen. In the debit side, trade receivables increased due to the expansion of the business operations, and rental assets and investment securities rose. In the credit side, net assets showed an increase. Equity ratio stood at 74.8% (74.6% as of the end of the previous term). The company acquired 102,700 treasury stocks (equivalent to 0.63% of the number of shares issued) at about 310 million yen in total during the period between August 17, 2017 and June 30, 2018. No treasury stock was acquired in July or August, and the company completed the acquisition of the treasury stocks on August 16, 2018 at the number of stocks and the total acquisition cost mentioned above in accordance with the resolution agreed on at the meeting of the board of directors held on August 16, 2017.
 
 
Fiscal Year December 2018 Earnings Estimates
Earnings forecasts for the first half and the full year remain unchanged, with sales and operating income estimated to increase 17.3% and 25.9%, respectively, for the full year. In the Global WiFi business, sales are estimated to grow 24.6% year on year due to expansion of channels (increase of sales commission agreements in partnership with travel agencies and corporate agreements, etc.) and incorporation of inbound travelers. Profit is expected to increase by 22.2% year on year, absorbing upfront investment in travel related service platform by sales increase and improvement in operation efficiency. Meanwhile, in the Information and Communications Service business, it is projected that sales and profit will grow 5.6% and 12.5%, respectively, as a result of the enhanced sales channels and accumulation of up and cross selling.
 
 
Approaches in the fiscal year ending December 2018, and their progress
With "Challenge for Evolution: Chapter 2" being cited as a slogan for the fiscal year ending December 2018, the company is forging ahead with its efforts toward "differentiation through business expansion and peripheral businesses" and "realization of the best player (in terms of market share, productivity, and profit) that overwhelmingly leads the industry." Global WiFi Business Utilization of Cloud WiFi (profitability enhancement) The company has adopted the Wi-Fi router that is equipped with the next-generation telecommunication technology (Cloud WiFi) capable of managing Subscriber Identity Modules (SIMs) on cloud. This Wi-Fi router allows its users to use telecommunication lines all over the world without inserting or exchanging SIMs. Thus, labor for the shipping operation has been saved (meaning that SG&A expenses have been reduced), and telecommunications cost, too, has been cut down as a result of the improved efficiency of using telecommunication lines (as users do not have to shoulder any burden of using the lines when they are out of operation). Furthermore, the fact that any burden of using telecommunication lines is not imposed when they are out of operation has enabled the company to offer "Global WiFi for Biz," a standing-type service exclusively for corporations. In addition, it has been made possible to build up alliances with travel agencies and incorporate the service into overseas travel products. Moreover, this has led to an increase in the number of personal Wi-Fi routers in stock at the airport counters, diminishing the risk of opportunity loss due to a stock shortage (the company is now able to secure travelers who are about to depart, without fail). The company has offered the "Global WiFi for Biz" router as a standard service in Japan (for free of charge up to 3GB), which has realized an environment where users feel comfortable with keeping the router in hand. The company plans to provide it for individual customers as well. Store digitalization strategy The company is going ahead with the strategy of making stores digitalized by increasing the number of automatic delivery lockers (Smart Pickup), and adopting self-registration KIOSK terminals including the multilingual correspondence and settlement function (Smart Entry) and the immediate customer identification counter that is a QR code-based reception counter (Smart Check). The company aims to evolve its stores to ones that can be used by Japanese tourists travelling abroad, and foreign tourists visiting Japan more conveniently, more comfortably, and with greater peace of mind, as well as strengthen its efforts toward the increases in the number of routers on lease (number of routers delivered) and in the optional services (such as insurance services and accessories). The company has installed 10 automatic delivery lockers (Smart Pickup) at 5 airport counters out of its 15 airport counters in Japan. It is planning to further strengthen the contact point with users by expanding or transferring the Smart Pickup lockers to other airport counters, or installing more Smart Pickup lockers. In addition, it will optimize the level of its services according to user needs by thoroughly reducing the length of waiting time for repeat users who do not require explanation and meticulously dealing with users who need explanation by airport staff. Super Last-Minute Online Order Receipt System Collaboration between the store digitalization strategy, Cloud WiFi, and the customer database has established a "super last-minute online order receipt system," enabling the company to provide services for customers who are about to depart, whom the company failed to secure before the system was established (the system has made it possible for the company to cope expeditiously with online application submitted right in front of airport counters by collaborating with the database). Information and Communications Service Business The company has focused on development of "Vision Business Market" as part of its effort to expand the inflow channels (strengthen its sales channels). "Vision Business Market" is a business support website designed for start-up companies, small- and medium-sized enterprises, and ventures. Targeted also at individuals who are preparing for starting business, the website offers the company's services, partner companies' merchandise, as well as useful information. Furthermore, it started selling in-house developed services in the first half of this term in order to make the most of its customer foundation. The company sells Cloud-based services that it has developed internally using its know-how, and as the first step, it began to sell "VWS WEB CALL SYSTEM," a total solution for telephone appointment business support. The service is easy to be adopted even by small-scale business operators because it has a competitive edge in terms of the functions of increasing the staff operation efficiency and grasping the business condition, and the burden of fixed cost is insignificant. The service is subject to the "IT-introduction subsidies." The company plans to provide services with growing customer needs one after another. Travel-related Service Platform The Media Service business for foreign tourists visiting Japan has shown a healthy growth. The company has offered information and services that are useful for solving issues during trips overseas via advertising media that uses the user contact points of "Global WiFi," "NINJA WiFi," and overseas affiliated services. The company and its services have gained in popularity among the users of personal Wi-Fi routers and services, and besides, the numbers of companies placing advertisements of the company's services and of companies continuing ad placement are rising as the company has earned excellent reputation for its effort to handing routers over directly to customers and its capability to take measures for each attribute. "Pro Drivers," a pickup-reservation and courtesy-car service (enrichment of the travel-related service platform) The company started to offer a pickup-reservation and courtesy-car service for the existing customers of the Global WiFi business as part of the "travel-related service platform" plot. It plans to focus not only on targeting the existing customers of the Global WiFi business but also on prospecting for new customers and reeling in the customers of the Information and Communications Service business, and schedules to fully launch the service around the fall of 2018. The company will operate the service solely by its corporate group in Japan (starting off with Tokyo) and expand gradually to major Japanese cities, including expansion by partner companies. Meanwhile, in overseas nations, the company will use "SmartRyde" of DLGB Inc., one of the enterprises with which the company has established capital and business alliances.
 
 
Conclusions
The company will never be satisfied with its tremendous growth, but will continue striving to increase the quantity of routers on lease and improve profitability through various approaches, including not only high-speed launch of Cloud WiFi and provision of “Global WiFi for Biz,” a standing-type service exclusively for corporations, but also operational streamlining through line use cost reduction, AI-based FAQs, and chat bot-based customer support and promotion of the store digitalization strategy. In other words, sedulous efforts as well as the market expansion are the secrets behind the company’s outstanding growth. Cloud WiFi, in particular, is expected to further boost the company’s potential. Users do not have to take on any burden of using lines when they are out of operation, and besides, a “super” last-minute online order receipt system has been realized, making it possible for the company to provide “Global WiFi for Biz” and earn stable monthly earnings through the provision. It is the advantages of the Information and Communications Service business to prospect for and profoundly cultivate corporate customers. Moreover, as the company is now able to forge alliances with travel agencies and incorporate the service into overseas travel products, there are rising expectations for development of new businesses. There is no doubt that the company’s immediate business performance, too, is healthy. Although the full-year earnings forecast has been left unchanged, the progress rates are 47.8% for sales (compared to 47.6% year on year on the basis of the full-year actual results), 54.9% for operating income (47.5% year on year on the aforementioned basis), 55.3% for ordinary income (47.4% year on year on the same basis), and 53.2% for net income (47.3% year on year on the same basis). The company seems to plan to revise the forecast and announce a more accurate forecast by taking the results of the third quarter, which is the busiest period, into account. Given the immediate growth rates, it is predicted that the company will finish this fiscal year with sales of 20.9 to 21.0 billion yen and an operating income of 2.5 to 2.7 billion yen.
 
 
<Reference: Regarding corporate governance>
Corporate Governance ReportUpdated on April 2, 2018 ◎ Basic policy Our corporate group improves ourselves to change clients' expectations into impression, pursues innovation without hesitation to actualize the ideal, always feels grateful about the support of many people (stakeholders), and operates its business activities with a humble mindset. Under this code of conduct, Vision observes laws, in-company regulations, and policies, carries out business in good faith, and strives to realize optimal corporate governance. <Reasons for Non-compliance with the Principles of the Corporate Governance Code (Excerpts)> 【Principle 4-1-3 Roles and responsibilities of the board of directors (1) (To oversee the planning by a successor to the chief executive officer and others)】 Under a business environment that will change from time to time, our company will have thorough discussion before appointing top executives. For instance, in our company the board of directors will designate top executives from candidates who are considered appropriate for the position in terms of their personality, knowledge, business performance, and other factors, in accordance with our management philosophy and business strategies. We will hold discussion on supervision of succession planning. <Disclosure Based on the Principles of the Corporate Governance Code (Excerpts)> 【Principle 1-4 So-called strategically held shares】 The basic policy of Vision is not to hold the shares of other companies strategically, unless it is considered beneficial for improving corporate value in the medium to long term. As of now, there are no strategically held shares. With regard to exercise of voting rights, our company has followed a policy of judging whether or not to exercise the voting rights for each case, and will make careful judgment from the perspective of medium- and long-term improvement of our corporate value. 【Principle 1-7 Related party transactions】 When beginning related party transactions, from the perspective of the corporate management soundness, our company recognizes that there are various points that should be noted and obtains proper final decision, such as a resolution by the board of directors, in accordance with the regulations of the ringi system (a system of circulating a document for approval), official regulations of administrative authority, and other similar regulations by taking into account especially whether or not a relevant transaction impairs the soundness of our corporate group’s management, whether or not the transaction is effective in light of a reasonable judgment, and whether or not the conditions of the transaction are proper compared to those of outside transactions. In an attempt to grasp related-party transactions and any associated matters, our company requires all the officers, upon appointing each of them to the position and at the end of each fiscal year, to submit a list of related parties and questionnaire on whether or not any related- party transaction was carried out. 【Principle 3-1 Enrichment of disclosure】 (1) We disclose our management philosophy, management strategy, etc. on our website. (2) Basic principles and basic policies regarding corporate governance are disclosed in the Corporate Governance Report and Securities Report. (3) The amount of remuneration for each director is determined by the Board of Directors in consideration of the company's performance and the degree of contribution to the company, etc. within the limit of the total remuneration resolved at the general meeting of shareholders. (4) The Board of Directors resolves appointment of management executives and candidates for directors and corporate auditors, by comprehensively taking into account knowledge, experience, ability, etc. of each person. (5) The reasons for the appointment of each candidate for external officers are disclosed in the reference documents of the notice of convocation of general meeting of shareholders. In the future, we plan to disclose the reasons for appointing candidates for directors and corporate auditors. 【Principle 5-1 Policy for constructive dialogue with shareholders】 If shareholders or others want to have a dialogue with Vision, the company will respond positively within a reasonable range, to contribute to the sustainable growth of the company and the medium to long-term improvement in corporate value. As of now, Vision holds a briefing session attended by the president or a director in charge of IR two or more times per year, meetings with institutional investors, briefing sessions for individual investors several times a year, and so on. The information on their results is properly shared through meetings of the board of directors, etc. In addition, Vision takes thoroughgoing measures for preventing the leakage of insider information.
 
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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