URL: www.walden.co.jp
Written by Yoshiyuki Muroya
E-mail: [email protected]
Phone：+81 3 3553 3769
FT COMMUNICATIONS (2763)
Consolidated Fiscal Year
Sales
(Million Yen)
FY03/2013
45,879
FY03/2014
35,837
FY03/2015CoE
38,000
FY03/2014
YoY
(21.9%)
FY03/2015CoE
YoY
6.0%
Consolidated Q1 to Q3
Sales
(Million Yen)
Q1 to Q3 FY03/2014
26,469
Q1 to Q3 FY03/2015
25,874
Q1 to Q3 FY03/2015
YoY
(2.2%)
Source: Company Data, WRJ Calculation
OP
RP
NP
3,108
3,761
4,800
21.0%
27.6%
OP
3,285
4,113
5,000
25.2%
21.6%
RP
1,760
2,654
2,800
50.7%
5.5%
NP
2,582
3,018
16.9%
2,786
3,278
17.7%
1,832
2,017
10.1%
EPS
DPS
BPS
(Yen)
(Yen)
(Yen)
160.5
30.0
528.3
232.3
50.0
720.0
240.0
70.0
EPS
DPS
BPS
(Yen)
(Yen)
(Yen)
-
1.0 Executive Summary (19 March 2015)
Coping with Security Enhancement
FT COMMUNICATIONS, being involved with selling diverse merchandises & services mainly to small-sized
corporates as the key earnings pillar, is calling for prospective recurring profit ¥10,000m as midterm target.
“Development & promotion of new business”, “enhancement of market shares in existing business” and
“accumulation of stock income” are the three major management strategies for the Company to achieve the
midterm target. Meanwhile, recent trading has been driven by surging sales of server & UTM (Unified
Threat Management), corporate-use mobile phones and website productions (e.g., EC sites), as well as by
takeoff of CFC-free natural refrigerant gas (adopted in air-conditioners). In regards to server & UTM, sales
have risen some 1.8 times over the year. As far as we could gather, the Company well succeeds in
incorporating increasing needs for security enhancement among small-sized corporates (headcounts less
than 20), i.e., the Company’s mainstay customer base. Meanwhile, sales of corporate-use mobile phones have
quadrupled over the year.
In Q1 to Q3 FY03/2015, sales came in at ¥25,874m (down 2.2% YoY) and recurring profit ¥3,278m (up
17.7%). Corporate Business saw sales ¥21,935m (up 19.2%) and segment profit ¥2,939m (up 14.1%), while
sales ¥4,466m (up 12.5%) and segment profit ¥281m (down 27.3%) for Consumer Business. In regards to
Marking Supply Business, from which the Company pulled out as of the end of Q1 FY03/2014, the Company
saw sales ¥4,728m and segment loss ¥38m over the year. Thus, sales of the Company as a whole have been
decreased while segment profit increased as much as suggested by these figures over the year. In Corporate
Business, sales and earnings increased favorably over the year in line with “development & promotion of
new business” and “enhancement of market shares in existing business”, as discussed above. Meanwhile, in
regards to Consumer Business, dedicated to sales for general consumers, sales of optical line services have
1
remained buoyant, but segment profit came down over the year as it was not substantial enough to fully
compensate for increasing expenses stemming from frontloaded investments to newly set up a call center in
Osaka, etc. Meanwhile, the Company reveals an intention to make remarkable progresses in “accumulation
of stock income” by means of being heavily involved with own-brand operations in “Hikari Collaboration”,
representing a wholesale model for NTT’s optical line services to start up in March 2015, as FVNO (Fixed
Virtual Network Operator).
Initial Company forecasts in FY03/2015 have remained unchanged, calling for prospective sales ¥38,000m
(up 6.0% YoY) and recurring profit ¥5,000m (up 21.6％). The Company saw recurring profit better than
initially expected in H1 (Q1 to Q2), but this did not continue into Q3, as far as we could gather. Progress rate
in Q1 to Q3 against full-year Company forecasts was rather disappointing for recurring profit, when
compared with results in the previous year. Recent trading associated with environmental-related
merchandises, comprising LED lighting and CFC-free natural refrigerant gas (adopted in air-conditioners),
looks undershooting, when compared with assumptions of Company forecasts. Meanwhile, dividend per
share remains increasing and so does payout ratio, in line with the Company’s measure to share increasing
earnings with shareholders. Prospective dividend per share is ¥70.0, implying payout ratio 29.2%, in
FY03/2015, versus ¥50.0, implying payout ratio 21.5%, in FY03/2014, while ¥30.0, implying payout ratio
18.7%, in FY03/2013.
IR Representative: Corporate Division (+81 3 5847 2777 [email protected]）
2
2.0 Company Profile
Selling Merchandises & Services to Small-Sized Corporates
Company Name
FT COMMUNICATIONS CO., LTD.
Company Website
IR Information
Share Price
Established
1 August 1985
Listing
12 March 2003: Tokyo Stock Exchange JASDAQ Standard (Ticker: 2763)
Capital
¥1,309m (As of the end of December 2014)
No. of Shares
11,916,800 shares, including 194,728 treasury shares (As of the end of Dec. 2014)
Main Features

More than 90% exposed to small-sized corporates whose headcounts below 20 in
Corporate Business
Businesses

Well coping with security enhancement among customers

HIKARI TSUSHIN, INC., the parent company since 27 June 2013
Ⅰ. Corporate Business
Ⅱ. Consumer Business
Top Management
Chairman & Executive Director: Makoto Kuroyanagi
Representative Director, President & CEO: Toshiyuki Hirasaki
Shareholders
HIKARI TSUSHIN, INC. 30.9%, Makoto Kuroyanagi 14.0%, H-Communications,
Inc. 10.8% (As of the end of September 2014)
Headquarters
Chuo-ku, Tokyo JAPAN
No. of Employees
Consolidated: 1,400, Parent: 598 (As of the end of December 2014)
Source: Company Data
3
3.0 Recent Trading & Prospects
Q1 to Q3 FY03/2015 Results
In Q1 to Q3 FY03/2015, sales came in at ¥25,874m (down 2.2% YoY), operating profit ¥3,018m (up 16.9%),
recurring profit ¥3,278m (up 17.7%) and net profit ¥2,017m (up 10.1%), while operating profit margin 11.7%
(up 1.9% points).
Sales
(Million Yen)
Corporate Business
Consumer Business
Marking Supply Business
10,000
5,000
Q4 FY03/2015
Q3 FY03/2015
Q2 FY03/2015
Q1 FY03/2015
Q4 FY03/2014
Q3 FY03/2014
Q2 FY03/2014
Q1 FY03/2014
Q4 FY03/2013
Q3 FY03/2013
Q2 FY03/2013
Q1 FY03/2013
0
Segment Profit
(Million Yen)
4
Corporate Business
Consumer Business
Marking Supply Business
1,500
1,000
500
0
Q4 FY03/2015
Q3 FY03/2015
Q2 FY03/2015
Q1 FY03/2015
Q4 FY03/2014
Q3 FY03/2014
Q2 FY03/2014
Q1 FY03/2014
Q4 FY03/2013
Q3 FY03/2013
Q2 FY03/2013
Q1 FY03/2013
(500)
Source: Company Data, WRJ Calculation
Meanwhile, progress rate came in at 68.1% in sales against full-year Company forecasts, 62.9% in operating
profit, 65.6% in recurring profit and 72.1% in net profit. In terms of recurring profit, which is the key
management indicator for the Company, progress rate was 67.8% over the year in results, suggesting
progress rate this year 2.2% points lower over the year. Thus, it could be the case that recurring profit may
have fallen short of expectations as much as this.
Segmented information, disclosed by the Company, implies that earnings of the Company heavily hinge on
those of Corporate Business, having accounted for 91.3% of collective segment profit of the Company in Q1
to Q3 results.
Meanwhile, the gap between operating profit and recurring profit suggests net add-ons ¥260m at the
non-operating level, which mainly came from royalty income ¥207m (up 23.7%) to have been collected. As
the royalty income is persistently generated, stemming from sales of merchandises & services, i.e., the
Company’s mainstay business, the Company argues that recurring profit is more appropriate than
operating profit for grasping the underlying earnings of the Company. By business segment, Corporate
Business presumably accounts for almost everything of the royalty income and thus, in terms of recurring
profit, the Company’s earnings are even more dependent on Corporate Business than in terms of
aforementioned segment profit.
At present, the Company’s business comprises Corporate Business and Consumer Business by business
segment. This has been the case since the suspension of Marking Supply Business as of the end of Q1
FY03/2014. In Q1 FY03/2014, this business segment saw sales ¥4,728m and segment loss ¥38m. In here,
the Company was involved with trading of printing-related supplies (represented by toner cartridges),
imported furniture, environment-business-related merchandises, etc. as a wholesaler. Meanwhile, it was
found out to be too difficult for the Company to improve added value created in here even in the future. Thus,
the Company sold all those operations.
In Corporate Business, the Company runs operations to sell diverse merchandises & services mainly to
small-sized corporates (headcounts below 20, accounting for more than 90%). On top of conventional
mainstay merchandises, i.e., OA equipment (multifunctional printers) and business phones, all those
operations include sales of environmental-related merchandises, i.e., own-brand LED lighting and CFC-free
natural refrigerant gas (adopted in air-conditioners), as well as, sales of server & UTM (Unified Threat
Management) to well cope with needs to beef up security in small-sized corporates, sales of corporate-use
mobile phones and website productions. On top of this, sales of ALEXON Co., ltd., which plans,
manufactures and sells cable broadcasting equipment & tuners, etc., to have been newly consolidated since
Q4 FY03/2014 are also included in here.
On 20 December 2013, the Company disclosed that it was going to procure shares of Newtech Co., Ltd.
(capital ¥11m), while having consolidated this as a subsidiary in Q4 FY03/2014. The aim of this deal was to
take in CFC-free natural refrigerant gas (adopted in air-conditioners) as own new merchandises that have a
potential to become almost as substantial as own-brand LED lighting in terms of sales amounts in the near
future, eventually enhancing own exposure to environmental-related merchandises, comprising own-brand
LED lighting and them.
5
In Q4 FY03/2014, when the consolidation was carried out, sales of the merchandises came in at ¥160m,
while ¥290m in Q1, ¥290m in Q2 and ¥230m in Q3, so far in FY03/2015, just roughly speaking. Thus, sales
have adjusted in Q3. As far as we could gather, this had a lot to do with an issue that the Company failed to
come up with sufficient capacity to install them in a timely manner, having made own sales forces to focus
on merchandises & services other than them. Nevertheless, as focus on other than them did succeed as
mentioned earlier, and thus the negative impacts from here are not so substantial as a whole for the
Company. Meanwhile, intensifying competition led to delayed recovery for sales of LED lighting, but this
has been also compensated for by strengths elsewhere, as far as we could gather.
Newtech Co., Ltd. has competitive knowhow, etc. on CFC-free natural refrigerant gas (adopted in
air-conditioners). Still, lacking in management resources to make it commercially viable, it was decided for
the Company to utilize own sales networks, etc. to do so. This means nothing but acquisition of promising
new merchandises in a view of the Company.
As CFC-free natural refrigerant gas (adopted in air-conditioners) is constituted literally and exclusively by
natural refrigerants (carbon dioxide, ammonia, hydrocarbons, etc. i.e., materials existing in nature), it
causes no environmental issues, e.g., destruction of ozone layer, global warming, etc. Thus, the gas has a
high potential to gradually replace existing CFCs including specified CFCs and CFC alternatives, going
forward. On the expenses side, meanwhile, it is noteworthy that the adoption of CFC-free natural
refrigerant gas reduces power consumption of air-conditioners 15% to 40%. Thus, the superiority on the
expenses side could be the key driver to facilitate the changeover to this new format from all those existing
formats.
When simply assuming expenses on power (electric bills) are cutback 15% to 40%, initial expenses will be
fully compensated for in two and half years to 6 years, while only benefits from here are to be generated
after all those years. Thus, customers of the Company adopting CFC-free natural refrigerant gas (adopted in
air-conditioners) are supposed to see net decreases of future expenses as much as this.
Meanwhile, the Company argues that incorporating ALEXON Co., ltd. (capital ¥90m) in Q4 FY03/2014,
heavily involved with manufacturing of cable broadcasting equipment & tuners, etc. as own consolidated
subsidiary through procuring the shares should generate opportunities for the Company to learn about
knowhow, etc. as a manufacturer. Thus, the Company has been implementing mergers as a means to make
progresses in “development & promotion of new business”, while all those recent deals suggest that it has
been done both horizontally and vertically, i.e., for acquisitions of new merchandises to increase sales and
enhancement of exposure to manufacturing of own merchandises, respectively.
6
Income Statement (Cumulative, Quarterly)
Income Statement
(Million Yen)
Sales
Cons.Act
Cons.Act
Cons.Act
Cons.Act
Cons.Act
Cons.Act
Cons.Act
Cons.Act
Q1
Q1 to Q2
Q1 to Q3
Q1 to Q4
Q1
Q1 to Q2
Q1 to Q3
Q1 to Q4
YoY
03/2014
03/2014
03/2014
03/2014
03/2015
03/2015
03/2015
03/2015
Net Chg.
11,409
18,880
26,469
35,837
8,233
17,101
25,874
-
(594)
Cost of Sales
7,686
11,285
15,032
19,637
3,986
8,252
12,508
-
(2,524)
Gross Profit
3,722
7,595
11,436
16,200
4,247
8,849
13,365
-
+1,929
SG&A Expenses
3,134
5,954
8,840
12,424
3,312
6,905
10,345
-
+1,504
584
1,630
2,582
3,761
928
1,941
3,018
-
+435
24
131
204
352
55
175
260
-
+56
609
1,762
2,786
4,113
984
2,117
3,278
-
+491
Operating Profit
Non Operating Balance
Recurring Profit
Extraordinary Balance
3
(193)
266
388
(2)
12
12
-
(254)
Pretax Profit
613
1,568
3,053
4,501
981
2,129
3,291
-
+237
Tax Charges, etc.
195
571
987
1,608
371
799
1,248
-
+260
(7)
-
233
239
11
16
25
-
(208)
424
996
1,832
2,654
598
1,314
2,017
-
+185
Minorities' Interests
Net Profit
Sales YoY
+4.8%
(13.4%)
(21.4%)
(21.9%)
(27.8%)
(9.4%)
(2.2%)
-
-
Operating Profit YoY
(23.3%)
(0.2%)
+6.0%
+21.0%
+58.8%
+19.1%
+16.9%
-
-
Recurring Profit YoY
(22.0%)
+3.8%
+10.9%
+25.2%
+61.4%
+20.1%
+17.7%
-
-
(1.0%)
+11.3%
+41.3%
+50.7%
+41.0%
+31.9%
+10.1%
-
-
Net Profit YoY
Gross Profit Margin
32.6%
40.2%
43.2%
45.2%
51.6%
51.7%
51.7%
-
+8.4%
SG&A / Sales
27.5%
31.5%
33.4%
34.7%
40.2%
40.4%
40.0%
-
+6.6%
Operating Profit Margin
5.1%
8.6%
9.8%
10.5%
11.3%
11.4%
11.7%
-
+1.9%
Recurring Profit Margin
5.3%
9.3%
10.5%
11.5%
12.0%
12.4%
12.7%
-
+2.1%
Net Profit Margin
3.7%
5.2%
6.9%
7.4%
7.3%
7.7%
7.8%
-
+0.9%
+5.6%
Tax Charges, etc. / Pretax Profit
Income Statement
(Million Yen)
Sales
31.9%
36.4%
32.4%
35.7%
37.9%
37.6%
37.9%
-
Cons.Act
Cons.Act
Cons.Act
Cons.Act
Cons.Act
Cons.Act
Cons.Act
Cons.Act
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
YoY
03/2014
03/2014
03/2014
03/2014
03/2015
03/2015
03/2015
03/2015
Net Chg.
+1,184
11,409
7,471
7,588
9,368
8,233
8,868
8,772
-
Cost of Sales
7,686
3,598
3,747
4,604
3,986
4,266
4,256
-
+509
Gross Profit
3,722
3,872
3,841
4,763
4,247
4,602
4,515
-
+674
SG&A Expenses
3,134
2,820
2,885
3,584
3,312
3,593
3,439
-
+553
584
1,045
951
1,178
928
1,012
1,076
-
+124
Operating Profit
Non Operating Balance
Recurring Profit
Extraordinary Balance
24
106
72
147
55
120
84
-
+12
609
1,152
1,024
1,326
984
1,132
1,161
-
+137
3
(196)
460
121
(2)
15
-
-
(460)
Pretax Profit
613
955
1,485
1,447
981
1,148
1,161
-
(323)
Tax Charges, etc.
195
375
416
620
371
427
448
-
+31
(7)
7
232
5
11
4
9
-
(223)
Minorities' Interests
Net Profit
424
572
835
822
598
715
703
-
(132)
Sales YoY
+4.8%
(31.6%)
(36.0%)
(23.3%)
(27.8%)
+18.7%
+15.6%
-
-
Operating Profit YoY
(23.3%)
+20.0%
+18.8%
+75.0%
+58.8%
(3.2%)
+13.1%
-
-
Recurring Profit YoY
(22.0%)
+25.8%
+25.7%
+71.5%
+61.4%
(1.7%)
+13.4%
-
-
(1.0%)
+22.5%
+108.4%
+77.0%
+41.0%
+25.1%
(15.8%)
-
-
Net Profit YoY
Gross Profit Margin
32.6%
51.8%
50.6%
50.9%
51.6%
51.9%
51.5%
-
+0.9%
SG&A / Sales
27.5%
37.7%
38.0%
38.3%
40.2%
40.5%
39.2%
-
+1.2%
Operating Profit Margin
5.1%
14.0%
12.5%
12.6%
11.3%
11.4%
12.3%
-
(0.3%)
Recurring Profit Margin
5.3%
15.4%
13.5%
14.2%
12.0%
12.8%
13.2%
-
(0.3%)
Net Profit Margin
3.7%
7.7%
11.0%
8.8%
7.3%
8.1%
8.0%
-
(3.0%)
31.9%
39.3%
28.1%
42.8%
37.9%
37.3%
38.6%
-
+10.5%
Tax Charges, etc. / Pretax Profit
Source: Company Data, WRJ Calculation
7
Segmented Information (Cumulative, Quarterly)
Segmented Information
(Million Yen)
Corporate Business
Consumer Business
Marking Supply Business
Sales (Before Adjustments)
Elimination
Sales
Corporate Business
Consumer Business
Marking Supply Business
Sales (YoY)
Corporate Business
Consumer Business
Marking Supply Business
Sales (Composition)
Corporate Business
Consumer Business
Marking Supply Business
Segment Profit
Elimination
Operating Profit
Corporate Business
Consumer Business
Marking Supply Business
Segment Profit (YoY)
Corporate Business
Consumer Business
Marking Supply Business
Segment Profit (Composition)
Segmented Information
(Million Yen)
Corporate Business
Consumer Business
Marking Supply Business
Sales (Before Adjustments)
Elimination
Sales
Corporate Business
Consumer Business
Marking Supply Business
Sales (YoY)
Corporate Business
Consumer Business
Marking Supply Business
Sales (Composition)
Corporate Business
Consumer Business
Marking Supply Business
Segment Profit
Elimination
Operating Profit
Corporate Business
Consumer Business
Marking Supply Business
Segment Profit (YoY)
Corporate Business
Consumer Business
Marking Supply Business
Segment Profit (Composition)
Source: Company Data, WRJ Calculation
Cons.Act
Q1
03/2014
5,632
1,267
4,728
11,629
(219)
11,409
+14.9%
+14.9%
(5.2%)
+4.8%
48.4%
10.9%
40.7%
100.0%
670
64
(38)
696
(111)
584
+1.9%
(35.6%)
(23.3%)
96.2%
9.3%
(5.6%)
100.0%
Cons.Act
Q1
03/2014
5,632
1,267
4,728
11,629
(219)
11,409
+14.9%
+14.9%
(5.2%)
+4.8%
48.4%
10.9%
40.7%
100.0%
670
64
(38)
696
(111)
584
+1.9%
(35.6%)
(23.3%)
96.2%
9.3%
(5.6%)
100.0%
Cons.Act
Q1 to Q2
03/2014
12,046
2,539
4,728
19,314
(434)
18,880
+19.6%
+9.3%
(51.0%)
(13.4%)
62.4%
13.1%
24.5%
100.0%
1,658
208
(38)
1,828
(197)
1,630
+19.9%
(0.5%)
(0.2%)
90.7%
11.4%
(2.1%)
100.0%
Cons.Act
Q2
03/2014
6,413
1,271
7,685
(214)
7,471
+24.0%
+4.3%
(31.6%)
83.5%
16.5%
100.0%
988
143
1,131
(86)
1,045
+36.1%
+32.0%
+20.0%
87.3%
12.7%
100.0%
Cons.Act
Q1 to Q3
03/2014
18,403
3,968
4,728
27,101
(632)
26,469
+20.3%
+11.8%
(69.0%)
(21.4%)
67.9%
14.6%
17.4%
100.0%
2,576
387
(38)
2,925
(342)
2,582
+26.8%
+17.0%
+6.0%
88.1%
13.2%
(1.3%)
100.0%
Cons.Act
Q3
03/2014
6,356
1,429
7,786
(198)
7,588
+21.8%
+16.5%
(36.0%)
81.6%
18.4%
100.0%
918
178
1,096
(144)
951
+41.8%
+47.2%
+18.8%
83.7%
16.3%
100.0%
Cons.Act
Q1 to Q4
03/2014
26,280
5,664
4,728
36,674
(837)
35,837
+25.3%
+16.6%
(77.1%)
(21.9%)
71.7%
15.4%
12.9%
100.0%
3,662
622
(38)
4,246
(484)
3,761
+32.7%
+43.1%
+21.0%
86.3%
14.7%
(0.9%)
100.0%
Cons.Act
Q4
03/2014
7,877
1,696
9,573
(204)
9,368
+38.6%
+29.5%
(23.3%)
82.3%
17.7%
100.0%
1,085
235
1,320
(142)
1,178
+49.1%
+125.8%
+75.0%
82.2%
17.8%
100.0%
Cons.Act
Q1
03/2015
6,893
1,507
8,400
(167)
8,233
+22.4%
+18.9%
(27.8%)
82.1%
17.9%
100.0%
905
91
997
(69)
928
+35.2%
+41.4%
+58.8%
90.8%
9.2%
100.0%
Cons.Act
Q1
03/2015
6,893
1,507
8,400
(167)
8,233
+22.4%
+18.9%
(27.8%)
82.1%
17.9%
100.0%
905
91
997
(69)
928
+35.2%
+41.4%
+58.8%
90.8%
9.2%
100.0%
Cons.Act
Q1 to Q2
03/2015
14,482
2,970
17,453
(351)
17,101
+20.2%
+17.0%
(9.4%)
83.0%
17.0%
100.0%
1,928
159
2,088
(146)
1,941
+16.3%
(23.6%)
+19.1%
92.4%
7.6%
100.0%
Cons.Act
Q2
03/2015
7,588
1,463
9,052
(184)
8,868
+18.3%
+15.1%
+18.7%
83.8%
16.2%
100.0%
1,022
67
1,090
(77)
1,012
+3.5%
(53.1%)
(3.2%)
93.8%
6.2%
100.0%
Cons.Act
Q1 to Q3
03/2015
21,935
4,466
26,401
(527)
25,874
+19.2%
+12.5%
(2.2%)
83.1%
16.9%
100.0%
2,939
281
3,221
(203)
3,018
+14.1%
(27.3%)
+16.9%
91.3%
8.7%
100.0%
Cons.Act
Q3
03/2015
7,453
1,495
8,948
(176)
8,772
+17.2%
+4.6%
+15.6%
83.3%
16.7%
100.0%
1,011
121
1,133
(56)
1,076
+10.1%
(31.6%)
+13.1%
89.2%
10.8%
100.0%
Cons.Act
Q1 to Q4
03/2015
Cons.Act
Q4
03/2015
-
YoY
Net Chg.
+3,531
+497
(4,728)
(699)
+104
(594)
+363
(105)
+38
+296
+139
+435
YoY
Net Chg.
+1,096
+65
+1,161
+22
+1,184
+92
(56)
+36
+88
+124
-
8
Balance Sheet (Quarterly)
Balance Sheet
Cons.Act
Cons.Act
Cons.Act
Cons.Act
Cons.Act
Cons.Act
Cons.Act
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
YoY
03/2014
03/2014
03/2014
03/2014
03/2015
03/2015
03/2015
03/2015
Net Chg.
Cash & Deposit
5,756
4,722
5,323
6,137
6,423
7,543
8,224
-
+2,901
Accounts Receivables
5,519
3,335
3,943
5,063
4,323
4,521
4,201
-
+257
Inventory
2,917
1,372
1,655
1,647
1,454
1,363
1,355
-
(299)
(Million Yen)
Other
Current Assets
Tangible Assets
Intangible Assets
Investments & Other Assets
Cons.Act
874
684
692
934
770
829
695
-
+3
15,067
10,115
11,614
13,782
12,972
14,258
14,477
-
+2,862
1,192
1,146
1,497
1,471
1,496
1,476
1,461
-
(36)
150
131
266
271
262
254
246
-
(20)
1,378
1,034
1,104
1,529
1,518
1,552
1,627
-
+522
Fixed Assets
2,721
2,313
2,869
3,272
3,277
3,283
3,335
-
+465
Total Assets
+3,328
17,789
12,428
14,484
17,054
16,250
17,541
17,812
-
Accounts Payables
3,560
1,317
1,977
2,266
2,076
2,052
2,270
-
+292
Short Term Debt
3,243
559
809
783
810
903
932
-
+122
Corporate Bond (Less than 1 year)
Other
Current Liabilities
20
20
20
170
170
170
170
-
+150
3,003
3,033
2,994
4,608
3,808
4,329
4,081
-
+1,087
9,827
4,929
5,801
7,828
6,865
7,455
7,454
-
+1,653
Corporate Bond
50
50
190
40
30
30
20
-
(170)
Long Term Debt
562
282
335
291
238
212
165
-
(170)
Other
122
61
84
109
89
86
72
-
(11)
735
394
609
441
357
329
257
-
(351)
10,563
5,323
6,411
8,270
7,222
7,784
7,712
-
+1,301
6,165
6,750
7,418
8,296
8,552
9,282
9,635
-
+2,216
Other
1,060
354
654
488
475
474
465
-
(189)
Total Assets
7,226
7,104
8,073
8,784
9,027
9,756
10,100
-
+2,026
17,789
12,428
14,484
17,054
16,250
17,541
17,812
-
+3,328
6,177
6,790
7,468
8,400
8,633
9,351
9,685
-
+2,217
Fixed Liabilities
Total Liabilities
Shareholders' Equity
Total Liabilities & net Assets
Equity Capital
Interest Bearing Debt
Net Debt
Equity Capital Ratio
3,876
911
1,354
1,285
1,248
1,316
1,287
-
(67)
(1,880)
(3,811)
(3,969)
(4,851)
(5,174)
(6,226)
(6,937)
-
(2,968)
34.7%
54.6%
51.6%
49.3%
53.1%
53.3%
54.4%
-
+2.8%
(30.5%)
(56.5%)
(53.5%)
(58.5%)
(60.5%)
(67.1%)
(72.0%)
-
(18.5%)
ROE (12 months)
32.6%
31.3%
35.6%
36.9%
38.2%
36.8%
33.1%
-
(2.5%)
ROA (12 months)
17.6%
22.8%
21.9%
22.7%
26.4%
29.8%
28.5%
-
+6.7%
35
35
40
33
33
29
29
-
-
Net-Debt-Equity Ratio
Days for Inventory Turnover
Inventory Turnover
10.5
10.5
9.1
11.2
11.0
12.5
12.6
-
Quick Ratio
115%
163%
160%
143%
157%
162%
167%
-
-
Current Ratio
153%
205%
200%
176%
189%
191%
194%
-
-
Cons.Act
Cons.Act
Cons.Act
Cons.Act
Cons.Act
Cons.Act
Cons.Act
Cons.Act
Q1
Q1 to Q2
Q1 to Q3
Q1 to Q4
Q1
Q1 to Q2
Q1 to Q3
Q1 to Q4
YoY
03/2014
03/2014
03/2014
03/2014
03/2015
03/2015
03/2015
03/2015
Net Chg.
-
Source: Company Data, WRJ Calculation
Cash Flow Statement (Cumulative)
Cash Flow Statement
(Million Yen)
Operating Cash Flow
na
875
na
2,939
na
1,860
na
-
Investing Cash Flow
na
(1,257)
na
(1,678)
na
(130)
na
-
-
na
(381)
na
1,260
na
1,729
na
-
-
na
(678)
na
(1,017)
na
(328)
na
-
-
Operating CF & Investing CF
Financing Cash Flow
Source: Company Data, WRJ Calculation
9
FY03/2015 Company Forecasts
FY03/2015 Company forecasts have remained unchanged, going for prospective sales ¥38,000m (up 6.0%
YoY), operating profit ¥4,800m (up 27.6％), recurring profit ¥5,000m (up 21.6%) and net profit ¥2,800m (up
5.5%), while operating profit margin 12.6% (up 2.1% points). Compared with those of recurring profit, net
profit is to see limited increases over the year. This is mainly due to a non-reappearance of negative goodwill
write-off ¥611m, booked as extraordinary profit in FY03/2014. Meanwhile, this was in line with shares
acquisition of ALEXON Co., ltd.
Quarterly Sales and Operating Profit Margin
Sales (Million Yen)
15,000
20.0%
12,221
11,409
7,471
7,588
9,368
8,233
8,868
8,772
12,125
Q1 FY03/2014
Q2 FY03/2014
Q3 FY03/2014
Q4 FY03/2014
Q1 FY03/2015
Q2 FY03/2015
Q3 FY03/2015
Q4 FY03/2015
0.0%
Q4 FY03/2013
10.0%
11,851
5.1%
Q3 FY03/2013
5.5%
10,921
7
6.8%
Q2 FY03/2013
0
8.0%
10,885
5,000
7.0%
14.7%
14.0% 12.5% 12.6%
11.3% 11.4% 12.3%
Q1 FY03/2013
10,000
Operating Profit Margin (%)
(10.0%)
Source: Company Data, WRJ Calculation
The Company, considering that sharing earnings with shareholders is one of the primary management
issues, claims that the basic dividend policy is to persistently carry out payouts of stable dividend.
Meanwhile, however, given steady earnings growth in FY03/2014 over FY03/2013, the Company raised
dividend per share up to ¥50.0, implying payout ratio 21.5%, from ¥30.0 (after retroactive adjustments for
1:100 share split, effective on 1 October 2013), implying payout ratio 18.7%.
In regards to prospective dividend per share in FY03/2015, the Company was initially going for ¥50.0,
unchanged from FY03/2014, implying payout ratio 20.8%. However, on 7 November 2014, the Company
disclosed to increase divided per share up to ¥70.0, implying payout ratio 29.2%. Given H1 (Q1 to Q2)
results exceeding Company forecasts, the Company decided to pay out dividend per share ¥30.0 as of the
end of Q2 versus ¥20.0 initially planned. Meanwhile, in regards to payouts of divided as of the end of Q4, the
Company has decided to go for commemorative dividend ¥10.0 per share for its 30th anniversary on 1
August 2015, on top of ¥30.0 initially planned.
10
Long-Term Prospects
As midterm target, the Company suggests prospective recurring profit ¥10,000m to be achieved. While
trying to get at the target as soon as possible, the Company mentions that corporate strategies to be carried
out for this include “enhancement of market shares in existing business”, “accumulation of stock income”
and “development & promotion of new business”.
Long-Term Prospects
Sales (Million Yen)
Recurring Profit (Million Yen)
Recurring Profit Margin (%)
60,000
50.0%
3.1%
20.0%
10.0%
0.0%
(10.0%)
FY03/2015
FY03/2014
FY03/2013
FY03/2012
FY03/2011
(20.0%)
FY03/2010
0
30.0%
10,000
762
10,000
1.2%
5,000
2.0%
20,000
7.2%
35,837 38,000
11.5% 13.2%
4,113
30,000
3,286
37,690
40.0%
44,402 45,879
1,395
40,000
41,520
494
50,000
Source: Company Data, WRJ Calculation
Existing business of “enhancement of market shares in existing business” comprises business phones, OA
equipment (multifunctional printers), etc. belonging to Corporate Business. The Company is planning to
enhance market shares in here, by means of promoting enclosure of existing customers through focusing on
cross selling and/or up selling based on CRM (Customer Relationship Management) system, while
developing new partner companies, i.e., external distributors for own merchandises and implementing
mergers to aggressively and efficiently take advantage of excess cash (net cash ¥6,937m as of the end of Q3
FY03/2015). Nevertheless, recent mergers have contributed rather to “development & promotion of new
business”.
In order to promote “accumulation of stock income”, the Company is trying to enhance that of the mainstay
Internet services, while doing so for that of corporate services, comprising maintenance and services
associated with business phones, OA equipment (multifunctional printers), etc. at the same time. In Q1 to
Q3 FY03/2015, stock income accounted for 12% of sales for the Company as a whole and 11% of gross profit,
roughly speaking, implying gross profit margin relatively lower than the rest of the business, i.e., outright
sales of merchandises and services. Nevertheless, future increases of exposure to stock income should make
recurring profit margin improved in that stock income requires less SG&A expenses than outright sales.
11
The bulk of stock income in mainstay domain of Internet services is accounted for by sales stemming from
operations to run own ISP services for general consumers. Now, given “Hikari Collaboration”, representing a
wholesale model for NTT’s optical line services to start up in March 2015, the business in here should make
a dramatic change. The Company reveals an intention to aggressively work on developing own-brand
services for general consumers as FVNO (Fixed Virtual Network Operator) in here.
4.0 Business Model
Selling Merchandises to Small-Sized Corporates
The Company is in charge of a part of corporate business in the HIKARI TSUSHIN group. The Company
started up its capital & operational tie-up with HIKARI TSUSHIN, INC., triggered by acceptance of capital
injections from HIKARI TSUSHIN, INC. in 2006. In order to further promote operational tie-up with the
Company, HIKARI TSUSHIN, INC. implemented tender offer for the Company’s shares while procuring the
shares from the market at the same time, having resulted in that HIKARI TSUSHIN, INC. became the
parent company for the Company on 27 June 2013. The number of shares of the Company, held by the
HIKARI TSUSHIN group, stood at 4,967,100 as of the end of Q2 FY03/2015, equating to 41.7% of shares
outstanding, comprising those held by HIKARI TSUSHIN, INC. and its 100% consolidated subsidiary, i.e.,
H-Communications, Inc.
Mainstay Merchandises & Services
12
LED Lighting
Business Phones, OA Equipment, etc.
Docomo shop
Mercury Lamp Type
Halogen Type
UTM (Unified Threat Management)
Server
Gift Site
Call Center, Marketing
Natural Refrigerant Gas
Hydrocarbon Refrigerant
Ｒ441a
Ｒ443a
Mobile LTE
Telecom Facilities Construction , etc.
Tablet Devices, Smartphones, etc.
Settlement Services
GISTAR PREMIUM
C to C
Internet Services
Business Phone
Installation
Credit card settlement
services, based on the use
of Smartphones, etc.
Source: Company Data
C to C Used Car Trading Portal
ISP
Website Productions
LED Lighting
Installation
Industrial Solar Power Panel Installation
In the Company’s Corporate Business, the Company sells merchandises and services for small-sized
corporates and more than 90% of sales in here are associated with those with headcounts less than 20. At
the same time, FT COMMUNICATIONS CO., LTD. is directly involved with the operations as much as more
than 60% in terms of sales, comprising own-brand LED lighting, business phones, OA equipment
(multifunctional printers), server & UTM (Unified Threat Management) and CFC-free natural refrigerant
gas (adopted in air-conditioners). FT COMMUNICATIONS CO., LTD. is also heavily involved with telecom
facilities construction, maintenance and services for all those merchandises at the same time.
The remaining less than 40% of sales in this business segment are accounted for by operations by the
Company’s consolidated subsidiaries, mainly comprising ISP services, website productions and sales of
corporate-use mobile phones.
In Consumer Business, meanwhile, the Company runs operations to sell mobile phones for general
consumers by means of running mobile phone stores, while selling optical line services and house-operated
ISP services as well as being involved with contracted outright sales of ISP services run by HIKARI
TSUSHIN, INC., i.e., the parent company.
13
Disclaimer
Information here is a summary of “IR Information” of the Company, compiled by Walden Research Japan,
from a neutral and professional standing point, in the form of a report. “IR Information” of the Company
comprises a) contents of our interview with the Company, b) contents of presentations for institutional
investors, c) contents of timely disclosed information and d) contents of the homepage etc.
Company Name: Walden Research Japan Incorporated
Headquarters Office：#1110 4-12-4 Hatchobori, Chuo-ku, Tokyo 104-0032, JAPAN
URL: www.walden.co.jp
E-mail: [email protected]
Phone：+81 3 3553 3769
Copyright 2015 Walden Research Japan Incorporated