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宁夏十一选五计划: COMPANY RESEARCH AND ANALYSIS REPORT：eGuarantee, Inc-8771-Tokyo Stock Exchange First Section( II )
十一选五玩法 www.yhyqa.cn ◆Financial results
For the 11th consecutive fiscal period since its listing, set new record highs for profits from the growth of the balance of guarantees outstanding
1. Summary of FY3/18 results
In the FY3/18 consolidated results, net sales increased 11.5% YoY to ¥5,105mn, operating profit rose 7.4% to ¥2,276mn, recurring profit grew 7.0% to ¥2,302mn, and net profit attributed to owners of parent increased 9.9% to ¥1,468mn. In the context of the steady performance of the Japanese economy, the Company is aiming to expand the base of its credit risk undertaking business, and as a new channel, it has entered-into business alliances with the Bank of The Ryukyus, Limited. <8399> and three other companies. In addition, by strengthening consulting sales, include by setting detailed guarantee fee ratios against the backdrop of its advanced screening capabilities, re-approaching customers that it came into contact with in the past, and providing services according to customer needs, at the end of the fiscal period the balance of credit guarantees outstanding had risen steadily, up 15.6% on the on the end of the previous fiscal year to ¥345.3bn.
The cost-of-sales ratio rose 3.4 percentage points compared to the previous fiscal year to 20.7%. But this was because the re-guarantee fee increased due to the Company not restricting its credit guarantee targets to the low-risk zone and expanding them to as far as the middle risk zone. From the analysis of customer and other data that it has accumulated up to the present time, it improved the accuracy of bankruptcy probabilities and judged that generating profits from the middle zone was possible even when providing guarantees for it, and started developing operations for it in FY3/18. For example, in the past the Company targeted the sales credits of companies with a bankruptcy probability of 1% or less, but it has expanded the scope of this to 1.5%. Initially, this will be a factor causing the cost-of-sales ratio rise, but it seems likely that it be able to set highly precise guarantee fee ratios by accumulating a track record of results.
Also, compared to the initial Company forecasts, net sales were 1.8% below forecast. But this was because the middle risk credit guarantees with high guarantee fee ratios were less than forecast, and the balance of guarantees outstanding achieved its forecast. Conversely, on a profits basis, the low-risk zone credit guarantees were above forecast, and also the costs ratio improved more than expected, so profits were slightly higher than forecast.
Is financially sound and building a business model that is highly profitable and stable
2. Financial conditions and indicators
Looking at the financial position at the end of FY3/18, total assets were up ¥2,635mn the end of the previous fiscal year to ¥14,368mn. The main change factors were that in current assets, cash and deposits increased ¥1,825mn due to the sales of shares (¥1,281mn) held in the ESOP (Employee Stock Ownership Plan) Trust and also from the higher earnings, and that in non-current assets, tangible non-current assets rose ¥502mn on the acquisition of an employee dormitory.
Total liabilities were up ¥1,470mn on the end of the previous fiscal year to ¥4,928mn. The main change factors were that deposits increased ¥1,107mn following the sales of shares held in the ESOP Trust, and also that alongside the growth of the balance of credit guarantees outstanding, advances received and income taxes payable increased by ¥160mn and ¥105mn, respectively. Net assets were up ¥1,164mn on the end of the previous fiscal year to ¥9,440mn. Retained earnings increased ¥1,047mn, while treasury shares decreased ¥166mn (an increase factor) following the sales of shares in the ESOP Trust.
Looking at the financial indicators, the equity ratio, which is an indicator of financial stability, declined 2.4 percentage points on the end of the previous fiscal year to 58.0%, but this was due to the increase in deposits following the sale of shares held in the ESOP Trust. Moreover, the Company has an abundance of cash and hand and no outstanding interesting-bearing debt, so it is judged to be highly financially sound. Looking at the indicators of profitability also, the operating margin fell slightly compared to the previous fiscal year to 44.6%, including due to the start of the strategic underwriting of middle risk, but even so a high level of profitability is being maintained. Further, both ROA and ROE declined slightly compared to the previous fiscal year, to 17.6% and 19.0% respectively. But if we look at the last few years, we see that they are being maintained at high levels, and that highly stable profit is one of the features of the Company.
The outlook is for the higher sales and profits to continue in FY3/19 also, from the extremely strong demand for sales credit guarantees
1. FY3/19 outlook
The outlook for the FY3/19 consolidated results is for double-digit increases in sales and profits, with net sales increasing 11.6% YoY to ¥5,700mn, recurring profit rising 10.7% to ¥2,550mn, and net profit attributed to owners of parent growing 10.3% to ¥1,620mn. The Company’s policy will be to continue to actively underwrite risk, including undertaking middle risk, while paying attention to the economic climate and bankruptcy trends. On the other hand, it is also preparing for changes to the risk environment in the future and undertaking risk based on careful risk assessments. In addition, it is working to develop products and services that meet customers’ needs in new forms, while also aiming to accumulate the balance of guarantees outstanding through expanding its sales resources.
Demand at the present time continues to be plentiful, and if looking only at the number of inquiring companies, it has doubled compared to a year and a half ago. Inquiries are increasing from companies that want to develop new customers and to grow sales while hedging against the risk of sales credit bad debt. For major companies also, in an increasing number of cases they are deciding that using the Company’s services is more efficient than using their own in-house human resources to manage sales credits of below a certain level. Furthermore, it seems that synergies are being created, of companies entering-into contracts for the Company’s low risk guarantee services in conjunction with its provision of middle risk credit guarantees. The middle risk balance of guarantees outstanding is currently only a few percent of the total balance, but the policy going forward is to gradually increase it.
Other than the above, the progress being made in the revitalization of regional banks with low service utilization rates (with few referrals) is leading to an increase in the number of customers. Depending on the bank that is the alliance partner, there are banks with low service utilization rates even among the alliance banks. The effects of the measures for these banks, such as appealing to the merits of the banks’ customer companies using the Company’s services, started to appear in FY3/18, and this momentum is being maintained in FY3/19 also.
2. Key policies
The Company has set two key policies for FY3/19; expanding the scale of guarantees by increasing sales resources, and strengthening the ability to undertake risk in preparation for the expansion of the scale of guarantees.
(1) Expanding the scale of guarantees by increasing sales resources
In order to respond to the plentiful demand, the Company is aiming to strengthen its sales force and education system. It is also working to improve operational efficiency through a fully-fledged review of sales administrative work, and to increase the number of contracts and to expand the scale of guarantees.
In terms of the personnel system, the Company had 149 employees at the end of FY3/18 (consolidated basis). Of these, around 100 were members of the sales department, and it plans to increase the number of employees in this department by around 20% a year. Also, in the review of sales administrative work, it will clearly distinguish the staff who are directly involved in sales from the middle office staff who are involved in preparing proposals and other such work, toward establishing a structure that makes it easier for the sales force to concentrate exclusively on sales activities with customers, thereby improving the productivity of sales.
The Company is also aiming to streamline back office operations by transferring them to a subsidiary, eGuarantee Shared Services, which it newly established in 2017. In addition, the subsidiary eGuarantee Solution is strengthening systems development in order to improve operational efficiency, and the intention is to improve productivity in all of the companies through pursuing the systemization of various operations. The Company also has in sight utilizing AI technologies in the future. It recruits around 20 new graduates a year, and going forward it intends to recruit more personnel, including mid-career hires, alongside the growth in results.
(2) Strengthening the ability to undertake risk in preparation for the expansion of the scale of guarantees
In order to build a securitization structure in preparation for the expansion of scale of guarantees, the Company is establishing a system to stably undertake risk over the long term and strengthening its ability to undertake risk through forming funds in which the main sponsor is an organization other than the Company itself. Already in March 2018, it announced that it will invest as a silent partner in the Credit Guarantee No. 3 joint venture company (investment stake 49%, investment amount, ¥96mn).
As the situation of long-term, low interest rates continues, the yield from fund management by financial institutions and others is declining, so needs for new investment destinations are strengthening. Therefore, the Company’s policy going forward is to expand the scale of guarantees by also utilizing fund composition through minority investments. For the fund’s management period as well, funds are being formed not only of one year, but also of three years, which is a comparatively long period. So for the credit guarantee period, the Company can provide a long-term guarantee service of a three-year guarantee, and as the guarantee fee ratio is higher for long-term guarantees, this will become a factor increasing sales. Also, by expanding the scope of guarantees from low risk to middle risk, the scope of the financial institutions that are the securitization destinations and the funds are also widened, which could ultimately lead to an expansion of the scale of guarantees.
Aiming for consolidated recurring profit of ¥5bn as the medium-term target
3. The medium-term target
As its medium-term management target, the Company is aiming for consolidated recurring profit of ¥5bn. In terms of the standard to achieve this target of ¥5bn, the balance of guarantees outstanding must approximately double on the end of the previous fiscal period, to approximately ¥700bn to ¥800bn. If growth continues at around the current pace of 15%, then the prospect is that it will be able to achieve this target in FY3/23.
In order to grow the balance of guarantees outstanding, it is thought that growth of about 15% a year is possible through, as previously mentioned, the Company working to strengthen the sales structure and improve productivity by increasing operational efficiency, and also by expanding the scope of credits it targets (up to middle risk and to various credits other than sales credits*). Also, currently around 80% of its new customers are referrals from regional banks and it has built a network that covers almost all of the country. But it is working to further enhance its sales network by expanding its alliance partners to other business categories.
* Small-ticket credits, purchase credits, special credits, loan credits, long-term bonds, etc.
In particular, recently, against the backdrop of the expansion of the EC market, needs have been growing from companies that are developing the B2B marketplace on the Internet that want to utilize the Company’s sales credit guarantee service as one type of financial service. So it is expected that alliances with these companies will increase in the future.
◆Shareholder return policy
Aiming to continue to increase the dividend alongside the growth in profits
The Company’s basic dividend policy is to pay dividends in line with earnings while also considering supplementing the internal reserves it needs to strengthen its financial structure and to actively develop its business. The standard for the dividend payout ratio is around 30%. Looking at the trend up to the present time, since the Company starting paying dividends in FY3/09, it continuously and consecutively increased it up to FY3/18, and it has expressed its intention to continue to increase the dividend in the future also, if the profit growth is maintained. In FY3/19, it plans to pay a dividend of ¥22.5 (dividend payout ratio, 29.3%), which is unchanged YoY. But at FISCO, we think that it is highly possible it will increase it, if the results achieve their forecasts.
In addition, the Company has a shareholder gift program. Specifically, eGuarantee uniformly awards a QUO card worth ¥1,500 to each shareholder who holds 100 or more shares at the end of March every year. Based on the share price (¥2,123) as of June 20, 2018, the total return on investment for each shareholder holding one unit of shares was 1.8%.
As the Company handles information on its customer companies and others through its guarantee service business, it is aware that information security measures are an important management issue. Therefore, it is taking various steps to ensure information security, including updating to the latest security software, restricting access to the information management system according to the person in change and the managerial position, and providing education and training on information management.