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11选五: COMPANY RESEARCH AND ANALYSIS REPORT：PiPEDO HD, Inc.- 3919-Tokyo Stock Exchange First Section( II )
十一选五玩法 www.yhyqa.cn ◆Results trends
Earnings on track with forecast led by the information asset platform business
• Summary of FY2/18 results
(1) Profit-and-loss conditions
In FY2/18, the Company reported ¥5,143mn in net sales (+7.1% YoY), ¥750mn in operating profit (-11.2%), ¥749mn in recurring profit (-13.3%), and ¥457mn in profit attributable to owners of parent (+13.2%). It already projected flat profits on higher sales in forecast at the period-start and 1H announcement because of aggressive hiring (investment) plans. While the results slightly missed the forecast and profit dropped YoY, the primary cause was shortfall in the advertising business. In this business, the Company was unsuccessful in efforts to secure a relatively large deal in 1H. It presented targets aimed at catching up in 2H, but was unable to achieve these levels. Nevertheless, mainstay information asset platform business is expanding at a healthy pace, and overall content did not raise concerns. Profit attributable to owners of parent increased because of non-recurrence of extraordinary losses incurred in FY2/17 (impairment losses, security incident response losses, and others).
(2) Trends in active accounts
The number of active accounts influences the Company’s results because it mainly operates cloud-based businesses. The Company had 10,129 active accounts (down by 547 accounts compared with the end of FY2/17) at the end of FY2/18. While earnings driver SPIRAL® is making healthy gains, the number of accounts fell because of exits from some businesses (Net de Kaikei® and Net de Aoiroshinkoku®) as already explained.
(3) Trend in the number of employees
The Company had declared that it would aggressively hire (invest) in FY2/18 and FY2/19 in order to realize goals in the new medium-term business plan that lasts through FY2/20, as explained below. In fact, employee headcount at period-end climbed sharply (by 77 people or 23.6% YoY) to 403 people in FY2/18 due to hiring 90 people, including new university graduate.
(4) Profit and loss by segment
The information asset platform business posted ¥3,605mn in net sales (+6.7% YoY) thanks to healthy growth in core product SPIRAL®. Segment profit, however, slipped 16.7% to ¥761mn because this segment incurred a large portion of the cost increase from adding people. However, the result was within the range expected initially and not a cause for concern.
The advertising business booked ¥209mn in net sales (-6.6%) and a ¥37mn segment loss (vs. a ¥48mn profit in the previous fiscal year). It had a loss due to inability to secure a relatively large deal in 1H. While the Company aimed to catch up in 2H, the outcome was less than planned and this business reported a loss for the full year as well.
The solutions business recorded ¥1,287mn in net sales (+10.3% YoY), mainly on support from upbeat trends in PaperlessStudio and consignment and production businesses and increase in e-commerce management sales. Earnings improved too with a boost from higher sales to a ¥46mn profit (vs. a ¥66mn loss a year earlier). The social innovation business, a new segment from FY2/18, booked ¥41mn in net sales (+34.2% YoY) and a ¥19mn segment loss (vs. a ¥49mn loss a year earlier). This segment did not have much impact on overall results because of its small values.
(5) Financial standing and cash flow conditions
Looking at the financial position at the end of FY2/18, total assets were up ¥42mn from the end of the previous fiscal year to ¥5,107mn. Current assets decreased by ¥207mn, with the main factors being a decline in cash and deposits of ¥227mn and an increase in notes and accounts receivable of ¥59mn. Fixed assets increased ¥249mn, primarily due to increases in intangible fixed assets of ¥88mn and investments and other assets of ¥136mn. Total liabilities were down ¥255mn from the end of the previous fiscal year to ¥2,718mn. This was mainly due to a decrease in long-term borrowings of ¥267mn. Net assets were ¥2,388mn, up ¥298mn. This was mainly due to an increase in retained earnings of ¥298mn following the recording of net profit.
Cash provided by operating activities was ¥647mn, with the main income items being the recording of net profit before income taxes of ¥182mn, depreciation and amortization of ¥729mn, while the main expenditure items included an increase in accounts receivable of ¥59mn. Cash used in investing activities was ¥461mn, with the main expenditure items including the acquisition of intangible fixed assets (largely software) of ¥235mn and of investment securities of ¥102mn. Cash used in financing activities was ¥413mn, with the main items including ¥269mn for the payment of borrowings and ¥159mn for the payment of dividends. As a result, during the period, cash and cash equivalents decreased ¥227mn, and the balance of cash and cash equivalents at the end of the period was ¥1,916mn.
(6) Main policies and topics
a) Established two consolidated subsidiaries (March 2017)
The Company established VOTE FOR and I LOVE, which had been internal entities, as consolidated subsidiaries. VOTE FOR aims to realize Internet-based voting and build voting systems that utilize blockchain and other new technologies. I LOVE seeks to make further progress in the “I LOVE ShimoKitazawa” local revitalization project and pursue development of a new transaction format for single-coin donations, tips, and other small-sum transactions employing smartphone cryptocurrency.
b) Subscribed to a third-party allocation of shares by Cross Rink Inc. (March 2017)
The Company subscribed to a third-party allocation of shares by Cross Rink Inc. (¥52mn), which operates websites that broadly support the relaxation market (Hitosapo®, Caresapo®, Onemorehand®, Rakurira®, and others) (this entity is not consolidated). It hopes to share experiences, knowhow, knowledge, and other resources with Group companies and lift the quality of each other’s services.
c) Launch of the BIREKI® original icon plan (April 2017)
BIREKI started provision of the “original icon plan” that enables beauty salons to create an app with their own design in order to promote the salon’s unique brand. The first business to adopt this service was “luve heart’s And Be,” which mainly operates in Osaka City.
d) Exits from Net de Kaikei® and other services (May 2017)
The Company exited Net de Kaikei® and Net de Aoiroshinkoku® services due to tougher competition in the cloud accounting industry and diminished service competitiveness in functionality. While these exits affected the number of accounts, they did not have much impact on overall income (FY2/17 results were ¥18mn in net sales and a ¥12mn operating loss).
e) Tokyo Metropolitan Assembly election coverage on Seijiyama® (June 2017)
The Seijiyama® political and election information website carried special feature pages on the Tokyo Metropolitan Assembly election (official announcement on June 23, 2017 and voting on July 2) entitled “Tokyo Metropolitan Assembly Member Election 2017” and “Comparison of Main Policies and Campaign Promises.” Demand for this website is still minor, but is likely to grow alongside of progress with Internet voting.
f) Strengthened collaboration of SPIRAL® and other systems
Through collaboration with AsBase’s BizBase®, the Company aims to improve efficiency in sales activities by unifying information from the sales division and inside sales division managed by separate systems. (July 2017)
The Company also started collaboration with LINE Corporation <3938> (August 2017). It built an attribute-based distribution system for students at Meijo University using SPIRAL® and LINE® for use as a mechanism to contact students. It hopes to leverage this case to promote deployments at other schools too.
g) Distribution of My Public Relations Bulletin on i-concier® (August 2017)
The Company started distribution of articles for viewing My Public Relations Bulletin issued by 320 local governments on the i-concier® information service provided by NTT DOCOMO, INC. <9437>. This service facilitates distribution and viewing of on i-concier® through conversion to data of contents from the public relations magazines of local governments issued on paper media up to now. Digitalization is likely to generate demand from even more local governments.
h) Started provision of ArchiSymphonyVBP (September 2017)
The Company developed the first dedicated cloud service for BIM*1/CIM*2 collaboration in Japan that enables real-time sharing of construction and design data and started providing this service.
*1 BIM (Building Information Modeling): This format creates a Building Information Model (BIM model) for the building field via a combination of 3D shape information prepared on a computer with finishing, materials and parts specifications and performance, cost information, and other attribute information. Utilization of BIM improves efficiency in all processes from the building lifecycle (ranging from design to construction and subsequent maintenance and management). Many test projects are taking place globally, and international standardization is moving forward.
*2 CIM (Construction Information Modeling): This format broadens use of BIM from the building field to construction and aims to enhance productivity for the construction industry as a whole.
The United States, the United Kingdom, and other major advanced countries are requiring construction business reforms led by BIM and CIM and implementing them at the national level. In Japan, the Ministry of Land, Infrastructure, Transportation, and Tourism formulated BIM and CIM guidelines. While these formats are making rapid inroads, they have not become industry-wide business reforms that alter construction workflow to suit BIM/ CIM, as has happened with BIM/CIM in other major advanced countries and Japan is not yet harnessing the full benefits of BIM/CIM. Reasons include 1) expensive deployment costs, 2) significant difficulties with system operations, 3) lack of operational knowhow, and 4) differences in information policies at related companies and very strong resistance to sharing 3D construction and design data and other information among related parties.
Amid these conditions, ArchiSymphonyVBP, the dedicated cloud service for BIM/CIM collaboration launched by the Company, comprehensively manages the information security policies of various companies related to construction projects and realize real-time sharing and permanent management of 3D construction and design data in virtual conditions as a first-time initiative in Japan. The project was realized through collaboration with I-NET CORP. <9600>, which operates cloud data centers, and technology cooperation from Nvidia Corporation <NVDA>, which leads in GPU virtualization technology, and VMware, Inc. <VMW>, which leads in virtual desktop infrastructure (VDI) technology. The initiative aims to develop a de-facto standard for the information platform used in domestic construction industry reforms and is anticipated to make sizable contributions to earnings in the near future.
i) SPIRAL EC® support for Amazon Pay (September 2017)
The Company started provision of a new version of SPIRAL EC® (3.3.0) that supports Amazon Pay settlement service that simplifies product purchases using an account from the Amazon.co.jp comprehensive online store.
j) Establishment of subsidiary L Coin (December 2017)
The Company invested 70% in L Coin to make it a consolidated subsidiary. L Coin builds payment systems for local governments, companies, and local financial institutions using an electronic regional currency platform that applies blockchain technology and thereby promotes cashless transactions in local areas. It can also issue unique electronic regional currencies at low cost through the platform and supports smooth development of payment systems and store point systems.
k) Merger of consolidated subsidiaries FREINDIT and AsBase (April 2018)
Projects a 33.4% decline in FY2/19 operating profit, mainly because of investments aimed at an uplift in FY2/20
• FY2/19 outlook
The Company’s FY2/19 forecast targets ¥5,800mn in net sales (up 12.8% YoY), ¥500mn in operating profit (down 33.4%), ¥490mn in recurring profit (down 34.6%), and ¥300mn in profit attributable to owners of parent (down 34.5%).
With plans to hire 95 people in FY2/19, after large-scale hiring (90 people) in FY2/18, as the groundwork for achieving goals in the new medium-term business plan described below, the Company expects weaker FY2/19 profits due to investments in training and educational costs for the new hires.
◆Medium to long-term growth strategy
Medium-term plan goals unchanged at ¥7,300mn in net sales and ¥1,700mn in operating profit in FY2/20
1. Medium-Term Business Plan 2020 goals unchanged
The Company announced the Medium-Term Business Plan 2020, a new medium-term business plan with FY2/20 as the final year, after completing the previous medium-term plan in FY2/17. The new plan sets goals of ¥7,300mn in net sales and ¥1,700mn in operating profit in FY2/20 that work out to compound average growth rates (CAGR) from FY2/17 of 15.0% in net sales (vs. 24.0% in the previous plan) and 26.2% in operating profit (vs. 14.4%).
The Company has not changed goals from the medium-term business plan, despite the prospect of a decline in FY2/19 profits as explained above. This stance factors in earlier recognition of costs (training and educational costs, etc.) prior to sales contributions from major hiring with 90 people in FY2/18 and 95 people in FY2/19 (planned) aimed at realizing the plan goals. On its website, the Company explains: “Our group does not immediately assign newly hired people to front-line operations. Instead, after a concentrated training period that lasts about six months in which new hires thoroughly learn our services and systems, we make assignment to group companies, taking into account the person’s request and suitability...New hires do not contribute to results during the initial six months or so after being hired because of focus just on training. The group’s investments are hiring costs as well as training and personnel costs in the subject period.” The Company thus expects a steep profit recovery in FY2/20 after a setback in FY2/19.
2. Priority measures
The Company uses a title of “Re-Innovation” for the new medium-term plan and seeks to become a “corporate group that contributes to a future rich information lifestyle.” It intends to implement the priority measures covered below to achieve this goal and the above-mentioned numerical targets.
(1) Promote “real × IT”
The Company intends to strengthen the contact point between real business and IT and pursue innovative businesses. The establishment of new subsidiaries was a specific example.
a) VOTE FOR
The Company established this entity in Mach 2017 to conduct “real × IT” business using the Seijiyama® political and election information website that existed internally. It aims to build voting systems that utilize blockchain and other new technologies that facilitate Internet-based voting with emphasis on Seijiyama® and Internet-based voting.
b) I LOVE
The Company created this entity to make further progress in the “I LOVE ShimoKitazawa” local revitalization project that had already been taking place internally and apply this knowhow to cultivate “towns capable of delivering enjoyable services on par with shopping malls and theme parks.” Specifically, it will pursue development of a new transaction format for single-coin donations, tips, and other small-sum transactions employing smartphone cryptocurrency.
(2) Group hiring and group cultivation
Group companies will conduct common elementary education in the IT field in order to boost the overall knowledge level and reduce time spent on training front-line staff. With a goal of maximizing profits in FY2/20, the Company hired 90 people in FY2/18 (including new university graduates and recent graduates with work experience) and intends to hire another 95 people in FY2/19.
Subsidiary BLOOM NOTES (established in October 2016) will support the group hiring and development. This entity’s main business is a customized personnel training service through arrangement of unique knowhow at customer companies into a program and assists in implementation, and the Company plans to harness the same program for development of its own Group personnel.
(3) Effective utilization of information assets at Group companies
The Company intends to further promote customer and product/service matching at Group companies and create new transactions and businesses.
3. Fund-raising initiative
The Company announced the following share buyback and fund-raising plan that targets future growth.
(1) Acquiring its own shares from subsidiaries
The Company acquired 500,000 shares of its stock owned by consolidated subsidiary PIPED BITS for ¥767mn. However, this transaction simply transferred ownership and does not affect consolidated results because it obtained the Company’s own shares held by a consolidated subsidiary. PIPED BITS originally purchased these shares in response to a request from a minority shareholder prior to formation of the holding company.
(2) Issuance of No.5 and No.6 new share warrants
Additionally, the Company adopted a resolution to issue new share warrants (No.5 250,000 shares, No.6 250,000 shares) for third-party allotment to Macquarie Bank Limited.
Key points are a ¥1,800 exercise price for No.5 (with no revisions to the exercise price) and a ¥1,800 bottom in the exercise price for No.6, but an ability to raise this level to over ¥1,800 by Company resolution. This puts the maximum number of shares available for allocation at 500,000 shares and supports a minimum procurement value of ¥900mn. Additionally, total outstanding issuance volume should not increase if warrants are exercised because the Company plans to utilize the above-mentioned treasury shares acquired from the subsidiary (500,000 shares). Existing shareholders hence would not incur dilution.
Furthermore, Macquarie Bank Limited, the recipient of the new share warrants, paid ¥5,872,000 for the warrants and is unlikely to exercise the rights until the shares trade at ¥1,800 or above in order to recoup its outlay. We expect gradual sale of acquired shares in the market after purchase using the warrants and contribution to better liquidity in the stock market once these shares enter the market.
While this fund-raising scheme is attractive to all stakeholders (the Company, existing investors, and the warrant recipient), it requires a share price of over ¥1,800. We think the Company hence must attain goals from the above-mentioned medium-term business plan.
◆Shareholder return policy
Maintaining a 30% dividend payout ratio in FY2/19 despite profit decline
The Company is committed to a 30% dividend payout ratio as a shareholder return policy. It paid a ¥21.0 annual dividend in FY2/18, which worked out to a 34.9% dividend payout ratio. While it expects lower profits in FY2/19 as explained above, the Company plans to pay a ¥12.0 dividend in order to keep the payout ratio at 30%.