Hoosiers Holdings / 3284
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Hoosiers Holdings / 3284 COVERAGE INITIATED ON: 2021.08.03 LAST UPDATE: 2021.08.05 Shared Research Inc. has produced this report by request from the company discussed in the report. The aim is to provide an “owner’s manual” to investors. We at Shared Research Inc. make every effort to provide an accurate, objective, and neutral analysis. In order to highlight any biases, we clearly attribute our data and findings. We will always present opinions from company management as such. Our views are ours where stated. We do not try to convince or influence, only inform. We appreciate your suggestions and feedback. Write to us at [email protected] or find us on Bloomberg. Research Coverage Report by Shared Research Inc. Hoosiers Holdings / 3284 RCoverage LAST UPDATE: 2021.08.05 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp INDEX How to read a Shared Research report: This report begins with the trends and outlook section, which discusses the company’s most recent earnings. First-time readers should start at the business section later in the report. Executive summary ----------------------------------------------------------------------------------------------------------------------------------- 3 Key financial data ------------------------------------------------------------------------------------------------------------------------------------- 5 Recent updates ---------------------------------------------------------------------------------------------------------------------------------------- 6 Highlights --------------------------------------------------------------------------------------------------------------------------------------------------------------- 6 Trends and outlook ----------------------------------------------------------------------------------------------------------------------------------- 7 Quarterly trends and results -------------------------------------------------------------------------------------------------------------------------------------- 7 Business ------------------------------------------------------------------------------------------------------------------------------------------------ 15 Business model ------------------------------------------------------------------------------------------------------------------------------------------------------ 15 Real Estate Development segment (68.4% of revenue and 87.1% of operating profit in FY03/21) ------------------------------------ 18 CCRC segment (14.3% of revenue and 6.5% of operating profit in FY03/21) ----------------------------------------------------------------- 25 Real Estate Investment segment (9.5% of revenue and 7.5% of operating profit in FY03/21) ------------------------------------------- 29 Condominium Management and Related Services segment (7.7% of revenue and a JPY71mn operating loss in FY03/21) ---- 34 Other (PFI) segment (0.1% of revenue and 0.1% of operating profit in FY03/21) ----------------------------------------------------------- 35 Market and value chain---------------------------------------------------------------------------------------------------------------------------- 36 Competitors ---------------------------------------------------------------------------------------------------------------------------------------------------------- 43 Strengths and weaknesses --------------------------------------------------------------------------------------------------------------------------------------- 45 Historical performance and financial statements ------------------------------------------------------------------------------------------ 47 Income statement -------------------------------------------------------------------------------------------------------------------------------------------------- 47 Balance sheet -------------------------------------------------------------------------------------------------------------------------------------------------------- 49 Cash flow statement ----------------------------------------------------------------------------------------------------------------------------------------------- 52 Historical performance -------------------------------------------------------------------------------------------------------------------------------------------- 54 Other information ---------------------------------------------------------------------------------------------------------------------------------- 58 History ------------------------------------------------------------------------------------------------------------------------------------------------------------------ 58 Sustainability initiatives ------------------------------------------------------------------------------------------------------------------------------------------- 58 Corporate governance and top management ------------------------------------------------------------------------------------------------------------ 59 Dividend policy and shareholder returns ------------------------------------------------------------------------------------------------------------------- 60 Major shareholders ------------------------------------------------------------------------------------------------------------------------------------------------- 61 Employees ------------------------------------------------------------------------------------------------------------------------------------------------------------ 61 Profile ------------------------------------------------------------------------------------------------------------------------------------------------------------------- 62 02/63 Hoosiers Holdings / 3284 RCoverage LAST UPDATE: 2021.08.05 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp Executive summary Business overview ◤ Hoosiers is a medium-sized condominium developer focused on new-build condominiums in the Tokyo metropolitan area and regional core cities nationwide (populations of 100,000 to 500,000). The company is an independent developer unaffiliated with any of the major corporate groups. When the company was established in 1994, it concentrated on the Tokyo metropolitan area. After the Great East Japan Earthquake in 2011, Hoosiers began shifting its focus beyond the above to regional core cities. Populations in these cities were growing but they were being overlooked by large competitors. (In FY03/21, sales in regional areas accounted for 80% of the company’s total.) Since 2015, the company has diversified, moving into condominiums for seniors and real estate investment. Hoosiers’ business model has three focuses: regional areas, seniors, and high-net-worth individuals. ◤ In terms of earnings contribution, the largest segment is Real Estate Development, which handles new-build condominiums (68.4% of total revenue and 87.1% of operating profit in FY03/21). Next is the CCRC segment (short for “Continuing Care Retirement Community”), which handles condominiums for seniors (14.3%, 6.5%). The Real Estate Investment segment acquires, develops, holds and disposes of income properties (9.5%, 7.5%). In addition, the company has the Condominium Management and Related Services segment (7.7%, operating loss of JPY71mn), and the Other (PFI) segment, which handles business related to private finance initiatives (0.1%, 0.1%). ◤ In its mainstay Real Estate Development segment, the company targets customers who already own houses in regional core cities but want to relocate to highly convenient urban centers. For this clientele, the company develops and sells the “Duo Hills” brand of condominiums. In this segment, the company also develops and sells compact condominiums (brand name: “Duo Veel”). These are designed mainly for single women who live in major metropolises: Tokyo, Sapporo, Nagoya, and Fukuoka. According to a study by the Japan Real Estate Institute, in 2019 Hoosiers ranked third, by sales, in the condominium business in regional areas. Shared Research thinks this figure suggests the company has a certain level of name recognition in this category. Hoosiers mainly sells condominiums in blocks containing 50 to 100 units per building. Units are typically priced at JPY20mn to JPY50mn (average price of around JPY35mn). These condominiums are more spacious than an equivalently priced condominium in the Tokyo metro area. The company says it pays special attention to the quality and functionality of interior furnishings, which is popular with female customers. Women are key members of Hoosiers’ sales team, and they are closely involved in planning and product development. The company explains that few large developers are promoting business in regional areas, even though the stock of suitable condominiums for sale is lower than in the Tokyo metro area and potential demand exists among cash-rich business owners and seniors. Revenue is calculated as units sold multiplied by unit price. Expenses include direct costs (land, construction), personnel expenses (salespeople and people to manage model rooms), and promotional and other SG&A expenses. ◤ The company positions the Real Estate Investment segment as a growth business. In the four years to FY03/20, operating profit grew by a CAGR of 38.9% in this segment, compared with 9.3% in the Real Estate Development segment. (In FY03/21, operating profit was down 88.9% YoY because the company decided to hold on to properties and wait for a better time to exit through sale.) In this segment, the company develops investment rental properties: “Duo Maison Flat” buildings, which