Coverage initiated on: 2019-04-22 Research Coverage Report by Shared Research Inc. Last update: 2021-08-12
3496 AZoom
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Executive summary ...... 3. Key financial data ...... 5. Recent updates ...... 6. Trends and outlook ...... 7. Quarterly trends and results ...... 7. Business ...... 14. . Business model ...... 1.4. Market and value chain ...... 2.6. Competitors ...... 2.9. Strengths and weaknesses ...... 3. .2. Historical results and financial statements ...... 3.3. Income statement ...... 3.3. Balance sheet ...... 3.4. Cash flow statement ...... 3.5. Historical performance ...... 3.5. Other information ...... 4. .3. News and topics ...... 4. .6. Company profile ...... 4.7.
AZoom/ 3496
Research Coverage Report by Shared Research Inc. | pdf.summary.company_website 2 Executive summary Business overview
AZoom uses information technology to put idle real estate to productive use. Its target properties are mainly parking lots rented on a monthly basis. Since its inception, the company has built up a database of information on available monthly parking lots and their potential renters, which it now uses to operate one of the most extensive online parking space matching systems in Japan with some 50,000 listings. Still, given that Japan has some 5mn parking spaces available, the company has ample room to grow, and hence, it continues to expand its scope of information in both urban and rural areas. AZoom generates around 98% of sales from the parking lot business and provides two main service types. With the Monthly Parking Lot Introduction Service (around 12% of sales in FY09/19), it matches available parking lots with people who wish to rent them. The company earns commissions when the introduction results in a rental agreement. With the Monthly Parking Lot Subleasing Service (around 85% of sales with 8,361 subleased spaces as of end-FY09/19), the company leases parking lots from their owners and then subleases them using its matching system.
The company leverages its parking lot search website (the online parking lot introduction service) to increase the number of parking spaces it can introduce. The site acts as a marketplace for parking lots in Japan, providing applicants with vacancy information. In the subleasing service, the company guarantees the parking lot owners a certain amount of rental income for the parking spaces it leases. AZoom’s main source of earnings is the difference between the rental income paid to these owners and that received from the renters (introduced through its search website). This sort of service has expanded rapidly in recent years to alleviate the problem of vacancies in parking lots, including lots for condo residents and building parking lots erected to conform to urban planning requirements. (See the “Market and value chain” section.)
AZoom’s property management system for its subleasing service differs from those of other companies in a key way: it allows the company to monitor the rental status of properties in detail through the duration of their contracts. Using the information on parking spaces that are currently vacant and those that will become vacant, the company tailors its sales efforts and efficiently manages and prevents vacancies. The company also taps into the information gathered through its search website, and applies the big data on parking lots throughout Japan and on registered users to optimize its property management system. Such data allows it to grasp parking-lot market prices in target locations and helps distinguish the company’s subleasing service. Trends and outlook
In FY09/20, the company reported consolidated sales of JPY3.8bn (+39.8% YoY compared to parent sales in FY09/19), operating profit of JPY224mn (+139.1% YoY), recurring profit of JPY223mn (+135.5% YoY), and net income attributable to owners of the parent of JPY139mn (+147.9% YoY). The expansion in sales was driven by an increase in the number of parking spaces subleased to end-users in the Monthly Parking Lot Subleasing Service as well as an increase in introductions in the Monthly Parking Lot Introduction Service. Operating profit came in at 118.2% of the full-year forecast thanks to a lull in cost increases as the company put a halt to new sales personnel hiring and successfully controlled overall expenses.
For FY09/21, the company forecasts consolidated sales of JPY4.8bn (+25.8% YoY), operating profit of JPY450mn (+100.5% YoY), recurring profit of JPY450mn (+101.6 YoY), and net income attributable to owners of the parent of JPY288mn (+106.5% YoY). The company aims to achieve steady sales and profit growth in the recurring-revenue business by increasing leased parking spaces under management and the number of spaces subleased to end-users in the Monthly Parking Lot Subleasing Service, the mainstay of the Idle Real Estate Utilization business. The company also expects a YoY improvement in OPM and looks to further strengthen its management base and structure.
In terms of its growth strategy, the company continues to believe three measures will drive growth: 1) increasing the quantity and quality of information in its parking lot database; 2) further penetrating existing markets and expanding the operating area for the subleasing service; and 3) expanding the scope of the company’s business through the creation of businesses that utilize other kinds of idle real estate than parking lots. Strengths and weaknesses
Strengths ◤ Leverages technology to manage parking lots ◤ Maintains the trust of real estate management companies
AZoom/ 3496
Research Coverage Report by Shared Research Inc. | pdf.summary.company_website 3 Weaknesses ◤ Subleasing business skewed toward certain property types ◤ A shortage of IT personnel familiar with parking lot leasing ◤ Brand recognition low compared to real estate-related websites
AZoom/ 3496
Research Coverage Report by Shared Research Inc. | pdf.summary.company_website 4 Key financial data
Income statement FY09/13 FY09/14 FY09/15 FY09/16 FY09/17 FY09/18 FY09/19 FY09/20 FY09/21 (JPYmn) Parent Parent Parent Parent Parent Parent Parent Cons. Cons. Est. Sales 245 320 510 804 1,221 1,845 2,728 3,814 4,800 YoY - 30.6% 59.6% 57.5% 51.9% 51.2% 47.9% 39.8% 25.8% Gross profit - - - 370 555 828 1,169 1,542 - YoY - - - - 50.2% 49.1% 41.2% 31.9% - Gross profit margin - - - 46.0% 45.5% 44.9% 42.8% 40.4% - Operating profit - - - -27 31 165 94 224 450 YoY - - - - - 430.2% -43.2% 139.1% 100.5% Operating profit margin - - - -3.3% 2.6% 9.0% 3.4% 5.9% 9.4% Recurring profit -9 -29 -44 -28 30 150 95 223 450 YoY - - - - - 400.5% -36.8% 135.5% 101.6% Recurring profit margin -3.7% -9.2% -8.6% -3.4% 2.5% 8.1% 3.5% 5.9% 9.4% Net income -11 -35 -50 -28 37 110 56 139 288 YoY - - - - - 197.6% -48.8% 147.9% 106.5% Net margin - - - - 3.0% 6.0% 2.1% 3.7% 6.0% Per-share data (JPY) Shares issued (year-end; '000) 0 11 11 11 1,203 1,453 1,461 1,461 - EPS -10.9 -33.7 -47.3 -25.7 32.0 90.8 38.5 95.9 100.1 EPS (fully diluted) ------Dividend per share ------Book value per share 58.2 -33.2 -80.4 -89.4 28.5 574.1 611.5 660.5 - Balance sheet (JPYmn) Cash and cash equivalents - - - 21 169 1,007 769 1,078 - Total current assets - - - 87 273 1,168 1,037 1,397 - Tangible fixed assets - - - 14 16 19 84 89 - Investments and other assets - - - 47 57 93 284 268 - Intangible assets - - - 12 11 11 117 137 - Total assets - - - 160 357 1,290 1,522 1,891 - Accounts payable - - - 0 0 0 0 0 - Short-term debt - - - 0 0 0 0 0 - Total current liabilities - - - 114 140 241 228 416 - Long-term debt - - - 29 39 18 105 143 - Total fixed liabilities - - - 148 183 215 400 521 - Total liabilities - - - 262 323 456 629 937 - Total net assets - - - -103 34 834 893 953 Total liabilities and net assets - - - 160 357 1,290 1,522 1,891 - Total interest-bearing debt - - - 29 39 18 105 143 - Cash flow statement (JPYmn) Cash flows from operating activities - - - 38 62 192 17 367 - Cash flows from investing activities - - - -5 -12 -17 -353 -63 - Cash flows from financing activities - - - -13 98 664 98 -37 - Financial ratios ROA (RP-based) - - - -17.3% 11.6% 18.2% 6.7% 13.1% - ROE - - - - - 25.3% 6.5% 15.2% - Equity ratio - - - - 9.6% 64.7% 58.7% 50.3% -
Source: Shared Research based on company data; per-share data are adjusted for stock splits. Note: Figures may differ from company materials due to differences in rounding methods. Note: The company moved to consolidated accounting in FY09/20. YoY changes shown for projected FY09/20 results reflect comparisons of consolidated results in FY09/20 with parent company results in FY09/19. Note: The company plans to carry out a 2-for-1 stock split on February 1, 2021.
AZoom/ 3496
Research Coverage Report by Shared Research Inc. | pdf.summary.company_website 5 Recent updates Q3 FY09/21 Report Update
2021-08-12
Shared Research updated the report following interviews with AZoom Co., Ltd.
Q3 FY09/21 Flash Update
2021-07-29
On July 29, 2021, AZoom Co., Ltd. announced earnings results for Q3 FY09/21; see the results section for details.
1H FY09/21 Report Update
2021-06-15
On June 15, 2021, Shared Research updated the report following interviews with AZoom Co., Ltd.
Planned change in its largest shareholder / Purchase of its shares by Panorama Inc / Expected a change in its largest shareholder
2021-05-13
On May 13, 2021, AZoom Co., Ltd. announced a planned change in its largest shareholder (a major shareholder) and the purchase of its shares by Panorama Inc.
On the same day, the company announced that it expected a change in its largest shareholder (a major shareholder).
The company was informed by its largest shareholder (a major shareholder) Yoji Sugata, president and representative director of the company, that he planned to transfer 320,000 company shares to Panorama Inc. (unlisted, representative director: Yoji Sugata) on May 14, 2021. Once the transfer is completed, AZoom’s largest shareholder (a major shareholder) will be changed. In terms of the share of voting rights held, Yoji Sugata will be moved from the top position (36.20%) to the second position (25.14%), and Panorama will be moved from the second position (24.88%) to the top (35.94%). Note that Panorama is an asset management company whose shares are held by the company president and representative director Yoji Sugata and his family. See company release for details.
AZoom/ 3496
Research Coverage Report by Shared Research Inc. | pdf.summary.company_website 6 Trends and outlook Quarterly trends and results
Cumulative FY09/19 FY09/20 FY09/21 FY09/21 (JPYmn) Q1 Q1–Q2 Q1–Q3 Q1–Q4 Q1 Q1–Q2 Q1–Q3 Q1–Q4 Q1 Q1–Q2 Q1–Q3 % of Est. FY Est. Sales 575 1,224 1,941 2,728 843 1,775 2,749 3,814 1,109 2,328 3,625 75.5% 4,800 YoY - - 46.2% 47.9% 46.7% 45.0% 41.7% 39.8% 31.6% 31.2% 31.9% 25.8% Gross profit 240 533 849 1,169 326 696 1,088 1,542 459 985 1,546 YoY - - 38.9% 41.2% 35.4% 30.5% 28.1% 31.9% 40.9% 41.6% 42.1% Gross profit margin 41.8% 43.6% 43.8% 42.8% 38.6% 39.2% 39.6% 40.4% 41.4% 42.3% 42.7% SG&A expenses 224 494 775 1,075 325 651 980 1,317 358 732 1,145 YoY - - 61.5% 62.2% 44.8% 31.8% 26.5% 22.5% 10.2% 12.3% 16.8% SG&A ratio 39.0% 40.4% 39.9% 39.4% 38.5% 36.7% 35.7% 34.5% 32.3% 31.4% 31.6% Operating profit 16 39 74 94 1 44 108 224 101 254 401 89.1% 450 YoY - - -43.6% -43.2% -93.8% 14.4% 45.0% 139.1% 9,968.3% 470.4% 272.8% 100.5% Operating profit margin 2.8% 3.2% 3.8% 3.4% 0.1% 2.5% 3.9% 5.9% 9.1% 10.9% 11.1% 9.4% Recurring profit 16 39 75 95 1 44 107 223 101 253 400 88.9% 450 YoY - - -42.4% -36.8% -95.4% 13.8% 43.1% 135.5% 13,599.7% 471.9% 274.7% 101.6% Recurring profit margin 2.8% 3.2% 3.8% 3.5% 0.1% 2.5% 3.9% 5.9% 9.1% 10.9% 11.0% 9.4% Net income 11 20 45 56 -2 23 58 139 64 159 255 88.7% 288 YoY - - -45.6% -48.8% - 18.2% 27.2% 147.9% - 581.2% 341.7% 106.5% Net margin 1.8% 1.6% 2.3% 2.1% - 1.3% 2.1% 3.7% 5.8% 6.8% 7.0% 6.0% Quarterly FY09/19 FY09/20 FY09/21 (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Sales 575 650 716 788 843 932 974 1,065 1,109 1,220 1,296 YoY - - -46.0% 52.0% 46.7% 43.5% 36.0% 35.2% 31.6% 30.9% 33.1% Gross profit 240 293 316 320 326 370 392 454 459 527 561 YoY - - -48.3% 47.5% 35.4% 26.5% 24.0% 41.9% 40.9% 42.2% 43.0% Gross profit margin 41.8% 45.1% 44.1% 40.6% 38.6% 39.7% 40.2% 42.6% 41.4% 43.2% 43.2% SG&A expenses 224 270 281 300 325 327 329 337 358 374 413 YoY - - -41.5% 64.0% 44.8% 21.0% 17.1% 12.3% 10.2% 14.4% 25.7% SG&A ratio 39.0% 41.6% 39.2% 38.1% 38.5% 35.1% 33.8% 31.6% 32.3% 30.7% 31.9% Operating profit 16 23 35 20 1 43 63 117 101 153 147 YoY - - -73.2% -41.7% -93.8% 92.0% 78.8% 494.3% 9,968.3% 251.1% 133.5% Operating profit margin 2.8% 3.5% 4.9% 2.5% 0.1% 4.7% 6.5% 11.0% 9.1% 12.5% 11.4% Recurring profit 16 23 36 20 1 43 63 117 101 152 147 YoY - - -72.4% -1.6% -95.4% 91.5% 74.9% 476.8% 13,599.7% 249.6% 135.3% Recurring profit margin 2.8% 3.5% 5.0% 2.6% 0.1% 4.7% 6.4% 10.9% 9.1% 12.5% 11.3% Net income 11 9 26 11 -2 26 34 82 64 95 96 YoY - - -69.2% -59.1% - 179.4% 34.0% 656.9% - 269.8% 179.7% Net margin 1.8% 1.4% 3.6% 1.4% - 2.8% 3.5% 7.7% 5.8% 7.8% 7.4%
Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods. Note: The company moved to consolidated accounting in FY09/20. YoY changes shown for projected FY09/20 results reflect comparisons of consolidated results in FY09/20 with parent company results in FY09/19.
AZoom/ 3496
Research Coverage Report by Shared Research Inc. | pdf.summary.company_website 7 Sales by quarter Operating profit by quarter
Vehicle spaces leased from lessors Vehicle spaces subleased to end-users
Source: Shared Research based on company data Note: Figures displayed indicate financial year-end results; Average utilization rates were calculated using annual averages. Q3 FY09/21 results (out July 29, 2021) Overview
Q3 FY09/21 (October 2020–June 2021) results
Sales: JPY3.6bn (+31.9% YoY) Operating profit: JPY401mn (+272.8% YoY) Recurring profit: JPY400mn (+274.7% YoY) Net income attributable to owners of the parent: JPY255mn (+341.7% YoY)
Industry trends and background
At the Idle Real Estate Utilization segment, where its main focus is parking lots, the company saw continued growth in demand on both sides of its business with its online service generating more inquires from would-be users for parking spaces available to rent on a monthly basis, as well as more interest from property owners seeking to monetize the empty parking spaces at their office buildings, condominium complexes, and other properties. In years past, the company said most people looking for rental parking spaces would have made an inquiry at a real estate broker with a brick-and-mortar storefront. The COVID-19 pandemic changed that, and since the outbreak the company has been seeing more and more people do online searches for monthly rental parking spaces using its portal website, and this in turn has led to increases in the total number of rental parking space inquires it has received. Shared Research has concluded that this increase in inquiries is contributing to an upturn in monthly parking lot introductions and growth in the utilization rate of monthly parking lot subleasing spaces.
AZoom/ 3496
Research Coverage Report by Shared Research Inc. | pdf.summary.company_website 8 At its Visualization business, demand has been weak in the wake of the pandemic as businesses that would normally be the biggest users of its real estate visualization services—real estate developers of lodging and commercial properties—were hit hard by the pandemic-driven downturn in the economy. Despite this downward impact, economic activity is gradually resuming now that COVID-19 vaccination has begun, and signs of recovery are emerging, including demand associated with the operation of Web-based virtual stores. Adding further to the momentum, the company has launched a new initiative to expand its business reach with the rollout of its new Open Office VR service in June 2021.
Ongoing favorable performance from the monthly parking lot introduction and subleasing services in Q3
During the nine-month period through Q3 FY09/21, the company saw continued growth in the number of inquiries about the availability of monthly rental parking spaces through its portal website (CarParking), with the total number of inquires reaching 186,439 for a 42.1% increase over the same nine-month period the previous year. The sharp jump in parking space inquiries during this timeframe was aided by the presence of the busy month of March, a busy time of year for residential moves, and this provided a boost not only to the number of parking space introductions handled by the company but also the number of rental parking spaces subleased to end-users. The Visualization business also reported positive sales growth thanks to an increase in project work involving its virtual reality (VR) and 3-D computer graphics imaging technology. Against this backdrop, the company reported consolidated sales of JPY3.6bn (+31.9% YoY).
The cumulative GPM at the conclusion of Q3 was 42.7%, having risen 3.1pp YoY as the utilization rate of Monthly Parking Lot Subleasing Service spaces continued to increase as it did in 1H. AZoom was able to steadily propose subleasing contracts thanks to a continuously high inflow of customer inquiries received through its website. Despite a YoY increase of JPY165mn in SG&A expenses stemming primarily from a rise in personnel expenses associated with growth in the number of recruited personnel, operating profit soared to JPY401mn (+272.8% YoY) thanks mainly to efforts aimed at controlling expenses including office rent and personnel-related expenditures.
Segment results
Idle Real Estate Utilization segment
Earnings in this segment mainly comprised the Monthly Parking Lot Introduction Service and the Monthly Parking Lot Subleasing Service, previously disclosed under parent company results. These earnings additionally incorporate impact from other businesses including Smart Kaigishitsu.
In cumulative Q3 FY09/21, the Idle Real Estate Utilization segment reported sales of JPY3.5bn (+31.0% YoY) and segment operating profit of JPY408mn (+213.8% YoY).
Monthly Parking Lot Introduction Service
In cumulative Q3 FY09/21, the Monthly Parking Lot Introduction Service reported sales of JPY371mn (+33.0% YoY).
The number of inquiries about parking spaces continued to grow, rising 42.1% YoY to 186,439. This growth generated an increase in sales revenue from parking space introduction fees.
Monthly Parking Lot Subleasing Service
In cumulative Q3 FY09/21, the Monthly Parking Lot Subleasing Service reported sales of JPY3.0bn (+28.4% YoY).
Subleasing metrics: As of end-June 2021, the number of leased parking spaces under management totaled 13,545, with the number of spaces subleased to end-users at 12,491 (utilization rate of 92.2%).
Comprehending customer demand has become easier for the company thanks to the ongoing rise in inquiries received through its website. AZoom believes that this ease of comprehension will enable the company to develop sublease contracts that suits corresponding demand. The company also feels that contract negotiations with owners of office buildings and condominiums will be simplified thanks to its relationship with potential customers. AZoom steadily developed new subleasing projects in Q3, and its total number of leased parking spaces at the end of this period (June 30, 2021) was up 24.6% YoY. According to the company, the average utilization rate of its leased parking spaces under management was over 92% in non-cumulative Q3, compared to 89.8% which is an average rate in FY09/20.
AZoom/ 3496
Research Coverage Report by Shared Research Inc. | pdf.summary.company_website 9 Visualization segment
The Visualization segment mainly comprises the two new subsidiaries that were included in consolidated accounts (CGWorks Co., Ltd. and Azoom Vietnam Inc.).
Segment sales were JPY88mn (+76.3% YoY), with an operating loss of JPY7mn (loss of JPY23mn in Q3 FY09/20).
The primary contributor to overall sales in the Visualization segment is CGWorks’ sales service for digital content based primarily on VR and CG perspectives(according to the website of CG Works, CG perspective refers to Computer Graphics representation of perspective drawing, mainly used for completion drawings of commercial facilities and housings) . In addition to laying the groundwork for future growth by helping existing employees improve their technical skills and building out its sales team so as to be in a position to offer a wider variety of proposals to client companies, in June 2021 the company launched its new Open Office VR service.
Although the long shadow of the pandemic continues to hang over operating environment, with this new service the company aims to expand its business by using VR technology to reach out to clients in a remote work environment. Full-year FY09/21 company forecast
FY09/18 FY09/19 FY09/20 (consolidated) FY09/21 (consolidated) (JPYmn) FY Act. 1H Act. 2H Act. FY Act. 1H Act. 2H Act. FY Act. 1H Act. 2H Est. FY Est. Sales 1,845 1,224 1,504 2,728 1,775 2,039 3,814 2,328 2,472 4,800 YoY 51.2% - - 47.9% 45.0% 35.6% 39.8% 31.2% 21.2% 25.8% Cost of sales 1,017 691 868 1,559 1,079 1,194 2,273 650 Gross profit 828 533 636 1,169 696 846 1,542 985 Gross profit margin 44.9% 43.6% 42.3% 42.8% 39.2% 41.5% 40.4% 42.3% SG&A expenses 663 494 581 1,075 651 666 1,317 358 SG&A ratio 35.9% 40.4% 38.6% 39.4% 36.7% 32.6% 34.5% 15.4% Operating profit 165 39 55 94 44 180 224 254 196 450 YoY 430.2% - - -43.2% 14.4% 227.4% 139.1% 470.4% 9.0% 100.5% Operating profit margin 9.0% 3.2% 3.7% 3.4% 2.5% 8.8% 5.9% 10.9% 7.9% 9.4% Recurring profit 150 39 56 95 44 179 223 253 197 450 YoY 400.5% - - -36.8% 13.8% 220.0% 135.5% 471.9% 10.2% 101.6% Recurring profit margin 8.1% 3.2% 3.7% 3.5% 2.5% 8.8% 5.9% 10.9% 8.0% 9.4% Net income 110 20 37 56 23 116 139 159 129 288 YoY 197.6% - - -48.8% 18.2% 218.0% 147.9% 581.2% 11.1% 106.5% Net margin 6.0% 1.6% 2.4% 2.1% 1.3% 5.7% 3.7% 6.8% 5.2% 6.0%
Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.
Consolidated earnings forecast for FY09/21 is as follows.
For FY09/21, AZoom forecasts consolidated sales of JPY4.8bn (+25.8% YoY), operating profit of JPY450mn (+100.5% YoY), recurring profit of JPY450mn (+101.6% YoY), and net income attributable to owners of the parent of JPY288mn (+106.5% YoY). The company forecasts OPM of 9.4% in FY09/21, up 3.5pp YoY from 5.9%. No change had been made to the full-year forecast as of the time of 1H results announcement.
Idle Real Estate Utilization business
The company expects performance in the Monthly Parking Lot Introduction and Monthly Parking Lot Subleasing services to exceed FY09/20 results. This reflects an anticipated ongoing rise in online inquiries about monthly parking spaces even in 2H, as well as an increase in the number of introductions and subleasing contracts. In addition, the company plans to expand its regional focus beyond the Tokyo metro area by bolstering sales efforts in Osaka, Nagoya, and other major regional cities where it has already rolled out branches.$$
The company will also reinforce its leasing and intermediary functions to promote new development of its parking lot subleasing business. In the Monthly Parking Lot Subleasing Service, which AZoom has positioned as the mainstay of its Idle Real Estate Utilization business, the company aims to achieve steady growth of leased parking spaces under management by continuing to boost sales activities for commercial buildings and condominiums with idle parking lot spaces. While at the same time, the company pursues sales and profit growth by maintaining and improving occupancy rates of subleased parking lots by way of the company’s portal site. AZoom also expects a YoY improvement in OPM and plans to further strengthen its management base and structure, starting with ongoing improvements to its core system.
AZoom/ 3496
Research Coverage Report by Shared Research Inc. | pdf.summary.company_website 10 Visualization business
This business entails using 3D computer graphic processing (3DCG) and virtual reality technology to visually convey real estate information, including showing how spaces might be put to use and what finished properties will look like.
With orders having returned more or less to pre-COVID-19 levels at the end of the previous fiscal year, the company is working to proactively increase personnel and capitalize on demand for remote sales solutions using 3DCG technology. The company is also undertaking offshore CG production at its subsidiary in Vietnam to increase operations of the visualization business as a whole. Medium-term outlook
The company’s management plan through FY09/21 reflects its largely unchanged expectations that growth in the parking lot business will remain robust, driving earnings. Since the plan was drawn up before the COVID-19 outbreak, its FY09/21 performance forecast differs from that which the company announced along with its FY09/20 results on November 9, 2020. For FY09/21, the company targets sales of JPY6.5bn, operating profit of JPY1.1bn, OPM of 17%, and ROE of 36%. To reach these levels, CAGR for the three years leading up to FY09/21 would be 52% for sales and 88% for operating profit. The company expects expansion in the parking lot business, particularly the subleasing service, to drive this growth.
Medium-term management plan Number of leased parking spaces
Source: Shared Research based on company data
The company’s medium-term strategy also calls for growth on three fronts:
Expand the parking lot database
Increase the business area and service the area more thoroughly
Move into business areas that utilize idle real estate in other ways
The first two items refer to expansion of the company’s two existing services, the Monthly Parking Lot Introduction Service and the Monthly Parking Lot Subleasing Service. The company is currently searching for ways to enact the third strategy, of moving into areas other than parking lots. This business would fall under the “Other Services” category. Although some services are gaining traction, this category currently accounts for about 2% of total sales.
Expanding the parking lot database
One medium-term strategy is to expand listings on CarParking, the portal site that underlies the parking lot business, onto a nationwide scale. Increasing both the quality and quantity of information on parking spaces listed on the site should attract more people, the company thinks. A second aim in expanding the site is to obtain more information about people who wish to rent parking lots. This would help increase the quality of the database the company uses to analyze parking lot market prices. In fact, the company’s parking lot database is already nationwide, but it has relatively few listings outside the Tokyo metro area. In central Tokyo and regional hubs, parking lots are being built in line with the new construction of office buildings and condos, but many of these areas are not yet covered by the company’s database. The company plans to expand coverage by implementing the measures outlined below.
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Research Coverage Report by Shared Research Inc. | pdf.summary.company_website 11 Gathering local information efficiently
Expanding the quantity of parking lot data is important to the company as it is a way to ensure AZoom’s site ranks highly on search websites. Gathering local parking lot data is labor-intensive, however. The company is addressing this situation by using the “coconi” framework to form a network of crowdworkers throughout Japan. Through this network, the company asks people who live in a specific region for the information it requires and pays a small monetary compensation for their service; local people take a moment from their daily routines to send local parking lot information to the company. These workers use their smartphones to gather information on local parking lots (dimensions, overview, image, local conditions, and other details that might be useful to a person interested in renting space). This arrangement suits crowdworkers, as it requires little time or effort. The company benefits by obtaining the information it needs inexpensively. coconi has three key features.
A crowd service specialized for obtaining location information
Matches location information with the people who wish to use spaces (or their proxies)
Smartphones used to gather local information
How coconi works
Source: Shared Research based on company data
Penetrate the existing business area more deeply and expand its scope
AZoom’s parking lot database covers all of Japan, but currently the Monthly Parking Lot Subleasing Service is focused mainly on the Tokyo metro area, which has numerous office buildings and condos. However, condos and office buildings are being built in major cities nationwide, and problems related to vacancies in parking lots are possible in these areas as well. Accordingly, the company plans to expand the coverage of its subleasing service to include these locations. AZoom currently has five regional branches: for Tokyo, Kanto (centered on Yokohama), Kansai (Osaka), Chubu Tokai (Nagoya), Kyushu (Fukuoka), and Hokkaido (Sapporo). To expand nationwide, the company plans to open more regional branches in Tohoku, Chugoku, Shikoku, and other areas.
AZoom says its strategy has been to stabilize earnings by shifting from the spot earnings model to a recurring-revenue model. The company receives one-time earnings for the online introduction of parking lots (receives commissions from both the property owner and the lessor when a rental contract is concluded). The amount of cash the company receives at the time of contract can also vary. For instance, the company sometimes discounts the introduction fee it receives from a property owner if the owner agrees to list his property on the company’s website. Owners also may not pay as expected.
The subleasing service generates a different type of cash flow. Once the company leases a property from an owner and subleases it to an end-user, the company continues to earn income as long as the contract with the owner remains in place. Increasing the number of owner contracts leads to more properties under management, increasing the likelihood of business growth.
That said, the parking lot introduction and subleasing businesses are interdependent. Having the introduction business makes the company’s subleasing service more efficient, it believes. Thus, AZoom plans to continue operating both businesses while
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Research Coverage Report by Shared Research Inc. | pdf.summary.company_website 12 shifting the weight of its business toward the recurring-revenue business, with the aim of stabilizing earnings.
Plans to expand in new areas
Source: Shared Research based on company data
Expanding from parking lots into other categories of real estate
The company currently utilizes idle real estate in a number of ways other than for parking spaces, but sales from these businesses are small. The company is also looking for new ways to create a new pillar of business by leveraging the expertise acquired through the parking lot business. Focusing initially on other ways to use idle real estate, the company has launched businesses involving information on open outdoor advertising space, and vacant parking lots for motorcycles. Shared Research understands that each of these businesses uses know-how acquired through the parking lot business.
Expanding application of parking-lot operation expertise
Source: Shared Research based on company data
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Research Coverage Report by Shared Research Inc. | pdf.summary.company_website 13 Business Business model
The company combines information technology and real estate to realize its management philosophy of “putting idle real estate to productive use.” Businesses that make effective use of vacant parking spaces by matching property owners with renters account for the lion’s share of AZoom’s sales. The business model of the company’s Monthly Parking Lot Introduction and Monthly Parking Lot Subleasing services are explained below. AZoom focuses on monthly parking lots rather than lots where space is rented by the hour.
The company has a portal site, CarParking, which lists monthly parking lots, as well as a site called CarPark, which concentrates specifically on Tokyo’s 23 wards (below, referred to collectively as “CarParking”). The company provides two main services: Monthly Parking Lot Introduction and Monthly Parking Lot Subleasing. The first service involves matching property owners and renters through the CarParking platform; with the second, the company leases vacant parking spaces from property owners and subleases them to end-customers.
The company’s business model for the Monthly Parking Lot Introduction Service involves expanding its database of information on monthly parking sites throughout Japan through its portal site. As the number of introductions increases and the properties available for subleasing are added to the pool during the process, the number of people using the company’s services grows, boosting earnings. From another perspective, parking lot introductions generate spot earnings, while subleasing provides recurring revenue. In this sense, the company leverages information amassed through its Monthly Parking Lot Introduction Service (spot business model) to achieve business growth in the Monthly Parking Lot Subleasing Service (recurring-revenue business model).
Spot business model: Increase number of search website listings Increase number of introductions
Recurring-revenue business model: Increase spaces taken on for subleasing Increase number of subleased properties and the occupancy rate
Monthly parking lot business (introduction Sales by service category and subleasing services)
Source: Shared Research based on company data Overview of business by segment
AZoom moved to consolidated accounting in Q1 FY09/20. Prior to that, the company only reported nonconsolidated results of AZoom Co., Ltd. Included in consolidated results are two subsidiaries established in 2019: CGworks Co., Ltd. (established in March 2019) and AZoom Vietnam Inc. (established in September 2019). The company’s two reportable segments are the Idle Real Estate Utilization business, which includes the Monthly Parking Lot Introduction and Monthly Parking Lot Subleasing services and related businesses run by the parent company, and the Visualization business operated chiefly by the newly consolidated CGworks and AZoom Vietnam.
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Research Coverage Report by Shared Research Inc. | pdf.summary.company_website 14 Idle Real Estate Utilization business
This segment comprises the Monthly Parking Lot Introduction and Monthly Parking Lot Subleasing services and real estate utilization-related businesses. Sales and operating profit mostly derive from the two parking lot-related services, with the Monthly Parking Lot Introduction service generating 10.9% of the JPY3.7bn in sales in FY09/20, Monthly Parking Lot Subleasing service generating 85.9%, and other businesses generating 3.2%. The company does not report service-specific operating profit.
Monthly Parking Lot Introduction Service
With this service, the company matches the owners of available parking spaces with people who wish to rent them. When the introduction results in a rental agreement, the company receives parking space introduction fees from renters and, depending on their business practices, sometimes receives customer introduction fees from owners. This service is available nationwide, with data on vacant parking spaces throughout Japan listed on the company’s search website (vacancy statuses at the time of search must be individually verified). Owners of monthly parking lots post information about available spaces on the site. People searching for monthly parking spaces can search for them via the company’s website, and, assuming that they wish to sign a rental agreement, fill in an inquiry form on the site (name, contact information, desired area, model of car, etc.). In this way, potential renters verify current parking space vacancy statuses and proceed with rental agreements. Earnings for the company are proportional to the number of agreements reached, so it works to make the site as attractive as possible to potential renters.
People who wish to rent a parking space have several options. They can physically go to look, contact a real estate agent directly, or conduct an internet search. Before the internet, people typically walked around their neighborhood looking for a spot and then contacted a management company (real estate agent) for an introduction. The internet has made it possible to list vacant spaces, expanded the pool of potential customers, and spawned numerous specialized search websites like the one AZoom provides. The company says that each of the three methods have advantages and disadvantages, but that internet searches are the most convenient for customers.
AZoom’s parking lot search website lists monthly parking lots around Japan. The company believes its site ranks higher than peer companies that publicize their number of listings and that its own site is the most extensive in Japan, by number of listings. The company explains it achieved this level of differentiation by concentrating its data gathering on monthly parking sites from early on and building a website based on this information. The structure of AZoom’s search website is not markedly different than those of similar companies. However, the company says it has created a virtuous cycle by being popular with users for its number of listings, which in turn attracts more listings.
Business model
With its Monthly Parking Lot Introduction Service, the company matches available parking lots with people who wish to rent them. For this reason, assembling registrations of parking lots from their owners is clearly important, but the company must also secure a higher number of inquiries from potential renters than its competitors. Consequently, gathering more data from parking lot owners and renters than other companies have is important. Having large amounts of data allows the company to be more active in proposing (introducing) parking lots to potential customers. The company does not disclose its rate of successful contracts relative to the number of inquiries it receives. Fees are success-based; when an introduction via its site results in a rental agreement, the company typically receives the equivalent of one month’s rent from the renter. The company sometimes receives parking lot introduction fees from owners, although this depends on each owner’s individual business practices. These fees are the main source of revenue for this business, which therefore generates spot earnings.
Monetization framework
AZoom earns introduction fees from inquiring users who locate properties using the portal site when the two parties conclude a rental agreement. AZoom is not a party to that agreement; it merely provides the introduction. The company receives no usage fees from inquiries alone, which accordingly provide no earnings on their own. Inquiring users must reach rental agreements with parking lot owners in order for the company to receive introduction fees. Basically, rental agreements are normally formed between just property owners and inquiring users. However, the company will sometimes participate in the process in a variety of ways, including assisting with the paperwork and sending invoices.
Registered users contact owners (or owners’ real estate agents) via the website when they find a property that meets their requirements. Although AZoom is not involved in contracts between the property owner and renter, it requires a rental agreement confirmation document in order to bill the introduction fee. Based on that document, the company invoices the renter for the introduction fee, receiving cash in return. Every month thereafter, the individual pays rent directly to the owner.
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Research Coverage Report by Shared Research Inc. | pdf.summary.company_website 15 Parking lot renters pay a commission to the company when a rental contract is concluded as the result of an introduction on the company’s site. Commission levels differ somewhat depending on the price of monthly rent, but they typically equal one month’s rent. Owners as well often pay introduction fees to the company that are equivalent to one month of the rent paid by the user. However, the rates for these introduction fees may vary due to differences in offers made by owners during negotiations regarding conditions for posting parking lot data.
Differences between conventional business customs and the Monthly Parking Lot Introduction Service
Source: Shared Research based on company data
AZoom’s search website (CarParking)
The parking lot data on the company’s CarParking website comes from local real estate agents and property owners throughout Japan. The site is configured to allow drill-down searches, but so are many of the sites operated by AZoom’s peers. Rather, the company’s differentiator is its number of listings.
The top page of the CarParking site shows a map of Japan, divided by region. Selecting the target area takes the user to a more detailed map of that area. From there, s/he can decide what registered properties to view. The user can also select one of the green pointers to access further detail (property address, rental conditions, etc.). Some data is incomplete; some property records may not indicate monthly rents or other details (often, according to the owner’s wishes). In such cases, the potential renter needs to make direct contact to obtain more detailed information.
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Research Coverage Report by Shared Research Inc. | pdf.summary.company_website 16 AZoom’s parking lot search website (CarParking)
Top page Area search page (in AZoom’s vicinity, for illustrative purposes)
Source: Company website
Whether a user decides on a specific lot or decides to continue browsing the site because s/he was unable to find an appropriate space, he or she must enter his or her personal information on the inquiry website and wait for a response. The inquiry site requires the user to enter his/her name, company name, contact information, and desired conditions. This information allows the company to verify that a person browsing the site is one of its own users and introduce suitable properties to that user.
AZoom uses the data provided by users to understand what sort of properties are sought after and organizes the information to determine market needs. The company does not disclose information about user registrations, but it does disclose the number of inquiries (when users contact the company by telephone or email to ask about a parking lot). A rise in the number of inquiries suggests that the number of site searches is rising, implying more introductions. An increase in the number of inquiries can also be compared with the number of listings on the site, showing how the number of users rises in line with the amount of information listed. Hence an increase in the number of inquiries is tied to growth of the company’s Monthly Parking Lot Introduction Service.
User inquiry screen
The company requires users to enter five items of information. Users can also enter additional details about the space they are looking for.
1. Name
2. Contact information (email address)
3. Address
4. Parking lot search area
5. Vehicle type
Source: Company website
Sites to search for monthly parking
Many companies offer websites that match information on parking lots with the people who wish to rent them, but only a few disclose the number of listings online (some sites indicate the number of listings they have in each area). The graph below
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Research Coverage Report by Shared Research Inc. | pdf.summary.company_website 17 compares sites that post listing volumes regularly. In Japan, there are more than 10 companies like AZoom operating websites that introduce vacant parking lots, but few of them indicate their number of listings. For people searching a site, the more listings available the better because a greater number of listings means a better chance of finding a parking lot that meets their needs. Each of the companies shows the number of listings on its site for specific areas of Japan, but few disclose the total number of listings for the entire site. Our research indicates that only five companies, including AZoom, disclose their total number of listings. The graph below indicates our research results, which show that AZoom has significantly more listings than other companies.
Listings on parking lot search websites
Source: Shared Research from individual companies’ websites (as of December 6, 2020)
Win–win–win for owners, users, and AZoom
By listing their property information, the company’s site gives property owners access to a wide range of potential customers across Japan and obviates the need to rely on specific management companies (real estate agents). The site benefits users by allowing them to browse properties and make selections without having to visit the place on foot, which simplifies the process of narrowing down a list of candidates in the target area. AZoom earns introduction fees from the site’s users when they enter into a rental agreement. Depending on the relationship with the property owner, the company may not always receive introduction fees from them.
Gathering parking lot information
In earlier days, the company used a “pull” sales approach to populate its search website with more information. At that time, salespeople would approach parking lot owners and real estates in specific areas about registering their information on the site. The company says it continues using this approach today, but now its sales are more efficient: having accumulated details about the users’ requirements, it can narrow down high-demand areas ahead of time. As is described in more detail later in the report, the company uses a management system that maps areas where parking lot demand is particularly high, increasing the sales team’s efficiency. Parking lot owners have also begun finding some of the information on the site beneficial, which makes it easier for the company to gather information. As AZoom’s parking lot search site grows, gathering even more information becomes easier. This network effect is a competitive advantage. Shared Research understands that the site’s increasing coverage as a marketplace is earning it a leadership position.
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Research Coverage Report by Shared Research Inc. | pdf.summary.company_website 18 Number of inquiries and parking lot listings (AZoom)
Source: Shared Research based on company website
Monthly Parking Lot Subleasing Service
With this service, the company rents vacant parking lots from their owners, introduces the spaces on its website, and subleases the spaces to end users via rental agreements. For end users, this service differs from the company’s introduction business in that the company itself is the lessor, so they pay rent to the company rather than the property owner. Rather than receiving an introduction fee, the company earns the difference between the rental income it receives from end customers and the guaranteed monthly rent it pays to parking lots’ owners.
Difference between direct contracts and the Monthly Parking Lot Subleasing Service
Source: Shared Research based on company website
Business model
In the Monthly Parking Lot Subleasing Service, the company leases lots from their owners and manages the lots in their stead. The company enters contracts, which state its intent to sublease properties and the guaranteed rent amount the owners will receive. Rent guarantees are the main expense in this business. As is explained later (in the “Historical results and financial statements” section), “rents paid” account for more than 90% of cost of sales for this service. The company earns profits on the difference between the guaranteed rent it pays owners and the rental income it receives from subleasing lots.
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Research Coverage Report by Shared Research Inc. | pdf.summary.company_website 19 As the rental costs are fixed, knowing how to manage rental properties efficiently is key to improving profits, explains the company. AZoom works to maximize profits by constantly monitoring the rental status of properties. The company aims to find renters before it must begin paying guaranteed rents to owners (contracts typically stipulate a lag of around three months) and then remain vigilant about contract periods to ensure against vacancies. This is a recurring-revenue business, as parking lots continue to generate income as long as sublease agreements are in place.
Connections with the Monthly Parking Lot Introduction Service: Sourcing, appealing to owners
The guarantee amount determines whether a property owner will agree to an agreement, and whether the company can make profit once an agreement is in place.
The company uses the big data on parking lots and potential renters gathered through its search website (in the Monthly Parking Lot Introduction Service business) to compute appropriate rent guarantees. Based on this data, the company analyzes market price information for similar regions and proposes guaranteed rents based on its market price assumptions. AZoom says it offers owners guaranteed rent amounting to around 60% of the list price, compared with the 50% offered by competitors. The company explains it can offer higher rates because of its ability to calculate accurate market prices. The company also says it has never cancelled a contract mid-term, a practice that other companies sometimes use to extricate themselves from agreements that are unprofitable because they set rent guarantees too high at the beginning.
Parking lot owners typically choose the subleasing option because they have no effective way to find renters, so are unable fill all the spaces they have available. Parking lot owners may wish to avoid vacancies or may wish to outsource management because of the large number of lots they own. Also, in recent years condo management companies and owners’ associations have been facing a growing number of vacant parking spaces on their premises. By leasing all their lots to AZoom, management companies and owners’ associations avoid the risk of not being able to earn rents on vacant parking spaces. In exchange, AZoom guarantees them rental income that is discounted from market rates. The company searches for people to rent the parking spaces and profits on the difference between the guaranteed rent it pays out and the rental income it receives from renters, which vary by location. Through the subleasing service, the company thus takes over from owners the task of looking for renters and the risk of not being able to find them.
At present, the company offers this service in areas where demand is particularly high: in the Kanto region (via the head office), as well in the Kansai, Chubu Tokai, Kyushu, and Hokkaido regions (via branches).
Vehicle spaces leased from lessors (as of Vehicle spaces subleased to end-users (as of fiscal year-end) fiscal year-end)
Source: Shared Research based on company data
Clients for the company’s subleasing service divide broadly into owners of offices and commercial buildings, companies that managed owned or rented condos, and operators of real estate REITs. Rental income from the parking lots at office buildings and condos is typically incorporated into building/condo management fees, and a drop in rents due to vacant parking lots means lower income for building/condo owners. (See the “Market and value chain” section.) Owners desire a service that produces income directly from the parking lots and offers stable management. Accordingly, companies that sublease are judged on their ability to manage parking lots in a reasonable manner and ensure stable rental income. AZoom earns high marks on these fronts thanks to its introduction of IT to real estate management and due to its ability to minimize parking lot vacancies.
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Research Coverage Report by Shared Research Inc. | pdf.summary.company_website 20 Composition of clients in subleasing service Subleasing service branches
Source: Shared Research based on interviews with the company
Source: Company data
A breakdown of clients by property types shows that office buildings and condos account for around 90%. To date this business has concentrated on office buildings which have relatively large parking lots. AZoom’s competitors handle relatively fewer parking lots around rented properties and condominiums. Nippon Parking Development (TSE1: 2353), which has a business model similar to AZoom’s, essentially does not sublease condo parking lots. Compared with office buildings, condo parking lots require close interaction with the owners associations (the lease agreement counterparty) comprising condo unit owners, and the number of parking units available can differ greatly. The company’s focus on providing services for parking lots adjoining condos has enabled it to increase the number of subleased parking spaces, with such spaces accounting for more than half of the total in FY09/20.
Management system feature: Real estate tech (real estate + IT)
AZoom aims to cultivate real estate tech, which introduces IT to the real estate industry, where it has been slow to gain traction. By doing so, the company aims to streamline its business. Specifically, by using IT the company intends to accelerate business expansion, assess rent levels appropriately, and boost operational efficiency. The company says it is using real estate tech to strengthen operations in three ways.
Transactions: Use platforms and the cloud to facilitate fast, low-cost real estate investment, sale/purchase, and renting. In the parking lot business, use a portal site for searching parking lot information to provide information quickly and inexpensively to owners and users.
Valuation: Use information and technology to automate and provide easy-to-understand assessments of real estate and regions. In the parking lot business, calculate regionally appropriate rents based on a large volume of information.
Operations: Use mobile devices, tools, and IoT to increase the efficiency of real estate operations. In the parking lot business, increase the sales and management efficiency by obtaining real-time data on parking lots taken on for sublease.
The company uses data from inquiries made to the search portal site as well as recent parking lot information (such as number of vacancies and rents) to determine user needs and changes in demand. The company analyzes past-to-present data to determine changes in rents and occupancies in individual lots, and is attempting to forecast trends in the parking lot market. Through these analyses, the company thinks it can calculate appropriate rents and select target parking lots based on future projections. Currently, the company obtains real-time information about parking lots it takes on for subleasing. It uses this information to make recommendations to the people in charge of those properties and helps accelerate internal decision- making and lower management costs. For example, the company uses a “parking lot heat map” as a sales tool. This map shows the status of parking lot inquiries by region, as well as the actual level of demand for parking lots.
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Research Coverage Report by Shared Research Inc. | pdf.summary.company_website 21 Parking lot heat map
・The company analyzes user inquiries to compute demand for parking lots. Colors and gradations show this demand for different regions.
・Darker colors indicate areas of high demand for monthly parking lots (red, then yellow, then green, by level of demand).
Source: Company materials
Proprietary system for detailed management of subleased properties
The company manages subleased parking lots in a detailed manner sorted by property and individual units. For example, if the company is subleasing 10 units of a parking lot attached to a condominium, its management system will indicate at a glance the overall income and expenditures from those 10 units along with the management status of individual units, showing differences in contract conditions for each (contract starting and ending dates, property data, rent collection status, etc.). When a contract is nearing the end of its term, the sales team uses this data to check up on parking needs in the specific area and ensure the space does not become vacant (so the company will not have to waste the money it pays as guaranteed rents).
The company says this system is unique to AZoom. The reason, it explains, is that real estate information systems are created mainly for residential properties. As such, longer-established companies find it more difficult to revise their systems to match contract styles on monthly parking lots. Furthermore, subleasing arrangements were mostly limited to parking lots of office buildings in the past. Now that they are expanding into condo parking lots, Shared Research thinks that it is difficult for other companies to adjust to the systems needed to handle the contract formats suited to managing such parking lots.
The team that created this management system is also in charge of administering it, but other employees can also check this information on their computers (usually PCs). The team that handles subleasing and the sales team can access the system, allowing registered properties that become vacant to be listed on the company’s search website, where they can be seen by sales staff in charge of users looking for properties in that area. The figure below is a simplified, schematic representation of the information visible on employee computers. The information is shown in a format that makes it easy to see contract status and income and expenses for each property.
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Research Coverage Report by Shared Research Inc. | pdf.summary.company_website 22 Sample image of AZoom’s system (section of the management screen)
Source: Shared Research
Other Services
In the interest of medium-term growth, the company is working to build a new pillar of business that will make effective use of idle real estate for purposes other than parking. The images below show some businesses the company is cultivating. They are small in scale, however, and together account for only around several million yen per year. (The company does not disclose sales for individual businesses.)
The company offers a search platform (Adwall) that connects the owners of outdoor advertising media (signs on walls and the tops of buildings, outdoor television screens, etc.) with advertisers who wish to use the space.
Adwall homepage Search for an advertising sign
Source: Company website
CoinPa Search website for hourly parking
CoinPa Search homepage Search in the Tokyo area
Source: Company website
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Research Coverage Report by Shared Research Inc. | pdf.summary.company_website 23 Smart Kaigishitsu (smart conference room) search site
Smart Kaigishitsu: top page Search example
Source: Company website Visualization business
This segment was created when AZoom moved to consolidated accounting in Q1 FY09/20. While the Idle Real Estate Utilization business corresponds more or less to the business activities previously reported in nonconsolidated statements, the Visualization business encompasses the expanding business of CGworks, established in March 2019, together with the activities of AZoom Vietnam, established in September 2019. The company began reporting results for both segments in Q1 FY09/20.
The Visualization business primarily involves services that make use of 3D computer graphic processing (3DCG) and virtual reality technology to visually convey real estate information, including showing how spaces might be put to use and what finished properties will look like. CGworks is the service provider, while AZoom Vietnam serves as an overseas development base for the AZoom group.
In FY09/20, the first year of reporting, sales were JPY72mn, yielding an operating loss of JPY29mn, which did not significantly impact consolidated results.
CGworks Co., Ltd.
Established: March 2019 Capital: JPY20mn (wholly owned by AZoom Co., Ltd.) Business activities: Production of visualizations using 3D computer graphics, virtual reality (VR), augmented reality (AR), mixed reality (MR) development, and related operations
CGworks’s main customer industries are lodging and commercial facilities, for whom the company provides spatial graphic design and creates virtual spaces. The company believes the business will expand in three 3DCG-based areas: VR, AR, and MR development; video production, including full-blown product videos and promotion videos for use on websites; and 3DCG-based WebGL development (WebGL is a standard API for rendering interactive 3D graphics in web browsers) that takes advantage of 5G environments. This technology makes it possible to view real estate properties, arrange furniture, and purchase real estate via a web browser without specialized software.
AZoom Vietnam Inc.
Established: September 2019 Capital: US278,000 (about JPY30mn) (wholly owned by AZoom Co., Ltd.) Business activities: Computer and system management-related consulting, software development, database businesses, data processing, and other computer-related businesses
AZoom Vietnam was established as an overseas development base for the AZoom group. Vietnam as a country is turning out excellent engineers. With its goal of developing IT for services targeting the real estate industry, AZoom’s main purpose in
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Research Coverage Report by Shared Research Inc. | pdf.summary.company_website 24 establishing the subsidiary was to secure the engineering personnel needed to support sustained business growth. Having already hired many engineers from Vietnam to work in Japan, the company hopes by establishing the base in Vietnam to cut costs and speed up development, in addition to ensuring the availability of personnel.
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Research Coverage Report by Shared Research Inc. | pdf.summary.company_website 25 Market and value chain
As of October 1, 2020, the Japanese population numbered 125.88mn, down 0.23% YoY (according to the Statistics Bureau, Ministry of Internal Affairs and Communications), and the population is widely thought to be in long-term decline. Regardless of this demographic trend, Japanese car ownership remains flat or even up slightly. Parking lots in Japan are largely established in accordance with standards specified under the Parking Lot Act. The chart below outlines parking lot categories in Japan. Under this system, the number of parking lots in the country is trending upward irrespective of demographics, creating an environment that tends to yield unused vacant parking lots.
The increase in the number of parking lots is due in part to a crackdown on illegal parking. Another factor is a rise in the number of parking lots that need to be provided as part of urban planning regulations. Parking lots adjoining large new office, commercial, and condominium buildings must meet certain size requirements. Shared Research thinks an increase in such parking lots is another reason for the growing supply.
Parking lot categories
Source: Shared Research based on materials from the City Bureau, Ministry of Land, Infrastructure, Transport and Tourism
Parking lot categories Facilities that require adjoining parking lots
Source: Shared Research based on materials from the Cabinet Office, Government of Japan and others
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Research Coverage Report by Shared Research Inc. | pdf.summary.company_website 26 Examples of locations where adjoining parking lots are required (Tokyo)
Note: In a parking lot development district, adjoining parking must be provided for buildings that have both specific use and non-specific use areas, if the total area (the sum of the area for specific use and 3/4 of the area for non-specific use) is 1,500sqm or more. “Specific use:” Use for theaters, cinemas, entertainment halls, viewing areas, broadcasting studios, public halls, exhibition halls, wedding halls, funeral halls, assembly halls, Japanese inns, hotels, restaurants, food-and-beverage establishments, meeting areas, cabarets, cafes, nightclubs, bars, dance halls, game halls, bowling alleys, gymnasiums, department stores and other types of stores, offices, hospitals, wholesale markets, warehouses, or plants “Non-specific use:” Use for anything other than specific use, condominiums A “parking lot development district” is defined in urban planning terms as a commercial area, neighboring commercial area, residential area, semi-industrial area, or district neighboring one of these areas that experiences significant congestion due to automobile traffic. A “surrounding area” is a parking lot development district, commercial area, or area within an urban planning area nearby a neighboring commercial area as stipulated by ordinance. Source: Shared Research based on data from the Bureau of Urban Development, Tokyo Metropolitan Government
Demand for subleasing of vacant parking lots occurs for several reasons: Unoccupied parking lots increase when the number of automobiles owned does not change much but the supply of parking lots continues to rise. When this happens, owners of parking lots must work to reduce the number of these vacant lots as much as possible and maximize their own income from rented parking lots. In other words, the extent to which owners can reduce these vacancies becomes an important metric. Under the subleasing arrangement (leasing the lot for subleasing), owners regularly collect guaranteed rental income in the form of rental fees discounted from the fees they originally set. Although the income they receive per unit will decline, the issue concerning vacant parking lots will be solved. Having lots available to sublease benefits AZoom because it can attract customers by listing the lots on its search website, prevent vacancies through careful management, and generate income as a result.
Vehicle ownership in Japan Number of parking lots nationwide
Source: Shared Research based on Automobile Inspection & Registration Source: Shared Research based on materials from the Ministry of Land, Information Association data Infrastructure, Transport and Tourism
Increase in car rentals and car sharing; advantageous in terms of subleasing demand
Car rental and car sharing is on the rise in Japan. This increase in demand suggests that car ownership should be falling. While overall ownership remains flat, individual ownership is dropping while ownership by companies that run car rental and car sharing businesses (and who must hold vehicles as operating assets) is growing. Falling ownership by individuals would seem to lead to a falling demand for monthly parking lots, but this is apparently not the case because car rental and car sharing account for a relatively small proportion of car ownership in Japan (of around 70 million vehicles). Further, operators of car rental and sharing services also need to secure parking space for the vehicles they use for business.
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Research Coverage Report by Shared Research Inc. | pdf.summary.company_website 27 Even with the increase in car rental and car sharing and a decrease in the population that owns vehicles, the supply of parking lots is not falling. Rather, it is increasing gradually due to legal requirements for building parking lots. The number of vacant parking lots is growing as a result, and an increasing number of owners are feeling the need to address this problem. One way to do so is by using AZoom’s subleasing service. In short, a rise in car rental and car sharing and a gradually increasing supply of parking lots are both sources of the vacant-parking-lot problem, which actually increases demand for the company’s subleasing service.
Car rental operations and number of vehicles
Source: Shared Research based on materials from the Ministry of Land, Infrastructure, Transport and Tourism
Condominiums and office buildings
The number of condominiums in Japan is increasing. In Tokyo’s 23 wards, around 20 new large and medium-sized office buildings are added each year. According to Japan’s Parking Lot Act and related legislation, large-scale buildings (including condominiums) require adjoining parking facilities, which is another factor behind the growing supply of parking lots.
Condominiums in Japan (completed) Supply of new office buildings in Tokyo’s 23 wards
Source: Shared Research based on Ministry of Land, Infrastructure, Transport and Tourism Housing Economy Data
Source: Shared Research based on company and other data
The rate at which business in Japan is moving online suggests there may be room for more parking lot searches to be made online, as well. In the past, parking lot searches were an offshoot of searches for residential properties. Customers searching for residential properties would usually contact real estate agents in areas where they wished to rent or go through agents they used before to find parking lots. As more real estate business has moved online, explains the company, more people are searching for ideal parking lots and concluding agreements independent of their searches for residential properties. Data on customers who viewed the company’s website and made contact shows that the percentage of people contacting the company directly by telephone has fallen. Email and other types of online messaging have correspondingly increased. Shared Research understands that previously, people searched for parking lots directly. The next trend was to first conduct an online search, and then visit sites. The next step is for all processes to be handled online.
AZoom/ 3496
Research Coverage Report by Shared Research Inc. | pdf.summary.company_website 28 AZoom’s changing routes for inquiries Online sales (BtoC) and percentage of sales that are online
Source: Shared Research based on company data Source: Shared Research based on data from the Ministry of Economy, Trade and Industry
The issue of condominium parking lot vacancies—condominiums in Japan
In Japan, condo unit owners are expected to pay a monthly fee for common-area upkeep. These include funds set aside as a reserve for long-term maintenance, as well as those covering outsourced management of everyday maintenance. When a condo is initially sold, the company handling the sale usually indicates these fees. In many cases, however, their calculations assume full occupancy of car and bicycle parking lots belonging to the condo, as well as the generation of full rental income from them.
There is no guarantee, however, that all spaces will be rented. Japanese car ownership is falling, due to an aging population and changing lifestyle choices. If parking spaces at condominiums remain vacant for an extended period, resulting in lower rental income, charges assessed for common-area upkeep may need to be increased.
As well as daily maintenance, lower parking lot rental income can affect the ability to finance long-term maintenance plans, which is becoming a major problem for condo owner associations (organized by the unit owners) and the owners themselves. Even so, condo owner associations are limited in their ability to search for new parking lot occupants. Through subleasing, AZoom addresses this problem and works to improve occupancy rates.
Value chain
The company’s value chain for the Monthly Parking Lot Introduction Service differs from the one for the Monthly Parking Lot Subleasing Service. With the Monthly Parking Lot Introduction Service, the company addresses the desire of parking lot owners to reach out online to a broad range of potential renters. Meanwhile, the service enables end customers to search for parking spaces over the internet without the need to visit them. They can also compare conditions in neighboring areas and efficiently search for properties that best match their conditions. With the Monthly Parking Lot Subleasing Service, the company concludes rental agreements with parking lot owners. Owners have no need to worry about lot vacancies and can receive stable income in the form of guaranteed rents. By analyzing prices of nearby markets managing operations with its IT system, AZoom can minimize leased parking lot vacancies and continuously generate earnings. Occupancy rates for the company’s subleased properties are indicated in quarterly results, and generally range from 80–90%. Excluding management costs, guaranteed rents are about 50% of regular rents (which also forms the market price). So, by setting its subleasing rates close to market prices, the company can profit from the difference. Competitors
The number of real estate tech companies that provide real estate-related information, including on monthly parking lots, is increasing. Property owners providing information tend to choose popular websites that attract high visitor traffic, and may simultaneously list on multiple sites to widen exposure. The number of properties registered with a site also correlates closely to name recognition.
AZoom/ 3496
Research Coverage Report by Shared Research Inc. | pdf.summary.company_website 29 Comparable listed companies
Latest full-year results Fiscal Operating Ticker Company Sales Operating Description year-end profit ROE profit margin (JPYmn) (JPYmn) Operates TATERU, a real estate management site. Also expanding in the area of funds and 1435 TATERU Dec 18,828 -9,671 -51.4% -93.9% IoT.
Operates Homes, a search site for real estate information that leads the market in number 2120 LIFULL Sep 35,403 2,498 7.1% 3.5% of listings. Expanding overseas through acquisition.
Nippon Parking 2353 Jul 22,980 2,673 11.6% 13.7% Subleases monthly parking lots, in Japan and overseas, at commercial facilities. Development Approaches owners of hourly parking lots and proposes plans for constructing commercial 3267 Phil Company Nov 7,025 1,096 15.6% 24.2% space for rent above the lots.
Leads the Japanese market for leased conference rooms. Leases idle property, subdivides 3479 TKP Feb 54,343 6,325 11.6% 7.5% it, and leases it out. Also runs hotels.
Main business is subleasing monthly parking lots. Runs CarParking, an introduction site, 3496 AZoom Sep 3,814 224 5.9% 6.5% and is expanding throughout Japan.
Operates the Times brand of 24-hour unmanned hourly parking lots. Also does business in 4666 Park24 Oct 317,438 22,322 7.0% 13.4% the UK and Australia. Second line of business is car sharing.
Operates hourly rental parking lots. Mainly rents or buys land on which to build parking 4809 Paraca Sep 12,471 1,393 11.2% 4.9% lots. Regional cities are the main focus. Has three main businesses: Indeed, an HR search site; sales promotion and HR media 6098 Recruit Holdings Mar 2,399,465 206,011 8.6% 18.4% related to lifestyle information; and personnel dispatch.
Source: Shared Research based on company data
As comparable listed companies, we have selected firms whose main businesses are related to real estate and make use of the internet. Like AZoom, Nippon Parking Development (TSE1: 2353), Phil Company (TSE1: 3267), Park24 (TSE1: 4666), and Paraca (TSE1: 4809) handle parking lots.
Although Nippon Parking Development handles monthly parking lots, it differs from AZoom in that it subleases few monthly parking lots at condominiums. Rather, monthly parking lots at commercial buildings are its mainstay. Nippon Parking Development is also developing business overseas, including other parts of Asia. Through consolidated subsidiaries, it is also developing ski resort and theme park businesses.
Both Phil Company and Park24 concentrate on hourly parking lots. Phil Company is less focused on just the parking lots themselves. Instead, it works with property owners, proposing plans to help them utilize the space above parking lots for rental shops and other uses. Phil Company also has subsidiaries that handle design and construction. Park24 operates the Times brand of unmanned 24-hour parking lots and is expanding operations into the UK and Australia. Park24 is also developing car sharing as its second-largest pillar of earnings. Paraca also operates hourly parking lots. Paraca’s approach is to rent or buy land and then build parking lots on it. Regional cities are its main focus.
Although not in real estate, companies with business models similar to AZoom’s include TATERU (TSE1: 1435), LIFULL (TSE1: 2120), TKP (TSE1: 3479), and Recruit Holdings (TSE1: 6098). TATERU, which got its start planning, designing, and selling designer apartments, now operates an online apartment management platform. TATERU provides comprehensive services; it obtains information for people who are considering apartment management, matches them with owners of land suitable for apartment buildings, and then handles planning, design, and rental property management. TATERU also offers an app that enables cloud-funded real estate investment in units of JPY10,000, manages rental properties that feature IoT equipment, and offers services to support the renting of private lodgings. LIFULL operates a real estate information search website. Listed property types include new or preowned detached homes, new or preowned condos, rental properties, and land. Its site is the most extensive of its type in Japan, according to one third-party research institute. TKP is Japan’s leading provider of rental conference rooms. It rents idle real estate inexpensively and divides the space into conference rooms that it rents out by the hour. TKP also has a hotel and resort business and a food and catering business. AZoom says it considers TKP a benchmark of efficient asset management. Recruit Holdings oversees group companies involved in a host of businesses, including help- wanted ads, personnel placement, recruiting, and sales promotion. In the real estate category, Recruit (a subsidiary) runs SUUMO, a real estate information site. According to a third-party research company, SUUMO has high name recognition, ranking number one in Oricon’s Japanese customer satisfaction ranking for rental housing websites (December 2020).
AZoom/ 3496
Research Coverage Report by Shared Research Inc. | pdf.summary.company_website 30 Key indicators for listed peer companies
AZoom (3496) TATERU (1435) LIFULL (2120) (JPYmn) FY09/18 FY09/19 FY09/20 FY12/17 FY12/18 FY12/19 FY09/18 FY09/19 FY09/20 Parent Parent Cons. Cons. Cons. Cons. IFRS cons. IFRS cons. IFRS cons. Sales 1,845 2,728 3,814 67,016 79,149 18,828 34,565 39,297 35,403 Gross profit 828 1,169 1,542 11,704 8,625 -4,092 30,686 34,737 31,306 SG&A expenses 663 1,075 1,317 5,806 7,903 5,579 26,422 30,787 27,003 Operating profit 165 94 224 5,899 722 -9,671 4,315 4,185 2,498 Recurring profit 150 95 223 5,864 508 -10,123 4,157 3,626 2,149 Net income 110 56 139 3,995 823 -14,537 2,800 2,361 1,176 ROE 25.3% 25.3% 6.5% 51.3% 5.1% -93.9% 12.8% 8.7% 3.5% ROA (RP-based) 18.2% 18.2% 6.7% 35.8% 1.9% -45.3% 14.2% 9.8% 4.3% Operating profit margin 9.0% 3.4% 5.9% 8.8% 0.9% -51.4% 12.5% 10.5% 7.1% Total assets 1,290 1,522 1,891 21,865 32,450 12,291 29,182 43,673 55,320 NET ASSETS 834 893 953 968 22,881 8,228 16,282 32,627 33,647 Equity ratio 64.7% 58.7% 50.3% 43.6% 70.1% 66.9% 75.0% 74.8% 60.5% Operating CF 192 17 367 3,647 -6,669 -5,174 4,671 2,166 4,884 Investing CF -17 -353 -63 -3,105 -2,017 -327 -1,534 -2,836 -1,730 Financing CF 664 98 -37 4,441 10,792 -724 -1,073 2,782 3,392 Cash and deposits 1,007 769 1,078 9,888 11,994 6,371 7,571 9,239 15,963 Interest-bearing debt 18 105 143 5,010 3,402 2,650 85 3,639 10,604 Net debt -990 -664 -935 -4,878 -8,592 -3,721 -7,487 -5,600 -5,359 Nippon Parking Development (2353) Phil Company (3267) TKP (3479) FY07/18 FY07/19 FY07/20 FY11/17 FY11/18 FY11/19 FY02/18 FY02/19 FY02/20 Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Sales 22,771 24,382 22,980 2,950 4,739 7,025 28,689 35,523 54,343 Gross profit 10,129 10,872 8,109 647 1,218 1,887 10,950 13,722 20,722 SG&A expenses 6,595 6,714 5,436 350 580 791 7,501 9,433 14,396 Operating profit 3,533 4,158 2,673 296 637 1,096 3,449 4,289 6,325 Recurring profit 3,610 4,152 2,741 305 616 1,077 3,200 4,053 4,761 Net income 2,211 3,037 1,202 188 415 601 2,071 1,893 1,743 ROE 26.0% 32.1% 13.7% 12.1% 23.4% 24.2% 31.8% 19.6% 7.5% ROA (RP-based) 15.4% 17.3% 9.9% 9.1% 16.5% 22.7% 10.9% 9.5% 5.7% Operating profit margin 15.5% 17.1% 11.6% 10.0% 13.4% 15.6% 12.0% 12.1% 11.6% Total assets 23,372 26,638 30,604 3,344 4,113 5,373 34,530 51,066 117,473 NET ASSETS 10,992 11,914 11,053 1,557 1,996 2,984 8,655 10,763 35,802 Equity ratio 36.3% 37.0% 27.4% 46.5% 48.4% 55.5% 24.9% 21.0% 30.4% Operating CF 2,947 4,183 2,980 -448 1,032 1,696 1,995 2,485 6,756 Investing CF -2,851 -1,753 -1,182 -58 -392 -223 -8,515 -11,283 -58,544 Financing CF -2,787 -2,351 4,106 1,257 -401 408 6,735 15,064 49,141 Cash and deposits 11,709 11,717 16,484 1,870 2,108 3,989 5,706 11,967 9,131 Interest-bearing debt 6,599 6,702 12,974 730 304 330 21,358 35,911 64,297 Net debt -5,110 -5,015 -3,510 -1,140 -1,804 -3,659 15,652 23,944 55,166 Park24 (4666) Paraca (4809) Recruit Holdings (6098) FY10/17 FY10/18 FY10/19 FY09/18 FY09/19 FY09/20 FY03/18 FY03/19 FY03/20 Cons. Cons. Cons. Parent Parent Parent IFRS cons. IFRS cons. IFRS cons. Sales 232,956 298,517 317,438 13,670 14,085 12,471 2,173,385 2,310,756 2,399,465 Gross profit 60,188 72,283 78,092 3,648 3,807 2,880 1,014,283 1,169,162 1,293,215 SG&A expenses 39,683 49,743 55,770 1,495 1,535 1,487 817,233 947,041 1,045,380 Operating profit 20,505 22,539 22,322 2,153 2,272 1,393 191,794 223,090 206,011 Recurring profit 20,281 22,532 21,566 1,952 2,076 1,185 199,228 239,814 226,149 Net income 13,439 13,851 12,348 1,881 2,381 748 151,667 175,381 179,880 ROE 17.2% 16.1% 13.4% 15.1% 16.8% 4.9% 18.2% 19.3% 18.4% ROA (RP-based) 7.9% 8.3% 7.5% 6.7% 6.4% 3.4% 12.7% 14.4% 12.1% Operating profit margin 8.8% 7.6% 7.0% 15.7% 16.1% 11.2% 8.8% 9.7% 8.6% Total assets 256,341 283,171 293,097 30,740 34,035 35,608 1,574,032 1,748,982 1,998,917 NET ASSETS 78,804 94,847 90,791 13,278 15,221 15,497 840,660 972,251 995,743 Equity ratio 30.5% 33.3% 30.8% 43.0% 44.6% 43.4% 53.1% 55.2% 49.4% Operating CF 38,290 53,476 45,695 2,083 1,935 644 194,117 276,960 303,325 Investing CF -72,769 -43,095 -49,454 -1,703 -1,156 -2,858 -65,937 -204,619 -88,993 Financing CF 32,570 1,754 -782 472 507 1,463 -83,169 -68,521 -192,721 Cash and deposits 17,775 29,785 24,881 3,964 5,251 4,500 389,822 402,911 421,253 Interest-bearing debt 121,635 124,283 139,378 15,720 16,895 19,061 189,291 164,590 136,699 Net debt 103,860 94,498 114,497 11,756 11,644 14,561 -206,747 -238,321 -284,554
Source: Shared Research based on various company data
Major websites used to search for monthly parking lots
Website Operator PMC Monthly Parking Parking Market Co., Ltd. TIMES hourly parking search Times24 Co., Ltd. WEB-PARKING JSY Corporation Car Parking AZoom Co., Ltd. Chu-map Vortex Co., Ltd. Mitsui-no Repark Mitsui Fudosan Realty Co., Ltd. gogo.gs monthly parking search site GOGO Labs, Inc. Monthly Parking.com Fudosan Kobo Co., Ltd. Monthly Parking NAVI Associate Parking Co., Ltd. Leopalace21 parking lot search Leopalace21 Corporation Parking Net Corazon Co., Ltd. Parking.JP MssB Co., Ltd. Nippon Parking Search Nippon Car Service Development Co., Ltd. at home information on monthly and rental parking At Home Co., Ltd. LIFULL HOME'S monthly parking all over Japan LIFULL Co., Ltd.
Source: Shared Research
Although many other companies list information about vacant monthly parking lots on search websites and provide introduction businesses, few sites indicate their number of listings. In many cases, such sites are run by companies that mainly handle rental housing or condominiums, such as large developers and real estate agents.
AZoom/ 3496
Research Coverage Report by Shared Research Inc. | pdf.summary.company_website 31 Most search websites are configured similarly, with the initial page showing a map of Japan broken down by region. Users start by looking at nationwide information and then gradually drill down into their target area. Some sites show all available properties in a list. The company explains that for users, ease of search is an important factor but the number of listings is what really makes the difference. Strengths and weaknesses Strengths
Leverages technology to manage parking lots: AZoom possesses an enormous store of data covering both vacant parking lots and users’ requirements. Analyzing this store of data allows the company to quickly determine fair market prices for parking lots by region. The company uses this information for its subleasing business to determine rent levels that will satisfy both property owners and users, while affording the company a steady stream of guaranteed rental income. Having real-time access to contract information on the parking lots it manages enables the company to operate the lots efficiently and prevent vacancies when contracts end. Shared Research understand that this capability is what differentiates AZoom from its peers.
Maintains the trust of real estate management companies: In the subleasing business in which the company addresses parking space vacancies at condominiums and other buildings, access to available spaces is often secured through referrals of property management companies. AZoom uses its own method for calculating rent guarantees and regional market prices and provides owners with reasonable rents. The company says it has never had to cancel a contract because the rent guarantee was set at too high a level. These practices have earned AZoom a high level of trust among property management companies. The company has dealings with nearly all large and medium-sized management companies in Japan that deal with condominium and other buildings, and these companies account for around 80% of its subleasing business.
Portal site has extensive information on monthly parking lots: Prior to founding AZoom, the company’s president had been working on a database of parking lots because he believed Japan’s real estate industry was lagging in terms of IT adoption and that business practices cold be streamlined by bringing IT into the business of brokering monthly parking lots. The company has around 50,000 listings on its site, compared with 20,000 to 30,000 on competitors’ sites. Having a superior portal site is one reason for this advantage, as users tend to flock to sites with the most information, which in turn attracts more listings, creating a virtuous cycle. The company was early in creating a parking lot database, so gained an edge over other companies in obtaining a large volume of information. The volume of listings continues to grow. Weaknesses
Subleasing business skewed toward certain property types: The company does not disclose income by service, but the subleasing service accounts for more than 85% of total sales. Considering that rent guarantees the company pays equate to around 60% of actual rent, Shared Research calculates that subleasing makes an even higher percentage contribution to overall profit than to sales. That said, around 80% of the properties AZoom subleases are parking spaces adjoining condos and other buildings, so the company is highly susceptible to market fluctuations in these building categories. If the market turns downward, this business could be affected by a negative spread. Furthermore, the overall business structure is unstable. Incursions into the parking lot business by large operators in condominium and other building categories could affect the market greatly.
A shortage of IT personnel familiar with parking lot leasing: The company has created a distinctive service in the real estate space by using IT. However, to expand this service the company needs IT engineers who are not only accustomed to industry practices but are also well-versed in the management of monthly parking lots, which differs from that of housing. These engineers are in short supply, and outside the key IT personnel who were involved at startup, the company has found it difficult to recruit people with knowledge of both IT and parking lot rentals. Shared Research sees this as a bottleneck to growth.
Brand recognition low compared to real estate-related websites: Online searches are widely used in residential real estate, and some sites are well recognized. Many companies provide parking lot search websites, and well-known companies in the residential housing sector are beginning to offer parking lot search websites. It becomes important for a company like AZoom with relatively low brand recognition to implement search engine optimization so that it becomes included in higher-listed search results, but websites can still easily lose traffic when search algorithms are changed. AZoom would not be able to take advantage of having a large number of listings if this happens.
AZoom/ 3496
Research Coverage Report by Shared Research Inc. | pdf.summary.company_website 32 Historical results and financial statements Income statement
Income statement FY09/16 FY09/17 FY09/18 FY09/19 FY09/20 (JPYmn) Parent Parent Parent Parent Cons. Sales 804 1,221 1,845 2,728 3,814 YoY 57.5% 51.9% 51.2% 47.9% 39.8% Cost of sales 434 665 1,017 1,559 2,273 Gross profit 370 555 828 1,169 1,542 YoY - 50.2% 49.1% 41.2% 31.9% Gross profit margin 46.0% 45.5% 44.9% 42.8% 40.4% SG&A expenses 396 524 663 1,075 1,317 SG&A ratio 49.3% 42.9% 35.9% 39.4% 34.5% Operating profit -27 31 165 94 224 YoY - - 430.2% -43.2% 139.1% Operating profit margin -3.3% 2.6% 9.0% 3.4% 5.9% Non-operating income (expenses) 0 0 1 2 0 Non-operating expenses 1 1 16 1 2 Recurring profit -28 30 150 95 223 YoY - - 400.5% -36.8% 135.5% Recurring profit margin -3.4% 2.5% 8.1% 3.5% 5.9% Extraordinary gains 0 0 0 0 0 Extraordinary losses 1 0 0 0 0 Income taxes 0 -7 40 39 88 Implied tax rate 1.4% -23.2% 26.8% 40.7% 39.2% Net income attributable to non-controlling interests 0 0 0 0 -4 Net income -28 37 110 56 139 YoY - - 197.6% -48.8% 147.9% Net margin -3.5% 3.0% 6.0% 2.1% 3.7%
Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.
Sales grew at a yearly average of 47.6% in the five years from FY09/16 to FY09/20. In the past, the company’s subleasing service was focused on the owners of office buildings. Substantial growth has come from the addition of leasing contracts with property management companies and owners associations in charge of condominiums, helping them overcome the issue of vacancies in their adjoining parking lots.
In the subleasing business, the majority of cost of sales comes from the guaranteed rent paid to the owners. As the number of subleased properties increases, cost of sales can rise ahead of sales.
That being said, in the Japanese real estate subleasing business it is customary to postpone the start of paying guaranteed rent, typically by one to three months. During this “free-rent” period, the lessee looks for sublessees. If this search is unsuccessful, the lessee ends up paying guaranteed rent to the property owner without having an incoming revenue stream from end customers. Taking on too much property for subleasing too quickly can therefore leave the company vulnerable to excessive costs.
A close look at the company’s cost of sales shows that rent payments account for 98%. Most of this comes from rents paid to property owners in the subleasing service. (Typically, the company pays owners guarantee rents equal to around 60% of the market rent for monthly parking lots.) “Rents paid” amounted to JPY1.0bn (+53.8% YoY) in FY09/18, and JPY1.5bn in FY09/19 (+52.2% YoY).
Cost of sales breakdown
(JPYmn) FY09/17 % of total FY09/18 % of total FY09/19 % of total FY09/20 % of total Rents paid 650 97.8% 1,000 98.3% 1,522 97.6% 2,210 98.1% Other costs 15 2.2% 17 1.7% 38 2.4% 42 1.9% Commission fees 14 16 26 21 Other 1 2 11 21 Cost of sales 665 100.0% 1,017 100.0% 1,559 100.0% 2,252 100.0%
Source: Shared Research based on company data
AZoom/ 3496
Research Coverage Report by Shared Research Inc. | pdf.summary.company_website 33 Balance sheet
Balance sheet FY09/16 FY09/17 FY09/18 FY09/19 FY09/20 (JPYmn) Parent Parent Parent Parent Cons. ASSETS Cash and deposits 21 169 1,007 769 1,078 Notes and accounts receivable 10 21 28 50 67 Operational investment securities Inventories 0 0 0 0 0 Other 2 12 1 17 9 Allowance for doubtful accounts 0 -1 -1 -2 -3 Total current assets 87 273 1,168 1,037 1,397 Total tangible fixed assets 14 16 19 84 89 Total intangible assets 12 11 11 117 137 Lease deposits 27 29 32 108 109 Guarantee deposits paid 18 24 57 83 99 Claims provable in bankruptcy and rehabilitation 0 1 2 2 0 Long-term advance payment Long-term loans receivable Other 20 29 63 178 163 Allowance for doubtful accounts 0 -1 -2 -2 -3 Investments and other assets 47 57 93 284 268 Total fixed assets 73 84 122 485 494 Total assets 160 357 1,290 1,522 1,891 LIABILITIES Notes and accounts payable Short-term debt 0 0 0 0 0 Income taxes payable 0 0 56 9 87 Consumption taxes payable 11 17 24 11 79 Deposits received 7 9 13 18 0 Advances received 2 1 1 1 0 Unearned revenue 34 56 62 76 94 Other 114 139 186 219 328 Total current liabilities 114 140 241 228 416 Long-term debt 29 39 18 105 143 Deferred tax assets 2 2 0 0 0 Other 116 142 197 295 378 Total fixed liabilities 148 183 215 400 521 Total liabilities 262 323 456 629 937 NET ASSETS Capital stock 20 70 415 417 417 Capital surplus 0 50 395 397 397 Retained earnings -123 -86 24 80 218 Treasury stock 0 0 0 0 -80 Shareholders' equity -103 34 834 893 951 Valuation difference on marketable securities 0 0 0 0 0 Foreign currency translation adjustments 0 0 0 0 0 Other 0 0 0 0 3 Non-controlling interests 0 0 0 0 0 Total net assets -103 34 834 893 953 Total liabilities and net assets 160 357 1,290 1,522 1,891 Working capital 10 21 28 50 67 Discounts on notes received Total interest-bearing debt 29 39 18 105 143 Net debt 8 -129 -990 -664 -935
Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.
Under the company’s business model, there is little reason for tangible fixed assets to rise. Accordingly, cash and deposits make up the bulk of assets. One reason for this is that the company raised cash at listing in FY09/18, as equity expanded significantly.
The subleasing business continues to expand, leading to increases in guarantee deposits paid (within investments and other assets), advances received (within current liabilities) and unearned revenue. Human resources represent a bottleneck for the company. As parking lots are a niche category of real estate (offices and residences being mainstream), the company finds it difficult to hire people with this expertise and so must provide in-house training. For this reason, Shared Research thinks the company will need to use some of the cash it has amassed and prioritize personnel training. In line with its ethos of applying IT to real estate, Shared Research understands it will be important for the company to concentrate on investment in IT systems.
AZoom/ 3496
Research Coverage Report by Shared Research Inc. | pdf.summary.company_website 34 Cash flow statement
Cash flow statement FY09/16 FY09/17 FY09/18 FY09/19 FY09/20 (JPYmn) Parent Parent Parent Parent Cons. Cash flows from operating activities (1) 38 62 192 17 367 Pre-tax profit -29 30 150 95 223 Depreciation 9 9 13 20 34 Amortization of goodwill Increase (decrease) in accounts receivable -4 -10 -7 -22 -11 Increase (decrease) in inventories Increase (decrease) in accounts payable Cash flows from investing activities (2) -5 -12 -17 -353 -63 Purchase of tangible fixed assets -1 -5 -10 -49 -17 Purchase of intangible fixed assets -6 -4 -5 -33 -38 Purchase, sale, and redemption of investment securities Increase in investments affecting scope of consolidation Increase (decrease) in loans (long- and short-term; net) Free cash flow (1+2) 33 49 175 -336 303 Cash flows from financing activities -13 98 664 98 -37 Change in short-term borrowings Change in long-term borrowings -18 -1 -20 105 45 Proceeds from issuance of shares 10 100 686 2 0 Acquisition of treasury stock Dividends paid
Source: Shared Research based on company data Note: Figures may differ from company materials due to differences in rounding methods.
Cash flows from operating activities
Unlike a manufacturer, the company has little in the way of inventory, and company’s assets are small in scale. As a result, cash flows are relatively unaffected by depreciation, receivables, and payables. Trade receivables occur with regard to the collection of commissions and rents, but the company says this is due to the time difference between contract and collection, and debt recovery periods are seldom long.
Cash flows from investing activities
Internet equipment makes up most of the company’s tangible and intangible fixed assets; it has no business need for large- scale equipment. Cash flows from investing activities are consequently small in scale. The sizeable cash outflow in FY09/19 was due to the combination of expenses related to a business transfer and the acquisition of shares of affiliated companies. As a result, free cash flow for that year was negative, but turned positive again in FY09/20, reflecting the lack of the kind of major investment-related outflow seen in FY09/19 and greater inflows from operating activities on the back of an upturn in business performance.
Cash flows from financing activities
As the business model does not require substantial assets, the company’s financing activities remained small in scale prior to listing its shares. The company says it plans to use the cash it earned by issuing shares to shore up systems and recruit personnel, building up parking lot management expertise for the subleasing service and enhancing the ability to gather parking lot information. Historical performance 1H FY09/21 results (out April 30, 2021) Overview
Sales: JPY2.3bn (+31.2% YoY) Operating profit: JPY254mn (JPY44mn in 1H FY09/20) Recurring profit: JPY253mn (JPY44mn in 1H FY09/20) Net income attributable to owners of the parent: JPY159mn (JPY23mn in 1H FY09/20)
Industry trends and background
At its Idle Real Estate Utilization segment, amid the spread of COVID-19 cases, users who have been looking for monthly parking lot space at the traditional route of real estate agents began to search online through the company’s portal site. As a result, a number of inquiries for monthly parking lot has been on the rise. This in turn boosted demand for parking lot introductory services via the internet as well as demand for other services that help commercial facility and condominium
AZoom/ 3496
Research Coverage Report by Shared Research Inc. | pdf.summary.company_website 35 owners monetize their vacant parking lot spaces. Both the number of monthly parking spaces taken on for subleasing and the number of occupancies of subleased monthly parking spaces are growing.
At its new Visualization business, however, the spread of COVID-19 from February 2020 has contributed to a slump in the development of lodging and commercial facilities, the main users of this service, and a subsequent decline in demand. Demand was on a gradual recovery trend after economic activities resumed around July 2020, but uncertainties remained due in large part to the Japanese government’s reissue of the state of emergency in Greater Tokyo and many other major cities from January 2021 to March when it was lifted. Advance vaccine rollout for healthcare professionals began in February 2021, but the number of cases is still rising and the outlook remains uncertain.
Sales and profits were stronger than expected in 1H
Moving and changes of address tend to pick up in March every year, lifting up monthly parking lot introductions and sublease sales for the company. In Q2 (January-March 2021), in addition to such seasonal factors, coupled with the impact of the pandemic, there was an increase in the number of inquiries via the company's parking portal site Car Parking (+44.4% YoY). The number of parking lot introductions, the number of leased parking spaces under management, and the number of those subleased to end-users significantly increased, outperforming the company’s expectations. As a result, sales increased to JPY2.3bn versus the initial plan of JPY2.1bn. In terms of profit, the company successfully controlled costs, and operating profit was JPY253.0mn, ahead of the JPY180.0mn forecast.
Segment results
Idle Real Estate Utilization segment
Earnings in this segment, mainly comprised the Monthly Parking Lot Introduction Service and the Monthly Parking Lot Subleasing Service, previously disclosed under parent company results.
In 1H FY09/21 (October 2020 to March 2021), the Idle Real Estate Utilization segment reported sales of JPY2.3bn (+30.6% YoY) and operating profit of JPY259mn (+381.0% YoY).
The segment’s profit margin significantly improved to 11.4% (+8.3pp YoY) on the back of curtailed expenses and improved occupancy rate at subleasing service.
Monthly Parking Lot Introduction Service
In 1H FY09/21 (October 2020–March 2021), the Monthly Parking Lot Introduction Service reported sales of JPY233mn (+28.0% YoY).
The number of inquiries about parking spaces continued to grow, rising 44.4% YoY to 119,094.
Monthly Parking Lot Subleasing Service
In 1H FY09/21 (October 2020–March 2021), the Monthly Parking Lot Subleasing Service reported sales of JPY1.9bn (+28.5% YoY).
Subleasing metrics: As of end-March 2021, the number of leased parking spaces under management totaled 12,716 (+20.5% YoY), with the number of spaces subleased to end-users at 11,755 (+22.9% YoY).
Shared Research sees that occupancy rate improved due to higher growth rate in the number of spaces subleased to end- users, which led to the improvement of overall segment profit margin.
Visualization segment
The Visualization segment mainly comprises the two new subsidiaries that were included in consolidated accounts (CGWorks Co., Ltd. and Azoom Vietnam Inc.).
In 1H FY09/21 (October 2020–March 2021), segment sales were JPY58mn (+62.3% YoY), with an operating loss at JPY5mn (loss of JPY9mn in 1H FY09/20).
The company took efforts to expand its business infrastructure to allow various types of sales proposals, as well as focusing on enhancing the technical and sales capabilities of existing employees.
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Research Coverage Report by Shared Research Inc. | pdf.summary.company_website 36 The number of COVID-19 cases has been on the rise again since around November 2020, and this affected the demand for traditional 3D computer graphic processing (3DCG). However, prompted by stay-at-home measures, demand for projects using virtual reality (VR) and 3DCG technology is growing for department stores and other venues.
In Q2 (January-March 2021) alone, segment profit was back in the black at JYP1.6mn (a loss of JPY7mn in Q2 FY09/20).
For details on previous quarterly and annual results, please refer to the “Historical financial statements” section. Q1 FY09/21 results (out January 27, 2021) Overview
Sales: JPY1.1bn (+31.6% YoY) Operating profit: JPY101mn (JPY1mn in Q1 FY09/20) Recurring profit: JPY101mn (JPY1mn in Q1 FY09/20) Net income attributable to owners of the parent: JPY64mn (loss of JPY2mn in Q1 FY09/20)
Industry trends and background: At its Idle Real Estate Utilization segment, the parking lot industry, in which the company focuses its operations, has seen an expansion in demand for parking lot introductory services via the internet, as well as an ongoing growth in demand for other services that help commercial facility and condominium owners monetize their vacant parking lot spaces. In addition, the company notes that the growing worries about the COVID-19 pandemic has prompted many people looking to rent a parking lot space on a monthly basis to visit its website rather than search for a parking space through the traditional route of real estate agents due to refraining from going out, and this has led to an increase in the number of inquiries for monthly parking space rentals received. At its new Visualization business, however, the spread of COVID-19 from February 2020 has contributed to a slump in the development of lodging and commercial facilities, the main users of this service, and a subsequent decline in demand. Demand was on a gradual recovery trend after economic activities resumed around July 2020, but uncertainties remain due in large part to the Japanese government’s reissue of the state of emergency in Greater Tokyo and many other major cities in January 2021.
Q1 sales achieved 52.8% of the company’s 1H forecast, and operating profit 56.2%, showing Q1 results trended ahead of forecasts. Earnings were driven by the Idle Real Estate Utilization business, which absorbed operating losses at the Visualization business to secure sharp growth in operating profit. Over the past two years, Q1 (October–December) has accounted for the least amount of profit, but in FY09/21, operating profit in Q1 had already achieved 45% of the full-year operating profit result in FY09/20 and more than the total amount of operating profit recorded in FY09/19. This growth in operating profit was due to monthly parking lot brokerage (including brokerage of parking spaces AZoom subleases) fees increasing and the occupancy of leased spaces improving in accordance with increased inquiries via the company’s monthly parking lot website.
GPM grew 2.9pp YoY to 41.4% due to improved proficiency among sales personnel recruited up to FY09/20, in addition to higher sales. SG&A expenses rose JPY33mn, mainly due to an increase in sales personnel, but the SG&A-to-sales ratio decreased 6.2pp thanks to gross profit growing 40.9% YoY. As a result, operating profit increased sharply from JPY1mn in Q1 FY09/20 to JPY101mn, and OPM grew 9.0pp to 9.1%.
Segment results
Idle Real Estate Utilization segment
Earnings in this segment, mainly comprised of the Monthly Parking Lot Introduction Service and the Monthly Parking Lot Subleasing Service, were previously disclosed in parent company results.
In Q1 FY09/21, the Idle Real Estate Utilization segment reported sales of JPY1.1bn (+31.0% YoY) and operating profit of JPY108mn (profit of JPY3mn in Q1 FY09/20).
The Idle Real Estate Utilization segment is the company’s core business, accounting for 98% of sales, and the majority of operating profit. The segment’s profit margin improved dramatically to 10.0% from 0.4% in Q1 FY09/20.
Monthly Parking Lot Subleasing Service
In Q1 FY09/21 (October–December 2020), the Monthly Parking Lot Introduction Service reported sales of JPY108mn (+30.1% YoY).
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Research Coverage Report by Shared Research Inc. | pdf.summary.company_website 37 The number of inquiries about parking spaces continued to grow, rising 45.4% YoY to 50,630.
More people used the internet to search for a parking lot space as a result of staying at home during the COVID-19 pandemic. The number of listings of parking spaces on the company’s website is one of the highest in Japan, and the increase in inquiries for the company’s listed properties via the internet led to sales rising. The improved proficiency among sales personnel recruited up to FY09/20 in responding to inquiries also contributed to an increase in the number of brokered deals.
Monthly Parking Lot Subleasing Service
In Q1 FY09/21 (October–December 2020), the Monthly Parking Lot Subleasing Service reported sales of JPY919mn (+28.9% YoY).
Subleasing metrics: As of end-December 2020, the number of leased parking spaces under management totaled 12,023 (+18.1% YoY), with the number of spaces subleased to end-users at 10,990 (+24.5% YoY).
Leased parking spaces increased steadily, centering on vacant parking lots from existing major real estate owners and condominium owners. The sublease operating rate of leased parking spaces was 91.4% (versus 86.7% in Q1 FY09/20), maintaining the seven-year high of 92% in full-year FY09/20.
Visualization segment
The Visualization segment is comprised mainly of the two new subsidiaries that were included in consolidated accounts (CGWorks Co., Ltd. and Azoom Vietnam Inc.).
Segment sales were JPY24mn (+59.9% YoY), with an operating loss at JPY7mn (loss of JPY2mn in Q1 FY09/20).
The company took efforts to expand its business infrastructure to allow various types of sales proposals, as well as focusing on enhancing the technical and sales capabilities of existing employees. The number of COVID-19 cases has been on the rise again since around November 2020, but the volume of orders recovered in Q1 compared to that seen when the state of emergency was issued in April 2020. However, the operating loss grew due to the company proactively increasing the number of personnel at CGWorks in view of signs of recovery in orders. Full-year FY09/20 results Overview
FY09/20 (October 2019–September 2020) results Note: All figures for YoY change below compare consolidated results in FY09/20 with parent company results in FY09/19. Sales: JPY3.8bn (+39.8% YoY) Operating profit: JPY224mn (+139.1% YoY) Recurring profit: JPY223mn (+135.5% YoY) Net income attributable to owners of the parent: JPY139mn (+147.9% YoY)
Consolidated results: The company switched from nonconsolidated to consolidated accounting in Q1 FY09/20; included in consolidated results are two subsidiaries, CGworks Co., Ltd. (established in March 2019) and AZoom Vietnam Inc. (established in September 2019).
Segment reporting: From FY09/20, the company combined previously separately reported data for the Monthly Parking Lot Introduction Service, Monthly Parking Lot Subleasing Service, and other related businesses into the Idle Real Estate Utilization segment. The company also created the Visualization business, centered around two newly consolidated companies involved in creating and selling visual data that shows what finished properties will look like and how properties might be put to use. It now reports results in these two segments.
The Idle Real Estate Utilization business performed well in FY09/20, compensating for the deficit in the Visualization business and leading to operating profit growth. Versus the initial forecast for full-year FY09/20, the company achieved 97.1% of its sales target, 118.2% of its operating profit target, 118.1% of its recurring profit target, and 119.2% of its net income target.
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Research Coverage Report by Shared Research Inc. | pdf.summary.company_website 38 Industry trends and background:
At its Idle Real Estate Utilization segment, the parking lot industry in which the company focuses its operations has seen an ongoing expansion in demand for parking lot introductory services and other services that help commercial facility and condominium owners monetize their vacant parking lot spaces. This trend reflects a number of factors, including a growing supply of parking lots in urban areas due to construction of large commercial and condominium buildings, greater diversity in the style of car ownership brought on by societal factors (including changes in personal consumption trends and an aging population), and differences in parking space supply from location to location, which working together have created mismatches between monthly parking space supply and demand. In addition, the company notes that the growing worries about the COVID-19 pandemic have prompted many people looking to rent a parking lot space on a monthly basis to make use of its website, whereas before they would have visited an actual real estate agent’s office, which has led to an increase in inquiries about monthly parking space rentals.
At its new Visualization business, starting 2019 through January 2020, the company had been seeing growing demand for its 3D computer graphic imaging services (that show how finished properties might look) as the number of renovation projects involving lodging facilities, commercial facilities, and other properties grew along with the rising stream of foreign tourists coming to Japan. From February 2020, however, the spread of COVID-19 has contributed to a slump in the development of lodging and commercial facilities, the main users of this service, and a subsequent decline in demand. Nevertheless, demand is on a gradual recovery trend after economic activities resumed around July 2020.
Segment results
Idle Real Estate Utilization segment
Earnings in this segment, mainly comprised of the Monthly Parking Lot Introduction Service and the Monthly Parking Lot Subleasing Service, were previously disclosed in parent company results.
In FY09/20, the Idle Real Estate Utilization segment reported sales of JPY3.7bn (no YoY comparison) and operating profit of JPY254mn (no YoY comparison).
Monthly Parking Lot Introduction Service
In FY09/20 (October 2019–September 2020), the Monthly Parking Lot Introduction Service reported sales of JPY407mn (+21.1% YoY).
The number of inquiries about parking spaces continued to grow, rising 17.2% YoY to 186,547.
Monthly Parking Lot Subleasing Service
In FY09/20 (October 2019–September 2020), the Monthly Parking Lot Subleasing Service reported sales of JPY3.2bn (+38.2% YoY).
Subleasing metrics: As of the end of September 2020, the number of leased parking spaces under management totaled 11,427 (+18.8% YoY), with the number of spaces subleased to end-users at 10,565 (+26.3% YoY).
Visualization segment
The Visualization segment is comprised mainly of the two new subsidiaries that were included in consolidated accounts.
The segment reported sales of JPY72mn (no YoY comparison) and an operating loss of JPY29mn (no YoY comparison).
From Q1 FY09/20 (October-December 2019) to Q2 FY09/20 (January-March 2020), prior to the COVID-19 outbreak, the rising stream of foreign tourists coming to Japan gave impetus to the renovation of lodging and commercial facilities and boosted demand for spatial graphic design. However, the pandemic dealt an economic blow to customers in these sectors in Q3 (April-June 2020), and orders stalled. Demand moved into recovery from July, with Q4 (July-September 2020) sales of JPY21mn and full-year sales of JPY42mn.
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Research Coverage Report by Shared Research Inc. | pdf.summary.company_website 39 Q3 FY09/20 results Results of the nine-month period through Q3 FY09/20 (October 2019–June 2020)
Note: All figures for YoY change below compare consolidated results in FY09/20 with parent company results in FY09/19. Sales: JPY2.7bn (+41.7% YoY) Operating profit: JPY108mn (+45.0% YoY) Recurring profit: JPY107mn (+43.1% YoY) Net income: JPY58mn (+27.2% YoY)
Consolidated results: The company switched from nonconsolidated to consolidated accounting in Q1 FY09/20; included in consolidated results are two subsidiaries, CGworks Co., Ltd. and AZoom Vietnam Inc., both of which began operations in March 2019. In cumulative Q3, the Idle Real Estate Utilization business performed well, compensating for the deficit in the Visualization business and leading to operating profit growth. In Q3 alone (April–June 2020), the Visualization segment fell short of the company’s projections due to the impact of the COVID-19 pandemic. Meanwhile, the Idle Real Estate Utilization business exceeded company projections and compensated for the shortfall in the Visualization segment. As a result, quarterly operating profit was up YoY (year-ago earnings were nonconsolidated results for the Idle Real Estate Utilization business alone), and came to JPY63mn, a record high for quarterly operating profit.
Full-year forecast: At the time of its cumulative Q3 results announcement, the company made no changes to its previous forecast for the full-year consolidated results, which was announced along with Q1 FY09/20 results. It forecasts FY09/20 consolidated sales of JPY3.9bn (+44.0% versus parent sales in FY09/19), operating profit of JPY190mn (+102.4% YoY), recurring profit of JPY189mn (+99.3% YoY), and net income attributable to owners of the parent of JPY117mn (+108.0% YoY).
Segment reporting: The company previously reported segment data for a single segment, the Idle Real Estate Utilization segment, which includes its Monthly Parking Lot Introduction Service and its Monthly Parking Lot Subleasing Service. Starting in FY09/20, the company added a second segment, the Visualization segment, encompassing its new business involved in creating and selling computer graphics-based images that show what finished properties will look like and how properties might be put to use.
Operating profit increased 45.0% compared to nonconsolidated results in Q3 FY09/19. The OPM also improved by 0.1pp YoY from 3.8% to 3.9%. The GPM dipped 4.2pp YoY from 43.8% to 39.6% due to the addition of the Visualization segment, but SG&A-to-sales ratio improved 4.2pp YoY from 39.9% to 35.7%, thus contributing to the OPM improvement. SG&A expenses themselves increased by JPY205mn from JPY775mn to JPY980mn. The company says that SG&A expenses increased approximately JPY70mn at the consolidated level and approximately JPY130mn at the parent company. The majority of the increase at the parent company was payroll related. The company explains that hiring and training costs, which temporarily drove up expenses in FY09/19, tapered off.
Industry trends and background: At its Idle Real Estate Utilization segment, which operates in the company’s key parking lot-related industry, the company has been enjoying ongoing demand for its parking lot introductory services and other services that help owners monetize their vacant parking lot spaces. This trend reflects a number of factors, including a growing supply of parking lots in urban areas due to construction of large commercial and condominium buildings, greater diversity in the style of car ownership brought on by societal factors (including changes in personal consumption trends and an aging population), and differences in parking space supply from location to location, which together have created mismatches between monthly parking space supply and demand that represent business opportunities for AZoom. In recent months, the company notes that the growing worries about the novel coronavirus pandemic has prompted many people looking to rent a parking lot space on a monthly basis to visit its website rather than search for a parking space through the traditional route of real estate agents, and this has led to an increase in the number of inquiries for monthly parking space rentals received. This sort of change in users’ parking space searching behavior has resulted in an increase in inquiries and an accompanying upward trend in the company’s Monthly Parking Lot Introduction Service. This has also led to growth for the Monthly Parking Lot Subleasing Service since parking spaces listed on the company’s portal site also include spaces that the company itself subleases.
At its new Visualization business, starting 2019 through January 2020, the company had been seeing growing demand for its 3D computer graphic imaging services (that show how finished properties might look) as the number of renovation projects involving lodging facilities, commercial facilities, and other properties grew along with the rising stream of
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Research Coverage Report by Shared Research Inc. | pdf.summary.company_website 40 foreign tourists coming to Japan. From February 2020, however, operators of lodging and commercial facilities, the main users of this new service, have all suffered major financial hits due to the spread of the novel coronavirus. Orders at CGworks Co., Ltd. are also trending downward, and the company is concerned that, if current business conditions persist, it could impact demand.
Segment results
Idle Real Estate Utilization segment
This segment, which includes its Monthly Parking Lot Introduction Service and Monthly Parking Lot Subleasing Service, was broken out and reported separately during the years when the company reported parent company results only.
For the nine-month period through Q3 FY09/20 (October 2019–June 2020), the Idle Real Estate Utilization segment reported sales of JPY2.7bn (+39.1% YoY) and operating profit of JPY130mn (+75.4% YoY).
Monthly Parking Lot Introduction Service
For the nine-month period through Q3 FY09/20, the Monthly Parking Lot Introduction Service reported sales of JPY279mn (+18.7% YoY).
The number of inquiries about parking spaces continued to grow, rising 8.4% YoY to 131,229. Part of the reason for this is that, owing to COVID-19, users who have traditionally gone in person to real estate agents to find parking spaces are now making greater use of the company’s portal site to search for spaces.
Monthly Parking Lot Subleasing Service
For the nine-month period through Q3 FY09/20, the Monthly Parking Lot Subleasing Service reported sales of JPY2.3bn (+40.0% YoY).
Subleasing metrics: As of the end of June 2020, the company took on a rising number of available parking spaces at for-sale condominiums, and the number of leased parking spaces under management totaled 10,870 (+319 versus end-March 2020). Due to area-specific sales and marketing efforts as well as the COVID-19 pandemic, the company digitized and systematized the process of signing lease contracts with its users, thus shorting the time required. This resulted in more efficient sales and marketing, and the number of spaces subleased to end-users totaled 10,000 (+437 versus end-March 2020). The Q3 (April–June) occupancy rate was 91–92%, a QoQ improvement. Consolidated subsidiary AZoom Vietnam is handling the systemization of operations.
Visualization segment
The Visualization segment is comprised mainly of the two new subsidiaries that were recently included in consolidated accounts.
For the nine-month period through Q3 FY09/20, the Visualization segment reported sales of JPY50mn and an operating loss of JPY23mn (comparisons not available with the same period the previous year).
During cumulative Q3 FY09/20, the company took efforts to expand its business infrastructure to allow various types of sales proposals, as well as focusing on enhancing the technical and sales capabilities of existing employees. However, owing to the spread of the novel coronavirus disease, CGworks saw orders decline in April–June 2020, which equates to the company’s Q3. Another consolidated subsidiary belonging to the business segment is AZoom Vietnam Inc., but it has only a minor impact on consolidated earnings since it largely handles development work for the company group internally, and so far has no external sales. Consequently, results at CGworks have a heavy influence on the segment’s earnings.
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Research Coverage Report by Shared Research Inc. | pdf.summary.company_website 41 Factors affecting cumulative Q3 FY09/20 operating profit
Source: Shared Research based on company data
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Research Coverage Report by Shared Research Inc. | pdf.summary.company_website 42 Other information History
Date Description Octob er 2009 AZoom Co., L td. established in Shibuya-ku, Tokyo (capital of JPY3.5mn)
Started operation of the Monthly Parking Lot Introduction Service and Monthly Parking Lot Subleasing Service February 2010 Launched CarParking, a search site for monthly parking lots April 2010 Launched CoinPa Search, a search site for hourly parking January 20 14 Relocated headquarters to Shinjuku Maynds Tower (curre nt location) March 2015 Launched Akiya Navi, a site that lists vacant homes Number of parking spaces under master lease agre ements exceeded 1,000 March 2016 Started the Ouchi de Parking Service January 201 7 Privacy Mark certification received
February 2017 Obtained license to engage in residential construction work (Governor of Tokyo (1) No. 100196) June 2017 Expanded the Monthly Parking Lot Introduction Service to all parts of Japan August 20 17 Launched AdWall, a search site for outdoor advertising October 2017 Launched Bikeru, a search site for monthly parking lots for motorcycles July 2018 Launched coconi, a crowd sourcing service for location information
Number of parking spaces under master lease agreements exceeded 7,000 September 2018 Listed on the Mothers market of the Tokyo Stock Exchange March 2019 Established CGworks Inc. in Shibuya-ku, Tokyo August 2019 Established AZOOM VIETNAM INC. in Hanoi, Vie tnam September 2 019 Acquired Smart Kaigishitsu business from Linough Inc .
Source: Shared Research based on company data Corporate governance and top management
Source: Shared Research based on company data
Top management
Yoji Sugata, president and representative director
February 2002 Joined Tajima Reform Corp. (now TJM Design Corp.) February 2005 Joined Nippon Parking Development Co., Ltd. January 2009 Joined Works Media Co., Ltd. October 2009 Established AZoom Appointed president and representative director (current position) Corporate governance
AZoom considers enhancing corporate governance a management priority from the perspective of management transparency, compliance, and achieving sustainable growth. Accordingly, the company is enhancing corporate governance
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Research Coverage Report by Shared Research Inc. | pdf.summary.company_website 43 through an understanding of the roles of directors, corporate auditors, and employees, as well as putting in place and operating an internal control system.
The company has in place a Board of Directors and a Board of Auditors as institutions based on the Companies Act. The Board of Directors comprises executive directors, who are familiar with the company’s operations, and outside directors, which take an independent perspective. The Board of Directors is in charge of executing important business decisions precisely and swiftly and overseeing the execution of business by directors. The Board of Auditors is made up of a majority of outside corporate auditors. Corporate auditors, who are specialists in law and other fields, audit the company from a fair and independent perspective. AZoom believes this structure effectively facilitates the company’s sustainable growth.
Board of Directors
The Board of Directors comprises seven members (two of whom are outside directors). The board decides matters of business execution and supervises the execution of operations by directors, using a system of mutual supervision. Based on the Board of Directors Regulations, the board holds regular meetings once each month, in principle. Extraordinary meetings are also held as necessary if an event of management importance occurs.
Board of Auditors, corporate auditors
AZoom has adopted the system of a “company with a Board of Auditors,” based on legislation related to the Companies Act. The Board of Auditors is made up of one full-time corporate auditor and three other corporate auditors, all of whom are outside auditors. This board supervises the status of corporate governance operations, conducts operational audits of routine operations (including the execution of duties by the directors), and performs accounting audits. Corporate auditors participate at the general meeting of shareholders and Board of Directors meetings and receive reports from directors, employees, the accounting auditors, and people in charge of internal audits.
Internal audits
As its organizational framework is currently small in scope, the company has no independent internal audit department. Two people are in charge of performing internal audits, having been instructed to do so by the representative director. These people audit the state of operational execution in each department, report their findings to the president and representative director, provide individual departments with instructions for improvement, and follow up.
Risk and Compliance Committee
As the body in charge of compliance initiatives, the company has established the Risk and Compliance Committee, which is chaired by the director in charge of risk and compliance. Based on the Compliance Regulations and other internal rules, this committee meets at least once every six months to identify, assess, and respond to compliance-related issues and risks.
Accounting auditor
The company has an audit agreement in place with KPMG AZSA LLC.
Specialized outside bodies
The company also engages legal and other specialists when necessary, consulting with general counsel, tax advisors, and social insurance labor consultants and receiving their advice when necessary. Dividend policy
The company considers the return of profits to shareholders instrumental to enhancing corporate value for the foreseeable future. Currently being in the process of growing, the company is prioritizing efforts targeting future business development and augmenting the management structure. To achieve these aims, AZoom believes that shoring up internal reserves is of foremost priority. For this reason, the company does not intend to award shareholder dividends for some time. However, each fiscal year the company will consider the return of profits to shareholders, taking operating performance and financial condition into account.
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Research Coverage Report by Shared Research Inc. | pdf.summary.company_website 44 Major shareholders
Top shareholders Shares held ('000) Shareholding ratio Youji Sugata 523 36.40% Panorama Inc. 360 25.02% NOMURA PB NOMINEES LIMITED OMNIBUS-MARGIN (CASHPB) 61 4.25% MSIP CLIENT SECURITIES 41 2.89% Takaaki Takahashi 30 2.08% Masaya Suzuki 30 2.08% Kunio Kushida 27 1.87% SBI Securities Co., Ltd. 25 1.74% CREDIT SUISSE AG, SINGAPORE BRANCH - FIRM EQUITY (POETS) 24 1.70% Custody Bank of Japan, Ltd. (Trust account 9) 20 1.39% SUM 1,143 79.46%
Source: Shared Research based on company data Note: As of September 30, 2020 Employees
FY09/13 FY09/14 FY09/15 FY09/16 FY09/17 FY09/18 FY09/19 FY09/20 Regular employees 18 24 31 40 54 64 132 134 Temporary 0 0 0 2 26 20 21 11 employees
Source: Shared Research based on company data
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Research Coverage Report by Shared Research Inc. | pdf.summary.company_website 45 News and topics 1H FY09/21 Flash Update / Variation between its earnings forecast and its actual results for 1H FY09/21
2021-04-30
On April 30, 2021, AZoom Co., Ltd. announced earnings results for 1H FY09/21; see the results section for details.
On the same day, the company announced the variation between its earnings forecast and its actual results for 1H FY09/21.
Stock split / Partial revisions to its Articles of Incorporation
2020-12-22
On December 22, 2020, AZoom Co., Ltd. announced a stock split and partial revisions to its Articles of Incorporation.
The company announced that it had passed a Board of Directors resolution on December 22, 2020, to implement a stock split and an accompanying partial revision to its Articles of Incorporation.
The company will carry out a two-for-one split of common stock held by shareholders listed on the shareholders registry at the end of January 31, 2021, the record date (which will actually be January 29, 2021, since January 31 is a holiday for the shareholders registry administrator). Notification of the record date will be made on January 14, 2021, and the effective date will be February 1, 2021.
The stock split is intended to increase liquidity of the company’s shares and appeal to a wider range of investors by lowering the stock price per trading unit. As a result of the split, total shares outstanding will change from 1,466,600 to 2,933,200, and total authorized shares will change from 4,800,000 to 9,600,000. The company will also update its Articles of Incorporation accordingly (effective February 1, 2021). The number of total shares outstanding could increase if new share warrants are exercised before the date of record. Refer to the company’s official press release for information on the exercise price of currently issued new share warrants and other details.
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Research Coverage Report by Shared Research Inc. | pdf.summary.company_website 46 Profile
Company Name Head Office AZoom Co., Ltd. Shinjuku MAYNDS Tower 19F, 2-1-1, Yoyogi, Shibuya-ku, Tokyo
Phone Listed On 03-5365-1235 Tokyo Stock Exchange Mothers
Established Exchange Listing 2009-10-09 2018-09-20
Website Fiscal Year-End https://azoom.jp/ Sep
IR Contact IR Web https://azoom.jp/contact/ https://azoom.jp/ir/(Japanese only)
IR Phone IR Email - -
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Research Coverage Report by Shared Research Inc. | pdf.summary.company_website 47 About Shared Research Inc.
We offer corporate clients comprehensive report coverage, a service that allows them to better inform investors and other stakeholders by presenting a continuously updated third-party view of business fundamentals, independent of investment biases. Shared Research can be found on the web at https://sharedresearch.jp. Contact Details
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Research Coverage Report by Shared Research Inc. | pdf.summary.company_website 48