Yume no Machi Souzou Iinkai / 2484 COVERAGE INITIATED ON: 2017.12.25 LAST UPDATE: 2019.06.07 Shared Research Inc. has produced this report by request from the company discussed herein. The aim is to provide an “owner’s manual” to investors. We at Shared Research Inc. make every effort to provide an accurate, objective, neutral analysis. To highlight any biases, we clearly attribute our data and findings. We always present opinions from company management as such. The views are ours where stated. We do not try to convince or influence, only inform. We appreciate your suggestions and feedback. Write to us at [email protected] or find us on Bloomberg. Research Coverage Report by Shared Research Inc. Yume no Machi Souzou Iinkai / 2484 RCoverage LAST UPDATE: 2019.06.07 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp INDEX How to read a Shared Research report: This report begins with the Trends and outlook section, which discusses the company’s most recent earnings. First-time readers should start at the later Business section. Executive summary ----------------------------------------------------------------------------------------------------------------------------------- 3 Key financial data ------------------------------------------------------------------------------------------------------------------------------------- 5 Recent updates ---------------------------------------------------------------------------------------------------------------------------------------- 6 Highlights ------------------------------------------------------------------------------------------------------------------------------------------------------------ 6 Trends and outlook ----------------------------------------------------------------------------------------------------------------------------------- 8 Monthly trends ----------------------------------------------------------------------------------------------------------------------------------------------------- 8 Quarterly trends and results ----------------------------------------------------------------------------------------------------------------------------------- 9 Q2 FY08/19 results (out March 28, 2019) -------------------------------------------------------------------------------------------------------------- 10 Initial forecasts for FY08/19 ----------------------------------------------------------------------------------------------------------------------------------- 14 Historical forecast accuracy ---------------------------------------------------------------------------------------------------------------------------------- 15 Medium-term management plan (out October 11, 2018) ---------------------------------------------------------------------------------------- 16 Business ------------------------------------------------------------------------------------------------------------------------------------------------ 25 Business description -------------------------------------------------------------------------------------------------------------------------------------------- 25 Demae-can business -------------------------------------------------------------------------------------------------------------------------------------------- 25 Mail Order business -------------------------------------------------------------------------------------------------------------------------------------------- 34 Group companies ----------------------------------------------------------------------------------------------------------------------------------------------- 34 Information on competitors ---------------------------------------------------------------------------------------------------------------------------------- 36 Strengths and weaknesses ------------------------------------------------------------------------------------------------------------------------------------ 37 Historical performance ---------------------------------------------------------------------------------------------------------------------------- 38 Income statement ----------------------------------------------------------------------------------------------------------------------------------------------- 38 Parent earnings --------------------------------------------------------------------------------------------------------------------------------------------------- 39 Segment earnings ----------------------------------------------------------------------------------------------------------------------------------------------- 40 Balance sheet ----------------------------------------------------------------------------------------------------------------------------------------------------- 41 Cash flow statement -------------------------------------------------------------------------------------------------------------------------------------------- 43 Other information ---------------------------------------------------------------------------------------------------------------------------------- 44 ESG-related -------------------------------------------------------------------------------------------------------------------------------------------------------- 44 Shareholder returns--------------------------------------------------------------------------------------------------------------------------------------------- 44 Top management ----------------------------------------------------------------------------------------------------------------------------------------------- 45 Major shareholders --------------------------------------------------------------------------------------------------------------------------------------------- 45 Employees --------------------------------------------------------------------------------------------------------------------------------------------------------- 45 Historical performance, news and topics ---------------------------------------------------------------------------------------------------- 46 Historical performance ---------------------------------------------------------------------------------------------------------------------------------------- 46 News and topics ------------------------------------------------------------------------------------------------------------------------------------------------- 57 Profile ---------------------------------------------------------------------------------------------------------------------------------------------------------------- 59 02/60 Yume no Machi Souzou Iinkai / 2484 RCoverage LAST UPDATE: 2019.06.07 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp Executive summary Business overview ◤ Corporate mission: The name “Yume no Machi Souzou Iinkai” (“Committee to Create a Dream Town”) incorporates the concept of the desire to offer innovative services. President Nakamura explains the company’s mission of expanding earnings while creating new socially beneficial systems: “We want our employees to experience the struggles and joys of starting up a business and grow while providing satisfaction to many people.” ◤ Demae-can business: The company core is food delivery platform Demae-can, contributing 75% of revenue and 80% of operating profit in FY08/18. It provides e-commerce websites and operating platforms that enable food delivery in just 20 minutes. The company has succeeded in creating a win-win situation for affiliated restaurants and customers. The restaurants have more cost-effective sales promotion than traditional flyers, and restaurant customers can choose from an array of menus. The company receives order processing fees (not gross merchandise volume) from affiliated restaurants which form the bulk of its revenue. ◤ Outsourced delivery: The company started offering full-fledged outsourced delivery services (Sharing Delivery®) for restaurants without their own delivery capabilities from FY08/17. It thinks that the number of potential affiliates will increase from 30,000 to 600,000 as a result. Affiliates that did not previously have their own delivery infrastructure receive increased revenue from offering home delivery, and consumers have more choices than before. The company is primarily using affiliates’ premises to grow the number of Sharing Delivery® bases, but is also unrolling some directly operated locations to obtain first-mover advantage. ◤ KPIs: The company focuses on three key performance indicators: order numbers, affiliate numbers, and active user numbers. Growth in order numbers flows directly through to revenue, while the numbers of affiliates and active users underpin growth in order numbers. Further, as the rollout of the Sharing Delivery® business accelerates, the number of sharing delivery bases is also becoming an important indicator. ◤ Competitors: In the US, Grubhub, Inc. (NYSE: GRUB) has the same business model as the company, while in Japan direct competitors include Uber Eats and Rakuten Delivery (Rakuten, TSE1: 4755). Following the sale of its overseas subsidiary, the company only operated in the domestic market from September 2018 onward. Trends and outlook ◤ FY08/18 results: Revenue JPY5.4bn (up 9.8%, +JPY487mn YoY), operating profit JPY837mn (+4.6% YoY), and net income attributable to owners of parent JPY558mn (+29.1% YoY). In the core Demae-can business, revenue was JPY4.1bn (+16.5% YoY) and operating profit JPY863mn (+1.1% YoY). Success in boosting repeat order rate drove growth in order numbers and order processing fees. KPIs: order numbers, 23.32mn (+35.0% YoY), affiliates,