Ichigo Inc. · TSE:2337
Ichigo — H1 FY16/2 Earnings Presentation
59 slides from Ichigo's earnings presentation, Oct 14, 2015
Slide 1: FY16/2 H1 Corporate Presentation
FY16/2 H1 (March – August 2015) Corporate Presentation April 23, October 14,2015 2015 Ichigo (2337) © 2015 Ichigo Inc. All rights reserved. www.ichigo.gr.jp/english
Slide 2: © 2015 Ichigo Inc. All rights reserved.
© 2015 Ichigo Inc. All rights reserved.
Slide 3: © 2015 Ichigo Inc. All rights reserved.
© 2015 Ichigo Inc. All rights reserved.
Slide 4: Creating peace of mind through honest and committed management
Creating peace of mind through honest and committed management. © 2015 Ichigo Inc. All rights reserved.
Slide 5: Shift Up 2016 Mid-Term Business Plan Progress
Shift Up 2016 Mid-Term Business Plan Progress ‒ 5X EPS in 3 Years ‒ Achieved All Key Performance Indicator Targets in First 2 Years, Expect Full Achievement for Final 3rd year ‒ Tokyo Stock Exchange First Section Listing by February 2016 (Application Submitted on August 10, 2015) ‒ Enter JPX-Nikkei
Slide 6: Mid-Term Business Plan Shift Up 2016 Commitment
Mid-Term Business Plan Shift Up 2016 Clean Energy ‒ Ichigo Solar Power Plant National Map Commitment: 100% Shift Up 2016 ‒ Expansion On Track ‒ New Opportunities: REAFF Law Achievement ‒ Individual Power Plant P&L Breakdown ‒ FY16/2 H1: OP 1.6X, EPS 1.7X YOY ‒ Near-Term Earnings ‒ Segment P&L Breakd
Slide 7: Commitment: 100% Shift Up 2016 Achievement
Commitment: 100% Shift Up 2016 Achievement © 2015 Ichigo Inc. All rights reserved. 7
Slide 8: FY16/2 H1: OP 1.6X, EPS 1.7X YOY
FY16/2 H1: OP 1.6X, EPS 1.7X YOY (Million Yen) Full-Year vs Full-Year FY15/2 FY15/2 H1 FY16/2 H1 YoY Initial Forecast Initial Forecast Actual Revenues 9,879 14,607 +47.9% 45,000 32.5% 42,705 Gross Profit 5,110 7,163 +40.2% 16,500 43.4% 12,166 Operating Profit 3,124 4,913 +57.3% 11,700 42.0% 8,189 Re
Slide 9: Segment P&L Breakdown
Segment P&L Breakdown ‒ Value-Add Rental Income 1.4X YOY ‒ Clean Energy Has Turned Profitable (Million Yen) Revenues Operating Profit FY16/2 vs Full-Year FY16/2 vs Full-Year Earnings Drivers Segment FY15/2 H1 FY16/2 H1 YoY Full-Year Initial Initial FY15/2 2Q FY16/2 H1 YoY Full-Year Initial Initial (
Slide 10: Accelerated Asset Turnover & Asset Management Expansion
Accelerated Asset Turnover & Asset Management Expansion Sale of Hotel Assets (JPY 20.4B) to Ichigo Hotel REIT Value-Add Business Model Real Estate Real Estate Ichigo Office Ichigo Office REIT Accelerated (8975) Asset Turnover Acquisition Acquisition Value - External Add Hotel Sale Sale Ichigo Hotel
Slide 11: FY16/2 Full-Year Forecast Revision
FY16/2 Full-Year Forecast Revision Forecasting Record Net Income of JPY 11B on Value-Add & Asset Management Growth (Previous Record Net Income: FY07/2 JPY 9.4) (Million Yen) FY16/2 FY16/2 Full-Year Revised Full-Year Initial Change Forecast Forecast Revenues 47,000 45,000 +4.4% Operating Profit 14,00
Slide 12: FY16/2 Full-Year Forecast Details
FY16/2 Full-Year Forecast Details (Million Yen) Revenues Segment Profit (Operating Profit) Segment FY16/2 Full-Year FY16/2 Full-Year FY16/2 Full-Year FY16/2 Full-Year YoY YoY Revised Forecast Initial Forecast Revised Forecast Initial Forecast Asset Management 4,950 4,713 +5.0% 2,536 2,140 +18.5% Val
Slide 13: Asset Management
Asset Management © 2015 Ichigo Inc. All rights reserved. 13
Slide 14: Ichigo Office REIT (8975) Strategic Transition
Ichigo Office REIT (8975)Strategic Transition Move from Multi-Asset Class REIT to Specialized Office REIT Focused on Mid-Size Offices, an Asset Class that Offers Both Return Stability and Upside Potential New Mid-Term Targets ‒ Dividend per Share: 2,000 yen (April 2015 actual: 1,603 yen) ‒ Total Ass
Slide 15: Supporting Continued Ichigo Office REIT Dividend Growth
Supporting Continued Ichigo Office REIT Dividend Growth Co-Purchased with Ichigo Office REIT 13 Mid-Size Office Assets, Granting Ichigo Office REIT Preferential Acquisition Right ‒ Contribution to Ichigo Office REIT dividend: JPY100M p.a. Offices Co-Purchased with Ichigo Office REIT Ichigo Sale of K
Slide 16: Value-Add Sale to Ichigo Hotel REIT
Value-Add Sale to Ichigo Hotel REIT Expanding Value-Add Business Model and Accelerating Asset Turnover ‒ Newly established Ichigo Hotel REIT as Ichigo’s second J-REIT ‒ Goal: Success similar to Ichigo Office REIT in serving Ichigo Hotel REIT’s shareholders. Ichigo Office REIT is No. 1 among all J-RE
Slide 17: Value-Add
Value-Add © 2015 Ichigo Inc. All rights reserved. 17
Slide 18: Capital-Efficient Asset Acquisitions
Capital-Efficient Asset Acquisitions Balance Sheet Management and Synergies with Ichigo Office REIT and Ichigo Hotel REIT Driving Higher ROE and Higher Earnings FY16/2 H1 Acquisitions: 43 assets, JPY 101.4B (excludes 2 Ichigo asset warehousing sales, JPY 3.4B) − Ichigo: 33 assets, JPY 60.8B − Ichigo
Slide 19: Value-Add Case (1) – Deep Value-Add for Tenants
Value-Add Case (1) – Deep Value-Add for Tenants Tokyo Retail (Daikanyama) ‒ Turned asset problem into an opportunity, fixing flawed, divided, and illegal space and increasing leasable space by 13% in a building 1-minute walk from Daikanyama Station ‒ Completed retrofit of 1st floor; Basement, 2nd an
Slide 20: Value-Add Case (2) – Differentiated Residential Development
Value-Add Case (2) – Differentiated Residential Development Tokyo Residential (OWCA Azabu Juban) High-Grade Residential Building Achieving Rapid Lease-Up ‒ Developed on prime location land in Azabu Juban, a high-end residential area in central Tokyo ‒ Higher leasable value achieved by eliminating ca
Slide 21: Value-Add Case (3) – Extending Value-Add Business Model
Value-Add Case (3) – Extending Value-Add Business Model Tokyo Retail (Hiroo) Value-Add ‒ 1.9X NOI via lease-up with high-quality tenants after rectification of illegalities New Business Development ‒ Sold asset to an individual owner after Ichigo value-add and Ichigo consulting ‒ Worked with lenders
Slide 22: Clean Energy
Clean Energy © 2015 Ichigo Inc. All rights reserved. 22
Slide 23: Ichigo Solar Power Plant National Map
Ichigo Solar Power Plant National Map Serving Local Communities and the Environment Ichigo Engaru Higashimachi (1.24MW) Total Operating and In-Development Ichigo Motomombetsu (1.40MW) Ichigo Engaru Kiyokawa Ichigo Solar Power Plants: (1.12MW) 31 Plants (106MW) Ichigo Abira Toasa (1.17MW) Ichigo Yube
Slide 24: Expansion on Track
Expansion on Track As of September 30, 31 Ichigo Solar Plants (106MW) Operating or In- Development ‒ 21 operating plants (36 MW) as of September 2015 ‒ All 31 plants have approved grid interconnections and/or signed power sale contracts with the regional electric utility. None of the projects are su
Slide 25: New Opportunities: REAFF Law
New Opportunities: REAFF Law Working to Develop New Solar Plants Using REAFF Law (May 1, 2014) Agricultural land, forest land, and other regulated lands generally prohibited for use for renewable energy projects are now potentially available if sound development of local agriculture, forestry, and
Slide 26: Individual Power Plant P&L Breakdown (1)
Individual Power Plant P&L Breakdown (1) Total 20-Year Forecast IRR for All Plants: 25.2% p.a. Fixed Panel Forecast Equity Tariff Operation Expected Ichigo Forecast No. Area Output Depreciation Multiple (Held (Pre-tax, Start Date NOI/Year Investment IRR2 (MW) for 20 years) 1 yen) 1 Ichigo Tokushima
Slide 27: Individual Power Plant P&L Breakdown (2)
Individual Power Plant P&L Breakdown (2) Fixed Panel Forecast Equity Tariff Operation Expected Ichigo Forecast No. Area Output Depreciation Multiple (Held (Pre-tax, Start Date NOI/Year Investment IRR2 (MW) for 20 years) 1 yen) 18 Ichigo Akkeshi Shirahama ECO Power Plant Hokkaido 0.81 40 Mar-15 JPY 2
Slide 28: Near-Term Earnings
Near-Term Earnings ‒ Significant Revenue Growth ‒ Now Profitable (FY16/2 Forecast OP = JPY 290M vs. FY15/2 JPY -43M) (Million Yen) FY15/2 FY16/2 Q1 FY16/2 H1 FY16/2 Full-Year vs Full-Year (12M) (3M) (6M) Forecast (12M) Forecast (12M) Revenues 605 379 870 1,507 57.8% Cost of Goods Sold 411 213 435 91
Slide 29: Long-Term Earnings (Operating Profit)
Long-Term Earnings (Operating Profit) Forecast JPY 1.58B Annual OP by FY19/2 Using Actual Production Results OP Forecast based on 31 Plants, 106MW 1.58B 1.55B * 20-Year OP Forecast = NOI minus Depreciation minus SG&A. Forward 1.49B SG&A estimate uses FY17/2 forecast 1.32B 1.36B SG&A of JPY 450M, wou
Slide 30: Reference: Long-Term Earnings (Gross Profit)
Reference: Long-Term Earnings (Gross Profit) Forecast JPY 2.04B Annual NOI by FY19/2 Revenue Forecast based on 31 Plants, 106MW * 20-Year NOI Forecast = NOI minus Depreciation 2.04B 2.00B 1.78B 1.79B 1.81B 1.78B 1.72B 1.58B 1.59B 13.1 20-Year NOI: JPY 40.8B 1.33B Forecast based upon actual productio
Slide 31: Appendices: Financial & Real Estate Data
Appendices: Financial & Real Estate Data © 2015 Ichigo Inc. All rights reserved. 31
Slide 32: Value-Add Social Significance
Value-Add Social Significance End Demolish and Rebuild and Embrace Value-Add ‒ Preserve and enhance high-function real estate ‒ Sustainable Real Estate serving a Sustainable Society ・Renovate, rectify, and repair Value-Add ・Raise earthquake resistance ・Focus on tenants and their needs ・Improve exter
Slide 33: Value-Add Sample Earnings Model
Value-Add Sample Earnings Model ‒ 5.5% NOI, JPY 2B purchase, LTV 70%, 1.5% interest rate, JPY 50M capex, 20% increase in NOI, 3-year holding period ‒ Tenant leasing, aesthetic improvement, building code violation remedy, earthquake retrofit, etc. At Acquisition NOI (JPY 110M NOI/year) － (JPY 21M int
Slide 34: Consolidated Risk-Based Balance Sheet
Consolidated Risk-Based Balance Sheet Consolidated Balance Sheet Total Assets JPY 232.3B Non-Recourse Loans & Non-Recourse Loan- Related Liabilities Related Assets JPY 67.2 B Consolidated Risk-Based Balance Sheet JPY 85.5 B Total Assets JPY 165.0B Non-Recourse Loan- Related IGH Equity JPY 18.3B Cash
Slide 35: Consolidated Balance Sheet: Unrealized Gains
Consolidated Balance Sheet: Unrealized Gains Unrealized Gains (at Appraisal Value): JPY 25B (+JPY 5.5B vs. FY15/2) Real estate directly held by Ichigo (Million Yen) Book Value as of Cap Rate Appraisal Value Location NOI Unrealized Gain August 2015 NOI/Book Value after w rite-dow n as of August 2015
Slide 36: Corporate Loan Details
Corporate Loan Details Weighted Average Interest Rate and Average Loan Period Weighted Average Interest Rate (Interest Rate) (Loan Period, Year) Average Loan Period 3.0% 11 2.56% 9.0 years 2.5% 9 2.22% 8.5 years 1.96% 2.0% 7 5.9 years 1.71% 1.5% 4.7 years 1.51% 5 3.6 years 1.0% 3 FY12/2 FY13/2 FY14/
Slide 37: Business Segments
Business Segments Asset Management generates fee income via managing the Ichigo Office REIT (8975) and private funds and providing real estate Asset Management services related to real estate acquisition, operation (PM/BM), and disposition. Value-Add deploys the Company’s expertise to acquire and im
Slide 38: Consolidated Balance Sheet
Consolidated Balance Sheet (Million Yen) FY16/2 Q1 FY16/2 H1 Unrealized Outside Quarter-on- Unrealized FY15/2 Market Value Gain on Listed B/S B/S Investors' Quarter Gain Securities 2 Interest Cash and Cash Equivalents 19,383 21,065 21,913 837 +848 21,913 — Operating Loans Receivable (Value-Add) 2,33
Slide 39: Consolidated Balance Sheet: Segment Breakdown
Consolidated Balance Sheet: Segment Breakdown (Million Yen) Cash and Operating Operational Real Estate Intangible Investments Segment Cash Loans Investments Fixed Assets Other Assets Total Assets for Sale Assets in Securities Equivalents Receivable in Securities Asset Management 380 — — — 42 1,691 —
Slide 40: Ichigo-Owned Real Estate Portfolio
Ichigo-Owned Real Estate Portfolio Assets by Type Assets by Location Other Other Sendai 2% 2% 3% Mixed Ground Other SendaiNagoya 8% Groun Mixed d 3% 4%8% (Billion Yen) Lease L ease Osaka 10% 3% 4% Osaka 8% 8% Hotel 9% Office Other Hotel 33% Office 10% Nagoya 11% Tokyo Tokyo 45% 9% Residence 49% 49%
Slide 41: Value-Add Full Asset Breakdown (1)
Value-Add Full Asset Breakdown (1) 110 Assets, Book Value JPY 179.5B, Forecast NOI JPY 10.8B (6.1%) Building Acquired Expected Ichigo Forecast Equity Forecast No. Asset Class Asset Type Location Acquisition Price Age Date NOI/Year Investment Multiple1 IRR2 1 Retail Real Estate for Sale Minato-ku, To
Slide 42: Value-Add Full Asset Breakdown (2)
Value-Add Full Asset Breakdown (2) Building Acquired Expected Ichigo Forecast Equity * Forecast No. Asset Class Asset Type Location Acquisition Price Age Date NOI/Year Investment Multiple1 IRR2 16 Ground Lease Real Estate for Sale Atsugi City, Kanagawa ― JPY 1B-2B 2011/06 JPY 171M JPY 147M ― ― 17 Mi
Slide 43: Value-Add Full Asset Breakdown (3)
Value-Add Full Asset Breakdown (3) Building Acquired Expected Ichigo Forecast Equity Forecast No. Asset Class Asset Type Location Acquisition Price Age Date NOI/Year Investment Multiple1 IRR2 31 Ground Lease Real Estate for Sale Chiba City, Chiba - JPY 2B-3B 2014/02 JPY 126M JPY 342M ― ― 32 Hotel Re
Slide 44: Value-Add Full Asset Breakdown (4)
Value-Add Full Asset Breakdown (4) Building Acquired Expected Ichigo Forecast Equity Forecast No. Asset Class Asset Type Location Acquisition Price Age Date NOI/Year Investment Multiple1 IRR2 46 Retail Fixed Asset Fukuoka City, Fukuoka 11 years <JPY 1B 2014/07 JPY 50M JPY 213M ― ― 47 Retail Fixed As
Slide 45: Value-Add Full Asset Breakdown (5)
Value-Add Full Asset Breakdown (5) Building Acquired Expected Ichigo Forecast Equity Forecast No. Asset Class Asset Type Location Acquisition Price Age Date NOI/Year Investment Multiple1 IRR2 61 Residence Real Estate for Sale Minato-ku, Tokyo 11 years <JPY 1B 2014/12 JPY 38M JPY 123M 1.97 x 23.3% 62
Slide 46: Value-Add Full Asset Breakdown (6)
Value-Add Full Asset Breakdown (6) Building Acquired Expected Ichigo Forecast Equity Forecast No. Asset Class Asset Type Location Acquisition Price Age Date NOI/Year Investment Multiple1 IRR2 76 Retail Real Estate for Sale Sendai City, Miyagi 11 years <JPY 1B 2015/02 JPY 63M JPY 8M 42.58 x 198.9% 77
Slide 47: Value-Add Full Asset Breakdown (7)
Value-Add Full Asset Breakdown (7) Building Acquired Expected Ichigo Forecast Equity Forecast No. Asset Class Asset Type Location Acquisition Price Age Date NOI/Year Investment Multiple1 IRR2 91 Office Real Estate for Sale Minato-ku, Tokyo 23 years JPY 1B-2B 2015/07 JPY 76M JPY 59M 2.93 x 323.9% 92
Slide 48: Value-Add Full Asset Breakdown (8)
Value-Add Full Asset Breakdown (8) Building Acquired Expected Ichigo Forecast Equity Forecast No. Asset Class Asset Type Location Acquisition Price Age Date NOI/Year Investment Multiple1 IRR2 106 Office Real Estate for Sale Fukuoka City, Fukuoka 13 years JPY 1B-2B 2015/07 JPY 89M JPY 358M 1.92 x 18.
Slide 49: Consolidated P&L: Gross Profit Segment Breakdown
Consolidated P&L: Gross Profit Segment Breakdown (Million Yen) Revenues Gross Profit YoY FY15/2 H1 FY16/2 H1 Change FY15/2 H1 FY16/2 H1 Change (Gross Profit) Asset Management 2,042 2,964 +922 930 2,067 +1,137 +122.3% Asset Management Fees 712 806 +93 652 800 +147 +22.7% PM/BM Fees 1,264 1,080 -183 2
Slide 50: Consolidated P&L: Progress vs. Full-Year Forecast
Consolidated P&L: Progress vs. Full-Year Forecast (Million Yen) FY16/2 H1 (6M) FY16/2 Full-Year Forecast(12M) vs Full-Year vs Full-Year Operating vs Full-Year Operating Revenues Gross Profit Revenues Gross Profit Forecast vs Full-Year Forecast Profit vs Forecast Full-Year Profit Forecast Forecast As
Slide 51: Asset Management AUM Detail
Asset Management AUM Detail Steady Growth in AM Fees Driving Higher Profitability FY12/2 FY13/2 FY14/2 FY15/2 FY16/2 H1 (12M) (12M) (12M) (12M) (6M) Ichigo Office REIT (8975) AUM (Fiscal Year End) JPY 106B JPY 104B JPY 121B JPY 124B JPY 164B AM Fee % (Average) 0.61% 0.63% 0.65% 0.65% 0.65% AM Fee Gr
Slide 52: Consolidated Balance Sheet: Assets
Consolidated Balance Sheet: Assets (Million Yen) Quarter-on- FY12/2 FY13/2 FY14/2 FY15/2 FY16/2 Q1 FY16/2 H1 Quarter Assets Current Assets Cash and cash equivalents 9,791 9,713 24,991 19,383 21,065 21,913 848 Trade notes and accounts receivable 1,069 548 451 519 1,163 1,114 -49 Operational investmen
Slide 53: Consolidated Balance Sheet: Liabilities & Net Assets
Consolidated Balance Sheet: Liabilities & Net Assets (Million Yen) Quarter-on- FY12/2 FY13/2 FY14/2 FY15/2 FY16/2 Q1 FY16/2 H1 Quarter Liabilties Current Liabilities Trade notes and accounts payable 57 64 132 124 78 82 +4 Short-term borrowings 170 484 950 1,416 735 740 +5 Short-term non-recourse loa
Slide 54: Consolidated P&L
Consolidated P&L (Million Yen) Full-Year vs Full- FY12/2 FY13/2 FY14/2 FY15/2 FY16/2 H1 FY15/2 H1 Year-on-Year Revised Year (12M） (12M） (12M） (12M） (6M） （6M) Forecast Forecast Revenues 18,952 16,397 35,101 42,705 14,607 9,879 4,728 47,000 31.1% Cost of Goods Sold 15,030 11,422 27,666 30,539 7,443 4,
Slide 55: Consolidated Cash Flows from Operating Activities
Consolidated Cash Flows from Operating Activities (Million Yen) FY12/2 (12M) FY13/2 (12M) FY14/2 (12M) FY15/2 (12M) FY16/2 H1 (6M) Cash Flows from Operating Activities: Pre-tax net income 1,976 1,693 3,933 7,220 4,565 Depreciation 166 230 304 565 375 Share-based compensation expenses 37 49 69 112 83
Slide 56: Consolidated Cash Flows from Investing & Financing Activities
Consolidated Cash Flows from Investing & Financing Activities (Million Yen) FY16/2 H1 FY12/2 (12M) FY13/2 (12M) FY14/2 (12M) FY15/2 (12M) (6M) Cash Flows from Investing Activities: Payments into time deposits -352 -0 -0 -325 -0 Proceeds from withdrawal of time deposits － 151 － 325 -300 Acquisition o
Slide 57: MEMO
MEMO © 2015 Ichigo Inc. All rights reserved. 57
Slide 58: MEMO
MEMO © 2015 Ichigo Inc. All rights reserved. 58
Slide 59: Disclaimer
These materials were prepared to explain the Company’s businesses and are not for the purpose of soliciting investment in marketable securities issued by the Company. The Company does not guarantee the accuracy of the figures, information, estimates or other statements included herein, and accepts n