Ichigo Inc. · TSE:2337

Ichigo — Q1 FY2016 Earnings Presentation

51 slides from Ichigo's earnings presentation, Jul 14, 2015

  1. Slide 1: Ichigo Group Holdings Corporate Presentation

    Ichigo (2337) February 2016 Q1 (March – May 2015) Corporate Presentation April 23, 2015 July 14, 2015 Ichigo Group Holdings © 2015 Ichigo Group Holdings Co., Ltd. All rights reserved. www.ichigo-holdings.co.jp/english

  2. Slide 2: © 2015 Ichigo Group Holdings Co., Ltd. All rights reserved.

    © 2015 Ichigo Group Holdings Co., Ltd. All rights reserved.

  3. Slide 3: © 2015 Ichigo Group Holdings Co., Ltd. All rights reserved.

    © 2015 Ichigo Group Holdings Co., Ltd. All rights reserved.

  4. Slide 4: Creating peace of mind through honest and committed management

    Creating peace of mind through honest and committed management. management © 2015 Ichigo Group Holdings Co., Ltd. All rights reserved.

  5. Slide 5: Commitment: 100% Shift Up 2016 Achievement

    Commitment: 100% Shift Up 2016 Achievement ‒ FY16/2 Q1: Net Income 1.3X YOY ‒ Segment P&L Breakdown Asset Management ‒ New Ichigo Hotel REIT to Further Drive AM Growth ‒ AM and Value-Add Business Model Synergies ‒ Ichigo REIT (8975) New A- Credit Rating Value Add Value-Add ‒ Highly Capital-Efficient

  6. Slide 6: 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 F ll A Full Achievement hi t ffor Fi Finall 3rd Year Y ‒ Tokyo Stock Exchange First Section Listing by February 2016 ‒ Enter JPX JPX-Nikkei Nikkei Index 400 by

  7. Slide 7: Commitment: 100% Shift Up 2016 Achievement

    Commitment: 100% Shift Up 2016 Achievement © 2015 Ichigo Group Holdings Co., Ltd. All rights reserved. 7

  8. Slide 8: FY16/2 Q1: Net Income 1.3X YOY

    FY16/2 Q1: Net Income 1.3X YOY (Million yen) FY15/2 Q1 FY16/2 Q1 Full-Year vs Full-Year FY15/2 YoY Actual Actual Forecast Forecast Actual Revenues 6,528 8,903 +36.4% 45,000 19.8% 42,705 Gross Profit 3,257 3,627 +11.4% 16,500 22.0% 12,166 Operating Profit 2 236 2,236 2 492 2,492 +11 5% +11.5% 11 700

  9. Slide 9: Segment P&L Breakdown

    Segment P&L Breakdown ‒ Value-Add Rental Income 1.5X ‒ Clean Energy Has Turned Profitable (Million yen) Revenues Segment Profit (Operating Profit) Earnings Drivers FY16/2 FY16/2 Segment FY16/2 Q1 FY16/2 Q1 (Note) YoY change is shown in FY15/2 Q1 Change (YoY) Full-Year vs Forecast FY15/2 Q1 Change (Y

  10. Slide 10: Asset Management

    Asset Management © 2015 Ichigo Group Holdings Co., Ltd. All rights reserved. 10

  11. Slide 11: New Ichigo Hotel REIT to Further Drive AM Growth

    New Ichigo Hotel REIT to Further Drive AM Growth Ichigo Hotel REIT TSE Listing Preparation − New hotel J-REIT to expand investment opportunities g − Ichigo’s office REIT ((8975)) No. 1 among g all J-REITs with ten consecutive periods of dividend growth − Growth in Japanese hotel industry due to econ

  12. Slide 12: AM & Value-Add Business Model Synergies

    AM & Value-Add Business Model Synergies Ichigo Value-Add Drives AM Expansion and High Asset Turnover Value-Add Business Model Real Estate Real Estate Ichigo Offfices Ichigo REIT (8975) Acquisition Acquisition Hotels Value - External Hotel REIT (new) Sale Add Sale Othe New J-REITs I Increase Asset A

  13. Slide 13: Ichigo REIT (8975) New A- Credit Rating

    Ichigo REIT (8975) New A- Credit Rating ̶ Recognizing Ichigo REIT’s continued stable growth, Ichigo REIT received a long-term g issuer rating g of A- on June 30,, 2015 Credit Rating Agency Type of Rating Rating Rating Outlook Japan Credit Rating Agency Long-term Issuer A- Stable (JCR) Rating ̶ Ichig

  14. Slide 14: Value-Add

    Value-Add © 2015 Ichigo Group Holdings Co., Ltd. All rights reserved. 14

  15. Slide 15: Highly Capital-Efficient Asset Acquisitions

    Highly Capital-Efficient Asset Acquisitions Effective balance sheet management and synergies with Ichigo REIT driving higher ROE and higher earnings FY16/2 Q1 Acquisitions A i iti − Ichigo REIT: 12 assets, JPY 44B − IGH: 4 assets, JPY 5.7B FY16/2 Ichigo REIT Acquisitions Shibuya-ku, Shibuya-ku, Chiy

  16. Slide 16: Hands-On Value Creation

    Hands-On Value Creation Established Ichigo Wakei-Kai in June 2015 to Instill and Refine Ichigo’s Property Management Standards with Partner Property Management Companies − The term wakei comes from a phrase used in tea ceremony, wakei seijaku, describing the sincere efforts of the tea master and gue

  17. Slide 17: Value-Add Case (1) – Fukuoka Hotel

    Value-Add Case (1) – Fukuoka Hotel Acquired and Renovated Valie Hotel Tenjin in Fukuoka, Capitalizing on Rapid expansion of Inbound Tourism − Forecast increase in ADR: +15% − Targeted increase in NOI: +2.03% Before After Quick renovation to raise the sophistication p of the hotel’s exterior and inte

  18. Slide 18: Value-Add Case (2) – Central Tokyo Office

    Value-Add Case (2) – Central Tokyo Office Full Renovation of the Ichigo Akasaka 317 Building, a Prime Location Office Building Targeting Fast-Growing Companies as Tenants − Significantly upgraded the design content of the entrance lobby − Highly-flexible office configurations received favorable revi

  19. Slide 19: Clean Energy

    Clean Energy © 2015 Ichigo Group Holdings Co., Ltd. All rights reserved. 19

  20. Slide 20: 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) 29 Plants (101MW) Ichigo Abira Toasa (1.17MW) Ichigo Yube

  21. Slide 21: Expansion on Track

    Expansion on Track As of May 2015, 29 Ichigo Solar Plants (101MW) Operating or In-Development ‒ 20 operating plants (34 MW) as of early July 2015 ‒ All 29 plants have approved grid interconnections and/or signed power sale contracts with the regional electric utility. None of the projects are subjec

  22. Slide 22: Individual Power Plant P&L Breakdown (1)

    Individual Power Plant P&L Breakdown (1) Total 20-Year Forecast IRR for All Plants: 25.4% p.a. Fixed Panel Forecast Equity Tariff Operation Expected Forecast No. Area Output Depreciation IGH Investment Multiple (Held (Pre-tax, Start Date NOI/Year IRR2 (MW) for 20 years) 1 yen) 1 Ichigo Tokushima Hig

  23. Slide 23: Individual Power Plant P&L Breakdown (2)

    Individual Power Plant P&L Breakdown (2) Fixed Panel Forecast Equity Tariff Operation Expected Forecast No. Area Output Depreciation IGH Investment Multiple (Held (Pre-tax, Start Date NOI/Year IRR2 (MW) for 20 years) 1 yen) 18 Ichigo g Akkeshi Shirahama ECO Power Plant Hokkaido 0.81 40 Mar-15 JPY 23

  24. Slide 24: Near-Term Earnings

    Near-Term Earnings ‒ Significant Revenue Growth ‒ Now Profitable (FY15/2 Q1 OP JPY -41M vs. FY16/2 Q1 96M) (Million yen) FY15/2 FY16/2 Q1 FY16/2 Full-Year vs, Full-Year (12M) (3M) Forecast (12M) Forecast Revenues 605 379 1,581 24.0% Cost of Goods Sold 411 213 992 － Gross Profit 194 165 589 28.2% SG&

  25. Slide 25: Long-Term Earnings

    Long-Term Earnings JPY 1.97B annual NOI by FY19/2 – Actual Production Beating P50 Forecasts Revenue Forecast based on 29 Plants, 101MW * 20-Year NOI Forecast = NOI minus Depreciation 19 B 1.97B 1.94B 1.75B 1.73B 1.75B 1.72B 1.56B 1.53B 13.1 20-Year NOI: JPY 39.5B 1.27B Forecast based upon actual pro

  26. Slide 26: Appendices: Financial & Real Estate Data

    Appendices: Financial & Real Estate Data © 2015 Ichigo Group Holdings Co., Ltd. All rights reserved. 26

  27. Slide 27: Value-Add Social Significance

    Value-Add Social Significance End Demolish and Rebuild and Embrace Value-Add ‒ Preserve and enhance high-function real estate ‒ Sustainable S t i bl R Reall E Estate t t serving i a Sustainable S t i bl S Society i t ・Renovate, rectify, and repair Value‐Add ・Raise earthquake resistance Focus on tena

  28. Slide 28: 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

  29. Slide 29: Consolidated Risk-Based Balance Sheet

    Consolidated Risk-Based Balance Sheet Consolidated Balance Sheet Total Assets JPY 176.4B Non-Recourse Loans & Related Liabilities Non-Recourse Loan- Related Assets JPY 49.8 B Consolidated Risk-Based Balance Sheet JPY 63.8 B Total Assets JPY 126.6B Non-Recourse Loan- Related IGH Equity JPY 14.0B Cash

  30. Slide 30: Consolidated Balance Sheet: Unrealized Gains

    Consolidated Balance Sheet: Unrealized Gains Unrealized Gains (Appraisal Value): JPY 20B Real estate directly held by IGH (either on IGH balance sheet or in SPCs where IGH is sole equity holder) (Million yen) Book Value Cap Rate Appraisal Value Location NOI Unrealized Gain as of May 2015 NOI/Book Va

  31. Slide 31: Corporate Loan Details

    Corporate Loan Details ■ Weighted Average Interest Rate and Average Loan Period Weighted Average Interest Rate (Interest Rate) Average Loan Period (Loan Period, Year) 3.0% 11 2.56% 9.1 years 9.0 years 2.5% 9 2.22% 1 96% 1.96% 2.0% 7 5.9 years 1.71% 1.67% 1 5% 1.5% 4.7 yyears 5 3.6 years 1.0% 3 Feb F

  32. Slide 32: Business Segments

    Business Segments Asset Management generates fee income via the management of the Ichigo REIT, private funds, and other fee-generating real estate Asset Management services related to the sourcing, financing, operation, property management, facility management, and disposition of real estate assets,

  33. Slide 33: Consolidated Balance Sheet

    Consolidated Balance Sheet (Million yen) FY16/2 Q1 YoY Unrealized Gain Unrealized FY15/2 Increase/ Market Value on Listed B/S Outside Gain Decrease Securities 2 Cash and Cash Equivalents 19,383 21,065 696 +1,682 21,065 0 0 Operating Loans Receivable (Value-Add) 2,330 1,324 ― -1,006 1,324 0 0 p Opera

  34. Slide 34: Consolidated Balance Sheet: Segment Breakdown

    Consolidated Balance Sheet: Segment Breakdown (Million yen) Cash and Operating Operational Real Estate Intangible Investments S Segment t Cash Loans Investment Fixed Assets Other Assets Total Assets For Sale Assets in Securities Equivalents Receivable in Securities Asset Management 374 － － － 41 1,71

  35. Slide 35: IGH-Owned Real Estate Portfolio (As of May 2015)

    IGH-Owned Real Estate Portfolio (As of May 2015) A Assets t by b Type T A Assets t by b Location L ti Sendai Ground Other Osaka 4% 3% Lease 7% 4% (Billion yen) Hotel Office 10% 25% Other 12% Mixed Tokyo 10% 51% Kanto 12% Retail Residence 29% 18% Fukuoka 15% Sendai 4.8 Assets by Size Tokyo 63.9 Kanto

  36. Slide 36: Value-Add Full Asset Breakdown (1)

    Value-Add Full Asset Breakdown (1) Assets owned as of May 2015: 82 Assets, JPY 124.6B, Forecast NOI JPY 8.0B Building Acquired Expected Forecast Equity Forecast No. Asset Class Asset Type Location Acquisition Price IGH Investment Age Date NOI/Year Multiple1 IRR2 1 Retail Real Estate for Sale Minato-

  37. Slide 37: Value-Add Full Asset Breakdown (2)

    Value-Add Full Asset Breakdown (2) Building Acquired Expected Forecast Equity Forecast No. Asset Class Asset Type Location Acquisition Price IGH Investment Age Date NOI/Year Multiple1 IRR2 16 Ground Lease Real Estate for Sale Atsugi City, Kanagawa JPY 1B-2B 2011/06 JPY 171M JPY 147M * － － － 17 Retai

  38. Slide 38: Value-Add Full Asset Breakdown (3)

    Value-Add Full Asset Breakdown (3) Building Acquired Expected Forecast Equity Forecast No. Asset Class Asset Type Location Acquisition Price IGH Investment Age Date NOI/Year Multiple1 IRR2 31 Hotel Real Estate for Sale Hamamatsu City, Shizuoka 5 JPY 1B-2B 2013/12 JPY 99M JPY 393M － － 32 Ground Lease

  39. Slide 39: Value-Add Full Asset Breakdown (4)

    Value-Add Full Asset Breakdown (4) Building Acquired Expected Forecast Equity Forecast No. Asset Class Asset Type Location Acquisition Price IGH Investment Age Date NOI/Year Multiple1 IRR2 46 Retail Fixed Asset Fukuoka City, Fukuoka 9 JPY 1B-2B 2014/04 JPY 58M JPY 279M － － 47 Retail Fixed Asset Fuku

  40. Slide 40: Value-Add Full Asset Breakdown (5)

    Value-Add Full Asset Breakdown (5) Building Acquired Expected Forecast Equity Forecast No. Asset Class Asset Type Location Acquisition Price IGH Investment Age Date NOI/Year Multiple1 IRR2 61 Residence Real Estate for Sale Chuo-ku, Tokyo y 12 <JPY 1B 2014/12 JPY 34M JPY 99M 2.96 x 44.4% 62 Residence

  41. Slide 41: Value-Add Full Asset Breakdown (6)

    Value-Add Full Asset Breakdown (6) Building Acquired Expected Forecast Equity Forecast No. Asset Class Asset Type Location Acquisition Price IGH Investment Age Date NOI/Year Multiple1 IRR2 76 Office Real Estate for Sale Fujisawa City City, Kanagawa 24 JPY 1B-2B 1B 2B 2015/01 JPY 70M JPY 375M 1 41 x

  42. Slide 42: Consolidated P&L: Gross Profit Segment Breakdown

    Consolidated P&L: Gross Profit Segment Breakdown (Million yen) Revenues Gross Profit YoY Segment FY15/2 Q1 FY16/2 Q1 Change FY15/2 Q1 FY16/2 Q1 Change (Gross Profit) Asset Management 1,095 1,529 +433 559 1,103 +543 +97.2% Asset Management Fees 424 509 +84 411 505 +93 +22.8% PM / BM Fees 631 530 -101

  43. Slide 43: Consolidated P&L: Progress vs. Full-Year Forecast

    Consolidated P&L: Progress vs. Full-Year Forecast (Million yen) FY16/2 Q1 Actual (3M) FY16/2 Full-Year Forecast (12M) vs Full- vs Full- Segment vs Full-Year Operating Operating Revenues Gross Profit Year Year Revenues Gross Profit Forecast Profit Profit Forecast Forecast Asset Management 1,529 32.4%

  44. Slide 44: Asset Management AUM Detail

    Asset Management AUM Detail Steady growth in overall AM fees drives higher profitability FY12/2 FY13/2 FY14/2 FY15/2 FY16/2 Q1 (12M) (12M) (12M) (12M) (3M) Ichigo REIT (Public) AUM (Fiscal Year End) JPY 106B JPY 104B JPY 121B JPY 124B JPY 164B AM F Fee % (A (Average)) 0 61% 0.61% 0 63% 0.63% 0 65% 0

  45. Slide 45: Consolidated Balance Sheet: Assets

    Consolidated Balance Sheet: Assets (Milli yen)) (Million FY16/2 Q1 vs FY15/2 FY12/2 FY13/2 FY14/2 FY15/2 (This quarter) (Increase/Decrease Assets Current Assets Cash and cash equivalents 9,791 9 791 9,713 9 713 24,991 24 991 19,383 19 383 21,065 21 065 +1,682 +1 682 Trade notes and accounts receivab

  46. Slide 46: Consolidated Balance Sheet: Liabilities & Net Assets

    Consolidated Balance Sheet: Liabilities & Net Assets (Milli yen)) (Million FY16/2 Q1 vs FY15/2 FY12/2 FY13/2 FY14/2 FY15/2 (This quarter) (Increase/Decrease) Liabilities Current Liabilities Trade notes and accounts p payable y 57 64 132 124 78 -46 Short-term borrowings 170 484 950 1,416 735 -681 Sho

  47. Slide 47: Consolidated P&L

    Consolidated P&L (Million yen) FY16/2 FY12/2 FY13/2 FY14/2 FY15/2 FY16/2 Q1 2015/02 Q1 Change vs Full-Year (12M) (12M) (12M) (12M) （3M） (3M) (YoY) Forecast Forecast Revenues 18,952 16,397 35,101 42,705 8,903 6,528 +2,375 45,000 19.8% Cost of Goods Sold 15,030 11,422 27,666 30,539 5,276 3,270 +2,006

  48. Slide 48: Consolidated Cash Flows from Operating Activities

    Consolidated Cash Flows from Operating Activities (Million yen) FY12/2 FY13/2 FY14/2 FY15/2 FY16/2 Q1 （12M） （12M） （12M） （12M） （3M） Cash Flows From Operating Activities: Pre-tax net income 1,976 1,693 3,933 7,220 2,456 Depreciation 166 230 304 565 181 Share-based compensation expenses 37 49 69 112 42

  49. Slide 49: Consolidated Cash Flows from Investing & Financing Activities

    Consolidated Cash Flows from Investing & Financing Activities (Million yen) FY12/2 FY13/2 FY14/2 FY15/2 FY16/2 Q1 (12M) (12M) (12M) (12M) (3M) Cash Flows from Investing Activities: Payments into time deposits -352 -0 -0 -325 -0 Proceeds from withdrawal of time deposits ― 151 ― 325 ― Acquisition of i

  50. Slide 50: MEMO

    MEMO © 2015 Ichigo Group Holdings Co., Ltd. All rights reserved. 50

  51. Slide 51: 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

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