Ichigo Inc. · TSE:2337
Ichigo — FY2017 Earnings Presentation
63 slides from Ichigo's earnings presentation, Apr 19, 2017
Slide 1: FY17/2 Corporate Presentation
FY17/2 Corporate Presentation January 13, April 19, 2017 2017 Ichigo (2337) © 2017 Ichigo Inc. All rights reserved. www.ichigo.gr.jp
Slide 2: Ichigo Preserves and Improves Real Estate
Ichigo Preserves and Improves Real Estate © 2017 Ichigo Inc. All rights reserved.
Slide 3: © 2017 Ichigo Inc. All rights reserved.
© 2017 Ichigo Inc. All rights reserved.
Slide 4: Contents
Contents FY17/2 Full-Year Earnings Appendices ‒ Operating Profit 1.4X, Net Income 1.2X YOY − Financial & Real Estate Data ‒ Segment Earnings Details − Power Up 2019 Mid-Term Business Plan ‒ Stock + Flow Earnings Model ‒ Robust Cash Flow and Cash-On-Hand ‒ Strong Financial Position ‒ Prudent Balance
Slide 5: FY17/2 Full-Year Earnings
FY17/2 Full-Year Earnings © 2017 Ichigo Inc. All rights reserved. 5
Slide 6: Operating Profit 1.4X, Net Income 1.2X YOY
Operating Profit 1.4X, Net Income 1.2X YOY ‒ Operating Profit, Recurring Profit, and Net Income All Record Highs ‒ Beat April 2016 Forecast: OP +17%, RP +20%, NI +12% ‒ ROE >20% for Second Consecutive Year (JPY million) Initial Full-Year vs. Full-Year FY16/2 FY17/2 YOY Forecast Forecast Revenue 49,6
Slide 7: Segment Earnings Details
Segment Earnings Details ‒ Significant Value-Add (+28%) and Clean Energy (+920%) Earnings Growth ‒ AM Earnings Down, but Stock Earnings +45% YOY (JPY million) Revenue Operating Profit Earnings Drivers Segment Initial vs. Initial Initial vs. Initial (Parentheses show YOY change FY16/2 FY17/2 YOY FY16
Slide 8: Stock + Flow Earnings Model
Stock + Flow Earnings Model Stock Earnings (Primarily Rental Income, AM Fees, & FIT Solar Power Sales) (JPY million) Flow Earnings (Primarily Profits on Value-Add Real Estate Sales ) Fixed Expenses (Fixed SG&A + Interest Expense) 26,806 25,994 19,863 14,011 12,949 8,973 12,166 4,553 Gross 7,435 Prof
Slide 9: Robust Cash Flow and Cash-On-Hand
Robust Cash Flow and Cash-On-Hand FY17/2 (12M) JPY +21.5B Buy − Deploy cash Value-Add Real Estate Sales − Increase borrowings Cash Flow from JPY +66.4B Operating Activities Value-Add Real Estate Acquisitions JPY -72.1B Solar Power Plant Sales JPY +7.2B Value- JPY -11.9B Cash Flow from Add Investing
Slide 10: Strong Financial Position
Strong Financial Position Weighted Average Interest Rate and Weighted Average Loan Term Weighted Average Interest Rate WeightedLoan Average Average Loan Term Period (Interest Rate) (Loan Term, Years) 2.5% 12 2.22% 10.8 years 1.96% 2.0% 9 9.0 years 8.7 years 1.71% 1.5% 6 5.9 years 4.7 years 1.41% 1.2
Slide 11: Prudent Balance Sheet Management (1)
Prudent Balance Sheet Management (1) Uncollateralized Loans & Lines (JPY 29B) Lender Amount Loan Period Use of Proceeds SMBC-Led Uncollateralized Loans 1 JPY 8B 7 years Refinancing of existing loans Syndicated Loan SMBC JPY 10B 2 years from drawdown date Acquisition of new hotels Uncollateralized Co
Slide 12: Prudent Balance Sheet Management (2)
Prudent Balance Sheet Management (2) 75% of Loans Fixed to Lock-in Japan’s Historically Low Interest Rates and Support Ongoing Earnings Stability Interest Rate Hedge Details Fixed vs. Floating Loans (as of Mar 31, 2017) Counterparty Amount Period JPY 93.5B SMBC JPY 15B 5 years Fixed Floating Interes
Slide 13: Powerful Value-Add Business Model Underpins Growth
Powerful Value-Add Business Model Underpins Growth © 2017 Ichigo Inc. All rights reserved. 13
Slide 14: Real Estate Owner Services Launch
Real Estate Owner Services Launch Ichigo Owners Established in March to Serve Clients by Leveraging Ichigo’s Value-Add Capabilities to Increase the Value of their Real Estate Value-Add Business Model Green Infrastructure Solar Plants Buy Ichigo Green (9282) Sell Third- Office Value-Add Real Party In
Slide 15: REtech Business Tie-Up
REtech Business Tie-Up REtech Business Tie-Up with ITANDI and KDDI − Support Ichigo’s leasing using ITANDI’s AI and KDDI’s big data − Increase sales of ITANDI’s services leveraging Ichigo’s real estate expertise and network Real Estate AI Big Data × × © 2017 Ichigo Inc. All rights reserved. 15
Slide 16: Ichigo Boutique Hotel Entry
Ichigo Boutique Hotel Entry Transformation of the Historic Yokohama Kokusai Hotel Working in Close Coordination with the Operator − Collaboration with Japanese designer and major interior goods brand, ACME Furniture; Guests can buy ACME goods that they use in the hotel − While preserving the hotel’s
Slide 17: Tradepia Odaiba Value-Add
Tradepia Odaiba Value-Add Increasing Tenant Satisfaction − Ichigo staff deployed on-site for quick tenant response − Tenant satisfaction surveys to establish value-add agenda; enhancing cooperation with PM Strengthening Leasing − Online virtual building tour www.vr-view.jp/ichigo/trade0411 Tradepia
Slide 18: Value-Add Driving Rental Income Growth
Value-Add Driving Rental Income Growth Keys: Improving Tenant Experience & Increasing Leasable Area Office (Weighted average holding period: 1.1 years) Hotel (Weighted average holding period: 1.6 years) (JPY million) +32.3% +46.6% +27.8% +37.1% +28.3% +79.5 +13.8% +68.5 +27.3 +16.6 +21.7 +34.0 246.3
Slide 19: Asset Management Business Expansion
Asset Management Business Expansion Ichigo Green IPO Expands Ichigo’s J-REIT and YieldCo Line-Up Forecast Dividend Yield REIT/ YieldCo Listing Date Characteristics (Based on Share Price as of Portfolio Mar 31, 2017) 86 assets JPY 194.5B ・ Specialized Office REIT focused on mid- size offices with ret
Slide 20: Ichigo Green: Japan's First Ten-Year Earnings Forecast
Ichigo Green (9282) : Japan’s First Ten-Year Earnings Forecast Long-Term Earnings Stability Enables 10-Year Earnings Forecast ‒ Fixed FIT and purchase period ‒ Geographically dispersed, stable solar energy production Attractive Dividend and Renewable Energy Sustainability Contribution ‒ Offers oppor
Slide 21: Ichigo Office REIT and Ichigo Hotel REIT Dividend Growth
Ichigo Office REIT and Ichigo Hotel REIT Dividend Growth Ichigo Office REIT (8975) Dividend Growth Ichigo Hotel REIT (3463) Dividend Growth 13 Consecutive Periods of Dividend Growth – Grow Dividend by Leveraging Ichigo’s No.1 vs. All J-REITs. Currently Forecasting 15 Value-Add Capabilities Consecuti
Slide 22: Clean Energy Business Growth
Clean Energy Business Growth New Solar Power Plant Development 6 plants (12.43 MW) operation-start in FY18/2 − Ichigo’s winning Mie public bid solar power plant under construction − First Ichigo floating solar power plant (Okayama) forecast operation-start in Jan 2018 Ichigo Showamura Ogose ECO Po
Slide 23: Share Buyback
Share Buyback Purpose: Grow Value for Ichigo’s Shareholders Number of Shares 5,300,000 shares (maximum) (1.05% of shares outstanding) Amount JPY 1.5 billion (maximum) Buyback Period April 24, 2017 – June 23, 2017 Buyback Method In-market purchases via trust bank © 2017 Ichigo Inc. All rights reserve
Slide 24: FY18/2 Full-Year Forecast
FY18/2 Full-Year Forecast © 2017 Ichigo Inc. All rights reserved. 24
Slide 25: FY18/2 Full-Year Forecast
FY18/2 Full-Year Forecast − Assumes no Ichigo REIT/YieldCo Public Offerings − 6th Consecutive Ichigo Dividend Increase (+20% YOY) (JPY million) FY18/2 FY17/2 vs. FY17/2 (Forecast) (Actual) Revenue 75,500 109,253 -30.9% Operating Profit 20,600 21,781 -5.4% Recurring Profit 18,300 19,755 -7.4% Net Inc
Slide 26: FY18/2 Full-Year Forecast Details
FY18/2 Full-Year Forecast Details (JPY million) Revenue Segment Profit (Operating Profit) FY18/2 FY17/2 FY18/2 FY17/2 vs. FY17/2 vs. FY17/2 (Forecast) (Actual) (Forecast) (Actual) Asset Management 2,485 4,747 -47.6% 1,656 2,326 -28.8% Value-Add 69,719 92,138 -24.3% 18,304 16,213 +12.9% Clean Energy
Slide 27: Appendix: Financial & Real Estate Data
Appendix: Financial & Real Estate Data © 2017 Ichigo Inc. All rights reserved. 27
Slide 28: Powerful Value-Add Business Model
Powerful Value-Add Business Model Significant Synergies between Ichigo’s Value-Add and Asset Management Businesses Value-Add Business Model Green Infrastructure Solar Plants Buy Ichigo Green (9282) Sell Office Real Third- Estate Party Ichigo Office REIT (8975) Value-Add Investors Real 不動産 Hotel Esta
Slide 29: Value-Add Social Significance
Value-Add Social Significance Sustainable Real Estate Serving a Sustainable Society End Demolish and Rebuild and Embrace Value-Add ‒ Preserve and enhance high-function real estate ‒ Lengthen useful life and improve quality of existing assets via Value-Add Preserve & Improve Value‐Add ・ Higher-Qualit
Slide 30: Value-Add Sample Earnings Model
Value-Add Sample Earnings Model 5.5% NOI yield, JPY 2B purchase, LTV 75%, 1.5% interest rate on borrowings, JPY 50M Capex, 15% increase in NOI, 3-year Value-Add period NOI at Acquisition (JPY 110M NOI/year) － (JPY 22.5M interest/year) ＝ JPY 87.5M NOI/year NOI÷ Initial Investment ＝17.5% NOI return du
Slide 31: Consolidated Risk-Based Balance Sheet
Consolidated Risk-Based Balance Sheet Mark-to-Market Consolidated Balance Sheet: JPY 310.2B (Book Value JPY 273.4B + Unrealized Gains JPY 36.7B) Non-Recourse Loans & Related Liabilities Non-Recourse Loan- JPY 83.8B Related Assets Consolidated Risk-Based Balance Sheet: JPY 226.4B JPY 116.9B (Book Val
Slide 32: Significant Unrealized Gains on Balance Sheet
Significant Unrealized Gains on Balance Sheet Total Unrealized Gains: JPY 36.7B (Appraisal Value Basis) Real estate directly held by Ichigo (JPY million) Book Value as of Cap Rate Appraisal Value as of Location NOI Unrealized Gains Feb 28, 2017 NOI/Book Value after Write-dow n Feb 28, 2017 Tokyo 105
Slide 33: Business Segments
Business Segments Asset Management generates fee income via management of Ichigo Office REIT (8975), Ichigo Hotel REIT (3463), and Ichigo Green Asset Management (9282), and providing real estate services related to real estate acquisition, operation (PM/BM), and disposition. Value-Add preserves and
Slide 34: Consolidated Balance Sheet
Consolidated Balance Sheet (JPY million) FY17/2 Unrealized Outside Market Unrealized Gains on FY16/2 YOY B/S Investors' Value Gains Listed Interest Securities 2 Cash and Cash Equivalents 28,779 47,678 565 +18,899 47,678 – – Operating Loans Receivable (Value-Add) 1,324 1,324 – – 1,830 +505 – Operatio
Slide 35: Consolidated Balance Sheet: Segment Breakdown
Consolidated Balance Sheet: Segment Breakdown (JPY million) Cash and Operational Operational Real Estate Fixed Intangible Securities Other Segment Cash Securities Total Assets Loans for Sale Assets Assets Investments Assets Equivalents Investments Asset Management 534 – – – 30 1,522 – 734 2,821 Valu
Slide 36: Consolidated P&L: Gross Profit Segment Breakdown
Consolidated P&L: Gross Profit Segment Breakdown (JPY million) Revenue Gross Profit YOY Segment FY16/2 FY17/2 Change FY16/2 FY17/2 Change (Gross Profit) Asset Management 5,067 4,747 -320 3,281 2,910 -371 -11.3% Asset Management Fees 1,670 2,177 +507 1,658 2,167 +509 +30.7% PM/BM Fees 2,201 2,313 +11
Slide 37: Consolidated P&L: Results vs. Forecast
Consolidated P&L: Results vs. Forecast (JPY million) FY17/2 (12M) FY17/2 Full-Year Forecast (12M) Segment vs. Full-Year Gross vs. Full-Year Operating vs. Full-Year Gross Operating Revenue Revenue Forecast Profit Forecast Profit Forecast Profit Profit Asset Management 4,747 -6.5% 2,910 -3.0% 2,326 -2
Slide 38: Asset Management AUM Detail
Asset Management AUM Detail FY12/2 FY13/2 FY14/2 FY15/2 FY16/2 FY17/2 (12M) (12M) (12M) (12M) (12M) (12M) Ichigo Office REIT (8975) AUM (Fiscal Year End) JPY 106.1B JPY 104.3B JPY 120.5B JPY 123.8B JPY 165.1B JPY 194.5B 1 AM Fee % (Average) 0.61% 0.63% 0.65% 0.65% 0.64% 0.69% AM Fee Gross Profit (Ac
Slide 39: Ichigo-Owned Real Estate Portfolio
Ichigo-Owned Real Estate Portfolio Asset Class Asset Location Other Ground Lease 2% (JPY billion) Nagoya 3% 2% Sendai Other Mixed 3% 6% 5％ Osaka Residence 5% 12% Office 34% Fukuoka 14% Tokyo Retail 56% Sendai 19% 5.8 Kanto Tokyo Hotel 14% 105.7 25% Kanto 26.0 Asset Size Nagoya Osaka 3.4 8.7 Fukuoka
Slide 40: Value-Add Asset Breakdown (1)
Value-Add Asset Breakdown (1) 92 Assets, JPY 189.8B, Forecast NOI JPY 11.0B (6.4% Yield) Building Acquisition Forecast Equity Forecast No. Asset Class Classification Location Acquisition Price Expected NOI/Year Ichigo Investment Age Date Multiple 1 IRR2 1 Other Fixed Asset Matsudo City, Chiba 44 yea
Slide 41: Value-Add Asset Breakdown (2)
Value-Add Asset Breakdown (2) Building Acquisition Forecast Equity Forecast No. Asset Class Classification Location Acquisition Price Expected NOI/Year Ichigo Investment Age Date Multiple 1 IRR2 17 Retail Fixed Asset Toshima-ku, Tokyo 5 years ≧JPY 3B 2013/03 JPY 230M JPY 340M – – * 18 Retail Real Es
Slide 42: Value-Add Asset Breakdown (3)
Value-Add Asset Breakdown (3) Building Acquisition Forecast Equity Forecast No. Asset Class Classification Location Acquisition Price Expected NOI/Year Ichigo Investment Age Date Multiple 1 IRR2 35 Mixed(Office/Retail) Real Estate for Sale Minato-ku, Tokyo 8 years JPY 2B-3B 2014/05 JPY 162M JPY 434M
Slide 43: Value-Add Asset Breakdown (4)
Value-Add Asset Breakdown (4) Building Acquisition Forecast Equity Forecast No. Asset Class Classification Location Acquisition Price Expected NOI/Year Ichigo Investment Age Date Multiple 1 IRR2 50 Residence Real Estate for Sale Sumida-ku, Tokyo 11 years JPY 1B-2B 2014/12 JPY 60M JPY 163M 1.55 x 15.
Slide 44: Value-Add Asset Breakdown (5)
Value-Add Asset Breakdown (5) Building Acquisition Forecast Equity Forecast No. Asset Class Classification Location Acquisition Price Expected NOI/Year Ichigo Investment Age Date Multiple 1 IRR2 66 Retail Real Estate for Sale Sendai City, Miyagi 13 years <JPY 1B 2015/02 JPY 49M JPY 8M 42.58 x 198.9%
Slide 45: Value-Add Asset Breakdown (6)
Value-Add Asset Breakdown (6) Building Acquisition Forecast Equity Forecast No. Asset Class Classification Location Acquisition Price Expected NOI/Year Ichigo Investment Age Date Multiple 1 IRR2 109 Hotel Real Estate for Sale Nagoya City, Aichi 8 years JPY 2B-3B 2016/03 JPY 124M JPY 525M 1.84 x 37.7
Slide 46: Value-Add Asset Breakdown (7)
Value-Add Asset Breakdown (7) Building Acquisition Forecast Equity Forecast No. Asset Class Classification Location Acquisition Price Expected NOI/Year Ichigo Investment Age Date Multiple 1 IRR2 122 Hotel Real Estate for Sale Shima City, Mie 19 years <JPY 1B 2017/01 JPY 47M JPY 73M 5.49 x 43.1% 123
Slide 47: Reference: Japan's Feed-in-Tariff (FIT)
Reference: Japan’s Feed-in-Tariff (FIT) What is a FIT? ‒ A policy mechanism designed to accelerate the deployment of renewable energy such as solar and wind, guaranteeing a long-term sale price for electricity (in Japan, 20 years) at a fixed price. ‒ Japan’s FIT is updated every year. Tariff per Gua
Slide 48: Clean Energy Earnings
Clean Energy Earnings Earnings Growth via Solar Power Plant Sales to Ichigo Green OP 10X YOY (JPY 3.3B in FY17/2 vs. JPY 323M in FY16/2) FY16/2 FY17/2 FY17/2 Full-Year vs. of Full-Year (12M) (12M) Forecast (12M) Forecast Revenue JPY 1,628M JPY 12,352M JPY 11,152M +10.8% Cost of Goods Sold JPY 945M J
Slide 49: Solar Power Plant Portfolio (1)
Solar Power Plant Portfolio (1) Ichigo (Operating) Ichigo (In-Development) Panel Panel FIT Operation FIT Operation Solar Power Plant Area Output Solar Power Plant Area Output (Pre-tax) Start Date (Pre-tax) Start Date (MW) (MW) Ichigo Tokushima Higashi Okinosu Shikoku 2.52 JPY 40 Aug 2013 Ichigo Memu
Slide 50: Solar Power Plant Portfolio (2)
Solar Power Plant Portfolio (2) 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) 43 Plants (128MW) Ichigo Abira Toasa (1.16MW) Ichigo Yubetsu Bar
Slide 51: Ichigo-Owned Solar Power Plant Details
Ichigo-Owned Solar Power Plant Details By Customer By Feed-In-Tariff By Operating Timeline (Electric Power Utility Co) Chubu Kyushu 5% Tohoku 6% 5% JPY 24 >1 year in Shikoku 10% JPY 40 operation 2% 16% 17% JPY 32 Hokkaido 10% 0.5-1 year in 4% operation 6% TEPCO <0.5 year in 57% Starting operat
Slide 52: Consolidated Balance Sheet: Assets
Consolidated Balance Sheet: Assets (JPY million) Change FY13/2 FY14/2 FY15/2 FY16/2 FY17/2 (YOY) Assets Current Assets Cash and cash equivalents 9,713 24,991 19,383 28,779 47,678 +18,899 Trade notes and accounts receivable 548 451 519 691 913 +222 Operational loan investments 3,636 1,100 2,330 1,324
Slide 53: Consolidated Balance Sheet: Liabilities & Net Assets
Consolidated Balance Sheet: Liabilities & Net Assets (JPY million) Change FY13/2 FY14/2 FY15/2 FY16/2 FY17/2 (YOY) Liabilities Current Liabilities Trade notes and accounts payable 64 132 124 80 110 +30 Short-term loans 484 950 1,416 2,188 805 -1,383 Short-term non-recourse loans – – 48 79 611 +532 B
Slide 54: Consolidated P&L
Consolidated P&L (JPY million) FY17/2 FY13/2 FY14/2 FY15/2 FY16/2 FY17/2 Change vs. Full-Year (12M) (12M) (12M) (12M) (12M) (YOY) Forecast Forecast Revenue 16,397 35,101 42,705 49,699 109,253 +59,554 125,600 -13.0% Cost of Goods Sold 11,422 27,666 30,539 29,835 82,446 +52,611 - - Gross Profit 4,974
Slide 55: Consolidated Cash Flows from Operating Activities
Consolidated Cash Flows from Operating Activities (JPY million) FY13/2 (12M) FY14/2 (12M) FY15/2 (12M) FY16/2 (12M) FY17/2 (12M) Cash Flows from Operating Activities: Pre-tax net income 1,693 3,933 7,220 14,022 20,630 Depreciation 230 304 565 792 778 Share-based compensation expenses 49 69 112 174 2
Slide 56: Consolidated Cash Flows from Investing & Financing Activities
Consolidated Cash Flows from Investing & Financing Activities (JPY million) FY13/2 (12M) FY14/2 (12M) FY15/2 (12M) FY16/2 (12M) FY17/2 (12M) Cash Flows from Investing Activities: Payments into time deposits – – -325 – -6,100 Redemptions of time deposits 151 – 325 – 201 Payments for securities invest
Slide 57: Appendix: Power Up 2019 Mid-Term Business Plan
Appendix: Power Up 2019 Mid-Term Business Plan © 2017 Ichigo Inc. All rights reserved. 57
Slide 58: Power Up 2019 Key Goals & KPIs
Power Up 2019 Key Goals & KPIs Key Goals 1. Drive Further Sustainable Growth in Ichigo’s Core Businesses 2. Develop New Ichigo Businesses 3. Deepen Ichigo’s Core Capabilities and Corporate Strength Power Up 2019 KPIs (Key Performance Indicators) (JPY million) FY16/2 (Actual) FY17/2 (Actual) FY18/2 (
Slide 59: Target: Top 200 Ranking within the JPX-Nikkei 400 Index
Target: Top 200 Ranking within the JPX-Nikkei 400 Index Ichigo Targeting Ranking Within the Index’s Top 200 Companies by August 2019 (the Final Year of Power Up 2019) Note: While the JPX-Nikkei Index 400 does not provide an official ranking of its 400 constituents, it can be calculated based upon th
Slide 60: Power Up 2019 Key Initiatives
Power Up 2019 Key Initiatives Profitability Sustainability • List Ichigo’s solar assets on the TSE’s new • Grow both financial stability and earnings Infrastructure Market (3) Finance as a • De-collateralize loans, lengthen loan • Support the ongoing growth of Ichigo Office Strategic Measure maturit
Slide 61: Adoption of Progressive Dividend & DOE Policy
Adoption of Progressive Dividend & DOE Policy Progressive Dividend: The previous year’s dividend is the floor for the current year’s dividend. Dividend will be raised (or kept flat) but not cut, providing shareholders with downside dividend protection Newly set a minimum DOE (dividend on equity)
Slide 62: MEMO
MEMO © 2017 Ichigo Inc. All rights reserved. 62
Slide 63: 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