Ichigo Inc. · TSE:2337
Ichigo — H1 FY2017/2 Earnings Presentation
59 slides from Ichigo's earnings presentation, Oct 14, 2016
Slide 1: FY17/2 H1 (March-August 2016) Corporate Presentation
FY17/2 H1 (March-August 2016) Corporate Presentation April 23, October 14,2015 2016 Ichigo (2337) © 2016 Ichigo Inc. All rights reserved. www.ichigo.gr.jp/english
Slide 2: Ichigo Preserves and Improves Real Estate
Ichigo Preserves and Improves Real Estate © 2016 Ichigo Inc. All rights reserved.
Slide 3: © 2016 Ichigo Inc. All rights reserved.
© 2016 Ichigo Inc. All rights reserved.
Slide 4: Contents
Contents FY17/2 H1 (March-August 2016) Earnings ‒ OP 3X, EPS 2.8X YOY ‒ Earnings Growing Across All Segments ‒ Robust Cash Flow and Cash-On-Hand ‒ Strong Financial Position Powerful Value-Add Business Model Underpins Growth ‒ Ichigo Hotel REIT (3463) Growth ‒ Ichigo Office REIT (8975): 12 Consecutiv
Slide 5: FY17/2 H1 (March-August 2016) Earnings
FY17/2 H1 (March-August 2016) Earnings © 2016 Ichigo Inc. All rights reserved. 5
Slide 6: OP 3X, EPS 2.8X YOY
OP 3X, EPS 2.8X YOY ‒ Revenue 5.9X YOY on Asset Sales to Ichigo Office REIT in Q1 and to Ichigo Hotel REIT in Q2 ‒ 90% Progress in H1 vs. Full-Year EPS Forecast (Million Yen) Full-Year % of Full-Year (Reference) FY16/2 H1 FY17/2 H1 YOY Forecast Forecast FY16/2 Actual Revenue 14,607 85,991 +488.7% 12
Slide 7: Earnings Growing Across All Segments
Earnings Growing Across All Segments ‒ Value-Add OP 4.2X YOY (96% Progress vs. Full-Year Forecast) ‒ Growth Across the Board in Durable, Ongoing Earnings (Million Yen) Revenue Operating Profit Earnings Drivers % of Full- % of Full- Segment Full-Year Full-Year (Parentheses show YOY change FY16/2 H1 F
Slide 8: Robust Cash Flow and Cash-On-Hand
Robust Cash Flow and Cash-On-Hand FY17/2 H1 JPY +51.7B Buy Sale of Value-Add Assets − Use cash (Real Estate for Sale) Cash Flow from − Increase borrowings Operating Activities JPY +64.0B Acquisition of Value-Add Assets (Real Estate for Sale) JPY -26.0B JPY -1.7B Value- Cash Flow from Investing Activ
Slide 9: 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% 12.0 2.22% 10.6 years 9.0 years 1.96% 2.0% 9.0 8.7 years 1.71% 1.5% 6.0 4.7 years 5.9 years 1.4
Slide 10: Powerful Value-Add Business Model Underpins Growth
Powerful Value-Add Business Model Underpins Growth © 2016 Ichigo Inc. All rights reserved. 10
Slide 11: Ichigo Hotel REIT (3463) Growth (1)
Ichigo Hotel REIT (3463) Growth (1) Completed Sale of 10 Hotels (JPY 27.2B) to Ichigo Hotel REIT 2.3X Portfolio Size: JPY 20.4B JPY 47.6B Gain on Sale JPY 7.0B JPY 27.2B JPY 47.6B Ichigo Hotel REIT Portfolio Growth JPY 20.4B Pre-Sale July 22 Asset Sale Post-Sale Further Growth 9 Assets 1,257 Rooms
Slide 12: Ichigo Hotel REIT (3463) Growth (2)
Ichigo Hotel REIT (3463) Growth (2) 14 Hotel Assets (JPY 38B) on Ichigo balance sheet & 7 Assets (JPY 11B) in Highly-Likely Acquisition Pipeline as of Sep 30, 2016 Major cities: Yokohama, Osaka, Nagoya, Fukuoka, Kumamoto, etc. New hotel development with operators in-place Acquiring existing as
Slide 13: 12 Consecutive Periods of Dividend Growth – No. 1 vs. All J-REITs
Ichigo Office REIT (8975) 12 Consecutive Periods of Dividend Growth – No. 1 vs. All J-REITs Currently Forecasting 14 Consecutive Periods of Dividend Growth 1,890 1,900 yen yen (Forecast) (Forecast) 1,706 1,740 yen yen 1,603 (Actual) 1,537 1,541 1,547 yen 1,494 yen yen yen yen 1,387 1,219 yen yen 1,0
Slide 14: Value-Add Driving Earnings
Value-Add Driving Earnings In Addition to Rental Income from Value-Add Assets of JPY 5.1B, Sale of 34 Value-Add Assets Generated JPY 10.3B Profit FY17/2 H1 Value-Add Asset Sales JPY 74.6B JPY 10.3B (34 Assets) (34 Assets) Sold to Third-Party Sold to Third-Party JPY 2.7B Gross Profit Margin JPY 17.4B
Slide 15: Hotel Value-Add Capex (1)
Hotel Value-Add Capex (1) Comfort Hotel Osaka Shinsaibashi: JPY 250M Capex to add 21 new guest rooms − Centrally-located hotel close to tourist attractions, generating significant demand from both business travelers and tourists − Moved the front desk from the 3rd floor to the 2nd floor, which was p
Slide 16: Hotel Value-Add Capex (2)
Hotel Value-Add Capex (2) Comfort Hotel Osaka Shinsaibashi Before Renovation After Renovation © 2016 Ichigo Inc. All rights reserved. 16
Slide 17: Expanding Value-Add Business to Large-Size Office Buildings
Expanding Value-Add Business to Large-Size Office Buildings Acquisition of Tradepia Odaiba announced on October 11, 2016 Name Tradepia Odaiba Location 2-Chome, Daiba, Minato-ku, Tokyo Transportation 3-minute walk from Tokyo Teleport Station on the Tokyo Rinkai Line Land Area 12,910.26 ㎡ Total Floor
Slide 18: Clean Energy Business Growth
Clean Energy Business Growth Expected Listing of Ichigo Green Infrastructure Investment Corporation Tax-advantaged solar ETF that will offer shareholders an opportunity to invest in the rapidly expanding green infrastructure asset class Green, safe, and contributes to Japan’s energy self-suffici
Slide 19: National Solar Power Plant Portfolio (1)
National Solar Power Plant Portfolio (1) 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) 37 Plants (116MW) Ichigo Abira Toasa (1.17MW) Ichigo Y
Slide 20: National Solar Power Plant Portfolio (2)
National Solar Power Plant Portfolio (2) By Customer By Feed-in-Tariff By Operating Timeline (Electric Power Utility Co) Kyushu Chubu3% 4% Tohoku 4% 32 yen Shikoku 11% Starting >1 year in 5% 40 yen Okinawa operation operation 30% within 1-2 32% 7% TEPCO years Hokkaido 49% 51% 11% 36 yen 0.5-1
Slide 21: JPX-Nikkei Index Inclusion
JPX-Nikkei Index 400 Inclusion Index Composed of Companies that Meet Global Investor Standards for Efficient Use of Capital and Strong Corporate Governance Ichigo successfully entered in August 2016 In its new mid-term plan Power Up 2019, Ichigo targeting ranking in the Index’s top 200 companies
Slide 22: Appendix: Financial & Real Estate Data
Appendix: Financial & Real Estate Data © 2016 Ichigo Inc. All rights reserved. 22
Slide 23: 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 Renewable Energy Solar Plants Buy Ichigo Green Infrastructure Fund Sell Office Real Third- Estate Party Ichigo Office REIT (8975) Value-Add Investors Real 不動産 H
Slide 24: 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 Preserve & Improve Value‐Add ・ Higher-Quality Tenant Servi
Slide 25: Value-Add Sample Earnings Model
Value-Add Sample Earnings Model 5.5% NOI, 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 during i
Slide 26: Consolidated Risk-Based Balance Sheet
Consolidated Risk-Based Balance Sheet Mark-to-Market Consolidated Balance Sheet: JPY 254.3B As of August 31, 2016 (Book Value JPY 229.6B + Unrealized Gains JPY 24.7B) Non-Recourse Loans & Non-Recourse Loan- Related Liabilities Related Assets JPY 55.2B Consolidated Risk-Based Balance Sheet JPY 74.3B
Slide 27: Significant Unrealized Gains on Balance Sheet
Significant Unrealized Gains on Balance Sheet Total Unrealized Gains: JPY 24.5B (Appraisal Value Basis) Real estate directly held by Ichigo (Million Yen) Book Value as of Cap Rate Appraisal Value Location NOI Unrealized Gain Aug 31, 2016 NOI/Book Value after write-down as of Aug 31, 2016 Tokyo 67,20
Slide 28: Business Segments
Business Segments Asset Management generates fee income via management of Ichigo Office REIT (8975), Ichigo Hotel REIT (3463), and private funds and Asset Management providing real estate services related to real estate acquisition, operation (PM/BM), and disposition. Value-Add preserves and improve
Slide 29: Consolidated Balance Sheet
Consolidated Balance Sheet (Million Yen) FY 17/2 Q1 FY 17/2 H1 Unrealized Gain Outside Quarter-on- Unrealized FY16/2 Market Value on Listed B/S B/S Investors' Quarter Gain 2 Securities Interest Cash and Cash Equivalents 28,779 35,183 46,473 557 +11,290 46,473 － － Operating Loans Receivable (Value-Ad
Slide 30: Consolidated Balance Sheet: Segment Breakdown
Consolidated Balance Sheet: Segment Breakdown (Million Yen) Cash and Operating Operational Power Investments Real Estate Fixed Intangible Other Segment Cash Loans Investments Plants for in Total Assets for Sale Assets Assets Assets Equivalents Receivable in Securities Sale Securities Asset Managemen
Slide 31: Consolidated P&L: Gross Profit Segment Breakdown
Consolidated P&L: Gross Profit Segment Breakdown (Million Yen) Revenue Gross Profit YOY Segment FY16/2 H1 FY17/2 H1 Change FY16/2 H1 FY17/2 H1 Change (Gross Profit) Asset Management 2,964 2,460 -503 2,067 1,558 -509 - 24.6% Asset Management Fees 806 1,107 +301 800 1,102 +302 +37.8% PM/BM Fees 1,080
Slide 32: Consolidated P&L: Results vs. Forecast
Consolidated P&L: Results vs. Forecast (Million Yen) ン FY17/2 H1 (6M) FY17/2 Full-Year Forecast (12M) Segment % of Full-Year Gross % of Full-Year Operating % of Full-Year Gross Operating Revenue Revenue Forecast Profit Forecast Profit Forecast Profit Profit Asset Management 2,460 48.4% 1,558 52.0% 1
Slide 33: Asset Management AUM Detail
Asset Management AUM Detail FY12/2 FY13/2 FY14/2 FY15/2 FY16/2 FY17/2 H1 (12M) (12M) (12M) (12M) (12M) (6M) Ichigo Office REIT AUM (Fiscal Year End) JPY 106.1B JPY 104.3B JPY 120.5B JPY 123.8B JPY 165.1B JPY 191.9B (8975) AM Fee % (Average) 0.61% 0.63% 0.65% 0.65% 0.64% 0.67% AM Fee Gross Profit (Ac
Slide 34: Ichigo-Owned Real Estate Portfolio
Ichigo-Owned Real Estate Portfolio As of August 31, 2016 Assets by Type Assets by Location Ground Other Nagoya Lease 1% 2% 4% Sendai (Billion Yen) 4% Other Mixed 6% 7% Office Osaka 26% 7% Residence 16% Fukuoka Tokyo 17% 47% Hotel Retail 21% 25% Kanto 17% Sendai Tokyo 5.8 68.3 Kanto Assets by Size 25
Slide 35: Value-Add Asset Breakdown (1)
Value-Add Asset Breakdown (1) 86 Assets, Book Value JPY 146.8B, Forecast NOI JPY 9.0B (6.2% Yield) Acquisition Expected Forecast Equity Forecast No. Asset Type Classification Location Building Age Acquisition Price Ichigo Investment 1 2 Date NOI/Year Multiple IRR 1 Other Fixed Asset Matsudo City, Ch
Slide 36: Value-Add Asset Breakdown (2)
Value-Add Asset Breakdown (2) No. Asset Type Classification Location Building Age Acquisition Price Acquisition Expected Ichigo Investment Forecast Equity * Forecast Date NOI/Year Multiple1 IRR2 17 Retail Fixed Asset Toshima-ku, Tokyo 5 years ≧ JPY 3B 2013/03 JPY 228mm JPY 340mm － － 18 Retail Real E
Slide 37: Value-Add Asset Breakdown (3)
Value-Add Asset Breakdown (3) Acquisition Expected Forecast Equity Forecast No. Asset Type Classification Location Building Age Acquisition Price Ichigo Investment Date NOI/Year Multiple1 IRR2 33 Office Real Estate for Sale Shinagawa-ku, Tokyo 27 years JPY 2B-3B 2014/05 JPY 155mm JPY 530mm 2.04 x 20
Slide 38: Value-Add Asset Breakdown (4)
Value-Add Asset Breakdown (4) Acquisition Expected Forecast Equity Forecast No. Asset Type Classification Location Building Age Acquisition Price Ichigo Investment 1 2 Date NOI/Year Multiple IRR 48 Residence Real Estate for Sale Minato-ku, Tokyo 12 years JPY 1B-2B 2014/12 JPY 79mm JPY 238mm 1.67 x 1
Slide 39: Value-Add Asset Breakdown (5)
Value-Add Asset Breakdown (5) Acquisition Expected Forecast Equity Forecast No. Asset Type Classification Location Building Age Acquisition Price Ichigo Investment 1 2 Date NOI/Year Multiple IRR 63 Retail Real Estate for Sale Meguro-ku, Tokyo 10 years JPY 1B-2B 2014/12 JPY 67mm JPY 129mm 3.98 x 23.8
Slide 40: Value-Add Asset Breakdown (6)
Value-Add Asset Breakdown (6) Acquisition Expected Forecast Equity Forecast No. Asset Type Classification Location Building Age Acquisition Price Ichigo Investment 1 2 Date NOI/Year Multiple IRR 105 Hotel Real Estate for Sale Kumamoto City, Kumamoto 32 years JPY 1B-2B 2015/12 JPY 117mm JPY 453mm 1.6
Slide 41: 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 42: Clean Energy Earnings
Clean Energy Earnings Revenue Growth via New Plants Coming Online OP +21% YOY (JPY 351mm in FY17/2 H1 vs. JPY 290mm in FY16/2 H1) (Million Yen) FY16/2 FY17/2 Q1 FY17/2 H1 FY17/2 Full-Year % of Full-Year (12M) (3M) (6M) Forecast (12M) Forecast Revenue 1,628 556 1,214 11,152 10.9% Cost of Goods Sold 9
Slide 43: Individual Solar Power Plant P&L Breakdown (1)
Individual Solar Power Plant P&L Breakdown (1) Total 20-Year Forecast IRR for All Plants: 40.7% p.a. Fixed Panel Forecast Equity Tariff Operation Expected Ichigo Forecast No. Solar Power Plant Area Output Depreciation Multiple (If held (Pre-tax, Start Date NOI/Year Investment IRR2 (MW) for 20 years)
Slide 44: Individual Solar Power Plant P&L Breakdown (2)
Individual Solar Power Plant P&L Breakdown (2) Fixed Panel Forecast Equity Tariff Operation Expected Forecast No. Solar Power Plant Area Output Depreciation Ichigo Investment Multiple (If held (Pre-tax, Start Date NOI/Year IRR2 (MW) for 20 years) 1 JPY) 21 Ichigo Toyokawa Mitocho Sawakihama Chubu 1.
Slide 45: Consolidated Balance Sheet: Assets
Consolidated Balance Sheet: Assets (Million Yen) Change FY13/2 FY14/2 FY15/2 FY16/2 FY17/2 Q1 FY17/2 H1 (QOQ) Assets Current Assets Cash and cash equivalents 9,713 24,991 19,383 28,779 35,183 46,473 +11,290 Trade notes and accounts receivable 548 451 519 691 1,494 1,021 -473 Operational investments
Slide 46: Consolidated Balance Sheet: Liabilities & Net Assets
Consolidated Balance Sheet: Liabilities & Net Assets (Million Yen) Change FY13/2 FY14/2 FY15/2 FY16/2 FY17/2 Q1 FY17/2 H1 (QOQ) Liabilities Current Liabilities Trade notes and accounts payable 64 132 124 80 81 72 -9 Short-term borrowings 484 950 1,416 2,188 1,425 1,410 -15 Short-term non-recourse lo
Slide 47: Consolidated P&L
Consolidated P&L (Million Yen) FY17/2 FY13/2 FY14/2 FY15/2 FY16/2 FY17/2 H1 FY16/2 H1 Change vs Full-Year (12M) (12M) (12M) (12M) (6M) (6M) (YOY) Forecast Forecast Revenue 16,397 35,101 42,705 49,699 85,991 14,607 +71,384 125,600 68.5% Cost of Goods Sold 11,422 27,666 30,539 29,835 68,522 7,443 +61,
Slide 48: Consolidated Cash Flows from Operating Activities
Consolidated Cash Flows from Operating Activities (Million Yen) FY13/2 FY14/2 FY15/2 FY16/2 FY17/2 H1 (12M) (12M) (12M) (12M) (6M) Cash Flows From Operating Activities Pre-tax net income 1,693 3,933 7,220 14,022 16,019 Depreciation 230 304 565 792 460 Share-based compensation expenses 49 69 112 174
Slide 49: Consolidated Cash Flows from Investing & Financing Activities
Consolidated Cash Flows from Investing & Financing Activities (Million Yen) FY13/2 FY14/2 FY15/2 FY16/2 FY17/2 H1 (12M) (12M) (12M) (12M) (6M) Cash Flows from Investing Activities: Payments into time deposits － － -325 － -3,000 Redemptions of time deposits 151 － 325 － 201 Acquisition of investment se
Slide 50: Appendix: Power Up 2019 Mid-Term Business Plan
Appendix: Power Up 2019 Mid-Term Business Plan © 2016 Ichigo Inc. All rights reserved. 50
Slide 51: 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) (Million Yen) FY16/2 (Actual) FY17/2 (Forecast) FY19/2
Slide 52: Target: Top 200 Ranking within the JPX-Nikkei 400
Target: Top 200 Ranking within the JPX-Nikkei 400 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 the JPY-
Slide 53: 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 Fund Market (3) Finance as a • De-collateralize loans, lengthen loan • Support the ongoing growth of Ichigo Office Strategic Measure ma
Slide 54: 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 55: Corporate Name Change on September 1, 2016
Corporate Name Change on September 1, 2016 To further focus on its core identity and unify its Japanese and English corporate names, Ichigo simplified its Japanese corporate name to Ichigo Inc. on September 1, 2016. Ichigo also simplified the name of its REIT asset management subsidiary to reflect t
Slide 56: MEMO
MEMO © 2016 Ichigo Inc. All rights reserved. 56
Slide 57: MEMO
MEMO © 2016 Ichigo Inc. All rights reserved. 57
Slide 58: MEMO
MEMO © 2016 Ichigo Inc. All rights reserved. 58
Slide 59: These materials were prepared to explain the Company’s businesses and are not for the
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