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cba广东录像全场回放: COMPANY RESEARCH AND ANALYSIS REPORT:Nousouken Corporation-3541-TSE Mothers( II )

2019-03-07  提供機構:FISCO  作者:FISCO  點閱次數:1

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cba上海队官网 www.wnjuk.tw ◆Results trends

The KPI are trending strongly and the value of goods distributed increased 23.8% YoY

1. FY8/18 results

In the FY8/18 consolidated results, net sales increased 39.2% YoY to ¥2,310mn. The KPI the Company uses are the number of outlets, the number of producers, and the number of transshipment terminals, and it aims to grow the value of goods distributed through increasing these numbers. The value of goods distributed refers to the total for the final sales prices purchased by the end consumers at supermarkets and other retailers. At the end of FY8/18, the number of outlets had increased by 201 on the end of the previous fiscal year to 1,197, the number of producers had risen by 1,015 to 7,845, and the number of transshipment terminals had increased by 17 to 86. As a result, the value of goods distributed also steadily grew, rising 23.8% YoY to ¥8,778mn.

(1) The number of outlets

Among the 1,197 outlets, there are 12 overseas outlets. The Company has established a system toward expanding distribution through the operations of its own centers. Its main customers include AEON RETAIL, HANKYU OASIS, and SUMMIT, INC. The introduction rate at customers has reached 26.4%. Also, the introduction rate at the 20,480 supermarkets nationwide (Supermarket White Paper, 2018) is 5.8%, so there remains plenty of room for further expansion, and the number of inquiries from supermarkets continues to increase.

(2) The number of registered producers

The number of registered producers at the end of FY8/18 was 7,845 producers, and the Company is aiming to increase this number, including through the operations of its own centers and by strengthening the IT platform. Registered producers are developing nationwide and out of the 2,155,082 farms nationwide (as of 2015), the registration rate is still only 0.36%. So this rate is expected to increase in the future, and basically the expansion is continuing through word of mouth. Looking by region, there are 3,903 producers in the Kansai area and 1,450 producers in the Kanto area.

(3) The number of transshipment terminals

At the end of FY8/18, there were 86 transshipment terminals, of which 62 were FC transshipment terminals. In FY8/18, subcontracting with the Shikoku Branch of JAPAN POST Co., Ltd., contributed to the increase in the number of terminals. Also, in some areas, the Company consolidated the terminals. Currently, they have been established in 31 prefectures. Looking by region, there are 24 terminals in the Kansai area, 16 in the Kanto area, and 15 in the Chugoku and Shikoku areas, and the effects of the subcontracting with the JAPAN POST Shikoku Branch are appearing.

(4) Trends in the KPI

From the results summary, it is evident that for sales, there is strong demand from supermarkets and other retailers, and that alongside this, outright purchase consignment sales are driving sales. For gross profit, the gross profit margin fell by 6.3 percentage points YoY, as it was affected by the change to the sales composition ratio alongside the increase in outright purchase consignment sales. However, for operating profit, the subsidies for subsidiaries were fixed at ¥43mn, and this contributed to reducing the loss. The reason why outright purchase consignment sales increased in FY8/18 was because during this fiscal year, there were many disasters causing damage, such as heavy snow, heavy rain, summer heatwaves and typhoons, so farm-produce harvests were small and the Company made purchases to secure a stable supply. It is aiming to realize a stable supply by securing a certain amount of goods so that it can respond not only to natural disasters that may occur in the future, but also to the increasing number of outlets (which the Company calls “platform stabilization”). So going forward also, outright purchase consignment sales are expected to increase. In addition, the initial forecast was for an operating loss of ¥100mn, but the result was ¥4mn less, of ¥96mn.

(5) Analysis of changes to ordinary profit

In FY8/18, the ordinary loss was ¥47,286mn. The main items in the breakdown of non-operating profit were subsidy income of ¥43mn and guarantee commission received of ¥4mn, while the main items in the breakdown of non-operating expenses were rent expenses of ¥15mn and a foreign exchange loss of ¥1mn. In FY8/18, the Company steadily implemented its plan to invest in distribution, IT, and human resources, toward solidifying the structure in the future. Distribution costs rose sharply, but this was absorbed by the review of shipment commissions (commissions corresponding to distribution costs collected at the time of shipment), while subsidy income was higher than forecast, and these factors contributed to the reduction in the ordinary loss.

2. Financial position

For the financial position, current assets increased ¥76mn on the end of the previous fiscal year to ¥1,372mn due to the growth in the transaction volume. Non-current assets rose ¥79mn on the end of the previous fiscal year to ¥143mn. In liabilities, there were increases in accounts payable, accrued liabilities, provision for bonuses, and long-term loans payable, so total liabilities increased ¥172mn on the end of the previous fiscal year to ¥847mn. In net assets, retained earnings declined ¥29mn due to the recording of loss attributable to the parents, and as a result, net assets were down ¥17mn on the end of the previous fiscal year to ¥668mn.

3. The main topics

(1) On April 18, 2018, announced a subcontracting agreement with the JAPAN POST Shikoku Branch

The Company had begun partial collaborative work with JAPAN POST in Chiba Prefecture in 2015, but it has concluded a subcontracting agreement with the Shikoku Branch in April 18, 2018. Under this agreement, it aims is to newly recruit producers (registered producers) who will ship farm produce and other items in order to expand shipments of vegetables, fruits, and other farm produce, and also products processed from these produce, and to promote farm produce distribution. Specifically, the work to recruit producers and the work required when registering them as registered producers will be subcontracted to the JAPAN POST Shikoku Branch, and in order to carry out this subcontracting work, the Company will establish transshipment terminal and facilities to enhance the transshipment terminals (hereafter, transshipment terminals, etc.) in the post offices owned or rented by the JAPAN POST Shikoku Branch. In other words, under this business alliance, that Company subcontracts shipments of vegetables and fruits to post offices, and the farm produce will be shipped to the supermarkets and other retailers utilizing the distribution capabilities of the JAPAN POST Shikoku Branch. Through this agreement, producers will be able to sell their produce at supermarkets and other retailers nationwide by bringing farm produce and other produce to post offices near to them. It will contribute to providing producers nationwide with expanded sales channels and enable them to stably acquire earnings. Due to this agreement, at the end of FY8/18 there were already an increase of 10 FC transshipment terminals in JAPAN POST Shikoku Branch post offices.

(2) On September 11, 2018, started the Saichoku service, an EC membership system for fruits and vegetables for restaurants

The Company judged that it can connect producers and restaurants by utilizing the distribution network it has reconstructed (with its own center in the Ota Market) and launched an innovative EC service Saichoku in FY8/19 in order to improve its future earnings capability. This was done in anticipation that the value of goods distributed would exceed ¥10bn. Saichoku is an EC membership system for fruits and vegetables for restaurants that will utilize the 86 transshipment terminals nationwide and the center within the Ota Market, and it is a new service that will conduct direct sales of approximately 8,000 registered producers’ fruits and vegetables to restaurants. Through Saichoku, the registered producers receiving orders will make shipments along with their regular daily shipments to the Company’s transshipment terminals. The shipped fruits and vegetables will be delivered, via the Company’s own center in Ota Market, to the stores of wholesalers that supply the restaurants in Ota Market (at the start of the service, it was targeting approximately 15,000 stores in the Tokyo area). It is a service never seen before, and advancing into the restaurant industry that covers a wide area can be expected to contribute to the Company’s earnings in the future.

Saichoku aims to achieve “benefits for all four sides.” The four sides refer to the Company, producers, wholesalers, and restaurants. Specifically, the business model for “benefits for all four sides” is as shown in the above chart, but the following explains each four side from their point of view.

a) For the Company, because it utilizes the existing distribution network, it can expand sales channels basically without having to conduct new investment or incur additional costs, and aim for increases in value of goods distributed and earnings.

b) For the producers, by registering with the Company, they can expect sales channels to expand and sales to increase not only to retailers, as up to the present time, but also to restaurants. Also, as the shipment destinations are the Company’s transshipment terminals, the same as up until now, additional costs are unnecessary. Moreover, they are able to acquire their own fans and to conduct branding.

c) For the wholesalers, they can provide new product proposals and conduct sales to restaurants, so they can expect sales to increase. As the service utilizes existing agreements, commercial channels, and distribution network, new investment and additional costs are not required.

d) For the restaurants, they are able to purchase a minimum of one pack of fruit and vegetables from nationwide producers, and by using traceable fruits and vegetables, they can easily put high-value added dishes to their menu. Produce can be delivered to the establishment in a minimum of within 24 hours from being harvested, and highly fresh fruit and vegetables maintain their quality for a long time, which contributes to a reduction in the loss ratio. By taking full advantage of the existing distribution network of the Company and the wholesalers, they can procure high value-added fruit and vegetables at low prices and utilize the Saichoku service via the wholesalers with which the Company already conducts transactions. Therefore, they can receive the produce in bulk with other goods, and no new problems will occur. There has been no such service for restaurants up to the present time, and it is expected to grow in the future.

4. Strengthening the relationship with the JAPAN POST Group

As a FY8/19 topic, on October 19, 2018, the Company announced the “Conclusion of a capital alliance agreement in order to strengthen the relationship with the JAPAN POST Holdings Co., Ltd., the sale of shares, and the change of major shareholder.” For the Company to grow further, it is essential to provide the registered producers with a highly convenient system by opening transshipment terminals nationwide and expanding the registered producers. But to establish transshipment terminals nationwide on its own and to establish a distribution network that will increase the delivery efficiency of the transshipment terminals, the Company faces time and financial restrictions. Therefore, it has subcontracted work to its business-alliance partners who share the same vision as the Company, and as one such partner, it concluded a subcontracting agreement with the JAPAN POST Shikoku Branch on April 18, 2018. It established transshipment terminals, etc. within the post offices owned or rented by the JAPAN POST Shikoku Branch and subcontracted the work to recruit registered producers and the work necessary when registering them. As a result, as of October 19, 2018, this work is being conducted at 10 post offices in Shikoku.

The effects of the alliance with the JAPAN POST Group are also appearing. In January 2019, the Company announced a business alliance with the JAPAN POST Kyushu Branch. In early March 2019 in Tosu City, Saga Prefecture, the Company will open the Tosu Center jointly with the JAPAN POST Kyushu Branch as a transshipment and distribution terminal. On the Company’s farm produce sales platform, there were inefficient distribution deliveries as producers bring farm produce to a nearby transshipment terminal, and the produce is then delivered from each transshipment terminal to the supermarkets and other retailers. By opening the Tosu Center, it can consolidate the deliveries from transshipment terminals within Kyushu, which will increase the efficiency of deliveries and reduce distribution costs.

The partner, JAPAN POST Capital Co., Ltd., belongs to the JAPAN POST Group, the same as the JAPAN POST Shikoku Branch, and the JAPAN POST Group has a strong shipping infrastructure from its network of approximately 24,000 post offices nationwide. In addition, it provides various product and services centered on its three businesses of post, savings, and insurance, and it also supports the lives of local people. The Company determined that by utilizing the JAPAN POST Group’s strengths, such as its brand power, functions and network, for the nationwide-use of a farm produce distribution system Farmer’s Direct Sales Outlet, it can increase convenience for the registered producers even more, which in turn would enable it to aim for further growth. It concluded this capital alliance agreement with JAPAN POST Capital with the main objective being strengthening the relationship with the JAPAN POST Group. In addition, in order to limit the dilution effect on existing shareholders, the leading shareholder, Plenty Co., Ltd., sold some of the shares in the Company it held and conducted a secondary distribution. The two companies agreed to the dispatch of directors from the JAPAN POST Group to the Company, with the Company accepting two people from the JAPAN POST Group as directors. The two companies will develop the business in the future while exchanging various information.

The JAPAN POST Group will receive commissions from the Company, while it is also thought that as the producers will come to the post offices, it will widen its customer base, such as for sales of the post offices’ products and for payments. It is also expected to lead to the securing of local staff at post offices. For the post offices, it creates a new distribution network, and it seems that the two companies intend to jointly develop the business by using both of their resources.

5. Outlook for FY8/19

In the Farmer’s Direct Sales Outlet business, there is a growing awareness among producers of the need for food security and safety, and therefore its high growth is expected to continue in FY8/19 also. The outlets established and the producers registered during FY8/18 will contribute for the full year, so the value of goods distributed is forecast to grow.

In FY8/19, the Company is aiming to establish a structural foundation with an eye to expand the value of goods distributed in the medium- to long-term, and it will further expand its earnings by utilizing the distribution platform that connects producers with supermarkets and other retailers that it strengthened and rebuilt based on the FY8/18 investment plan. On the other hand, it will continue to actively invest in human resources recruitment and in systems to improve productivity. For FY8/19, the Company expects to post operating profit while absorbing active investment costs, such as in personnel and distribution.

The forecasts for the FY8/19 consolidated results are for net sales of ¥3,200mn (up 38.5% YoY), operating profit of ¥50mn (compared to a loss of ¥96mn in the previous fiscal year), and profit attributable to owners of parent of ¥60mn (a loss of ¥29mn).

◆Overview of medium-term business plan

In its final fiscal year, aiming to further expand the value of goods distributed

The Company positioned the three-year period from FY8/17 as the investment phase to expand the value of goods distributed and formulated a medium-term business plan for this. In its second year in FY8/18, it actively conducted upfront investment, and therefore budgeted for an operating loss and implemented investments. For FY8/19, it has planned to invest in “distribution,” “IT,” and “human resources” toward the multi-layering of the top line.

As the prerequisites for formulating the medium-term business plan, with regards to the market environment, inquiries of demand from supermarkets and other retailers are strong, but on the other hand, the Company considers that establishing a business structure for supply has not been addressed, so it has set reestablishing “distribution,” “IT,” and “human resources” toward rapidly expanding the business and further accelerating growth as a management issue. In the current medium-term business plan, the 3 years from FY8/17 have been positioned as the investment phase to expand the value of goods distributed. So from the beginning, it budgeted for an operating loss in FY8/18 on the assumption that it would actively progress upfront investment. Therefore in FY8/18, in order to reestablish the business structure for the supply to supermarkets and other retailers, it implemented the plan to actively invest in “distribution,” “IT,” and “human resources toward solidifying the structure in the future

It progressed investment as expected in FY8/18 and also recorded a loss as planned, but the outcomes of the investment have been remarkable. We will be watching the progress made in the investment plan.

1. Distribution investment

For the “distribution” investment, the Company opened its own center within Ota Market (Ota Ward, Tokyo), which started operations in May 2018. This center is able to greatly eliminate the restrictions on distribution at shipment sites in remote locations, and it is also able to dramatically reduce opportunity losses. For the future, the aims are to add packing and other functions to the centers, and to strengthen shipments from large- and medium-sized producers.

2. IT investment

The “IT” investment enabled improved traceability functions for producers and to provide farm produce with higher product value. The Company has newly launched Field Memo, which is a pesticide usage history management app. It has also started Saichoku, an EC service for restaurants. In FY8/19, it is continuing with development to upgrade the core system, and its launch is planned for the end of FY8/19. It is also advancing the development of the Chokupo app for retail buyers (a system that that can directly connect producers and retail buyers to make and receive orders), and it intends to strengthen its IT platform for retailers. For the future, it is considering sales of parts of the Company’s core system, such as the demand forecast and payment functions, to other companies.

3. Human resources investment

For “human resources” investment, the Company increased the number of employees by 36 on the end of the previous fiscal year to 105 employees. Mainly focusing on recruits who are ready to work immediately in the field, it is actively recruiting for specialist positions, such as for distribution, IT, and fruit buyers. It is continuing to recruit human resources in FY8/19 also, to strengthen the structure that covers all of the country.

In FY8/19, the Company will invest in “distribution,” “IT,” and “human resources” toward the multi-layering of the top line. Although various businesses alliance and new business proposals have been brought to it in the past, it did not have a business system in place to respond to them. However, as it is making steady progress in the reconstruction and also has in place a financial foundation, it is aiming for multi-layering while conducting investment based on the investment plan. Multi-layering means adding, in a multi-layered manner, businesses other than the existing businesses on the existing platform that will raise plus alpha sales. As the value of goods distributed is expected to exceed ¥10bn, it will also actively use the existing platform. The Company will evolve the distribution platform for retailers, develop businesses that go beyond the direct sales business, and build the foundation for new businesses, such as the platform for restaurants. For example, in terms of distribution, it is using its own centers to construct further business development; for IT, it is developing an app for buyers; and for human resources, it is building a network structure that covers the leading production areas nationwide. It is also considering a so-called “real Amazon” strategy, in which actual products are sold at supermarkets and other retailers using the Company’s platform. Therefore, going forward, in addition to consignment sales, it is investigating building a structure that can actively increase purchases and provide a stable supply. It also has in its sight transport-related operations and handling products other than fruit and vegetables. In fact, it added a transportation business using freight vehicles to its articles of incorporation, and plans to engage in a transportation business using the empty spaces in the trucks that it charters. It is also considering purchasing and handling from producers of proper products to increase its share of the fruit sales floors of supermarkets and other retailers.

FY8/19 is the final phase of the medium-term business plan, and while continuing to invest in distribution, IT, and human resources, the Company expects ordinary profit of ¥60mn from the monetization of the investment plan. In terms of the specific investment content, for distribution, it is horizontally developing its own distribution centers, while for IT, it is strengthening the sales system and upgrading the core system. In particular, in FY8/19, it will build systems that incorporate the increase in consumption tax. Also, for human resources, as the value of goods distributed will grow, it plans to newly recruit 15 people in FY8/19.

For the value of goods distributed in the medium term, as the number of outlets is expected to continue to increase, it will be ¥12,000mn in in FY8/19 and ¥16,000mn in FY8/20. So as it was ¥8,778mn in FY8/18, going forward it is forecast to increase by at least 30% YoY.

◆Shareholder returns

Company plans to build up internal reserves to fund future growth investments

With regard to returns to shareholders, because the Company is still in the growth stage, management believes the greatest returns to shareholders will come not from paying dividends but from building up internal reserves and putting these funds towards investments that will increase operational efficiency and growth of the business. For that reason, the Company has never paid a dividend since its founding. Going forward, the Company will continue to follow its basic policy of retaining internal reserves for strengthening its business structure and expanding its businesses.

 

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