*Stock prices as of the close on November 26, 2018. Number of shares issued at the end of the most recent quarter excluding treasury shares.
ROE and BPS are based on FY 3/18 earnings results; EPS is based on FY 3/19 earnings estimates. Figures are rounded to the nearest decimal point.

 

*Estimates are those of the Company.

 

 

 

 

 

Fuji Corporation Ltd. provides various real estate related services including sales of new and used condominiums and detached homes primarily in Osaka Prefecture (where the Company is based), between Osaka and Kobe, and within Wakayama City. Their main business is the sale of detached homes, albeit a built-for-sale type, that would maximize customer satisfaction by allowing for the "free-design home" regarding layout, specifications, etc. within the boundaries of Japan's Building Standards Act. Fuji also boasts of strengths in the development of properties where 50 to 200 homes are constructed in coordination with the surrounding environment and each other to provide uniformity in neighborhoods. The other main pillars of the Company's business include renovation and sale of used residential properties, collaboration with financial institutions for effective land utilization, sales of rental apartments for sale to individual investors, property leasing and management services, and custom housing. Fuji boasts of unique knowhow developed in various businesses realms derived from its sales agency and detached home services. Furthermore, the complementary and synergistic effects that occur between its various business divisions allow the Company as a Complete Home Provider to respond with solutions that match the needs of home owners and residents in various geographic regions and times. Another strength of Fuji is local community-based management to match the time and place of the markets, and to maintain high levels of customer satisfaction by upholding the principles of "never ignoring customers after the sale" and "never ignoring customers after the completion of construction." (1) Business Description Residential Properties for Sale (36.7% of the Fiscal Year March 2018 Total Sales) Sales of detached homes and condominiums are conducted in this business. A characteristic of this business is Fuji's ability to develop neighborhoods of new detached homes in 50 to 200 units that match the local neighborhoods, and to allow its customers to participate in the designing of the property. More specifically, these "free-design" homes respond to the needs of individual customers by allowing them to customize the layout and specification of the homes to suit their tastes and needs. Furthermore, new condominiums for sale are also included in the residential properties for sale business segment. Fuji halted the condominium for sale business in spring of 2005, based upon the outlook for a weakening in pricing due to declines in demand and increases in supplies. However, in the aftermath of the Lehman Shock, declines in land prices and improvements in supply and demand conditions in the condominiums for sale market led Fuji to restart the condominiums for sale business in February 2012. Another feature of Fuji is its focus upon condominiums and residential properties that are carefully selected (such as their convenient proximity to stations) and that are attractively priced for first-time buyers. Housing Distribution (28.3% of the Fiscal Year March 2018 Total Sale) Sales of refurbished used residential property called "Kaizo Kun" is conducted in this business segment. "Kaizo Kun" refurbished used residential properties are used residential properties purchased for renovation and sales. Fuji's unique knowhow is leveraged in local community-based management and manualized procedure for renovation. Effective Land Utilization (19.7% of the Fiscal Year March 2018 Total Sale) Contract construction for leased properties and sales of rental apartment for sale to individual investors are conducted in this business. Construction work is performed for construction of rental residential properties sold on a proposal basis and leverages Fuji's knowhow developed in its property leasing and management business. In addition, Fuji purchases lands and then constructs rental apartment buildings for sale to individual investor in this business. The highly price competitive wooden structure apartments called "Fuji Palace" were launched in November 2008, subsequently affordable rental apartments for seniors with nursing-care service, which are called "Fuji Palace Senior" as a means of differentiation. With regards to rental apartments for sales to individual investors, the price for apartments is roughly ¥100 million, and the demand for these types of rental properties remains strong as a fund management method. In addition, recently, the Company has been proactively developing affordable rental apartments for seniors with nursing-care services. Property Leasing and Management (15.1% of the Fiscal Year March 2018 Total Sale) The fully owned subsidiary Fuji Amenity Services Co., Ltd. provides rental apartment structure management, tenant solicitation, rent collection and other management services, in addition to consigned management of condominiums. Superior rental and management related services not only act as stable source of earnings, but also provide opportunities to achieve high synergy with contract construction of rental income properties, sales of rental apartments for sale to individual investors, and sales of condominiums. Custom Housing (0.3% of the Fiscal Year March 2018 Total Sale) By leveraging the knowhow cultivated in the detached homes business, Fuji has successfully grown and marketed its services of reconstruction of existing detached homes and construction of new detached homes to land owning clients. This business has also grown to become the fifth cornerstone of its overall business. (2) Strengths of Fuji Corporation Strength as a Complete Home Provider Knowhow in the realms of acquisition of land and building permits, design, construction and sales cultivated in the detached home services has allowed Fuji to develop a wide range of businesses including its used residential property sales, effective land utilization, rental apartment buildings for sale to individual investors, and property leasing and management, as well as to cultivate synergies between these businesses. Furthermore, its local community-based management has also contributed to cultivate synergies among these wide ranging businesses and achieve high levels of customer satisfaction in its real estate and related services. Capabilities of the Refurbished Used Residential Property Business The "Kaizo-kun" refurbished used residential property business was born from the fusion of knowhow cultivated in the residential property agency sales and renovation businesses, which were launched along with the start of the Company. Fuji maintains a unique business model that enables them to conduct the three main functions of the residential property sales process including "acquisition," "renovation," and "sales" of used residential properties. The Company also boasts of the ability to create used residential properties that match the needs of customers because of its creation of manuals regarding how to renovate homes and information gathering of local markets based on its local community-based management style. In addition, a service called "Fuji Home Bank" has been created where coordination with judicial scriveners is conducted to purchase properties in cases of conclusion of inheritance registration. This service also offers the convenience of paying the inheritance registration fees from the fees derived from the sale of properties. Ability to Increase Returns by Proposing Effective Land Utilization Fuji does not only provides the ability to propose effective land utilization, but also offers market surveys, planning, design, construction, and rental property management services to maximize its capability as a comprehensive real estate developer. Land purchases and sales, apartment and condominium reconstruction, legal and tax related services, and other various expert opinions and services are available as precise solutions to suit the needs of customers. As to its rental property management business, strict selection of land from the vast amount of real estate information is based upon meticulous market surveys conducted by its full-time marketing staff, and planning is carried out only when long-term and stable management is feasible. In addition, Fuji only purchases properties that boast of highly superior locations and other conditions to be turned into high yielding used real estate products. Moreover, Fuji proposes a bundled leasing system to property owners as a means of providing them with full "security, safety, and stability" in the rental property management service. Business Portfolio Synergies The real estate industry is hugely influenced by external factors such as the economic environment and changes in interest rates. To establish a business model that can withstand these conditions, Fuji Corporation has endeavored to build a business portfolio that can generate stable profits by providing diversified products and services. Looking at the sales composition during the last 5 years, residential properties for sale has previously accounted for more than 40% of total sales in the past. However, Fuji Corporation has been able to achieve a more balanced business portfolio as the three business segments, 1) residential properties for sale, 2) housing distribution, and 3) effective land utilization and property leasing and management businesses, now account for over 30%.

 

 

With regards to the current medium term business plan, Fuji Corporation maintains targets for sales and ordinary income of ¥102.0 and ¥6.0 billion respectively to be achieved by Fiscal Year March 2019, the plan's final year. Furthermore, this plan calls for the turning of the large development of detached housing projects and the restarted sales of condominiums, which had been curtailed due to weak supply and demand conditions, into earnings drivers of the residential properties for sale business segment. Moreover, the plan also calls for growth in used residential properties through the expansion in the sales regions in the housing distribution business segment, and securing of stable profits through strengthening of property purchases in the effective land utilization business segment. In addition to these strategies, efforts to grow earnings through sustained increases in managed properties will be conducted in the property leasing and management business segment. Medium Term Business Plan Profit Assumptions Achievements during Fiscal Year March 2016 Strong sales and profits were recorded during Fiscal Year March 2016 and they far exceeded the assumptions of the current medium term business plan. Fuji Corporation expected both free-design homes sales and property leasing and management sales to expand by large margins, and anticipated large increase in sales of the effective land utilization business on the back of increases in rental apartments for sale to individual investors. All of these business segments exceeded the Company's estimates, and the used residential properties sales also posted much better than expected sales. Achievements during Fiscal Year March 2017 Both sales and profits exceeded the Medium Term Business Plan targets by large margins during Fiscal Year March 2017. Initially, increases in the number of deliveries of high quality and large scale residential properties for sale, in the number of units for sale due to an expansion in the sales region of used residential properties, and in the number of rental apartments for sale to individual investors allowed property leasing and management business to rise. In addition to these strong performances, higher sales pricing of used residential properties also contributed to the strong performance. Achievements during Fiscal Year March 2018 During fiscal year March 2018 both sales and profits exceeded the targets of the Medium Term Business Plan by a large margin. The start of deliveries of residential properties for sale of large projects in the Osaka and surrounding Hanshin regions, the restart of supplies of condominiums for sale, which had been halted, with the sale of units on a prime location in front of the Japan Railway Wakayama Station, and the delivery of rental apartments for sale to individual investors are expected to allow for growth in both sales and profits in the property leasing and management business. Sales of condominiums for sale located in front of Japan Railway Wakayama Station started a year earlier than expected in July 2016. Fuji Corporation has been able to record better than anticipated results in these businesses and achieve its medium term targets for sales and every level of profits. Plans for Fiscal Year March 2019 Sales of residential properties for sale are expected to be booked along with the restart of condominiums for sale deliveries in prime locations during fiscal year March 2018. Estimates call for higher sales due to a steady expansion of the sales territory for used residential properties into Hyogo and Nara Prefectures. In addition, as for property leasing and management business, expansion in the number of profitable projects in the used residential property asset businesses, and increases in the number of managed and sublet properties derived from the rental apartments for sale to individual investors business are expected. At the same time, sales and profits in fiscal year March 2018 exceeded the targets of medium term business plan and the estimates for fiscal year March 2019 are also exceeding the medium term business plan.

 

 

Sales and Ordinary Income Rise 9.4% and 12.2% Year-On-Year Respectively During the first half of fiscal year March 2019, sales rose by 9.4% year-on-year to ¥53.437 billion. Sales of spec new homes in the housing distribution segment and custom housing construction declined, but sales of detached free- design homes within the residential properties for sale segment and affordable rental apartments for seniors with nursing-care services and rental apartments for sale to individual investors within the effective land utilization segment rose, along with higher sales of the property leasing and management segment. In addition, Fuji Corporation had restrained its purchases of used residential properties due to increased competition and subsequently higher prices, but sales growth during the first half of fiscal year March 2019 turned positive. In addition, orders, which are a reflection of future sales, due to the contributions from strong demand for used residential properties and consigned construction of rental properties rose by 2.0% year-on-year. Ordinary income rose by 12.2% year-on-year to ¥2.564 billion. With regard to operating income by business segment, Fuji Corporation aggressively disposed of lower profitability properties with a goal of upgrading the stock of used residential properties, and profits of the housing distribution segment declined due to a drop in highly profitable spec new homes sales. At the same time, a rebound from deliveries of large rental apartments for sale to individual investors in the previous term also caused profits of the effective land utilization segment to decline. However, increases in deliveries of detached free-design homes allowed profits of the residential properties for sale segment to grow. Deliveries of rental properties and condominiums for sale linked to the effective land utilization segment allowed for increases in property management related work to grow. Also, increases in used rental properties within the used residential property asset division allowed profits of the property leasing and management segment to grow. Due to the influence of delays in improvements in profitability of used residential properties, gross income margin declined by 0.4% points from the first half of the previous fiscal year. Declines in advertising expenses allowed the margin of sales, general and administrative expenses relative to sales to decline by 0.3%. However, operating margin has also declined by 0.1% to 4.9%. Subsequent to these developments, operating income rose by 6.3% year-on-year to ¥2.599 billion. Also, booking of ¥128 million in subsidies within non-operating income allowed ordinary income to grow at a higher rate than operating income. In the future, subsidy income is expected to continue to expand due to increases in affordable rental apartments for seniors with nursing-care services developed in-house. Also, an extraordinary loss on sales of tangible assets of ¥12 million (¥1 million in the previous term) was recorded. Furthermore, sales and all levels of profits during the first half are proceeding favorably and exceeded the Company's initial estimates issued at the start of the term. The concentration of deliveries of detached free-design homes and deliveries of the large condominiums for sale project (91 units) in front of Sakai Station on the JR Hanwa Train Line during the fourth quarter are expected to also contribute significantly to sales and all levels of profits during the fourth quarter. Sales and operating income of the residential properties for sale segment rose by 12.6% and 50.6% year-on-year to ¥17.132 and ¥1.273 billion respectively. In particular, an increase in deliveries of detached free-design homes from 358 in the same period of the previous term to 426 in the current term contributed to increases in both sales and profits. The value of orders declined by 1.1% year-on-year to ¥18.757 billion due in part to declines in orders for free-design homes and condominiums for sale from 452 in the same term of the previous year to 404 in the current term and 47 to 23 respectively, and to an increase in land sales from ¥32 million to ¥2.739 billion over the same period. The higher land sales are attributed to Fuji Corporation's responding to requests from a local company to purchase its land that has yet to be developed as detached homes for sale in Kakogawa City, Hyogo Prefecture. (The land is projected to be handed over during the fourth quarter.) Sales and operating income of the housing distribution segment declined by 0.1% and 37.0% year-on-year to ¥15.749 billion and ¥170 million respectively. An increase in the entry by new participants to the used residential properties for resale business contributed to difficulties in acquisition of properties, but stable pricing allowed Fuji Corporation to grow its purchases and subsequently expand sales of used residential properties. At the same time, the Company terminated supplies of spec new homes and shifted its business focus towards free-design homes, which led to a decline in sales of spec new homes. Profits were impacted by delays in improvements in profitability of used residential properties and declines in sales of highly profitable spec new homes for sale. A volume of orders rose from 681 in the same term of the previous year to 719 in the current first half within the used residential properties segment, and the value of orders in the housing distribution segment grew by 6.7% year-on-year to ¥16.031 billion. In the effective land utilization segment, sales rose by 17.4% year-on-year to ¥11.879 billion and operating income fell by 14.7% year-on-year to ¥1.160 billion. While sales of affordable rental apartments for seniors with nursing-care services and rental apartments for sale to individual investors rose, the rebound from deliveries of large rental apartments for sale to individual investors in the same term of the previous year were responsible for the decline in segment operating income. Order value rose by a marginal 0.3% year-on-year to ¥12.313 billion on the back of a 10.5% and 0.4% year-on-year increases in order value of consigned construction of rental properties and rental apartments for sale to individual investors respectively, and despite a 4.5% year-on-year decline in orders for affordable rental apartments for seniors with nursing-care services. Aside from the above results, the property leasing and management segment sales and operating income rose by 12.8% and 17.4% year-on-year to ¥8.578 billion and ¥825 million respectively. Increases in the number of properties handled in the property leasing and management segment arising from deliveries of condominiums for sale and rental properties within the effective land utilization segment, and rise in used properties within the used residential property asset business also contributed to the strong earnings. In addition, custom housing segment sales declined by 29.3% year-on-year to ¥98 million, and an operating loss of ¥7 million was booked (Compared with a profit of ¥3 million in the same period of the previous term). During the first half of the fiscal year March 2019, sales exceeded the Company's estimates. A concentration of deliveries of detached free-design homes and deliveries of the large condominiums for sale project (91 units) in front of the Sakai Station on the JR Hanwa Line during the fourth quarter are expected to also contribute significantly to sales and all levels of profits during the fourth quarter. During the first half of the fiscal year March 2019, value of orders exceeded Fuji Corporation's estimates but orders during the third quarter are expected to decline compared to the second quarter. Order value during the first half remained close to the growth trajectory recorded during the past several years. At the end of September 2018, order value fell from the same period in the previous year, but this is attributed to the rebound from deliveries from a large of condominiums for sale project in Wakayama City made in the last fiscal year. Total assets rose by ¥7.733 billion from the end of the previous fiscal year to ¥143.297 billion at the end of September 2018. Factors contributing to this increase include increases in cash and deposits, tangible noncurrent assets, short term debt and retained earnings. With regard to inventories, real estate for sale rose from ¥23.99 to ¥24.57 billion, partially developed real estate for sale fell from ¥18.86 to ¥18.52 billion, and real estate for development declined from ¥55.28 to ¥53.77 billion over the same period. Interest bearing liabilities rose by ¥7.610 billion. Capital adequacy ratio declined by 0.4% points from the end of the previous fiscal year to 25.3% at the end of the first half. With regard to cash flow, declines in inventories and other factors allowed cash flow from operations to turn from a net outflow in the previous first half to a net inflow during the current first half. Increases in the acquisition of tangible noncurrent assets and other factors caused the net outflow of cash flow from investments to expand. Subsequent to these changes, the margin of net outflow of free cash flow contracted. At the same time, a reduction in the margin of increase in long term debt caused the margin of net inflow of financial cash flow to contract. Consequently, cash and equivalents rose by 5.4% year-on-year.

 

 

FY3/19 Estimates Call for Sales and Ordinary Income to Rise by 5.9%, 5.9% Year-On-Year At the end of the first half, sales estimates for the full fiscal year March 2019 were revised upwards on October 29. According to Fuji Corporation's most recent earnings estimates, sales are expected to rise by 5.9% year-on-year to ¥110.0 billion (Compared with initial estimates of ¥108.0 billion) and ordinary income is 5.9% year-on-year to ¥6.5 billion, both figures representing new record highs. The reason for the upward revision to sales estimates was unplanned sales of a part of developed real estate for detached homes in Kakogawa City, Hyogo Prefecture to a local company (Expected to be delivered to the purchasing company in the fourth quarter). At the same time, Fuji Corporation is still considering this and other various factors influencing all levels of profits and has decided to leave its estimates for profits unchanged. With regards to sales、the termination of spec new home supplies is expected to cause a small decline in sales of the housing distribution segment, but increases in free-design homes in the residential properties for sales segment and rental apartments for sale to individual investors in the effective land utilization segment are expected along with steady growth expected in the stock type business of property leasing and management segment. In addition, used residential properties sales are expected to see only marginal growth due to difficulties in acquisition of properties resulting from higher prices. With regard to profit, sales of units from a large condominium project are expected to decline from the high levels recorded in the term just ended, but an increase in total sales is expected to allow all levels of profits to grow. Fuji Corporation assumes that the operating income to sales ratio will decline by 0.1% to 6.1%. Moreover, the growth rates of consolidated earnings during the second half are expected to stagnate compared with the first half due to the deliveries of condominiums from a large project recorded during the second half of the term just ended. The Company expects to pay a full year dividend of ¥27 per share (¥14 and ¥13 dividends per share at the ends of the first half and full year). During the current fiscal year, concentration of deliveries of 91 units in the condominium for sale project in front of Sakai City Station on the JR Hanwa Train Line and detached free-design homes expected during the fourth quarter (January to March) is expected to also lead to a concentration of sales and profits during the same fourth quarter. Progress in Achieving Full Fiscal Year March 2019 Earnings Estimates as of the End of the First Half The combined total of first half sales of ¥53.437 billion and orders expected to be booked as sales during the current term of ¥37.991 billion (Of the total orders of ¥51.344 billion) amounts to ¥91.428 billion or 83.1% of the full year sales estimates. In addition, sales derived from the property leasing and management business are expected to remain stable from October onwards and an additional ¥8.421 billion in sales is expected to be acquired bringing the full year sales estimate achievement ratio to 90.8%. Consequently, Fuji Corporation will need to book another ¥10.150 billion (9.2% of the total full year sales estimate) from its backlog of orders for used residential properties and condominiums for sale. The Company expects that it can easily achieve this target as its current business is trending favorably. (3) Main Topics Fuji Corporation Selected as a Constituent Stock of the "JPX Nikkei Small to Medium Sized Capitalization Stock Index" Fuji Corporation was selected to become a constituent stock of the "JPX Nikkei Small to Medium Sized Capitalization Stock Index" in 2018 by the Tokyo Stock Exchange and the Nikkei Inc. (Financial newspaper). The 200 constituent stocks have been chosen from companies listed on the Tokyo Stock Exchange and have been screened according to various financial and other benchmarks including average return on equity over three years, aggregated operating profit over three years, hiring of independent external directors, and other qualitative and quantitative criteria. Fuji Corporation boasts of high return on equity, stable earnings and a strong corporate governance structure. Fuji Corporation Acquires Highest Rating in the Development Bank of Japan's "DBJ Health Management Certification" The Development Bank of Japan has established its own unique evaluation system called the "DBJ Health Management Certification" to recognize companies that are promoting efforts in health management and the implementing measures to promote the health of their employees. The Development Bank of Japan has also created special financing conditions for companies selected in this "Health Management Certification" evaluation system as a first for any bank in the world. Fuji Corporation is known for its corporate culture of taking good care of its employees and their families, and the management is promoting flexible measures to heighten the awareness of good health amongst its employees. Resolution to Acquire Treasury Stock During its Board of Directors meeting held on October 29, Fuji Corporation passed a resolution allowing it to acquire treasury stock. Details of the resolution are described below. ・Total number of treasury stock to be acquired (Maximum, amounts to 1.95% of total shares issued excluding existing treasury stock) ・Total acquisition value of ¥636 million (Maximum) ・Acquisition period from October 30, 2018 to March 31, 2019

 

 

Reflecting upon Fuji Corporation's first half of fiscal year March 2019 earnings, the main business services of free-design homes, affordable rental apartments for seniors with nursing-care services, and rental apartments for sale to individual investors are growing favorably. In addition, deliveries of rental properties and condominium for sale linked to the effective land utilization business are contributing to increases in the volume of property leasing and management related work, and used rental properties in the used residential property asset business are also growing. Consequently, the share of total profits derived from the property leasing and management business is growing. Growth in earnings derived from stock type businesses is contributing to a fortification of Fuji Corporation's overall earnings structure, and increasing market expectations for the ability of Fuji to withstand downturns in the economy. The low price to earnings ratios of participants in the housing industry is attributed to the high reliance upon bank debt and the weakness of earnings structures with the bulk of earnings derived from flow type businesses. However, Fuji Corporation is implementing efforts to resolve these perceived weaknesses of companies operating in the housing industry by leveraging its points of superiority. Amidst these trends, the decline in orders for free-design homes, and slowing growth rates of affordable rental apartments for seniors with nursing-care services and rental apartments for sale to individual investors appear to be the only points of concern during the first half. However, these concerns may be considered minor points given Fuji Corporation's efforts to achieve stable growth over the medium to long term by implementing carefully scheduled and planned order capturing activities. At the same time, concerns that growth may slow from the next term onwards due to the slowing in orders is a reason to keep a close watch on order trends. Consequently, a close watch should be kept upon Fuji's ability to secure favorable orders in free-design homes, affordable rental apartments for seniors with nursing-care services and rental apartments for sale to individual investors necessary to grow earnings from the next term onwards. With regard to the used residential properties, which had been restrained due to higher prices arising from intensified competition, sales began to increase during the first half of the fiscal year March 2019. The stabilization of market conditions is now expected to allow Fuji Corporation to expand its business activities to the regions surrounding Kyoto, with plans to expand acquisition of used residential properties in that region. Therefore, the used residential property sales should also be closely watched.

 

 

◎ Corporate Governance Report The company submitted its latest corporate governance report on November 12, 2018. <Other> In Basic Views regarding corporate governance, the company states that "it is crucial for the improvement of our business performance that the president himself demonstrates the management philosophy, business purposes, and code of conduct and the directors with excellent "capabilities," "enthusiasm," and "attitude" and great willingness to contribute to our company work in a complete solidarity toward the same aim in order to increase the shareholder investment value."