Investment Bridge Announces Investment Opinion: Bridge Report on Leopalace21 Issued: FY3/14 Profits Rise by Large Margin on Back, Continued Earnings Growth Expected in FY3/15
TOKYO--(BUSINESS WIRE)--Investment Bridge, one of Japan’s leading independent IR services companies, has released a “Bridge Report” on Leopalace21 Corporation (TOKYO:8848) reviewing its fiscal year March 2014 earnings results and its estimates for fiscal year March 2015.
- Sales rose by 3.7% year-over-year to JPY471.0 billion in fiscal year March 2014 on the back of strength in the construction business. Higher gross income absorbed increases in expenses and allowed operating income to rise by a large 84.4% year-over-year to JPY13.6 billion.
- Leopalace21 estimates call for fiscal year March 2015 sales and operating income to rise by 4.8% and 6.0% year-over-year to JPY493.5 and JPY14.5 billion respectively on the back of increases in sales of all business segments.
- The Bridge Report highlights the recent increase in occupancy rates through a focus upon construction of “new housing” in “major metropolitan regions,” and subsequent improvements in profitability. The Report also cites Leopalace21’s strategy of cultivating demand to replace the aging housing supply in the major metropolitan regions as part of Leopalace21’s new Mid-term Business Plan “EXPANDING VALUE.”
Leopalace21 Corporation conducts construction, leasing, and sales of apartments, condominiums, and other residential properties, in addition to operation of hotels and resorts, and senior citizen care services. During fiscal year March 2014, sales rose by 3.7% year-over-year to JPY471.0 billion on the back of a 0.5% and 18.3% year-over-year increases in sales of the leasing and construction businesses to JPY388.7 and JPY63.1 billion. Improvements in gross profitability offset a higher than expected increases in administrative expenses and allowed operating income to rise by a large 84.4% year-over-year to JPY13.6 billion. A decline in foreign exchange translation gains recorded during fiscal year March 2013 limited ordinary income to only a small margin of growth, while booking of deferred tax assets allowed net income to rise by double digits.
A public offering allowed cash and equivalents and total assets to increase by JPY18.0 and JPY25.8 billion to JPY74.7 and JPY287.4 billion respectively from the previous term end. Net assets also rose by JPY46.7 to JPY104.8 billion on the back of an increase in shareholder equity. Consequently, equity ratio rose by a large 14.3% point margin to 36.5%.
Leopalace21 estimates call for sales and operating income to rise by 4.8% and 6.0% year-over-year to JPY493.5 and JPY14.5 billion in the fiscal year March 2015 due to their outlook for increases in sales of all business segments, and the ability of higher gross income to absorb increases in labor costs, depreciation, and administrative expenses. The disappearance of corporate tax adjustments recorded during fiscal year March 2014 is expected to contribute to a 21.2% year-over-year decline in net income.
The Bridge Report also calls attention to Leopalace21’s success in raising occupancy rates in its main leasing business by focusing upon construction of “new housing” in the “major metropolitan regions” where demand for housing remains strong. Compared with the overall occupancy rate of 87.5% recorded at end March 2014, occupancy rates of properties less than three years of age stood at 96.8%, and that of properties constructed within three years in the Tokyo, Saitama, and Kanagawa regions boasted of even higher occupancy rates of 98.1%, 98.1% and 97.0% respectively. Another factor highlighted by the Report is how quickly Leopalace21 can cultivate latent demand to replace the aging housing supply in the major metropolitan and Tokyo regions, while protecting its earnings from negative fluctuations in the economy.
About Leopalace21 Corporation
Leopalace21 Corporation was established in August 1973 and conducts construction, leasing, and sales of apartments, condominiums, and residential housing, in addition to development and operation of resort facilities, and the operation of hotel business, broadband business, and elderly care business. The Company was first listed on the JASDAQ Market in February 1989, and moved its shares to the First Section of the Tokyo Stock Exchange in March 2004. Its headquarters are currently located in Tokyo.