■Business Overview
TOKAI Holdings ＜3167＞ is based in Shizuoka Prefecture and is developing businesses centered on “energy and housing related businesses” and “information and communication businesses” centered on LP gas, and aims to provide a one-stop service for all lifestyle-related services, contribute to people's rich lives, the development of local communities, and global environment while deepening connections with customers and the region, society, and global environment beyond, and grow into a comprehensive lifestyle service company representing Japan It's there.
The current business segment is disclosed by dividing it into 6 categories: “energy business,” “information and communication business,” “CATV business,” “construction equipment real estate business,” “aqua business,” and “others.” Looking at the sales composition ratio (fiscal year ending 2024/3) by business segment, the “energy business,” which is the parent business, is 43.6%, the “information and communication business” is 24.5%, and the “CATV business” is 15.4%, and these 3 businesses have exceeded 80% of the total, and there is no major change even when looking at trends over the last 5 years.
1. Energy business
In the energy business, the LP gas business accounts for about 83% of sales, and the city gas business accounts for about 17%. The main LP gas business is TOKAI Co., Ltd., which mainly sells household and industrial products, and also carries out some wholesale sales. The service area is centered around Shizuoka prefecture and the Kanto area, but since 2015, it has gradually expanded into the southern Tohoku, Chubu/Tokai, Chugoku/Shikoku, Kyushu areas, etc. as new areas, and is promoting the expansion of the customer base. The number of customers as of the end of the 2024/3 fiscal year was 778,000, and the upward trend continues in both existing and new areas. The composition ratio of the new area has risen from about 4% in the fiscal year ended 2019/3 to about 13%. As an industry position, it is third in direct sales after Iwatani Sangyo (8088) and Nippon Gas (8174). As for the market share, it occupies the top position with about 20% in Shizuoka Prefecture, where competition is fierce, and it is also in second place with less than 10% in the highly competitive Kanto area. Since the number of households using LP gas is approximately 21 million households nationwide, it is at a level of over 3% in terms of national market share, but it is a strategy to expand market share by expanding the business area and promoting M&A in the future. There are many small to medium businesses in the domestic LP gas sales industry, and consolidation into major capital is progressing year by year* due to the severity of the business environment*, and we see that there is plenty of room for the company to expand its market share.
* The number of LP gas sales businesses has decreased from approximately 21,000 businesses in 2012 to approximately 15,000 businesses in 2023.
As for the city gas business, Tokai Gas Co., Ltd. sells city gas in Yaizu City, Fujieda City, and Shimada City in Shizuoka Prefecture, and the business area is being expanded by taking over the city gas business operated by local governments in the wake of the complete liberalization of gas retail in 2017/4. Specifically, the city gas business has been transferred and operated from Shimonita Town in Gunma Prefecture (from 2019/4) and Nikaho City in Akita Prefecture (from 2020/4). As of the end of the 2024/3 fiscal year, the number of customers was 75,000. There are 190 city gas operators nationwide (172 privately operated, 18 public), and since most of these are small to medium businesses in the region except for the major 4 companies, it is our policy to consider M&A projects if they come up in the future.
2. Information and communication business
The information and communication business developed by TOKAI Communications Co., Ltd. is engaged in consumer business ISP (internet service provider) business, mobile phone business (mobile phone sales agency business), and corporate business communication line services, data center services, cloud services, system development contract business, etc. As for the sales composition ratio for the fiscal year ending 2024/3, the consumer business is about 43% and the corporate business is about 57%, and the ratio for corporations has been on an upward trend in the past few years, and it looks like the majority of operating income is for corporations.
The ISP business is developed under two brands: “@T COM (at TCOM),” which has a nationwide service area, and “TOKAI Network Club (TNC),” which has Shizuoka Prefecture as its service area, and it occupies the top position with a market share of about 20% within Shizuoka prefecture. Also, from 2015/2, we received wholesale optical lines from NTT (Nippon Telegraph and Telephone ＜9432＞), and in addition to starting providing an optical collaboration service (“@T COM Hikari” and “TNC Hikari”) provided as a set with the company's optical internet connection service, they are also offering plans set with services from major mobile carriers. Sales of the cheap SIM/smartphone “LIBMO (LIBMO)” using MVNO* also began in 2017. The number of customers at the end of the 2024/3 fiscal year was 393,000 for conventional ISP services, etc., 373,000 for Hikari Collaboration Services, and 80,000 for “LIBMO,” and there is a gradual but increasing trend due to the increase in Hikari Collaboration Services and “LIBMO.”
* MVNO (Mobile Virtual Network Operator): An operator that provides services by borrowing wireless communication infrastructure such as mobile phones from other companies.
In the mobile business, there are 14 mobile shops, mainly in Shizuoka prefecture, as agents of SoftBank ＜9434＞, but the number of customers at the end of the 2024/3 fiscal year peaked at 170,000 and 236,000 in the 2016/3 fiscal year, and the gradual decline continues. Also, they have opened 7 “iCracked Store,” which provides iPhone repair services, in Shizuoka prefecture.
3. CATV business
The CATV business is gradually expanding its service area through M&A strategies, and most recently Okinawa Cable Network Co., Ltd. was grouped in 2022/10. As of the end of the 2024/3 fiscal year, we are developing business in 1 metropolitan area and 7 prefectures of Shizuoka, Tokyo, Kanagawa, Chiba, Nagano, Okayama, Miyagi, and Okinawa (11 group companies). The number of customers continues to increase moderately, with 919,000 for broadcast services and 394,000 for communication services, for a total of 1,313,000. The total number of CATV service contracts in Japan, including communication services, etc. is 27.12 million (at the end of March 2023, of which 7.77 million for multi-channel services, 10.62 million for internet services, and 8.73 million for telephone services), and internet services seem to be leading the way. In the industry, the J:COM (JCOM Co., Ltd.) Group holds a market share of over 50% based on the number of viewers, and the market share of about a few percent is below 2nd place, including the company. For this reason, the company's strategy is to continue to aim to expand its market share through M&A in the future.
4. Building equipment real estate business
In the construction equipment real estate business, TOKAI designs and constructs detached houses, apartment complexes, stores, office buildings, etc., provides building management services, sells housing equipment, develops and sells real estate, etc., and TOKAI and Tokai Gas are developing the remodeling business. M&A is also being actively promoted, and starting with making Nissan Kogyo Co., Ltd., a general construction company based in Gifu prefecture, a subsidiary in 2019/9, Chuo Electric Construction Co., Ltd., which performs electrical equipment work in Aichi prefecture in 2020/8, Inouye Technica Co., Ltd., which conducts building maintenance business in Shizuoka prefecture in November of the same year, and Marco Polo Chemical Co., Ltd., which carries out large-scale repair work and renovation work on buildings in the Tokai area in 2021/4, was abandoned industrially in Gifu prefecture in 2022/5 Wood Recycling Co., Ltd., which processes materials and manufactures wood chips, has successively become a subsidiary. Going forward, it is a strategy to further expand the scale of business as a general construction operator in the Tokai area by bringing together the resources possessed by these group companies.
5. Aqua business
As for the aqua business (water delivery business), TOKAI started a returnable (bottle collection type) “delicious water delivery service” service in Shizuoka prefecture in 2007, and since 2011, it has been developing services under the brand name of the one-way system (single-use bottle type) “delicious water gift urun” in areas other than Shizuoka prefecture. Also, as a new initiative, sales of the “Shizukuria” *, a water supply type water purification server that filters tap water with a built-in filter began in 2023/4. The number of customers at the end of the 2024/3 fiscal year was 167,000. The number of customers in the industry as a whole in fiscal 2023 is 5,240 thousand units, and the company's market share is at the level of about 3% (about 50% share within Shizuoka prefecture).
※ The water dispenser rental fee is 2,640 yen/month or 3,300 yen/month (tax included), and a filter that is replaced every six months is provided free of charge.
6. others
Others include the nursing care business of TOKAI Lifeplus Co., Ltd., the wedding event business of Tokai City Service Co., Ltd., and the ship repair business of Tokai Shipbuilding and Transportation Co., Ltd. The nursing care business began in 2011, and in addition to operating 6 day service facilities, 1 short stay facility, and 1 paid nursing home with nursing care in Shizuoka prefecture as of the end of the 2024/3 fiscal year, 2 care plan centers have been established. Also, the wedding event business operates “Grandière Bouquet Tokai” in the “Aoi Tower” in front of JR Shizuoka Station.
(Author: FISCO Visiting Analyst Joe Sato)