Company Overview

1. Business content The main business of Sakai Heavy Industries <6358> is the manufacturing and sale of road rollers used for road paving, and road roller related products account for about 95% of its revenue. In addition, the company's corporate philosophy is to contribute to the world's land development through its road construction machinery business. 2. Characteristics and strengths As previously mentioned, the company is a specialist manufacturer of road construction machinery such as road rollers, but has the following characteristics and strengths. (1) Long history as a specialist manufacturer The company's biggest feature (strength) is its long history as a specialist manufacturer of road construction machinery, including road rollers. In other words, by focusing on and specializing in its global niche strategy, it has accumulated its own unique technologies. This long history and experience have enabled it to enhance its technical and credit strengths. (2) Technical strengths Simply saying "compacting or paving roads" requires different pressures, rotation forces, etc. (compaction technology) depending on the location, soil conditions, etc. According to the company, the construction function of the roller itself determines the final quality (density, flatness, lifespan) of the road or embankment, and it is generally said that if the compaction density is increased by 1%, the road lifespan is extended by 10%. Therefore, for construction clients and contractors, product quality (performance) is also a very important factor, in addition to the price of road rollers. Since the company has been a specialist manufacturer of road construction machinery, including road rollers, for a long time, it boasts high technical strengths in compaction technology that are not easily matched by other companies in the same industry. In summary, the technical strength of the company can be described as "knowledge about entities and concepts." In other words, it is their engineering ability to oversee the entire construction project and their ability to adapt to a variety of materials. Specifically, it is the combination of various technologies, such as mixing with tires, vertical vibration to increase the compaction force, horizontal vibration to scrape the ground, vertical vibration to form a thick layer of compaction, further high-density compaction by tire vibration, and solution to difficult compaction problems through high-frequency vibration. An example of the company's high technical strength is the ability to control the relationship between "mechanical vibration technology" and its "vibration suppression technology." Various mechanical vibrations are an important means of improving construction performance in road rollers, but this vibration itself can cause machine malfunctions and have a significant impact on operator comfort. Therefore, the power (technology) to control the conflicting relationship between vibration compaction strength and machine quality is important, and this cannot be accumulated in a short period of time.

J Trust <8508> is a holding company that oversees business companies such as domestic and overseas financial businesses. It is listed on the Tokyo Stock Exchange's Standard Market and has been growing as a comprehensive financial conglomerate in Asia by expanding overseas with the expertise cultivated in Japan. Within the group, based on the Japanese financial business, South Korea and Mongolia financial businesses, it has aimed for sustainable profit expansion with Southeast Asian financial business as the leading role. However, facing the deterioration of the global economic environment due to the spread of the novel coronavirus infection (hereinafter referred to as the COVID-19 pandemic), it took an early step to fundamentally restructure its business portfolio from the fiscal year ended December 2020. As a result, it turned to an operating profit in the fiscal year ending December 2021 and has continued to record operating profits while reviewing its business portfolio.

The company conducts financial business deploying three core businesses: banking, guarantee, and servicer (debt collection). Since the tender offer bid by Mr. Fujisawa in 2008, the group's business has rapidly expanded through numerous M&A activities, and the total assets have increased from 121.89 billion yen in the fiscal year ending March 2008 to 1,331.442 billion yen in the second quarter of the fiscal year ending December 2024. In addition to business expansion in South Korea, Singapore, Indonesia, and Mongolia, in August 2019, it acquired a new high-quality bank in Cambodia. In response to the deterioration of the global economic environment due to the COVID-19 pandemic, it has been reviewing its business portfolio since August 2020. For the real estate business, it sold Keynote Co., Ltd., for the Japanese financial business, J Trust Card Co., Ltd., and for the South Korea and Mongolia financial business, JT Beloved Savings Bank Co., Ltd., and JT Capital. Subsequently, aiming for profit expansion, it reconsolidated high-growth JT Beloved Savings Bank Co., Ltd., and Nexus Card Co., Ltd. (which changed its name from J Trust Card) and successfully made JT Trust Global Securities Co., Ltd. a subsidiary and absorbed and merged with Mirai Innovate Co., Ltd., a real estate business.

The breakdown of business segment operating revenue for the second quarter of the fiscal year ending December 2024 is as follows: South Korea and Mongolia financial business account for 35.9%, Southeast Asia financial business 35.4%, Japan financial business 12.3%, real estate business 16.3%, investment business 0.0%, and others (mainly system business) 0.5%. Operating profit saw significant increase for the Japan financial business and the Southeast Asia financial business that has been focused on restructuring. The South Korea and Mongolia financial business recorded significant losses due to increased loan loss provision and losses on debt sales, but the losses were in the first quarter, and by the second quarter, they have improved to the break-even point as planned. They are planning to achieve profitability from the second half onwards. The real estate business incurred a significant decline since there were no negative goodwill gains recorded in the same period of the previous year, but stable profit contributions are anticipated in the future. The investment business recorded a small loss due to an increase in litigation expenses, but expects a small profit from debt collection for the full year. Going forward, it aims to expand the Japan financial business and the high-growth Southeast Asia financial business, as well as achieve profitability growth sustainably through the profitability of the South Korea and Mongolia financial business and the reinforcement of the real estate business.

2. History

The company's former name was 'Ikko Co., Ltd.', which conducted lending operations such as commercial bill discounting and bill lending for small and medium-sized enterprises and individual business owners. It was listed on the Second Section of the Osaka Securities Exchange in September 1998. After Nationwide Guarantee <7164> became the parent company of the company in 2005, Mr. Fujisawa became the largest shareholder through a tender offer bid in March 2008, and in 2009, the company changed its name to the current 'J Trust Corporation'. Under Mr. Fujisawa, the company implemented flexible and effective M&A for debt collection companies and finance companies. On the other hand, aiming for business operation based on risk management, it promptly responds to changes in the external environment and aims to establish a management structure capable of making quick decisions. In 2010, it transitioned to a holding company structure with expertise in various financial businesses.

In June 2011, the company relocated its headquarters from Osaka to Minato-ku, Tokyo. It leveraged the accumulated finance expertise in Japan to expand overseas. Beginning banking operations in South Korea in 2012 and establishing an investment base in Singapore in 2013. From the fiscal year ending March 2014 to the fiscal year ending March 2015, it utilized 97.6 billion yen raised through a rights offering to acquire finance companies and savings banks in South Korea, and a commercial bank in Indonesia. In August 2019, it acquired 55% shares of the ANZ Royal Bank (Cambodia), a high-quality bank in Cambodia, and changed its name to J Trust Royal Bank Plc. In the fiscal year ending March 2019, it rigorously processed bad debts for the Southeast Asia financial business and the investment business, and recorded significant operating losses, paving the way for performance recovery.

In 2020, in the midst of the global COVID-19 pandemic, the economic environment underwent a drastic change. It began to review its fundamental business portfolio, including the sale of two South Korean savings banks that had been contributing stable profits. However, as the economic and social environment stabilized, the need to quickly liquidate assets diminished. As a result, in April 2022, it returned highly promising JT Dear Savings Bank and Nexus Card to the group, and also acquired J Trust Global Securities as a subsidiary, and in February 2023, it merged with Mirai Innovate. The next strategy for expanding the group's profitability is expected to be a focus. In addition, in order to strengthen its headquarters functions and improve operational efficiency, it relocated its headquarters to Shibuya Ward, Tokyo in December 2022.

(Written by FISCO guest analyst Nozomi Kokushige).