Summary: RIZAP Group<2928>The comprehensive enterprise, which is committed to proving that "people can change" as its unique management philosophy, develops a variety of businesses in the three areas of health creation, health care / beauty, lifestyle, and investment. Under the vision of "Global No.1 in the self-investment industry", it has achieved remarkable growth by actively utilizing M&A under the holding company structure and has grown to include 68 group companies, including 5 listed subsidiaries, and 4,606 consolidated employees. Listed on the Sapporo Stock Exchange's Ambitious Market in 2006, it formulated a medium-term management plan in September 2022, but revised it in February 2024 to achieve an operating profit of ¥400 million (fiscal year ending March 2027) by aggressively expanding the new business "chocoZAP". The fiscal 2024 performance was sales revenue of ¥16,629.8 million (+7.6% YoY), operating loss of ¥594 million (compared to a loss of ¥4948 million in the same period of the previous year), pre-tax loss of ¥4524 million (compared to a loss of ¥7,031 million in the same period of the previous year), and net loss attributable to the owners of the parent of ¥4,300 million (compared to a loss of ¥12,673 million in the same period of the previous year). Due to the black ink conversion of the chocoZAP business, it achieved a black ink of ¥417.5 million on an operating profit basis in the fourth quarter alone. As for sales revenue, the RIZAP-related business (including the chocoZAP business) significantly increased its revenue (+¥201 million) by focusing on expanding the convenience gym "chocoZAP". In existing businesses, there was an increase in revenue, including Antiroza Co., Ltd. (+¥419.8 million), while there was a decrease in revenue due to store structure reform in REXT Co., Ltd., etc. (-¥599.8 million) and the impact of selling the Sikata business under the subsidiary BRUNO<3140>at the end of the previous year (-¥511.1 million). As for operating loss, the group as a whole improved due to the transition of the chocoZAP business to the investment recovery period and the success of business portfolio reform such as REXT.

IchiGo <2337> focuses on a wide range of real estate types such as offices, commercial facilities, hotels, and residences, leveraging real estate value enhancement expertise to conduct investment and management with a strength in Shinchiku. The company also operates three investment corporations in offices, hotels, and renewable energy generation facilities with real estate value enhancement technology and expertise as its core, making it a unique conglomerate.

1. Performance Trends for the interim period of the fiscal year ending February 2025

For the 2nd quarter of the fiscal year ending February 2025 (interim period as below), revenue increased by 37.0% year-on-year to 36,295 million yen, operating profit increased by 25.0% to 6,855 million yen, and ALL-IN operating profit decreased by 31.6% to 9,446 million yen. Although there was a decrease in the important indicator ALL-IN operating profit, this was due to the concentration of property sales in the second half of the year as planned. The Asset Management business saw an increase in assets under management for IchiGo Hotel REIT Investment Corporation (3463) and Residence Token, leading to favorable fee income. However, IchiGo Office REIT Investment Corporation (8975) experienced a decrease in profit due to a reduction in management fees (recovery is expected to be flat for the full year). The Clean Energy business saw revenue and profit growth contributed by electricity sales from a power plant that started operation in the previous period.

2. Performance Forecast for the fiscal year ending February 2025

The full-year performance forecast for the fiscal year ending February 2025 includes an operating profit increase of 23.5% year-on-year to 16,000 million yen, and an increase of 13.2% to 24,000 million yen in ALL-IN operating profit, aiming to expand cash generation (as initially forecasted). The Asset Management business is expected to see continuous receipt of asset management fees from the expansion of assets under management (AUM) using Security Tokens and revenue growth for IchiGo Hotel REIT due to continued lodging demand. The Clean Energy business is expected to benefit from the profit contribution of IchiGo Ebi no Matsue ECO power plant that started operating in the prior period. Similarly, the Shinchiku business foresees an increase in office rental income through expanded lodging demand and the company's strength in Shinchiku. The progress rate towards the performance forecast at the end of the first half for both the Shinchiku business (rental) and Clean Energy business has exceeded 50%, indicating a smooth trajectory, with prospects of achieving the targets in the Asset Management business and Shinchiku business (transfer) as well. Along with strong performances of hotels and residences, the mid-sized offices and commercial facilities owned by the company are considered to have stable demand, and the real estate market is also favorable.

Regarding the medium- to long-term growth strategy, the company aims to achieve business expansion and enterprise value improvement based on a growth strategy centered on data utilization, under the slogan 'From an Ad Tech Company to a Comprehensive Data Company'. Specifically, they aim to achieve business expansion and enterprise values by three basic strategies: 'Expanding Data Products,' 'Response to PostCookie,' and 'Data Utilization for New Fields'. Regarding 'Expanding Data Products,' they focus on the 'Data Products,' which are self-developed products that can expect increased harvesting and high profit. They aim to increase the operating account of 'UNIVERSE' by strengthening the sales system and continuously introducing new products. They also aim to build a high-quality human resource pool that can continuously produce high-value-added products by investing in human resources. Regarding 'Response to PostCookie,' considering that support for 3rd party cookies will be discontinued in the Chrome browser provided by Google, the company aims to gain a first-mover advantage by quickly responding to it. Furthermore, they are actively exploring new fields by utilizing vast amounts of data and analysis technology that they have, not just staying in the frame of the advertising service. New services related to inbound and cross-border EC are also expanding successfully. Most recently, they established a joint venture to handle inbound and outbound support to Chinese active senior citizens as a new business in April 2024.

The company has been quick to focus on Security Tokens, issuing the "IchiGo Residence Token" and accumulating experience. Real estate sales at the time of composition, asset management fees during the over 5-year investment period, and other opportunities for income growth have increased its presence as a growth driver. Starting with the first issue in November 2022, the company has been accumulating achievements, and in the current first half, it composed the 4th issue (May 2024). The investment target real estate for the 5th issue (composed in October 2024) consists of seven properties (11.4 billion yen) within Tokyo's 23 wards owned by IchiGo Owners, including properties in Ichigaya Nakanocho, Bunkyo Koyahara, Komaba Todaimae, Nishi-Shinjuku, and Kiyosumi-Shirakawa, all acquired by IchiGo Owners.

The company has joined the international initiative RE100 and has been working towards the goal of switching 100% of the electricity consumed in its operations to renewable energy by 2025. As of the end of August 2024, the switch to renewable energy was 100% complete, effectively achieving RE100 ahead of schedule. This achievement includes not only the company itself but also the real estate owned by Ichigo Office REIT and Ichigo Hotel REIT, which are operated by the company. In terms of achieving RE100 among Japanese businesses, it ranks among the top group. Moving forward, while maintaining a 100% achievement rate, it will enter the formal evaluation period (6 months to 1 year).

4. Shareholder return policy

The company has set the management goal of shareholder returns, generally stating a "no decrease in dividends, only maintenance or increase in dividends" (progressive dividend policy), which has been practiced for the past 12 periods. In addition, in April of this year, the shareholder return on equity (DOE) was raised from over 3% to over 4%. The dividend for the fiscal year ending February 2025 is expected to be ¥10.00 per year (an increase of ¥1.00), with a dividend payout ratio of 31.2%, expecting a continuous increase in dividends for the third consecutive period from the dividend increase in the fiscal year ending February 2023 (from ¥7.00 to ¥8.00). In addition, from the fiscal year ending February 2018 to the fiscal year ending February 2024, the company has carried out a share buyback program continuously for 7 periods, ranging from ¥1.5 billion to ¥6 billion. It also announced a share buyback of ¥6 billion in the third quarter (from October 11, 2024, to April 30, 2025, representing 3.9% of the total issued shares). Given the strong financial foundation of the company, depending on the market price of its shares, shareholders can expect an increase in shareholder value through future share repurchases.

■Key Points

- For the interim period ending in February 2025, revenue increased by 37.0% year-on-year to ¥36,295 million.

- For the fiscal year ending in February 2025, an estimated ALL-IN operating profit of ¥24 billion (a 13.2% increase from the previous period) is expected. It is anticipated that flow income from securities tokens and other sources will accelerate in the second half.

- Early achievement of RE100 (100% switch to renewable energy).

- For the fiscal year ending in February 2025, an expected dividend of ¥10.00 per year (an increase of ¥1.00 from the previous period), with a projected dividend payout ratio of 31.2%.

Announcement of a share buyback of up to 6 billion yen.

(Written by FISCO Guest Analyst, Hideo Kakuta)