■ Growth strategy of Sunfrontier Real Estate <8934>

The company group has announced the next medium-term business plan (fiscal year March 2026 to March 2028) and the long-term vision 2035. In the next medium-term business plan, the basic policy is to promote diversification of the core business through customer-oriented product development and warm-hearted services, and to solve social issues. Growth strategies are formulated in each business, focusing on the enhancement of human resources and services, and the promotion of diversification of the core business. The management target is to achieve sales of 135 billion yen and recurring profit of 27 billion yen by March 2028. The management indicators aim for a recurring profit margin of 20%, a self-capital ratio of 45%, and a ROE of 10% or higher. In the long-term vision 2035, the slogan is "Using limited resources to fill the world with smiles and inspiration! Towards an enterprise group that continues to challenge the creation of future value." The sales target for the fiscal year ending March 2035 is 300 billion yen and the recurring profit target is 60 billion yen. The company group has been actively promoting future growth strategies, such as diversifying revenue bases and promoting ESG investments while responding to risks such as changes in office demand in the current medium-term business plan (fiscal year March 2019 to March 2025), and we believe that the likelihood of achieving the management target for the final year, the fiscal year ending March 2025, is also high. By formulating the long-term vision 2035 as the desired state ten years from now and then formulating the next medium-term business plan for the three-year period after the achievement of the current medium-term business plan, we believe that stable revenue and strong future growth prospects can be expected.

1. Review and Progress of the Current Medium-Term Business Plan

Regarding the review and progress of the current medium-term business plan (fiscal year March 2019 to March 2025), although the plan period was extended by two terms due to the COVID-19 pandemic, it is expected to achieve the target by the fiscal year ending March 2025 as planned.

The total amount of investment during the plan period is expected to be around 240 billion yen, against the planned total of 220 billion yen. In the office business, the amount of property acquisition in the fiscal year ending March 2024 is expected to reach a record high, and investment will be accelerated as planned. In the hotel business, which is experiencing a clear recovery in demand, active additional investments will be made with the aim of achieving a total number of guest rooms of 10,000. The overseas business has already started projects, and on August 19, 2024, construction of the "HIYORI Aqua Tower" began as the second condominium project. While carefully selecting M&A projects, the company's investment stance remains unchanged, and we will continue to consider active investment to create business synergy. In the digital field, investment is being expanded to promote business growth.

2. Next Medium-Term Business Plan and Long-Term Vision 2035

The company group has formulated the long-term vision 2035 and announced the next medium-term business plan for the three-year period after achieving the goals of the current medium-term business plan. The long-term vision 2035 sets a target of sales of 300 billion yen and recurring profit of 60 billion yen by March 2035, with the slogan "Using limited resources to fill the world with smiles and inspiration! Towards an enterprise group that continues to challenge the creation of future value." In the next medium-term business plan, the basic policy is to promote diversification of the core business through customer-oriented product development and warm-hearted services, and to solve social issues. The targets for the fiscal year ending March 2028, the final year of the plan, are sales of 135 billion yen, recurring profit of 27 billion yen, recurring profit margin of 20%, self-capital ratio of 45%, and ROE of 10% or higher. Growth strategies are formulated in each business, focusing on the enhancement of human resources and services, and the promotion of diversification of the core business. Even after achieving the goals of the current medium-term business plan, the company aims to maintain a financially disciplined management and pursue a capital-efficient management through proactive business investments, and we believe that a high level of profitability and future growth can be expected for the achievement of the long-term vision 2035.

(Author: FISCO Guest Analyst Ryoji Mogi)